Document:

exv10w11

Exhibit 10.11

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is entered into as of May 1, 2010 (the “Effective
Date”) by and between Tesoro Corporation (the “Company”), and Gregory J. Goff (“Executive”);

WITNESSETH THAT:

     WHEREAS, the Company wishes to employ Executive as its President and Chief Executive Officer
and Executive wishes to accept such employment; and

     WHEREAS, the Company and Executive wish to formalize the employment relationship in accordance
with the terms and conditions set forth below in this Agreement.

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

1. EMPLOYMENT.

Subject to Executive’s satisfactory passage of a routine pre-employment drug test and satisfactory
completion of a criminal background check, both of which are applicable generally to all new hires
of the Company, the Company shall employ Executive, and Executive shall be employed by the Company
upon the terms and subject to the conditions set forth in this Agreement.

2. TERM OF EMPLOYMENT.

The term of this Agreement shall be a three (3) year period beginning on the Effective Date and
ending on April 30, 2013. The period during which Executive is employed hereunder shall be referred
to as the “Employment Period.” Either the Company or Executive shall have the right to terminate
the Employment Period and, subject to the survival provisions of Section 17, this Agreement at any
time in accordance with Section 5 below. Upon the expiration of the term of this Agreement (if the
Employment Period and this Agreement are not earlier terminated in accordance with Section 5),
Executive’s employment shall continue on an “at will” basis.

3. DUTIES AND RESPONSIBILITIES.

(a) Executive shall serve as President and Chief Executive Officer
of the Company and also shall serve as a member of the Board of
Directors of the Company (the “Board”). In such capacity, 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 Board.

(b) Executive shall devote substantially all of his working time,
attention and energies to the business of the Company and affiliated
entities. Executive may make and manage his

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personal investments (provided such investments in other activities do not
violate the provisions of Section 9 of this Agreement), be involved in
charitable and professional activities, and with the consent of the Board,
serve on boards of other for profit entities; provided such activities do not
materially interfere with the performance of his duties hereunder.

4. COMPENSATION AND BENEFITS.

(a) ANNUAL BASE SALARY. During the Employment Period, Executive
shall receive an annual base salary (the “Base Salary”) at an annual
rate of $900,000, or such higher rate as may be determined from time
to time by the Board. The Base Salary shall be paid at such
intervals as the Company pays executive salaries generally. During
the Employment Period, the Base Salary shall be reviewed at least
annually. Any increase in the Base Salary shall not serve to limit
or reduce any other obligation to Executive under this Agreement.
Except as provided below, the Base Salary shall not be reduced after
any such increase and the term “Base Salary” shall refer to the Base
Salary as so increased. Notwithstanding the foregoing, Base Salary
may be decreased pursuant to a Company-wide executive salary
reduction plan, in which case “Base Salary” shall refer to
Executive’s Base Salary as so decreased.

(b) ANNUAL BONUS. In addition to the Base Salary, during the
Employment Period, Executive will be entitled to participate in an
annual incentive compensation plan of the Company. Executive’s
target annual bonus will be one hundred percent (100%) of his Base
Salary as in effect for such year (the “Target Bonus”), and his
actual annual bonus may range from zero percent (0%) to two hundred
percent (200%) of his Base Salary, and will be determined based upon
achievement of performance goals established by the Company pursuant
to such plan, with no minimum or guaranteed bonus amount.

(c) INDUCEMENT AWARD. As further inducement to entering into this
Agreement Executive shall receive a cash payment of $900,000 on the
Effective Date and the following on May 3, 2010:

(i) An award of the number of shares of the Company’s common stock equal to the quotient of
$100,000 divided by the closing price of a share of the Company’s common stock on May 3, 2010;

(ii) An award of that number of restricted stock units equal to the quotient of $3,500,000 divided
by the closing price of a share of the Company’s common stock on May 3, 2010, which will vest fifty
percent (50%) on May 3, 2011, and fifty percent (50%) on May 3, 2012, subject (except as otherwise
provided below) to Executive’s continuous employment with the Company through the applicable
vesting date and such other terms and conditions as the Compensation Committee of the Board shall
decide;

(iii) An award of that number of stock options for the Company’s common stock, the fair market
value of which options, using the Black-Scholes method as described on Attachment 1, on May 3, 2010
will be $250,000, which stock

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options will have an exercise price equal to fair market value (as determined by the Compensation
Committee of the Board) on the date of grant and will vest thirty percent (30%) on May 3, 2011,
thirty percent (30%) on May 3, 2012, and forty percent (40%) on May 3, 2013, subject (except as
otherwise provided below) to Executive’s continuous employment with the Company through the
applicable vesting date, a ten (10) year term, and such other terms and conditions as the
Compensation Committee of the Board shall decide; and

(iv) An award of that number of shares of restricted common stock equal to the quotient of $250,000
divided by the closing price of a share of the Company’s common stock on May 3, 2010, which will
vest one hundred percent (100%) on the first anniversary of the Effective Date at which time the
stock will be unrestricted, subject (except as otherwise provided below) to Executive’s continuous
employment with the Company through such anniversary date and such other terms and conditions as
the Compensation Committee of the Board shall decide.

In the event that Executive’s employment terminates as described in Sections 6(a), 6(b), 6(e) or
7(a) below, then the inducement awards described in Section 4(c)(ii), (iii) and (iv) above will
vest one hundred percent (100%) upon such termination.

As further inducement to entering into this Agreement Executive also shall receive a cash payment
of $250,000 on the first anniversary of the Effective Date, subject to Executive’s continuous
employment with the Company through such date.

In addition, in the event that Executive dies, becomes physically or mentally incapacitated such
that the Company determines that Executive would become Totally Disabled as described in Section
5(b) or is informed by the Company that he will not be employed by the Company on May 1. 2010, and
such event follows the later of (x) the first date that this Agreement has been executed by both
the Company and Executive and (y) the date Executive terminates employment with ConocoPhillips, but
before May 1, 2010, then the Company will pay the inducement awards described in this Section 4(c)
at the time and in the form described in this Section 4(c) to Executive (or Executive’s estate in
the event of death), such awards shall be one hundred percent (100%) vested, and such payments
shall be Executive’s (or Executive’s estate) sole remedy under this Agreement.

Finally, in the event Executive’s employment is terminated by the Company for Cause at any time
during the term of this Agreement, the Company will seek repayment or recovery of the inducement
awards paid pursuant to this Section 4(c), as appropriate, notwithstanding any contrary provision
of this Agreement.

(d) ANNUAL LONG-TERM INCENTIVE AWARD. As further inducement to entering into this Agreement,
effective for calendar year 2010, Executive also will be eligible for a long-term incentive award
for fiscal year 2010 with a target of $3,000,000, subject to such terms and conditions as the
Compensation Committee of the Board may in its sole discretion specify; provided that the fiscal
year 2010 award will be pro-rated if the grant of long-term incentive awards to other senior
executive officers of the Company

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occurs prior to the Effective Date. For example, if the grant date for such other executive
officers is April 1, 2010, then the target for Executive’s 2010 award will be $2,750,000 (11/12 x
$3,000,000). In the event that Executive’s employment terminates as described in Sections 6(a),
6(b), 6(e) or 7(a) below, then the fiscal year 2010 award will vest one hundred percent (100%) upon
such termination. The target awards for fiscal years after 2010 will be at the discretion of the
Compensation Committee of the Board. Long-term incentive awards shall be comprised of such mix of
equity-based and other long-term incentive awards (for example, stock options, restricted stock,
restricted stock units, performance shares or units) as determined by the Compensation Committee of
the Board from time to time, consistent with the mix of equity-based and other long-term incentive
awards granted to other senior executive officers of the Company. For fiscal year 2010, it is
anticipated that the long-term incentive award will be comprised of the following mix of
equity-based and long-term incentive awards: (i) thirty percent (30%) of the total award expected
value in stock options; (ii) thirty percent (30%) of the total award expected value in restricted
stock (time based vesting); and (iii) forty percent (40%) of the total award expected value in
performance units. If an equity-based or long-term incentive award is made to Executive and the
financial statements used to determine the amount of the award are materially restated within five
(5) years of the end of the period to which such financial statements relate and either (x) the
Audit Committee of the Board finds that Executive engaged in malfeasance, fraud or intentional
misconduct that contributed (directly or indirectly) to such restatement or that Executive was
aware of the acts that contributed (directly or indirectly) to such restatement or (y) the
compensation of all senior executives paid with respect to such financial statements is similarly
clawed back, the Company will seek repayment or recovery of the award, as appropriate,
notwithstanding any contrary provision of this Agreement.

(e) OTHER COMPENSATION. During the Employment Period, Executive shall be entitled to participate in
any other incentive or supplemental compensation plan or arrangement maintained or instituted by
the Company to such extent, if any, as the Compensation Committee of the Board may in its sole
discretion from time to time specify.

(f) OTHER BENEFIT PLANS. During the Employment Period, Executive and/or Executive’s family, as the
case may be, shall be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company (including, without
limitation, medical, prescription drugs, dental, vision, disability, employee life, group life,
accidental death and travel accident insurance plans and programs) and all pension, profit sharing,
incentive compensation, and savings plans and all other similar plans and benefits which the
Company from time to time makes available to other peer executives of the Company.

(g) FEE REIMBURSEMENTS. During the Employment Period, the Company will reimburse Executive as
provided in the Company’s policies, programs 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 Executive
for additional initiation fees to the extent the Board or the Governance Committee of the Board
determines such fees are reasonable and in the best interest of the Company. Notwithstanding the
foregoing,

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however, the Company will not reimburse Executive for any of the foregoing fees with respect to an
organization that discriminates against individuals on the basis of race, creed or sex.

(h) EXPENSE REIMBURSEMENT. During the Employment Period, Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the
expense reimbursement policies, programs, practices and procedures of the Company in effect for
Executive when Executive incurs such reimbursable expenses.

(i) RELOCATION. The Company will reimburse Executive for reasonable relocation expenses (including
a payment to make Executive whole for the loss, if any, up to $150,000, suffered by Executive on
the sale of the home, based on the original amount paid by Executive for the home) incurred by
Executive associated with Executive’s move from his home in Katy, Texas to San Antonio, Texas, as
appropriate as determined by the Board in its sole discretion and pursuant to the Company’s
standard relocation policy in effect on March 29, 2010 (the “Relocation Policy”). If Executive’s
family relocates to San Antonio, Texas from Utah within the Employment Period, the Company will
reimburse Executive for reasonable relocation expenses pursuant to the Relocation Policy (excluding
any payment to make Executive whole for any loss suffered by Executive based on the original amount
paid by Executive for the Utah home).

(j) OFFICE AND SUPPORT STAFF. During the Employment Period, Executive shall be entitled to an
appropriate office at the Company’s principal place of business.

(k) VACATION. During the Employment Period, Executive shall be entitled to vacation each year in
accordance with the Company’s executive vacation policy in effect from time to time, but in no
event less than four (4) weeks paid vacation per calendar year (prorated for 2010) and an
additional one (1) week for five (5) years of service and a further additional one (1) week for ten
(10) years of service, up to a maximum of six (6) weeks per calendar year. Executive shall be
entitled to such periods of sick leave as is customarily provided by the Company for its senior
executive employees.

5. TERMINATION OF EMPLOYMENT.

This Agreement and the Employment Period may be terminated under the following circumstances:

(a) DEATH. This Agreement and the Employment Period shall terminate upon Executive’s death.

(b) TOTAL DISABILITY. The Company may terminate this Agreement and the Employment Period upon
Executive becoming “Totally Disabled.” For purposes of this Agreement, Executive shall be “Totally
Disabled” if Executive has been physically or mentally incapacitated so as to render Executive
incapable of performing Executive’s material usual and customary duties, with or without reasonable
accommodation as required by law, under this Agreement for six (6) consecutive months (such
consecutive absence not being deemed interrupted by Executive’s return to service for less than ten

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(10) consecutive business days if absent thereafter for the same illness or disability). Any such
termination shall be upon thirty (30) days written notice given at any time thereafter while
Executive remains Totally Disabled, provided that a termination for Total Disability hereunder
shall not be effective if Executive returns to full performance of his duties within such thirty
(30) day period.

(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate this Agreement and the
Employment Period for “Cause” at any time. If the Company elects to terminate this Agreement and
the Employment Period for Cause, the Company shall provide ten (10) days written notice of the
Company’s intent to terminate this Agreement and the Employment Period for “Cause.”

(i) For purposes of this Agreement, the term “Cause” shall be limited to (A) willful misconduct by
Executive with regard to the Company which has a material adverse effect on the Company; (B) the
willful refusal of Executive to follow the proper direction of the Board, provided that the
foregoing refusal shall not be “Cause” if Executive in good faith believes that such direction is
illegal, unethical or immoral and promptly so notifies the Board; (C) the willful refusal by
Executive to perform the duties required of him hereunder (other than any such failure resulting
from incapacity due to physical or mental illness) after a written demand for performance is
delivered to Executive by the Board which specifically identifies the manner in which it is
believed that Executive has willfully refused to perform his duties hereunder; (D) the material
breach by Executive of any of the restrictive covenants of Section 9 hereof or of a fiduciary duty
to the Company; (E) the misappropriation by Executive of Company funds or property; or (F)
Executive being convicted of, or making a plea of nolo contendere to the charge of, a felony (other
than a felony involving a traffic violation or as a result of vicarious liability). For purposes of
this paragraph, no act, or failure to act, on Executive’s part shall be considered “willful” unless
done or omitted to be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interests of the Company.

(ii) The ten (10) day notice of intent to terminate for Cause shall mean a notice that shall
indicate the specific termination provision in Section 5(c)(i) relied upon and shall set forth in
reasonable detail the facts and circumstances which provide for a basis for termination for Cause.
Further, the ten (10) day notice of intent to terminate for Cause shall set the date of termination
at least ten (10) days after the date of the notice.

(d) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate this Agreement and the Employment
Period with or without Good Reason at any time upon thirty (30) days written notice to the Company.

(i) A Termination for Good Reason means a termination by Executive pursuant to a Notice of
Termination for Good Reason as described more fully below given within thirty (30) days after the
occurrence of the Good Reason event, unless such circumstances are fully corrected prior to the
date of

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termination specified in the Notice of Termination for Good Reason. For purposes of this Agreement,
“Good Reason” shall mean the occurrence or failure to cause the occurrence, as the case may be,
without Executive’s express written consent, of any of the following circumstances: (A) a material
adverse change in the governing body to which Executive regularly reports, including a requirement
that Executive report to another corporate officer rather than to the Board; (B) a material adverse
change in the bonus plans, programs or arrangements in which Executive is entitled to participate
(the “Bonus Plans”) other than a material adverse change in the Bonus Plans that adversely affects
other similarly situated executives in a manner proportionate to the material adverse effect of
such change on Executive; (C) any material breach by the Company of any provision of this
Agreement, including without limitation Section 11 hereof; (D) Executive’s failure to be elected or
reelected to the Board; or (E) the failure of any successor to the Company (whether direct or
indirect and whether by merger, acquisition, consolidation or otherwise) to assume in a writing
delivered to Executive upon the assignee becoming such, the obligations of the Company hereunder.
Expiration of the term of this Agreement in accordance with the first sentence of Section 2 hereof
is not a termination by Executive for Good Reason.

(ii) A Notice of Termination for Good Reason shall mean a written notice that shall indicate the
specific Good Reason event relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for Good Reason. The failure by Executive
to set forth in the Notice of Termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from thereafter timely asserting such fact or circumstance in enforcing his
rights hereunder. The Notice of Termination for Good Reason shall provide for a date of termination
not less than thirty (30) nor more than sixty (60) days after the date such Notice of Termination
for Good Reason is given. The Company shall have at least thirty (30) days from receipt of the
notice to remedy the condition.

(e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate this Agreement and the
Employment Period without Cause at any time upon thirty (30) days written notice to Executive.
Expiration of the term of this Agreement in accordance with the first sentence of Section 2 hereof
is not a termination by the Company without Cause.

(f) EFFECT OF TERMINATION. Upon any termination of this Agreement and the Employment Period prior
to the expiration of the term of this Agreement, Executive shall immediately resign from all
positions with the Company or any of its subsidiaries held by him at such time.

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6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT.

In the event that this Agreement and the Employment Period are terminated as provided in Section 5,
Executive shall be entitled to the following compensation and benefits upon such termination,
subject to his compliance with the release provisions of Section 8:

(a) TERMINATION IN THE EVENT OF DEATH. In the event that Executive’s employment is terminated by
reason of Executive’s death, the Company shall pay the following amounts to Executive’s beneficiary
or estate:

(i) Any accrued but unpaid Base Salary for services rendered to the date of death paid pursuant to
the timing arrangement under which the Company normally compensates employees for services
performed during a payroll period, any accrued but unpaid expenses required to be reimbursed under
this Agreement paid in accordance with Section 4, any unused vacation as of the date of termination
paid in accordance with the Company’s executive vacation policy, and any earned but unpaid cash
bonuses for any prior period to the same extent as earned and paid to other similarly situated
executives and a pro-rata target annual bonus or annual incentive compensation payment for the
period in which such termination occurred, paid at the time and in the form specified for payment
under the terms of such bonus or incentive compensation plan;

(ii) Any benefits to which Executive may be entitled pursuant to the Company’s plans, programs,
policies and arrangements (including those referred to in Section 4(f) hereof), as determined and
paid in accordance with the terms of such plans, programs, policies and arrangements;

(iii) An amount equal to the Base Salary (at the rate in effect as of the date of Executive’s
death) which would have been payable to Executive if Executive had continued in employment for one
(1) additional year, which amount will be paid to Executive’s estate or beneficiary in twelve (12)
substantially equal monthly installments beginning in the first calendar month after the date of
Executive’s death; and

(iv) Except as otherwise provided in this Agreement, the treatment of equity-based or long-term
incentive awards, including (without limitation) stock options, restricted stock, restricted stock
units, and performance shares or units, will be governed in accordance with the terms of the award
agreement governing such award.

(b) TERMINATION IN THE EVENT OF TOTAL DISABILITY. In the event that Executive’s employment is
terminated by reason of Executive’s Total Disability as determined in accordance with Section 5(b),
the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination paid
pursuant to the timing arrangement under which the Company normally compensates employees for
services performed during a payroll period,

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any accrued but unpaid expenses required to be reimbursed under this Agreement paid in accordance
with Section 4, any unused vacation as of the date of termination paid in accordance with the
Company’s executive vacation policy, and any earned but unpaid cash bonuses for any prior period to
the same extent as earned and paid to other similarly situated executives at the time and in the
form specified for payment under the terms of such bonus plan. Executive also shall be eligible for
a pro-rata target annual bonus or annual incentive compensation payment for the year in which
Executive is terminated; provided, however, that payment of such bonus or incentive compensation
will be made as soon as administratively practicable following the end of the six (6) month period
beginning immediately after such termination of employment;

(ii) Any benefits to which Executive may be entitled pursuant to the Company’s plans, programs,
policies and arrangements (including those referred to in Section 4(f) hereof) shall be determined
and paid in accordance with the terms of such plans, programs, policies and arrangements;

(iii) An amount equal to the Base Salary (at the rate in effect as of the date of Executive’s Total
Disability) which would have been payable to Executive if Executive had continued in active
employment for one (1) year following termination of employment, less any payments under any
long-term disability plan or arrangement paid for by the Company, which amount will be paid to
Executive one-half in a lump sum as soon as administratively practicable following the end of the
six (6) month period beginning immediately after such termination of employment and one-half in
substantially equal monthly installments during the two (2) year period beginning as soon as
administratively practicable following the end of the six (6) month period beginning immediately
after such termination of employment; and

(iv) The treatment of equity-based or long-term incentive awards, including (without limitation)
stock options, restricted stock, restricted stock units, and performance shares or units, will be
governed in accordance with the terms of the award agreement governing such award.

(c) TERMINATION FOR CAUSE. In the event that Executive’s employment is terminated by the Company
for Cause, the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination paid
pursuant to the timing arrangement under which the Company normally compensates employees for
services performed during a payroll period, any accrued but unpaid expenses required to be
reimbursed under this Agreement paid in accordance with Section 4, any unused vacation as of the
date of termination paid in accordance with the Company’s executive vacation policy, and any earned
but unpaid cash bonuses for any prior period to the same extent as earned and paid to other
similarly situated executives at the time and in the form specified for payment under the terms of
such bonus plan;

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(ii) Any benefits to which Executive may be entitled pursuant to the Company’s plans, programs,
policies and arrangements (including those referred to in Section 4(f) hereof) shall be determined
and paid in accordance with the terms of such plans, programs, policies and arrangements; and

(iii) The treatment of equity-based or long-term incentive awards, including (without limitation)
stock options, restricted stock, restricted stock units, and performance shares or units, will be
governed in accordance with the terms of the award agreement governing such award.

(d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive voluntarily terminates
employment other than for Good Reason, the Company shall pay the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination paid
pursuant to the timing arrangement under which the Company normally compensates employees for
services performed during a payroll period, any accrued but unpaid expenses required to be
reimbursed under this Agreement paid in accordance with Section 4, any unused vacation as of the
date of termination paid in accordance with the Company’s executive vacation policy, and any earned
but unpaid cash bonuses for any prior period to the same extent as earned and paid to other
similarly situated executives at the time and in the form specified for payment under the terms of
such bonus plan;

(ii) Any benefits to which Executive may be entitled pursuant to the Company’s plans, programs,
policies and arrangements (including those referred to in Section 4(f) hereof) shall be determined
and paid in accordance with the terms of such plans, programs, policies and arrangements; and

(iii) The treatment of equity-based or long-term incentive awards, including (without limitation)
stock options, restricted stock, restricted stock units, and performance shares or units, will be
governed in accordance with the terms of the award agreement governing such award.

(e) TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR GOOD REASON. In the
event that Executive’s employment is terminated by the Company for reasons other than death, Total
Disability or Cause, or Executive terminates his employment for Good Reason, the Company shall pay
the following amounts to Executive:

(i) Any accrued but unpaid Base Salary for services rendered to the date of termination paid
pursuant to the timing arrangement under which the Company normally compensates employees for
services performed during a payroll period, any accrued but unpaid expenses required to be
reimbursed under this Agreement paid in accordance with Section 4, any unused vacation as of the
date of termination paid in accordance with the Company’s executive vacation policy, and any earned
but unpaid cash bonuses for any prior period to the same extent as

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earned and paid to other similarly situated executives at the time and in the form specified for
payment under the terms of such bonus plan;

(ii) Any benefits to which Executive may be entitled pursuant to the Company’s plans, programs,
policies and arrangements (including those referred to in Section 4(f) hereof) shall be determined
and paid in accordance with the terms of such plans, programs, policies and arrangements;

(iii) An amount equal to two (2) times the sum of Executive’s Base Salary (as then in effect) plus
the greater of his highest annual bonus earned under the applicable annual incentive compensation
plan of the Company during the preceding 3 years or $450,000, of which one-half shall be paid in a
lump sum as soon as administratively practicable following the end of the six (6) month period
beginning immediately after such termination of employment and one-half shall be paid in
substantially equal monthly installments during the two (2) year period beginning as soon as
administratively practicable following the end of the six (6) month period beginning immediately
after such termination of employment;

(iv) Executive and Executive’s spouse and eligible dependents shall continue to participate in, and
receive group health coverage under, the Company’s group health plans that provide group health
coverage to active employees of the Company from time to time, but only to the extent such plans
continue to be available to the Company’s employees and only until the earliest to occur of (A) two
and one-half (21/2) years after the date of termination, (B)
Executive’s death (or in the case of coverage for a qualified beneficiary of Executive, the death
of that qualified beneficiary), or (C) the date on which Executive (or in the case of coverage for
a qualified beneficiary of Executive, the qualified beneficiary) becomes eligible for coverage
under any other group health plan of a subsequent employer providing comparable coverage (the
“Continuation Coverage Period”); provided that the Company shall pay for one hundred percent (100%)
of the premiums for such group health coverage, and the premiums that otherwise would be charged to
Executive for such coverage but for this Section 6(e)(iv) shall be taxable to Executive; the group
health plan coverage benefits provided by the Company under this Section 6(e)(iv) during any
taxable year of Executive will not affect such benefits provided by the Company in another taxable
year during the Continuation Coverage Period; and the right to the benefits provided under this
Section 6(e)(iv) is not subject to liquidation or exchange for another benefit;

(v) Except to the extent prohibited by law, and except as otherwise provided in this Section 6(e),
Executive will be one hundred percent (100%) vested in all benefits, awards, and grants accrued but
unpaid as of the date of termination under any non-qualified pension plan or supplemental executive
plan in which Executive was a participant as of the date of termination. Executive shall also be
eligible for an annual bonus or annual incentive compensation payment, on the same basis and to the
same extent payments are made to senior executives, pro-rated for the fiscal year in which
Executive is terminated and payable in the year

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following the date of termination at the later of (i) the same time payments are made to senior
executives or (ii) as soon as administratively practicable following the six (6) month period
beginning immediately after such termination of employment; and

(vi) Except as otherwise provided in this Agreement, the treatment of equity-based or long-term
incentive awards, including (without limitation) stock options, restricted stock, restricted stock
units, and performance shares or units, will be governed in accordance with the terms of the award
agreement governing such award.

(f) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this Agreement, under the
Indemnification Agreement or under the terms of any incentive compensation, employee benefit, or
fringe benefit plan applicable to Executive at the time of Executive’s termination or resignation
of employment, Executive shall have no right to receive any other compensation, or to participate
in any other plan, arrangement or benefit, with respect to future periods after such termination or
resignation.

(g) NO MITIGATION; NO SET-OFF. In the event of any termination of employment hereunder, Executive
shall be under no obligation to seek other employment and, except as otherwise provided in Section
6(e)(iv), there shall be no offset against any amounts due Executive under this Agreement on
account of any remuneration attributable to any subsequent employment that Executive may obtain.
Except as otherwise provided in Section 6(e)(iv), the amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or other right, which the Company may have
against Executive or others, except upon obtaining by the Company of a final unappealable judgment
against Executive.

7. COMPENSATION PAYABLE FOLLOWING CHANGE IN CONTROL.

(a) PAYMENTS FOLLOWING A CHANGE IN CONTROL. Notwithstanding anything
to the contrary contained herein, should Executive at any time
within two (2) years following a change in 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” (including involuntary termination due to Total
Disability), or (ii) voluntary termination by Executive for “Good
Reason”, the Company (or its successor) shall pay to Executive
except as otherwise expressly set forth herein, commencing as soon
as administratively practicable following the end of the six (6)
month period beginning immediately after such termination of
employment, the following severance payments and benefits, subject
to Executive’s compliance with the release provisions of Section 8:

(i) An amount equal to three (3) times the sum of Executive’s Base Salary plus his Target Bonus (in
each case as then in effect) payable in a lump sum if the applicable change in control qualifies as
a change in control event within the meaning of Section 409A of the Code, and otherwise such amount
shall be paid

12

 

one-half in a lump sum and one-half in substantially equal monthly installments during the two (2)
year period beginning as soon as administratively practicable following the end of the six (6)
month period beginning immediately after such termination of employment. Payment of the amount
specified under this Section 7(a)(i) shall be in lieu of any amount payable under Section 6(b)(iii)
or Section 6(e)(iii).

(ii) Executive will be one hundred percent (100%) vested in all benefits, awards, and grants
accrued but unpaid under any non-qualified pension plan or supplemental executive plan in which
Executive was a participant as of the date of termination. Executive shall also receive a pro rata
annual incentive bonus payment in a lump sum equal to his Base Salary multiplied by his annual
incentive bonus target percentage, each as then in effect, pro-rated as of the effective date of
the termination. Except as otherwise provided in this Agreement, the treatment of equity-based or
long-term incentive awards, including (without limitation) stock options, restricted stock,
restricted stock units, and performance shares or units, will be governed in accordance with the
terms of the award agreement governing such award. The vesting, pro rata bonus and equity-based or
long-term incentive award rights under this Section 7(a)(ii) shall be in lieu of any such rights
Executive would otherwise be entitled to receive under Sections 6(b)(i) and (iv) or Sections
6(e)(v) and (vi).

For purposes of this Agreement, following a Change in Control, the term “Company” shall include the
entity surviving such Change in Control.

(b) POTENTIAL REDUCTION IN PAYMENTS BY THE COMPANY.

(i) Notwithstanding any contrary provision, if any Payment would be subject to the Excise Tax, then
the Payment shall be either

(A) delivered in full pursuant to the terms of this Agreement or

(B) reduced in accordance with this Section 7(b) to the extent necessary to avoid the Excise Tax,

based on which of (A) or (B) would result in the greater Net After-Tax Receipt to Executive.

For purposes of this Section 7(b),

“Payment” means any payment, distribution, or other benefit provided by the Company to or for the
benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise that constitutes a “parachute payment” within the meaning of Section
280G of the Code;

“Excise Tax” means the excise imposed by Section 4999 of the Code or any similar or successor
provision thereto; and

13

 

“Net After-Tax Receipt” means the present value (as determined in accordance with Section 280G of
the Code) of the payments net of all applicable federal, state and local income, employment, and
other applicable taxes and the Excise Tax.

(ii) If Payments are reduced, the reduction shall be accomplished first by reducing cash Payments
under this Agreement, in the order in which such cash Payments otherwise would be paid and then by
forfeiting any equity-based awards that vest as a result of the Change in Control, starting with
the most recently granted equity-based awards, to the extent necessary to accomplish such
reduction.

(iii) All determinations under this Section 7(b) shall be made by the Company’s independent
accountants or compensation consultants (the “Third Party”) and all such determinations shall be
conclusive, final and binding on the parties hereto. The Company and Executive shall furnish to the
Third Party such information and documents as the Third Party may reasonably request in order to
make a determination under this Section 7(b). The Company shall bear all fees and costs of the
Third Party with respect to all determinations under or contemplated by this Section 7(b).

(c) CHANGE IN CONTROL means (i) there shall be consummated (A) any consolidation or merger of the
Company in which the Company is 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 one (1) 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 director, 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 (1) 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 thirty-five
percent (35%) 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 (1) year
thereafter, individuals who immediately prior to the beginning of such period constituted the Board
shall cease for any reason to constitute at least a majority thereof, unless election or the
nomination by the Board 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.

14

 

8. NO FURTHER LIABILITY; RELEASE.

The Company conditions the payment of any severance or other amounts pursuant to Sections 6 and 7
(other than any accrued but unpaid Base Salary for services rendered to the date of termination,
any accrued but unpaid expenses required to be reimbursed in accordance with Section 4, any unused
vacation as of the date of termination, and any payments under Section 6(a)) upon (a) the delivery
by Executive to the Company of a release in the form satisfactory to the Company, substantially in
the form attached hereto as Attachment 2, within such time following Executive’s termination of
employment as will permit the release to become irrevocable on or before the fifty-second
(52nd) day after Executive’s termination of employment and (b) such release
actually becoming irrevocable by the fifty-second (52nd) day after
Executive’s termination of employment. If Executive fails to execute such release or the release
does not become irrevocable by the fifty-second (52nd) day after Executive’s
termination of employment, Executive will forfeit any benefits under Sections 6 and 7 (other than
any accrued but unpaid Base Salary for services rendered to the date of termination, any accrued
but unpaid expenses required to be reimbursed in accordance with Section 4, any unused vacation as
of the date of termination, and any payments under Section 6(a)). Payment made and performance by
the Company in accordance with Sections 6 and 7, as applicable, shall operate to fully discharge
and release the Company and its directors, officers, employees, subsidiaries, affiliates,
stockholders, successors, assigns, agents and representatives from any further obligation or
liability with respect to Executive’s rights under this Agreement.

9. RESTRICTIVE COVENANTS.

The Company agrees to provide Executive, upon commencement of employment, with immediate access to
Protected Information as defined below, including Protected Information of third parties such as
customers, suppliers, and business affiliates; specialized training regarding the Company’s
methodologies and business strategies; and/or support in the development of goodwill such as
introductions, information and reimbursement of customer development expenses consistent with
Company policy. The foregoing is not contingent on continued employment, but upon Executive’s use
of the access, specialized training, and goodwill support provided by the Company for the exclusive
benefit of the Company and upon Executive’s full compliance with the restrictions on Executive’s
conduct provided for in this Agreement. Ancillary to the rights provided to Executive as set forth
in this Agreement and any addenda or amendments to this Agreement, the Company’s provision of
Protected Information, specialized training, and/or goodwill support to Executive, and Executive’s
agreements regarding the use of same, and in order to protect the value of any equity-based or
long-term incentive compensation, training, goodwill support and/or the Protected Information
described above, the Company and Executive agree to the following provisions against unfair
competition:

(a) COVENANTS AGAINST UNFAIR COMPETITION. Executive recognizes and agrees that in order to assure
that Executive devotes all of Executive’s professional time and energy to the operations of the
Company while employed by the Company, and that during and after such employment in order to
adequately protect the Company’s investment in its Protected Information and to protect the
Protected Information and all other confidential information from disclosures to competitors and to
protect the Company from unfair competition, separate covenants not to compete, not to solicit, not

15

 

to recruit the Company’s employees, and not to disclose Protected Information for the duration and
scope set forth below, are necessary and desirable. Executive understands and agrees that the
restrictions imposed in these covenants represent a fair balance of the Company’s rights to protect
its business and Executive’s right to pursue employment.

(b) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times during the Employment
Period and for one (1) year thereafter, Executive will not engage in, assist, or have any active
interest or involvement, whether as an employee, agent, consultant, creditor, advisor, officer,
director, stockholder (excluding holding of less than three percent (3%) of the stock of a public
company), partner, proprietor or any type of principal whatsoever in any person, firm, or business
entity which, directly or indirectly, competes with any Business (as defined below) of the Company
or its affiliates anywhere in the world where the Company conducts business or, on the last day of
the Employment Period, has plans to conduct business in the twelve (12) month period following the
last day of the Employment Period, without the Company’s specific written consent to do so. As used
in this Section 9, the term “Business” shall mean the refining and marketing of petroleum products,
as such business may be expanded or altered by the Company during the Employment Period.

(c) NON-SOLICITATION. Executive covenants and agrees that at all times during the Employment Period
and for a period of two (2) years after the termination thereof, whether such termination is
voluntary or involuntary by wrongful discharge or otherwise, Executive will not directly and
personally knowingly (i) induce any customers of the Company or of an affiliate of the Company to
patronize any similar business which competes with any material business of the Company or
affiliate; (ii) request or advise any customers of the Company or of an affiliate of the Company to
withdraw, curtail or cancel such customer’s business with the Company or affiliate; or (iii)
individually or through any person, firm, association or corporation with which he is now, or may
hereafter become associated, solicit, entice or induce any then employee of the Company, or of any
affiliate of the Company, to leave the employ of the Company, or such affiliate, to accept
employment with, or compensation from Executive, or any person, firm, association or corporation
with which Executive is affiliated without prior written consent of the Company. The foregoing
shall not prevent Executive from serving as a reference for employees.

(d) PROTECTED INFORMATION. Executive recognizes and acknowledges that Executive has had and will
continue to have access to various confidential or proprietary information concerning the Company,
affiliates of the Company, and its clients and third parties doing business with the Company of a
special and unique value which may include, without limitation, (i) books and records relating to
operation, finance, accounting, sales, personnel and management, (ii) policies and matters relating
particularly to operations such as customer service requirements, costs of providing service and
equipment, operating costs and pricing matters, and (iii) various trade or business secrets
including customer lists, route sheets, business opportunities, marketing or business
diversification plans, business development and bidding techniques, methods and processes,
financial data and the like, to the extent not generally known in the industry (collectively, the
“Protected Information”). In consideration of the Company

16

 

giving Executive access to Protected Information, Executive covenants and agrees that Executive
will not at any time, either during the Employment Period or afterwards, knowingly make any
independent use of, or knowingly disclose to any other person or organization (except as authorized
by the Company) any of the Protected Information, provided that (I) during the Employment Period,
Executive may in good faith make disclosures he believes desirable, and (II) Executive may comply
with legal process.

(e) NON-DISPARAGEMENT. Executive agrees not to disparage or communicate negatively about the
business, products, services, customers, directors, management, employees or
employment/compensation/benefit practices and policies of the Company or its affiliates at any
time, either during the Employment Period or afterwards. The Company agrees not to disparage or
communicate negatively about Executive at any time, either during the Employment Period or
afterwards. To the extent allowed by law, Executive also agrees not to help, encourage, or
participate (directly or indirectly) in any claims or lawsuits against the Company for any claims
related to any individual’s employment (or separation from employment) with the Company at any
time, either during the Employment Period or afterwards. Nothing in this Section 9(e), however,
shall be deemed to prevent the Executive or the Company or its affiliates (or the directors,
officers or employees of the Company or its affiliates) from testifying fully and truthfully in
response to a subpoena from any court or from responding to investigative inquiry from any
governmental agency.

10. ENFORCEMENT OF COVENANTS.

(a) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the
covenants set forth in Section 9 hereof by Executive will cause
irreparable damage to the Company with respect to which the
Company’s remedy at law for damages may be inadequate. Therefore, in
the event of breach or threatened breach of the covenants set forth
in Section 9 by Executive, Executive and the Company agree that the
Company shall be entitled to the following particular forms of
relief, in addition to remedies otherwise available to it at law or
equity: injunctions, both preliminary and permanent, enjoining or
restraining such breach or threatened breach, and Executive hereby
consents to the issuance thereof forthwith and without bond by any
court of competent jurisdiction.

(b) SEPARABILITY OF COVENANTS. The covenants contained in Section 9
hereof constitute a series of separate covenants, one (1) for each
applicable State in the United States and the District of Columbia,
and one (1) for each applicable foreign country. If in any judicial
proceeding, a court shall hold that any of the covenants set forth
in Section 9 exceed the time, geographic, or occupational
limitations permitted by applicable laws, Executive and the Company
agree that such provisions shall and are hereby reformed to the
maximum time, geographic, or occupational limitations permitted by
such laws. Further, in the event a court shall hold unenforceable
any of the separate covenants deemed included herein, then such
unenforceable covenant or covenants shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding
to the extent necessary to permit the remaining separate covenants
to be enforced in such proceeding. Executive and the Company further
agree that the covenants in Section 9 shall each be construed as a
separate agreement independent of any other provisions of

17

 

this Agreement, and the
existence of any claim or cause
of action by Executive against
the Company whether predicated
on this Agreement or otherwise,
shall not constitute a defense
to the enforcement by the
Company of any of the covenants
of Section 9.

11. INDEMNIFICATION.

The Company shall indemnify and hold harmless Executive to the fullest extent permitted by law and
in accordance with the Indemnification Agreement between the Company and Executive (the
“Indemnification Agreement”) for any action or inaction of Executive while serving as an officer
and director of the Company or, at the Company’s request, as an officer or director of any other,
entity or as a fiduciary of any benefit plan. The Company shall cover Executive under directors and
officers liability insurance both during and, while potential liability exists, after the
Employment Period in the same amount and to the same extent as the Company covers its other
officers and directors.

12. DISPUTES AND PAYMENT OF ATTORNEY’S FEES.

The Company and Executive each irrevocably and unconditionally waives all right to trial by jury in
any lawsuit, action, proceeding, or counterclaim (whether based in contract, tort, or otherwise)
arising out of or relating to this Agreement or arising out of or relating to Executive’s
employment by the Company. Executive and the Company each further agree that the exclusive forums
for the resolution of any disputes between them are the state and Federal courts located in Bexar
County, Texas. This waiver of jury trial and forum selection provision applies to disputes between
the parties as well as any claim by Executive against any agent, representative, or employee of the
Company.

If at any time during the term of this Agreement or for a period of four (4) years after the
expiration of this Agreement there should arise any dispute as to the validity, interpretation or
application of any term or condition of this Agreement and it is finally determined by a court of
competent jurisdiction that Executive is the prevailing party in such dispute, and all appeals are
exhausted and final, the Company agrees, upon written demand by Executive, to promptly reimburse
Executive’s reasonable costs and reasonable attorney’s fees incurred by Executive in connection
with reasonably seeking to enforce the terms of this Agreement up to $100,000 in the aggregate for
all such disputes. Any such reimbursement shall be made by the Company upon or as soon as
practicable following receipt of supporting documentation of the expenses reasonably satisfactory
to the Company (but in no event later than March 15th of the calendar year following the calendar
year in which it is finally determined that Executive is the prevailing party in such dispute and
all appeals are exhausted and final). The expenses paid by the Company during any taxable year of
Executive will not affect the expenses paid by the Company in another taxable year. This right to
reimbursement is not subject to liquidation or exchange for another benefit.

The provisions of this Section 12, without implication as to any other section hereof, shall
survive the expiration or termination of this Agreement and of Executive’s employment hereunder.

18

 

13. WITHHOLDING OF TAXES.

The Company may withhold from any compensation and benefits payable under this Agreement all
applicable federal, state, local, or other taxes.

14. SOURCE OF PAYMENTS.

All payments provided under this Agreement, other than payments made pursuant to a plan which
provides otherwise, shall be paid from the general funds of the Company, and no special or separate
fund shall be established, and no other segregation of assets made, to assure payment. Executive
shall have no right, title or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right shall be no greater than the right
of an unsecured creditor of the Company.

15. ASSIGNMENT.

Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by Executive (but any payments due hereunder which
would be payable at a time after Executive’s death shall be paid to Executive’s designated
beneficiary or, if none, his estate) and shall be assignable by the Company only to any financially
solvent corporation or other entity resulting from the reorganization, merger or consolidation of
the Company with any other corporation or entity or any corporation or entity to or with which the
Company’s business or substantially all of its business or assets may be sold, exchanged or
transferred, and it must be so assigned by the Company to, and accepted as binding upon it by, such
other corporation or entity in connection with any such reorganization, merger, consolidation,
sale, exchange or transfer in a writing delivered to Executive in a form reasonably acceptable to
Executive (the provisions of this sentence also being applicable to any successive such
transaction).

16. ENTIRE AGREEMENT; AMENDMENT.

This Agreement shall supersede any and all existing oral or written agreements, representations, or
warranties between Executive and the Company or any of its subsidiaries or affiliated entities
relating to the terms of Executive’s employment by the Company other than the Indemnification
Agreement. It may not be amended except by a written agreement signed by both parties.

17. SURVIVAL.

Upon the termination of this Agreement, the respective rights and obligations of Executive and the
Company under this Agreement shall terminate, except that (a) the provisions of Sections 8 through
21 shall survive the termination of this Agreement and remain in full force and effect after the
termination of this Agreement in accordance with their terms, and (b) the termination of this
Agreement shall not affect any rights or obligations of the parties accrued under the express terms
of this Agreement prior to or in connection with such termination.

19

 

18. GOVERNING LAW.

This Agreement 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.

19. REQUIREMENT OF TIMELY PAYMENTS.

If any amounts which are required, or determined to be paid or payable, or reimbursed or
reimbursable, to Executive under this Agreement (or any other plan, agreement, policy or
arrangement with the Company) are not so paid promptly at the times provided herein or therein,
such amounts shall accrue interest, compounded monthly, at the short-term applicable federal rate
for the applicable month of delinquency, as prescribed by the Internal Revenue Service by Revenue
Ruling, from the date such amounts were required or determined to have been paid or payable,
reimbursed or reimbursable to Executive, until such amounts and any interest accrued thereon are
finally and fully paid, provided, however, that in no event shall the amount of interest contracted
for, charged or received hereunder, exceed the maximum non-usurious amount of interest allowed by
applicable law.

20. NOTICES

Any notice, consent, request or other communication made or given in connection with this Agreement
shall be in writing and shall be deemed to have been duly given when delivered or mailed by
registered or certified mail, return receipt requested, by facsimile, by e-mail or by hand
delivery, to those listed below at their following respective addresses (and facsimile numbers), or
at such other address (or facsimile numbers) as each may specify by notice to the others:

	 	 	 

	To the Company:

	 	Tesoro Corporation
	 

	 	19100 Ridgewood Parkway
	 

	 	San Antonio, Texas 78259
	 
	 	 
	To Executive:

	 	Gregory J. Goff

21. MISCELLANEOUS.

(a) WAIVER. The failure of a party to insist upon strict adherence
to any term of this Agreement 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 Agreement.

(b) SEPARABILITY. Subject to Section 10 hereof, if any term or
provision of this Agreement 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 Agreement in full force and
effect.

20

 

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

(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 Agreement 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 (1)
Agreement.

(f) DEFERRED COMPENSATION. This Agreement is intended to meet the
requirements of Section 409A of the Code and may be administered in
a manner that is intended to meet those requirements and shall be
construed and interpreted in accordance with such intent, and any
reference to the termination or cessation of employment of Executive
in Sections 6 and 7 of this Agreement shall be interpreted to
require a separation from service of Executive within the meaning of
Section 409A of the Code. To the extent that an award or payment, or
the settlement or deferral thereof, is subject to Section 409A of
the Code, except as the Compensation Committee of the Board
otherwise determines in writing, the award shall be granted, paid,
settled or deferred in a manner that will meet the requirements of
Section 409A of the Code, including regulations or other guidance
issued with respect thereto, such that the grant, payment,
settlement or deferral shall not be subject to the excise tax
applicable under Section 409A of the Code. If Executive is a
specified employee within the meaning of Section 409A of the Code,
then to the extent the Company determines that any amounts payable
to Executive under this Agreement upon termination of employment
that are otherwise scheduled to be paid within six (6) months
following termination of employment (the “6-month period”) cannot be
paid under Section 409A of the Code within the 6-month period, then
payment of such amounts will not occur until the 6-month period has
elapsed. All reimbursements made under Sections 4(g), (h) or (i)
will be made in any event no later than the last day of Executive’s
taxable year following the taxable year in which the expense was
incurred, and the expenses reimbursed by the Company during any
taxable year of Executive will not affect the expenses reimbursed by
the Company in another taxable year. Further, this right to
reimbursement is not subject to liquidation or exchange for another
benefit. Any provision of this Agreement that would cause the award
or the payment, settlement or deferral thereof to fail to satisfy
Section 409A of the Code shall be amended (in a manner that as
closely as practicable achieves the original intent of this
Agreement) to comply with Section 409A of the Code on a timely
basis, which may be made on a retroactive basis, in accordance with
regulations and other guidance issued under Section 409A of the
Code. In the event additional regulations or other guidance is
issued under Section 409A of the Code or a court of competent
jurisdiction provides additional authority concerning the
application of Section 409A with respect to the payments described
in Sections 4, 6 and 7 of the Agreement, then the provisions of such
Sections shall be amended to permit such payments to be made at the
earliest time permitted under such additional regulations, guidance
or authority that is practicable and achieves the original intent of
this Agreement.

21

 

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

	 	 	 	 	 

	TESORO CORPORATION
	 
	 	 	 	 
	By:

	 	/s/ STEVEN H. GRAPSTEIN	 	 
	 

	 	 	 	 
	 

	 	Steven H. Grapstein	 	 
	 

	 	Lead Director	 	 
	 
	 	 	 	 
	Date: March 30, 2010
	 
	 	 	 	 
	EXECUTIVE
	 
	 	 	 	 
	Gregory J. Goff
	 
	 	 	 	 
	/s/ GREGORY J. GOFF
	 	 	 
	 
	 	 	 	 
	Date: March 29, 2010

22

 

Attachment 1

BLACK-SCHOLES

The Company uses the following inputs to determine the number of stock options to be granted to an
individual under the Black-Scholes option pricing model:

	 	a.	 	Stock Price — The 20-day (day is defined as one in which the Company’s common stock is actively traded on
the NYSE) moving average stock price ending on the date prior to the grant date — (e.g. April 30).
	 
	 	b.	 	Stock Price Volatility — Using the 200-day moving average stock price .
	 
	 	c.	 	Risk Free Rate of Return — Average of 5 & 7 Year Treasury Bill Rate.
	 
	 	d.	 	Expected Term of the Option — As prescribed by the Company’s outside auditors (currently, Ernst and Young).
	 
	 	e.	 	Dividend Yield — Current annual dividend yield.

23

 

Attachment 2

RELEASE OF CLAIMS

     I, the undersigned, agree to the following Release of Claims (“Release”) in exchange for good
and valuable consideration the sufficiency of which I acknowledge. This Release is made for myself,
and my heirs, executors, legal representatives, administrators, successors, and assigns.

1. Matters Released.

     (a) I release Tesoro Corporation and 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 “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 Release, resulting from or relating to any act or omission of any kind
occurring on or before the date of signing this Release.

     (b) 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.

     (c) 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.

     (d) 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.

     (e) This release is not intended to waive rights or claims, if any, that arise after the date
this Release 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 or any rights I may have to
indemnification under the Indemnification Agreement between the Company and me or under the
Company’s charter and bylaws. I understand that the terms and conditions contained within any such
benefit plan or program, specifically including those relating to any vested rights that I may have
in such plan or program, shall be controlling. In addition, notwithstanding the foregoing, nothing
in this

24

 

Release 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 Release.

2. Miscellaneous.

     (a) I acknowledge that the release and waiver provisions of this Release 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 Release 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.

     (b) I have voluntarily chosen to sign this Release and to agree to its terms and provisions. I
have been advised in writing to consult with an attorney prior to executing this Release. 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 Release with an attorney.

     (c) I have been provided and understand that I have at least twenty-one (21) days from receipt
of this Release to decide whether to accept it. I understand that I may elect to accept this
Release 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 Release. I
understand that if I fail to execute and return this Release within four (4) days of the twenty-one
(21) day period, the Release 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 Release during which I may revoke the Release in its entirety. I understand that
any revocation within this period must be submitted, in writing, to Tesoro’s Chairman of its Board
of Director’s and state, “I hereby revoke my acceptance of the release provisions of my Separation
and Waiver of Liability Release.” Revocation must be personally delivered to Tesoro, or express
overnight mailed to Tesoro and postmarked within seven (7) days of execution of this Release.

     (d) This Release 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 Release. 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 Release, I will not be
entitled to the consideration offered by Tesoro.

ACCEPTED:          Executive:

/s/ GREGORY J. GOFF                    

Date: March 29, 2010

25exv10w12

Exhibit 10.12

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is entered into as of May 7, 2009 (the “Effective
Date”) by and between Tesoro Corporation (the “Company”), and Charles S. Parrish (the “Executive”);

WITNESSETH THAT:

     WHEREAS, the Executive is currently employed by the Company as Senior Vice President, General
Counsel and Secretary;

     WHEREAS, effective April 21, 2009, the Executive received a promotion from the Company to
Executive Vice President, General Counsel and Secretary, and the Executive wishes to continue his
employment with the Company in that capacity; and

     WHEREAS, the Company and the Executive wish to formalize the continuation of the employment
relationship in accordance with the terms and conditions set forth below in this Agreement, which
terms and conditions shall supersede those of that certain Management Stability Agreement, dated
December 31, 2008, by and between the Company and the Executive;

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

     1. EMPLOYMENT. The Company shall employ Executive, and Executive shall be employed by the
Company upon the terms and subject to the conditions set forth in this Agreement.

     2. TERM OF EMPLOYMENT. The term of this Agreement shall be a three (3) year period beginning
on the Effective Date and ending on the third anniversary thereof; provided that the term of this
Agreement shall be automatically extended for additional successive one year periods until either
the Company or the Executive terminates it by written notice delivered at least 30 days prior to an
anniversary of the Effective Date. The period during which Executive is employed hereunder shall be
referred to as the “Employment Period”. Either the Company or the Executive shall have the right to
terminate the Employment Period at any time during the term hereof, in accordance with Section 5
below.

     3. DUTIES AND RESPONSIBILITIES.

          (a) Executive shall serve as Executive Vice President, General Counsel and Secretary 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) Executive shall devote substantially all of his working time, attention and energies to
the business of the Company and affiliated entities. Executive may make and manage his personal
investments and engage in other personal activities (provided such investments and other activities
do not violate, in any material respect, the provisions of Section 8 of this Agreement), be
involved in charitable and professional activities and, with the consent of the Board of Directors
of the Company (the “Board”) (which shall not unreasonably be withheld or delayed) serve on boards
of other for profit entities, provided such activities do not materially interfere with the
performance of his duties hereunder. Service on the for profit boards that Executive is currently
serving on are hereby approved.

     4. COMPENSATION AND BENEFITS.

     (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 $500,000 less applicable taxes, or such
higher rate as may be determined from time to time by 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 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.

     (b) ANNUAL BONUS. In addition to the Annual Base Salary, during the Employment Period,
Executive will be entitled to participate in an annual incentive compensation plan of the Company.
The Executive’s target annual bonus will be 70% of his Base Salary as in effect for such year (the
“Target Bonus”), and will be determined based upon achievement of performance goals established by
the Company pursuant to such plan. The Target Bonus will be paid at the time and in the manner
specified under the annual incentive compensation plan of the Company.

     (c) OTHER COMPENSATION. Executive shall be entitled to participate in any incentive or
supplemental compensation plan or arrangement maintained or instituted by the Company, and covering
its principal executive officers, at a level commensurate with his positions and to receive
additional compensation from the Company in such form, and to such extent, if any, as the
Compensation Committee may in its sole discretion from time to time specify.

     (d) WELFARE BENEFIT PLANS. Executive and/or the Executive’s family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without limitation, medical,
prescription drugs, dental, vision, disability, employee life, group life, accidental death and
travel accident insurance plans and programs, pensions, profit sharing programs, incentive
compensation and savings plans and all other similar plans and benefits which the Company from time
to time

2

 

makes available to executives) to the extent applicable generally to other peer executives of the
Company.

     (e) FEE REIMBURSEMENTS. During the Employment Period, the Company will reimburse the Executive
in accordance with 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 or a duly authorized committee thereof
determines such fees are reasonable and in the best interest of the Company. The Executive shall be
reimbursed no later than two and a half months after the end of the calendar year in which the
expenses are incurred; provided, however, the Company’s obligation to reimburse reasonable expenses
pursuant to this subsection will terminate in the event Executive does not request reimbursement in
a timely manner to allow the expense to be paid prior to the expiration of such period.

     (f) EXPENSE REIMBURSEMENT. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the Company in effect for the
Executive at any time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company. In addition, the Executive shall be reimbursed for all
reasonable expenses incurred in connection with professional activities, including but not limited
to, bar association activities, dues and membership fees; continuing legal education expenses,
including but not limited to, tuition, course materials, travel, meals and related expenses; and
any other reasonable expenses incurred in the course of such professional activities. The Executive
shall be reimbursed no later than two and a half months after the end of the calendar year in which
the expenses are incurred; provided, however, the Company’s obligation to reimburse reasonable
expenses pursuant to this subsection will terminate in the event Executive does not request
reimbursement in a timely manner to allow the expense to be paid prior to the expiration of such
period.

     (g) SECURITY BENEFIT. The Company will provide Executive with personal safety and security
protection as appropriate and reasonable under the circumstances.

     (h) OFFICE AND SUPPORT STAFF. During the Employment Period, the Executive shall be entitled to
an appropriate office at the Company’s principal place of business.

     (i) VACATION. During the Employment Period, Executive shall be entitled to vacation each year
in accordance with the Company’s policies in effect from time to time, but in no event less than
four (4) weeks paid vacation per calendar year and an additional one (1) week for five years of
service; and an additional second week for ten years of service. The Executive shall be entitled to
such periods of sick leave as is customarily provided by the Company for its senior executive
employees.

3

 

     5. TERMINATION OF EMPLOYMENT. Executive’s employment hereunder may be terminated under the
following circumstances:

     (a) DEATH. Executive’s employment hereunder shall terminate upon Executive’s death.

     (b) TOTAL DISABILITY. The Company may terminate Executive’s employment hereunder upon
Executive becoming ‘‘Totally Disabled”. For purposes of this Agreement, Executive shall be “Totally
Disabled” if Executive has been physically or mentally incapacitated so as to render Executive
incapable of performing Executive’s essential functions, with or without reasonable accommodation
as required by law, under this Agreement for six (6) consecutive months (such consecutive absence
not being deemed interrupted by Executive’s return to service for less than 10 consecutive business
days if absent thereafter for the same illness or disability). Any such termination shall be upon
thirty (30) days written notice given at any time thereafter while Executive remains Totally
Disabled, provided that a termination for Total Disability hereunder shall not be effective if
Executive returns to full performance of his duties within such thirty (30) day period.

     (c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate Executive’s employment
hereunder for “Cause” at any time. If the Company elects to terminate Executive’s employment for
Cause, the Company shall provide ten (10) days written notice of the Company’s intent to terminate
Executive’s employment for “Cause.”

     (i) For purposes of this Agreement, the term “Cause” shall be limited to (1) willful
misconduct by Executive with regard to the Company which has a material adverse effect on the
Company; (2) the willful refusal of Executive to attempt to follow the proper written direction of
the Chief Executive Officer, provided that the foregoing refusal shall not be “Cause” if Executive
in good faith believes that such direction is illegal, unethical or immoral and promptly so
notifies the Board; (3) substantial and continuing willful refusal by the Executive to attempt to
perform the duties required of him hereunder (other than any such failure resulting from incapacity
due to physical or mental illness) after a written demand for substantial performance is delivered
to the Executive by the Chief Executive Officer which specifically identifies the manner in which
it is believed that the Executive has substantially and continually refused to attempt to perform
his duties hereunder; (4) material breach of a fiduciary duty to the Company through
misappropriation of Company funds or property; or (5) the Executive being convicted of or a plea or
nolo contendere to the charge of a felony (other than a felony involving a traffic violation or as
a result of vicarious liability). For purposes of this paragraph, no act, or failure to act, on
Executive’s part shall be considered “willful” unless done or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the best interests of
the Company.

4

 

     (ii) The ten (10) day notice of intent to terminate for Cause shall mean a notice that shall
indicate the specific termination provision in Section 5(c)(i) relied upon and shall set forth in
reasonable detail the facts and circumstances which provide for a basis for termination for Cause.
Further, the ten (10) day notice of intent to terminate for Cause shall set the date at least ten
(10) days after the date of the notice. Any purported termination for Cause which is held by a
court or arbitrator not to have been based on the grounds set forth in this Agreement or not to
have followed the procedures set forth in this Agreement shall be deemed a termination by the
Company without Cause.

          (d) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate employment hereunder with or
without Good Reason at any time upon thirty (30) days written notice to the Company.

     (i) A Termination for Good Reason means a termination by Executive by written notice given
within thirty (30) days after the occurrence of the Good Reason event, unless such circumstances
are fully corrected prior to the date of termination specified in the Notice of Termination for
Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence or failure to
cause the occurrence, as the case may be, without Executive’s express written consent, of any of
the following circumstances: (1) any material diminution of Executive’s positions, duties or
responsibilities hereunder (except in each case in connection with the termination of Executive’s
employment for Cause or Total Disability or as a result of Executive’s death, or temporarily as a
result of Executive’s illness or other absence), or, the assignment to Executive of duties or
responsibilities that are inconsistent with Executive’s then position; (2) removal of the Executive
from officer positions with the Company specified herein or removal of the Executive from any of
his then officer positions; (3) requiring Executive’s principal place of business to be located
other than in the San Antonio, Texas greater Metropolitan region; (4) a failure by the Company (I)
to continue any bonus plan, program or arrangement in which Executive is entitled to participate
(the “Bonus Plans”), provided that any such Bonus Plans may be modified at the Company’s discretion
from time to time but shall be deemed terminated if any such plan does not remain substantially in
the form in effect prior to such modification and if plans providing Executive with substantially
similar benefits are not substituted therefor (“Substitute Plans”), or (II) to continue Executive
as a participant in the Bonus Plans and Substitute Plans on at least the same basis as to the
potential amount of the bonus Executive participated in prior to any change in such plans or
awards, in accordance with the Bonus Plans and the Substitute Plans, (5) any material breach by the
Company of any provision of this Agreement, including without limitation Section 10 hereof; (6)
failure of any successor to the Company (whether direct or indirect and whether by merger,
acquisition, consolidation or otherwise) to assume in a writing delivered to Executive upon the
assignee becoming such, the obligations of the Company hereunder.

5

 

     (ii) A Notice of Termination for Good Reason shall mean a notice that shall indicate the
specific termination provision relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for Termination for Good Reason. The failure by Executive
to set forth in the Notice of Termination for Good Reason any facts or circumstances which
contribute to the showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his rights hereunder. The
Notice of Termination for Good Reason shall provide for a date of termination not less than ten
(10) nor more than sixty (60) days after the date such Notice of Termination for Good Reason is
given, provided that in the case of the events set forth in Sections 5(d)(i)(1) or (2) the date may
be five (5) days after the giving of such notice.

     (e) TERMINATION BY THE COMPANY WITHOUT CAUSE. The Company may terminate Executive’s employment
hereunder without Cause at any time upon 30 days written notice to Executive.

     (f) EFFECT OF TERMINATION. Upon any termination of employment, Executive shall immediately
resign from all positions with the Company or any of its subsidiaries held by him at such time.

     6. COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT. In the event that Executive’s employment
hereunder is terminated, Executive shall be entitled to the following compensation and benefits
upon such termination:

     (a) TERMINATION IN THE EVENT OF DEATH. In the event that Executive’s employment is terminated
by reason of Executive’s death, the Company shall pay the following amounts to Executive’s
beneficiary or estate:

     (i) Any accrued but unpaid Base Salary for services rendered to the date of death, any accrued
but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the
date of termination, any earned but unpaid bonuses for any prior period, and a pro-rata bonus or
incentive compensation payment for the period in which such termination occurred to the extent
payments are awarded senior executives. Such bonuses or incentive compensation payment shall be
paid pursuant to the terms of the applicable bonus or annual incentive compensation plan;

     (ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and
arrangements (including those referred to in Section 4(d) hereof), as determined and paid in
accordance with the terms of such plans, policies and arrangements;

     (iii) An amount equal to the Base Salary (at the rate in effect as of the date of Executive’s
death) which would have been payable to Executive if Executive had continued in employment for one
additional year. Said payments will be paid to Executive’s estate or beneficiary at the same time
and in the same

6

 

manner as such compensation would have been paid if Executive had remained in active employment;

     (iv) As of the date of termination by reason of Executive’s death, stock options and
restricted stock grants awarded to the Executive shall be fully vested and Executive’s estate or
beneficiary shall have up to one (1) year from the date of death to exercise all such options; and

     (v) As otherwise specifically provided herein.

     (b) TERMINATION IN THE EVENT OF TOTAL DISABILITY. In the event that Executive’s employment is
terminated by reason of Executive’s Total Disability as determined in accordance with Section 5(b),
the Company shall pay the following amounts to Executive:

     (i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any
accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to
the date of termination, any earned but unpaid bonuses for any prior period. Executive shall also
be eligible for a pro-rata bonus or incentive compensation payment for the period in which such
termination occurred to the extent payments are awarded senior executives. Such bonuses or
incentive compensation payment shall be paid pursuant to the terms of the applicable bonus or
annual incentive compensation plan;

     (ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and
arrangements (including those referred to in Section 4(d) hereof) shall be determined and paid in
accordance with the terms of such plans, policies and arrangements;

     (iii) An amount equal to the Base Salary (at the rate in effect as of the date of Executive’s
Total Disability) which would have been payable to Executive if Executive had continued in active
employment for two (2) years following termination of employment, less any payments under any
long-term disability plan or arrangement paid for by the Company. Payment shall be made at the same
time and in the same manner as such compensation would have been paid if Executive had remained in
active employment until the end of such period, but shall not commence until six (6) months have
elapsed from Executive’s termination of employment, at which time the Executive shall receive a
lump sum payment equal to the payments that would have been paid during such 6-month period;

     (iv) As of the date of termination by reason of Executive’s Total Disability, Executive shall
be fully vested in all stock option awards and restricted stock grants and the Executive shall have
up to one (1) year from the date of termination by reason of total disability to exercise all such
options; and

     (v) As otherwise specifically provided herein.

7

 

     (c) TERMINATION FOR CAUSE. In the event that Executive’s employment is terminated by the
Company for Cause, the Company shall pay the following amounts to Executive:

     (i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any
accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to
the date of termination and any earned but unpaid bonuses for any prior period. Such bonuses shall
be paid pursuant to the terms of the applicable bonus plan;

     (ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and
arrangements shall be determined and paid in accordance with the terms of such plans, policies and
arrangements; and

     (iii) As otherwise specifically provided herein.

     (iv) Any stock options, restricted stock or other awards that have not vested prior to the
date of such termination of employment shall be cancelled and any stock options held by Executive
shall be cancelled, whether or not then vested.

     (d) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive voluntarily terminates
employment other than for Good Reason, the Company shall pay the following amounts to Executive:

     (i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any
accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to
the date of termination and any earned but unpaid bonuses for any prior period. Such bonuses shall
be paid pursuant to the terms of the applicable bonus plan;

     (ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and
arrangements shall be determined and paid in accordance with the terms of such plans, policies and
arrangements; and

     (iii) As otherwise specifically provided herein.

     (iv) The treatment of any options, restricted stock or other awards shall be governed in
accordance with the terms of such plan(s) under which the options, restricted stock or other awards
were granted.

     (e) TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR GOOD REASON. In the
event that Executive’s employment is terminated by the Company for reasons other than death, Total
Disability or Cause, or Executive terminates his employment for Good Reason, the Company shall pay
the following amounts to Executive:

8

 

     (i) Any accrued but unpaid Base Salary for services rendered to the date of termination, any
accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to
the date of termination, and any earned but unpaid bonuses for any prior period. Executive shall
also be eligible for a bonus or incentive compensation payment, at the same time, on the same
basis, and to the same extent payments are made to senior executives, pro-rated for the fiscal year
in which the Executive is terminated. Such bonuses or incentive compensation payment shall be paid
pursuant to the terms of the applicable bonus or annual incentive compensation plan;

     (ii) Any benefits to which Executive may be entitled pursuant to the plans, policies and
arrangements referred to in Section 4(d) hereof shall be determined and paid in accordance with the
terms of such plans, policies and arrangements;

     (iii) An amount equal to two times the sum of Executive’s Base Salary plus his Target Annual
Bonus (in each case as then in effect), of which one-half shall be paid in a lump sum six (6)
months after such termination and one-half shall be paid in substantially equal amounts at the same
time and in the same manner as Base Salary would have been paid during the two-year period
following such termination if Executive had remained in active employment until the end of such
period; provided, however, such payments shall not commence until six (6) months after Executive’s
termination of employment, at which time the Executive shall receive a lump sum payment equal to
the payments that would have been made during such 6-month period;

     (iv) If such termination occurs prior to Executive’s 55th birthday, the
Company, at its expense, will provide coverage for Executive and Executive’s spouse and dependents
no less favorable than the coverage provided under all health benefit plans, programs or
arrangements, whether group or individual, in which Executive would be entitled to participate as a
retiree of the Company, and in a manner that such benefits are excluded from the Executive’s income
for federal income tax purposes, until the earliest to occur (A) Executive’s death (provided that
benefits payable to Executive’s beneficiaries shall not terminate upon Executive’s death); or (B)
with respect to any particular plan, program or arrangement, the date Executive becomes covered for
a comparable benefit by a subsequent employer. If such termination occurs at age 55 or older, the
Executive shall be entitled to participate in the Company’s post-retirement benefit programs on the
same basis as other retirement eligible employees of the Company. Payments made by the Company for
coverage under the health benefit plans, programs or arrangements during a taxable year shall not
affect the payments made by the Company for coverage on behalf of the Executive under such plans,
programs or arrangements in another taxable year. The Executive’s right to the Company’s payment of
the cost of coverage hereunder shall not be subject to liquidation or exchange for another benefit.

9

 

     (v) Except to the extent prohibited by law, and except as otherwise provided herein, Executive
will be 100% vested in all benefits, awards, and grants accrued but unpaid as of the date of
termination under any supplemental and/or incentive compensation plans in which Executive was a
participant as of the date of termination. Executive shall receive additional years of service
credit and age credit under the Tesoro Corporation Amended and Restated Executive Security Plan to
the extent necessary to determine his benefit thereunder as if he had attained age fifty-five (55)
and had completed twenty (20) years of service;

     (vi) Executive shall continue to vest in all stock options or restricted stock grants over the
two (2) year period commencing on the date of such termination of employment. Executive shall have
two (2) years after the date of termination of employment to exercise all options, unless by virtue
of the particular stock option award, the option grant expires on an earlier date; and

     (vii) As otherwise specifically provided herein.

     (f) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this Agreement, under
the Indemnity Agreement or under the terms of any incentive compensation, employee benefit, or
fringe benefit plan applicable to Executive at the time of Executive’s termination or resignation
of employment, Executive shall have no right to receive any other compensation, or to participate
in any other plan, arrangement or benefit, with respect to future periods after such termination or
resignation.

     (g) NO MITIGATION; NO SET-OFF. In the event of any termination of employment hereunder,
Executive shall be under no obligation to seek other employment and there shall be no offset
against any amounts due Executive under this Agreement on account of any remuneration attributable
to any subsequent employment that Executive may obtain. The amounts payable hereunder shall not be
subject to setoff, counterclaim, recoupment, defense or other right, which the Company may have
against the Executive or others, except upon obtaining by the Company of a final unappealable
judgment against Executive.

     7. COMPENSATION PAYABLE FOLLOWING CHANGE IN CONTROL.

     (a) PAYMENTS FOLLOWING A CHANGE IN CONTROL. Notwithstanding anything to the contrary contained
herein, should Executive at any time within two (2) years of a “Change in 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”, or (ii) voluntary termination by Executive for “Good
Reason”, the Company (or its successor) shall pay to Executive except as otherwise expressly set
forth herein, the following severance payments and benefits:

     (i) An amount equal to three (3) times the sum of Executive’s Base Salary plus his Target
Annual Bonus (in each case as then in effect) payable in a lump sum six (6) months following
Executive’s termination of employment;

10

 

     (ii) Executive will receive three (3) years additional service credit under the current
non-qualified supplemental pension plans, or successors thereto, of the Company applicable to the
Executive; and

     (iii) If such termination occurs prior to Executive’s 55th birthday, the
Company, at its expense, will provide coverage for Executive and Executive’s spouse and dependents
no less favorable than the coverage provided under all health benefit plans, programs or
arrangements, whether group or individual, in which Executive would be entitled to participate as a
retiree of the Company, and in a manner that such benefits are excluded from the Executive’s income
for federal income tax purposes, until the earliest to occur (A) Executive’s death (provided that
benefits payable to Executive’s beneficiaries shall not terminate upon Executive’s death); or (B)
with respect to any particular plan, program or arrangement, the date Executive becomes covered for
a comparable benefit by a subsequent employer. If such termination occurs at age 55 or older, the
Executive shall be entitled to participate in the Company’s post-retirement benefit programs on the
same basis as other retirement eligible employees of the Company.

(iv) Payments made by the Company for coverage under the health benefit plans, programs or
arrangements during a taxable year shall not affect the payments made by the Company for coverage
on behalf of the Executive under such plans, programs or arrangements in another taxable year. The
Executive’s right to the Company’s payment of the cost of coverage hereunder shall not be subject
to liquidation or exchange for another benefit.

(v) Executive will be 100% vested in all benefits, awards, and grants (including stock option
grants and stock awards), and all amounts accrued but unpaid as of the Change in Control under any
non-qualified pension plan, supplemental and/or incentive compensation or bonus plans in which
Executive was a participant as of the date of the Change in Control. All stock options shall remain
exercisable for a period of three (3) years following the Change in Control, but in no event later
than the date on which the particular option would expire by its terms or the tenth (10th)
anniversary of the date on which such award was granted. Executive shall also receive a bonus or
incentive compensation payment (the “Bonus Payment”) equal to his Base Salary, multiplied by his
annual incentive Target Bonus percentage, each as then in effect, pro-rated as of the effective
date of the termination. The Bonus Payment shall be paid in a lump sum six (6) months following the
Executive’s termination of employment.

For purposes of this Agreement, following a Change in Control, the term “Company” shall include the
entity surviving such Change in Control.

     (b) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

     (i) In the event that the Executive shall become entitled to payments and/or benefits provided
by this Agreement or any other amounts in the “nature of

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compensation” (whether pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a change of ownership or effective
control covered by Section 280G(b)(2) of the Code or any person affiliated with the Company or such
person) as a result of such change in ownership or effective control (collectively the “Company
Payments”), and such Company Payments will be subject to the tax (the “Excise Tax”) imposed by
Section 4999 of the Code (and any similar tax that may hereafter be imposed by any taxing
authority) the Company shall pay to the Executive at the time specified in subsection (iv) below an
additional amount (the “Gross-up Payment”) such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Company Payments and any U.S. federal, state, and for
local income or payroll tax upon the Gross-up Payment provided for by this Section 7(b), but before
deduction for any U.S. federal, state, and local income or payroll tax on the Company Payments,
shall be equal to the Company Payments.

     (ii) For purposes of determining whether any of the Company Payments and Gross-up Payments
(collectively the “Total Payments”) will be subject to the Excise Tax and the amount of such Excise
Tax, (x) the Total Payments shall be treated as “parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “parachute payments” in excess of the “base amount” (as defined
under Code Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless
and except to the extent that, in the opinion of the Company’s independent certified public
accountants appointed prior to any change in ownership (as defined under Code Section 280G(b)(2))
or tax counsel selected by such accountants (the “Accountants”) such Total Payments (in whole or in
part) either do not constitute “parachute payments,” represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the “base
amount” or are otherwise not subject to the Excise Tax, and (y) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code.

     (iii) For purposes of determining the amount of the Gross-up Payment, the Executive shall be
deemed to pay U.S. federal income taxes at the highest marginal rate of U.S. federal income
taxation in the calendar year in which the Gross-up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s
residence for the calendar year in which the Company Payment is to be made, net of the maximum
reduction in U.S. federal income taxes which could be obtained from deduction of such state and
local taxes if paid in such year. In the event that the Excise Tax is subsequently determined by
the Accountants to be less than the amount taken into account hereunder at the time the Gross-up
Payment is made, the Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment attributable to the Excise
Tax and U.S. federal, state and local income tax

12

 

imposed on the portion of the Gross-up Payment being repaid by the Executive if such repayment
results in a reduction In Excise Tax or a U.S. federal, state and local income tax deduction), plus
interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of the Gross-up Payment to be refunded to
the Company has been paid to any U.S. federal, state and local tax authority, repayment thereof
(and related amounts) shall not be required until actual refund or credit of such portion has been
made to the Executive, and interest payable to the Company shall not exceed the interest received
or credited to the Executive by such tax authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the course of action to be pursued (and the
method of allocating the expense thereof) if the Executive’s claim for refund or credit is denied.

     In the event that the Excise Tax is later determined by the Accountant or the Internal Revenue
Service to exceed the amount taken into account hereunder at the time the Gross-up Payment is made
(including by reason of any payment the existence or amount of which cannot be determined at the
time of the Gross-up Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess) at the time that
the amount of such excess is finally determined.

     (iv) The Gross-up Payment or portion thereof provided for in subsection (iii) above shall be
paid not later than the thirtieth (30th) day following an event occurring which subjects the
Executive to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or
portion thereof cannot be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Accountant, of the minimum
amount of such payments and shall pay the remainder of such payments (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code), subject to further payments pursuant to
subsection (iii) hereof, as soon as the amount thereof can reasonably be determined, but in no
event later than the ninetieth day after the occurrence of the event subjecting the Executive to
the Excise Tax. In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall be payable by the Executive on the
fifth day after demand by the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).

     (v) In the event of any controversy with the Internal Revenue Service (or other taxing
authority) with regard to the Excise Tax, the Executive shall permit the Company to control issues
related to the Excise Tax (at its expense), provided that such issues do not potentially materially
adversely affect the Executive, but the Executive shall control any other issues. In the event the
issues are interrelated, the Executive and the Company shall in good faith cooperate so as not to
jeopardize resolution of either issue, but if the parties cannot agree the Executive shall make the
final determination with regard to the issues. In the

13

 

event of any conference with any taxing authority as to the Excise Tax or associated income taxes,
the Executive shall permit the representative of the Company to accompany the Executive, and the
Executive and the Executive’s representative shall cooperate with the Company and its
representative.

     (vi) The Company shall be responsible for all charges of the Accountant.

     (vii) The Company and the Executive shall promptly deliver to each other copies of any written
communications, and summaries of any verbal communications, with any taxing authority regarding the
Excise Tax covered by this Section 7(b).

     (c) CHANGE IN CONTROL means (i) there shall be consummated (A) any consolidation or merger of
Company in which Company is not the continuing or surviving corporation or pursuant to which shares
of Company’s Common Stock would be converted into cash, securities or other property, other than a
merger of Company where a majority of the board of directors of the surviving corporation are, and
for a one-year period after the merger continue to be, persons who were directors of Company
immediately prior to the merger or were elected as directors, or nominated for election as
director, by a vote of at least two-thirds of the directors then still in office who were directors
of 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
Company, or (ii) the shareholders of Company shall approve any plan or proposal for the liquidation
or dissolution of 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
Company or a subsidiary thereof or any employee benefit plan sponsored by Company or a subsidiary
thereof, shall become the beneficiary owner (within the meaning of Rule 13d-3 under the Exchange
Act) of securities of Company representing 35 percent or more of the combined voting power of
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 shall cease for any reason to constitute at least a majority
thereof, unless election or the nomination by the Board for election by 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.

     8. RESTRICTIVE COVENANTS.

     (a) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times during Executive’s
period of employment with the Company, and for one (1) year thereafter, Executive will not engage
in, assist, or have any active interest or involvement, whether as an employee, agent, consultant,
creditor, advisor, officer, director, stockholder (excluding holding of less than 3% of the stock
of a public

14

 

company), partner, proprietor or any type of principal whatsoever in any person, firm, or business
entity which, directly or indirectly, is engaged in the business competitive with that conducted
and carried on by the Company, without the Company’s specific written consent to do so.
Notwithstanding the foregoing, Executive may be employed by or provide services to, an investment
banking firm or consulting firm that provides services to entities described in the previous
sentence, provided that Executive does not personally represent or provide services to such
entities.

     (b) NON SOLICITATION. Executive covenants and agrees that at all times during Executive’s
period of employment with the Company, and for a period of two (2) years after the termination
thereof, whether such termination is voluntary or involuntary by wrongful discharge, or otherwise,
Executive will not directly and personally knowingly (i) induce any customers of the Company or
corporations affiliated with the Company to patronize any similar business which competes with any
material business of the Company; (ii) after his termination of employment, request or advise any
customers of the Company or corporations affiliated with the Company to withdraw, curtail or cancel
such customer’s business with the Company; or (iii) after his termination of employment,
individually or through any person, firm, association or corporation with which he is now, or may
hereafter become associated, solicit, entice or induce any then employee of the Company, or any
subsidiary of the Company, to leave the employ of the Company, or such other corporation, to accept
employment with, or compensation from the Executive, or any person, firm, association or
corporation with which Executive is affiliated without prior written consent of the Company. The
foregoing shall not prevent Executive from serving as a reference for employees.

     (c) PROTECTED INFORMATION. Executive recognizes and acknowledges that Executive has had and
will continue to have access to various confidential or proprietary information concerning the
Company, corporations affiliated with the Company, and its clients and third parties doing business
with the Company of a special and unique value which may include, without limitation, (i) books and
records relating to operation, finance, accounting, sales, personnel and management, (ii) policies
and matters relating particularly to operations such as customer service requirements, costs of
providing service and equipment, operating costs and pricing matters, and (iii) various trade or
business secrets, including customer lists, route sheets, business opportunities, marketing or
business diversification plans, business development and bidding techniques, methods and processes,
financial data and the like, to the extent not generally known in the industry (collectively, the
“Protected Information”). Executive therefore covenants and agrees that Executive will not at any
time, either while employed by the Company or afterwards, knowingly make any independent use of, or
knowingly disclose to any other person or organization (except as authorized by the Company) any of
the Protected Information, provided that (I) while employed by the Company, Executive may in good
faith make disclosures he believes desirable, and (II) Executive may comply with legal process.
Furthermore, Executive acknowledges and agrees that to the extent he has provided or been privy to
others providing legal advice to the Company, such advice is protected by the attorney-client
privilege, and such privilege belongs to the Company and cannot be waived by the Executive. Such
advice cannot be disclosed by Executive without the Company’s written permission.

15

 

     (d) RIGHT TO PRACTICE LAW. Notwithstanding the language in Section 8(a), (b) and (c) above,
nothing in this Agreement is intended nor shall be interpreted to preclude Executive from
practicing law subsequent to his separation from the Company’s employ for any reason.

     9. ENFORCEMENT OF COVENANTS.

     (a) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the covenants set forth in
Section 8 hereof will cause irreparable damage to the Company with respect to which the Company’s
remedy at law for damages may be inadequate. Therefore, in the event of breach or threatened breach
of the covenants set forth in Section 8 by Executive, Executive and the Company agree that the
Company shall be entitled to the following particular forms of relief, in addition to remedies
otherwise available to it at law or equity; injunctions, both preliminary and permanent, enjoining
or restraining such breach or threatened breach and Executive hereby consents to the issuance
thereof forthwith and without bond by any court of competent jurisdiction.

     (b) SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof constitute a series
of separate covenants, one for each applicable State in the United States and the District of
Columbia, and one for each applicable foreign country. If in any judicial proceeding, a court shall
hold that any of the covenants set forth in Section 8 exceed the time, geographic, or occupational
limitations permitted by applicable laws, Executive and the Company agree that such provisions
shall and are hereby reformed to the maximum time, geographic, or occupational limitations
permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate
covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed
eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent
necessary to permit the remaining separate covenants to be enforced in such proceeding. Executive
and the Company further agree that the covenants in Section 8 shall each be construed as a separate
agreement independent of any other provisions of this Agreement, and the existence of any claim or
cause of action by Executive against the Company whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of any of the covenants of Section
8.

     10. INDEMNIFICATION. The Company shall indemnify and hold harmless Executive to the fullest
extent permitted by law and in accordance with the existing Indemnification Agreement dated
September 15, 2008 between Company and the Executive (the “Indemnification Agreement”) for any
action or inaction of Executive while serving as an officer and director of the Company or, at the
Company’s request, as an officer or director of any other, entity or as a fiduciary of any benefit
plan. The Company shall cover the Executive under directors and officers liability insurance both
during and, while potential liability exists, after the Employment Term in the same amount and to
the same extent as the Company covers its other officers and directors.

     11. DISPUTES AND PAYMENT OF ATTORNEY’S FEES. If at any time during the term of this Agreement
or afterwards there should arise any dispute as to the validity,

16

 

interpretation or application of any term or condition of this Agreement, the Company agrees, upon
written demand by Executive (and Executive shall be entitled upon application to any court of
competent jurisdiction, to the entry of a mandatory injunction, without the necessity of posting
any bond with respect thereto, compelling the Company) to promptly provide sums sufficient to pay
on a current basis (either directly or by reimbursing Executive) Executive’s costs and reasonable
attorney’s fees (including expenses of investigation and disbursements for the fees and expenses of
experts, etc.) incurred by Executive in connection with reasonably seeking to enforce the terms of
this Agreement. The provisions of this Section 11, without implication as to any other section
hereof, shall survive the expiration or termination of this Agreement and of Executive’s employment
hereunder.

     12. WITHHOLDING OF TAXES. The Company may withhold from any compensation and benefits payable
under this Agreement all applicable federal, state, local, or other taxes.

     13. SOURCE OF PAYMENTS. All payments provided under this Agreement, other than payments made
pursuant to a plan which provides otherwise, shall be paid from the general funds of the Company,
and no special or separate fund shall be established, and no other segregation of assets made, to
assure payment. Executive shall have no right, title or interest whatever in or to any investments
which the Company may make to aid the Company in meeting its obligations hereunder. To the extent
that any person acquires a right to receive payments from the Company hereunder, such right shall
be no greater than the right of an unsecured creditor of the Company.

     14. ASSIGNMENT. Except as otherwise provided in this Agreement, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective heirs, representatives,
successors and assigns. This Agreement shall not be assignable by Executive (but any payments due
hereunder which would be payable at a time after Executive’s death shall be paid to Executive’s
designated beneficiary or, if none, his estate) and shall be assignable by the Company only to any
financially solvent corporation or other entity resulting from the reorganization, merger or
consolidation of the company with any other corporation or entity or any corporation or entity to
or with which. the Company’s business or substantially all of its business or assets may be sold,
exchanged or transferred, and it must be so assigned by the Company to, and accepted as binding
upon it by, such other corporation or entity in connection with any such reorganization, merger,
consolidation, sale, exchange or transfer in a writing delivered to Executive in a form reasonably
acceptable to Executive (the provisions of this sentence also being applicable to any successive
such transaction).

     15. ENTIRE AGREEMENT; AMENDMENT. This Agreement shall supersede any and all existing oral or
written agreements, representations, or warranties between Executive and the Company or any of its
subsidiaries or affiliated entities relating to the terms of Executive’s employment by the Company.
It may not be amended except by a written agreement signed by both parties.

     16. GOVERNING LAW. This Agreement shall be governed by and construed to 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.

17

 

     17. REQUIREMENT OF TIMELY PAYMENTS. If any amounts which are required, or determined to be
paid or payable, or reimbursed or reimbursable, to Executive under this Agreement (or any other
plan, agreement, policy or arrangement with the Company) are not so paid promptly at the times
provided herein or therein, such amounts shall accrue interest, compounded daily, at an 8% annual
percentage rate, from the date such amounts were required or determined to have been paid or
payable, reimbursed or reimbursable to Executive, until such amounts and any interest accrued
thereon are finally and fully paid, provided, however, that in no event shall the amount of
interest contracted for, charged or received hereunder, exceed the maximum non-usurious amount of
interest allowed by applicable law.

     18. NOTICES. Any notice, consent, request or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly given when delivered
or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand
delivery, to those listed below at their following respective addresses or at such other address as
each may specify by notice to the others:

	 	 	 

	To the Company:

	 	Tesoro Corporation
	 

	 	300 Concord Plaza Drive
	 

	 	San Antonio, Texas 78216
	 

	 	Attention: Bruce A. Smith
	 
	 	 
	To Executive:

	 	At the address for Executive set forth below.

     19. MISCELLANEOUS.

     (a) WAIVER. The failure of a party to insist upon strict adherence to any term of this
Agreement 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 Agreement.

     (b) SEPARABILITY. Subject to Section 9 hereof, if any term or provision of this Agreement 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 Agreement 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 Agreement.

     (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 Agreement 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 Agreement.

     (f) DEFERRED COMPENSATION. This Agreement is, to the extent applicable, intended to meet the
requirements of Section 409A of the Code and shall be

18

 

administered, construed and interpreted in a manner that is intended to meet those requirements.
Notwithstanding any provision of this Agreement to the contrary, for purposes of determining the
timing of any payment under this Agreement that is subject to Code Section 409A and is required to
be made upon the Executive’s termination of employment, the Executive’s employment shall not be
considered terminated until he has experienced a separation from service. For purposes of this
Agreement, a “separation from service” occurs when the Company and the Executive reasonably
anticipate a permanent reduction in the level of bona fide services performed by the Executive for
the Company and its affiliates to 20% or less of the average level of bona fide services performed
by the Executive for the Company and its affiliates (whether as an employee or an independent
contractor) in the immediately preceding thirty-six (36) months. The determination of whether a
separation from service has occurred shall be made by the Compensation Committee of the Board in
accordance with the provisions of Section 409A.

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

	 	 	 	 	 	 	 	 	 	 	 

	TESORO CORPORATION	 	 	 	EXECUTIVE
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ BRUCE A. SMITH	 	 	 	/s/ CHARLES S. PARRISH	 	 
	 	 	 	 	 	 	 	 	 
	Bruce A. Smith

Chairman of the Board of Directors,

President and Chief Executive Officer	 	 	 	Charles S. Parrish	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: May 7, 2009	 	 	 	Date: May 7, 2009	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Address:
	 	315 Nottingham

San Antonio, Texas 78209	 	 

19

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