Document:

exv10w1

EXHIBIT 10.1

TESORO CORPORATION

AMENDED AND RESTATED EXECUTIVE SECURITY PLAN

EFFECTIVE JANUARY 1, 2009

 

 

TESORO CORPORATION

AMENDED AND RESTATED EXECUTIVE SECURITY PLAN

PREAMBLE

The principal objective of this Amended and Restated Executive Security Plan (the “Plan”) is to
ensure the payment of a competitive level of retirement income in order to attract, retain and
motivate selected executives. The plan is designed to provide a benefit which, when added to other
retirement income of the executive, will meet the objective described above. This Plan is a
complete amendment and restatement of the Plan, which was originally established as a restatement
and amendment of the Tesoro Executive Post Retirement Benefit Plan and Tesoro Executive Death
Benefit Plan, and subsequently amended and restated, effective January 1, 2005. The Plan, as
amended and restated, effective January 1, 2009 (except as otherwise specifically noted herein), is
intended to conform to the requirements of Section 409A of the Code, together with the Regulations,
and is intended to qualify as an unfunded plan maintained primarily for the purpose of providing
benefits for a select group of management and highly compensated employees of the Company and its
Subsidiaries.

SECTION I

DEFINITIONS

	1.1	 	“Affiliate” means each entity that would be considered a single employer with the Company
under Section 414(b) or Section 414(c) of the Code, except that the phrase “at least 50%”
shall be substituted for the phrase “at least 80%” as used therein.
	 
	1.2	 	“Aggregated Plan” means all agreements, methods, programs and other arrangements that are
aggregated with this Plan under Section 1.409A-1(c) of the Regulations.
	 
	1.3	 	“Basic Compensation” shall have the meaning of such term, as set forth in the Tesoro
Corporation Retirement Plan, as in effect on the date of a Participant’s Retirement, but
determined without regard to any compensation limits imposed by the Code, and, further
provided, a normal bonus otherwise includible as Basic Compensation shall be credited in the
calendar year in which such bonus is earned and not in the calendar year when paid, if
different.
	 
	1.4	 	“Beneficiary” means the person or legal entity designated in writing by a Participant to
receive, after his death, any death benefits provided by the Plan. If no designation is in
effect at the time of the Participant’s death, or if no designated person shall survive the
Participant, the Beneficiary shall be the Participant’s estate.
	 
	1.5	 	“Board” means the Board of Directors of the Company.
	 
	1.6	 	“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,

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	 	 	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), other than Company or a Subsidiary thereof
or any employee benefit plan sponsored by Company or a Subsidiary thereof, shall become the beneficial
owner (within the meaning of Rule 13c-3 under the Securities Exchange Act of 1934) 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.
	 
	1.7	 	“Chief Executive Officer” means the Chief Executive Officer of the Company.
	 
	1.8	 	“Code” means the Internal Revenue Code of 1986, as amended from time to time.
	 
	1.9	 	“Committee” means the Tesoro Corporation Employee Benefits Committee appointed by the
Compensation Committee of the Board or such other committee designated by the Compensation
Committee of the Board to discharge the duties of the Committee hereunder.
	 
	1.10	 	“Company” means Tesoro Corporation, a Delaware corporation, or any successor thereto.
	 
	1.11	 	“Disabled” or “Disability” means that a Participant is entitled to benefits under the
long-term disability plan of the Company or an Affiliate.
	 
	1.12	 	“Distribution Schedule” means the method of distributions elected (or deemed elected) by a
Participant, which method may be either a lump sum payment or an annuity, pursuant to which
distribution of the Participant’s benefit hereunder shall be made or shall commence. Such
election shall be made at the time and in the manner described in Section 3.2 hereof and shall
be subject to the provisions thereof.
	 
	1.13	 	“Early Retirement Date” means the date on which a Participant has either: (i) both attained
age 55 and is credited with at least 5 years of Service or (ii) attained age 50 and

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	 	 	is credited with at least eighty (80) points, with points credited for this purpose by
adding the aggregate of a Participant’s age and Service, each of which shall be determined
in years and completed months rather than completed years only, and including “deemed years
of age” granted pursuant to an employment agreement, change in control agreement, separation
agreement or any other agreement between a Participant and the Company or an Affiliate.
	 
	1.14	 	“Earnings” shall mean the amount determined by dividing a Participant’s aggregate Basic
Compensation for the three (3) calendar years out of the last seven (7) calendar years
(including the year of such Participant’s Retirement) for which the Participant’s Basic
Compensation was the greatest by the number of full calendar months of employment during such
three (3)-calendar year period.
	 
	1.15	 	“Funded Plan” means the Tesoro Petroleum Corporation Funded Executive Security Plan.
	 
	1.16	 	“Lump Sum Interest Rate” means the discount rate used for the Company’s financial disclosure
purposes under Financial Accounting Standards Statement No. 158 for the December 31 prior to
or coincident with the Participant’s Retirement Date.
	 
	1.17	 	“Lump Sum Mortality Table” means the mortality table used for the Company’s financial
disclosure purposes under Financial Accounting Standards Statement No. 158 for the December 31
prior to or coincident with the Participant’s Retirement Date. For this purpose, the
mortality table will be a unisex table based on 95% of the male rates and 5% of the female
rates.
	 
	1.18	 	“Other Retirement Income” means the retirement income payable to a Participant from the
following sources and assumed to commence at the earliest date possible coincident with or
immediately following the Participant’s Retirement Date:

	 	•	 	Qualified and nonqualified retirement benefits from a prior employer of the
Participant if said prior employer or employer facility was acquired by or merged into
the Company or any Affiliate at any time and benefit service with the prior employer is
recognized by the Company for any retirement plan, qualified or nonqualified, pursuant
to the terms of an acquisition agreement or as otherwise provided under a separate
agreement with the Company or an Affiliate.
	 
	 	•	 	Social Security Benefit as defined in Section 1.28 hereof.

	1.19	 	“Participant” means an officer of the Company or an Affiliate with the title of Senior Vice
President or above who is recommended for participation by the Chief Executive Officer and
approved by the Compensation Committee of the Board as eligible to participate.
	 
	1.20	 	“Plan” means the Tesoro Corporation Amended and Restated Executive Security Plan, effective
January 1, 2009 (except as otherwise specifically noted herein), as amended from time to time.

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	1.21	 	“Regulations” means the Treasury Regulations promulgated under the Code.
	 
	1.22	 	“Retirement” means a Participant’s Separation from Service on or after the earlier of:
(i) his Early Retirement Date or (ii) a Change in Control.
	 
	1.23	 	“Retirement Date” means the date of a Participant’s Retirement.
	 
	1.24	 	“Retirement Plan” means the Tesoro Corporation Retirement Plan, as amended from time to time.
	 
	1.25	 	“Retirement Plan Benefit” means the amount of monthly benefit payable from the Retirement
Plan to a Participant in the form of a straight life annuity and assumed to commence at the
earliest date possible coincident with or immediately following the Participant’s Retirement
Date.
	 
	1.26	 	“Separation from Service” means a reasonably anticipated permanent reduction in the level of
bona fide services performed by the Participant for the Company and its Affiliates to 20% or
less of the average level of bona fide services performed by the Participant for the Company
and its Affiliates (whether as an employee or an independent contractor) in the immediately
preceding thirty-six (36) months (or the full period of service to the Company and its
Affiliates if the Participant has been providing services to the Company and its Affiliates
for fewer than thirty-six (36) months). The determination of whether a Separation from
Service has occurred shall be made by the Committee in accordance with the provisions of
Section 409A of the Code and the Regulations promulgated thereunder.
	 
	1.27	 	“Service” means a Participant’s “Vesting Service,” as such term is defined in the Retirement
Plan, but calculated in years and completed months rather than completed years only, and
including “deemed service” granted pursuant to an employment agreement, change in control
agreement, separation agreement or any other agreement between a Participant and the Company
or an Affiliate.
	 
	1.28	 	“Social Security Benefit” means the monthly primary insurance amount estimated by the
Committee to be payable to the Participant at age 65 under the federal Social Security Act,
provided, however, that:

	 	(a)	 	the Social Security Benefit for a Participant who terminates employment prior
to age 65 will be calculated assuming:

	 	(i)	 	the Participant will not receive any future wages which would
be treated as wages for purposes of the federal Social Security Act, and
	 
	 	(ii)	 	the Participant will elect to begin receiving his Social
Security Benefit as of the earliest age then allowable under said Social
Security Act, or if later, at actual date of Retirement.

	 	(b)	 	the Social Security Benefit, once calculated, will be frozen as of the date the
Participant terminates employment.

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	1.29	 	“Subsidiary” means any entity in which the Company owns or otherwise controls, directly or
indirectly, stock or other ownership interests having the voting power to elect a majority of
the board of directors, or other governing group having functions similar to a board of
directors, as determined by the Committee.

          The masculine gender, where appearing in the Plan, will be deemed to include the feminine
gender, and the singular may include the plural, unless the context clearly indicates to the
contrary.

SECTION II

ELIGIBILITY FOR BENEFITS

	2.1	 	Each Participant is eligible to receive a benefit under this Plan upon his Retirement. Such
benefit shall commence as provided in Section 4.1 hereof. Except as provided in Section V
hereof, no benefit is payable hereunder in the event of a Participant’s Separation from
Service prior to Retirement except in the event of such Participant’s Disability, as provided
in Section 2.2 below, or a Change in Control, as provided in Section 4.5 below.
	 
	2.2	 	In the event a Participant becomes Disabled while in the active employment of the Company or
an Affiliate and eligible to participate hereunder, he shall be entitled to the retirement
benefit determined under Section 3.1 payable on the first day of the month following the date
on which such Participant has both attained the age of 65 and is credited with at least 5
years of Service, but based upon the Service the Participant would have accrued had he
remained in active employment until such date and continued at the same rate of Earnings until
that date. Notwithstanding the foregoing, no Participant shall be entitled to credit for
Service after the date on which such Participant is no longer considered Disabled.
	 
	2.3	 	Notwithstanding anything herein to the contrary, if a Participant who is receiving, or may be
entitled to receive, a benefit hereunder, engages in competition with the Company (without
prior authorization given by the Committee in writing) or is discharged for cause, or performs
acts of willful malfeasance or gross negligence in a matter of material importance to the
Company, payments thereafter payable hereunder to such Participant or such Participant’s
Beneficiary will, at the discretion of the Committee, be forfeited and the Company will have
no further obligation hereunder to such Participant or Beneficiary.

SECTION III

AMOUNT AND FORM OF RETIREMENT BENEFIT

	3.1	 	The monthly retirement benefit under this Plan will equal 4% of Earnings times the first 10
years of Service, plus 2% of Earnings times the next 10 years of Service, plus 1% of Earnings
times the next 10 years of Service, actuarially reduced by seven percent (7%) per year from
age sixty (60) for Participants who have not attained age 55 with ten (10) years of Service by
December 31, 2005 and who retire prior to age sixty (60), and offset by any Retirement Plan
Benefit and any Other Retirement Income. Notwithstanding the foregoing, no credit will be
included under this Plan formula for Service in excess of 30

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		 	years. The amount payable under this Plan shall also be reduced by the amount of the vested
Basic Pension paid or payable under the Funded Plan (without regard to whether a smaller,
adjusted amount is in fact paid from such Funded Plan after retirement because of prior
distributions made from such Funded Plan to enable the Participant to pay taxes resulting
from his participation in such Funded Plan).
	 
	3.2	 	Each Participant may, within thirty (30) days of the date on which he is notified of his
eligibility to participate in the Plan, irrevocably elect the Distribution Schedule pursuant
to which benefits hereunder will be paid, subject to the restrictions of the Plan. The
Participant’s election shall become effective immediately following the Committee’s receipt of
the Participant’s executed participation agreement. A Participant’s failure to elect a
Distribution Schedule in accordance with this Section 3.2 shall be deemed an election by the
Participant to receive his benefits hereunder in the form of a single life annuity, payable
for the Participant’s lifetime, unless the Participant elects an actuarially equivalent life
annuity, as provided below. The Participant’s election (or deemed election) shall become
irrevocable as of the last day of the 30-day period during which the Participant is permitted
to make an election in accordance with this Section 3.2, except as provided below. If a
Participant has timely elected an annuity form of payment, or if the Participant has failed to
elect a Distribution Schedule, resulting in a deemed election of a single life annuity, the
benefit determined under this Plan will be paid in the form of a single life annuity, payable
for the Participant’s lifetime, unless, prior to the date on which an annuity payment has been
made, and within the time and in the manner determined by the Committee, the Participant
elects an actuarially equivalent life annuity, within the meaning of Section
1.409A-2(b)(2)(ii) of the Regulations. Subject to the preceding sentence. actuarially
equivalent life annuities shall be calculated by using the applicable actuarial assumptions
set forth in the Retirement Plan. The actuarially equivalent life annuity forms available
hereunder shall be those forms of life annuity set forth in the Retirement Plan as in effect
on the date of the Participant’s Separation from Service. Lump sum amounts shall be
determined by using the Lump Sum Interest Rate and the Lump Sum Mortality Table.
	 
	3.3	 	Notwithstanding any provision herein to the contrary, effective December 12, 2008, each
Participant who is actively employed by the Company or an Affiliate and who remains actively
employed through the 31st day of December, 2008, may elect to modify an existing
election (or deemed election) provided that such election: (i) may apply only to amounts that
would not otherwise be payable in 2008, (ii) may not cause an amount to be paid in 2008 that
would not otherwise be payable in 2008, (iii) shall be made no later than December 31, 2008
and prior to such earlier date as may be established by the Committee, and (iv) shall be made
in the manner and subject to such restrictions as shall be determined by the Committee. If a
Participant modifies an election (or deemed election) pursuant to this Section 3.3 and thereby
elects a lump sum form of payment, such Participant will not later be eligible to elect an
actuarially equivalent life annuity form of payment.

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SECTION IV

PAYMENT OF RETIREMENT BENEFITS

	4.1	 	Benefits payable in accordance with Section III will be calculated as of the first day of the
month next following the month of the Participant’s Retirement and shall commence, or in the
case of a lump sum payment, be distributed in full on the first day of the seventh
(7th) calendar month beginning after the Participant’s Retirement Date. Benefits
payable in the form of an annuity will continue to be paid on the first day of each succeeding
month. The last such payment will be on the first day of the month in which the retired
Participant dies unless another annuity form of payment that contemplates payments made
subsequent to the Participant’s death, is elected in accordance with Section 3.2. The first
payment will include all amounts that would otherwise have been paid during the period
commencing on the first day of the month next following the month of the Participant’s
Retirement and ending on such payment date.
	 
	4.2	 	The Company shall be liable for all benefits due the Participants under the Plan.
	 
	4.3	 	Under all circumstances, the rights of the Participants to the assets held in a rabbi trust,
if any, created with respect to the Plan shall be no greater than the rights expressed in this
Plan. Nothing contained in the trust agreement which creates any such rabbi trust shall
constitute a guarantee by the Company that the amounts transferred by it to the trust shall be
sufficient to pay any benefits under the Plan or would place the Participant in a secured
position ahead of judgment and/or general creditors should the Company become insolvent or
bankrupt. Any trust agreement established with respect to the Plan must specifically set out
these principles so it is clear in the trust agreement that the Participants are only
unsecured general creditors of the Company with respect to their benefits under the Plan.
	 
	4.4	 	The Plan is only a general corporate commitment and each Participant must rely upon the
general credit of the Company for the fulfillment of its obligations under the Plan. Under
all circumstances the rights of Participants to any asset held by the Company shall be no
greater than the rights expressed in this Plan. Nothing contained in this Plan shall
constitute a guarantee by the Company that the assets of the Company will be sufficient to pay
any benefits under the Plan or would place the Participant in a secured position ahead of
general creditors and judgment creditors of the Company. Though the Company may establish or
become a signatory to a rabbi trust and may accumulate assets to help fulfill its obligations
at any time, the Plan and any trust created, shall not create any lien, claim, encumbrance,
right, title or other interest of any kind in any Participant in any asset held by the
Company, contributed to any trust created, or otherwise be designated to be used for payment
of any of its obligations created in this agreement. No specific assets of the Company have
been or will be set aside, or will be transferred to a trust or will be pledged for the
performance of the Company’s obligations under the Plan which would remove those assets from
being subject to the general creditors and judgment creditors of the Company. Notwithstanding
the preceding provisions of this Section 4.4 to the contrary, upon a Change in Control, the
Company shall, as soon as possible following the Change in Control, make an irrevocable
contribution to the rabbi trust previously established, or if not so established, to a newly
created rabbi trust, in an

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	 	 	amount that is sufficient to pay each Plan Participant or Beneficiary the benefits to which
each Plan Participant or Beneficiary would be entitled pursuant to the terms of the Plan as
of the date on which the Change in Control occurred.
	 
	4.5	 	Upon a Change in Control, each Participant’s benefit hereunder shall be immediately vested.
Payment of such benefit shall commence as of the first day of the seventh (7th)
calendar month following the later of such Participant’s Separation from Service or Early
Retirement Date. Benefits will continue to be paid on the first day of each succeeding month.
The last payment will be on the first day of the month in which the Participant dies unless
another form of payment is elected in accordance with Section 3.2 hereof. The first payment
will include all amounts that would otherwise have been paid during the period commencing on
the first day of the month next following the month of the later of the Participant’s
Separation from Service or Early Retirement Date.
	 
	4.6	 	It is intended that this Plan shall be unfunded for tax purposes and for purposes of Title I
of ERISA.
	 
	4.7	 	Notwithstanding any provision of this Section IV to the contrary, the benefits payable
hereunder may, to the extent expressly provided in this Section 4.7, be paid prior to or later
than the date on which they would otherwise be paid to the Participant.

	 	(a)	 	Distribution in the Event of Income Inclusion Under Code Section 409A.
If any portion of a Participant’s benefit hereunder is required to be included in
income by the Participant prior to receipt due to a failure of this Plan or any
Aggregated Plan to comply with the requirements of Section 409A of the Code or the
Regulations, the Committee may determine that such Participant shall receive a
distribution from the Plan in an amount equal to the portion of his or her benefit
required to be included in income as a result of the failure of the Plan or any
Aggregated Plan to comply with the requirements of Section 409A of the Code or the
Regulations.
	 
	 	(b)	 	Distribution Necessary to Satisfy Applicable Tax Withholding. If the
Company is required to withhold amounts to pay the Participant’s portion of the Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or
3121(v)(2) with respect to amounts that are or will be paid to the Participant under
the Plan before they otherwise would be paid, the Committee may determine that such
Participant shall receive a distribution from the Plan in an amount equal to the lesser
of: (i) the amount of the Participant’s benefit hereunder or (ii) the aggregate of the
FICA taxes imposed and the income tax withholding related to such amount.
	 
	 	(c)	 	Delay for Payments in Violation of Federal Securities Laws or Other
Applicable Law. In the event the Company reasonably anticipates that the payment
of benefits as specified hereunder would violate Federal securities laws or other
applicable law, the Committee may delay the payment of such benefit hereunder until the
earliest date at which the Company reasonably anticipates that the making of such
payment would not cause such violation.

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	 	(d)	 	Delay for Insolvency or Compelling Business Reasons. In the event the
Company determines that the making of any payment of benefits on the date specified
hereunder would jeopardize the ability of the Company to continue as a going concern,
the Committee may delay the payment of such benefits until the first calendar year in
which the Company notifies the Committee that the payment of benefits would not have
such effect.
	 
	 	(e)	 	Administrative Delay in Payment. The payment of benefits hereunder
shall begin at the date specified in accordance with the provisions of the foregoing
paragraphs of this Section IV; provided that, in the case of administrative necessity,
the payment of such benefits may be delayed up to the later of the last day of the
calendar year in which payment would otherwise be made or the 15th day of
the third calendar month following the date on which payment would otherwise be made.
Further, if, as a result of events beyond the control of the Participant (or following
the Participant’s death, the Participant’s Beneficiary), it is not administratively
practicable for the Committee to calculate the amount of benefits due to the
Participant as of the date on which payment would otherwise be made, the payment may be
delayed until the first calendar year in which calculation of the amount is
administratively practicable.
	 
	 	(f)	 	No Participant Election. Notwithstanding the foregoing provisions, if
the period during which payment of benefits hereunder will be made occurs, or will
occur, in two calendar years, the Participant shall not be permitted to elect the
calendar year in which the payment shall be made.

SECTION V

PRE-RETIREMENT DEATH BENEFITS

	5.1	 	If a Participant should die before Retirement, the Beneficiary will receive the greatest of
(1), (2) and (3) where (1) is the Participant’s benefit hereunder calculated as of his date of
death and payable for the life of the Beneficiary as a single life annuity, (2) is a benefit
payable for the life of the Beneficiary as a single life annuity equal to the Actuarial
Equivalent of 400% of the amount of the Participant’s rate of annual base pay determined as of
the December 1 immediately preceding the Participant’s date of death, and (3) is the benefit
the Participant would have received under Section 2.2 hereof if he had been determined to be
Disabled on the date of his death (but payable immediately and reduced as provided in Section
3.1 hereof) and payable for the life of the Beneficiary as a single life annuity. “Actuarial
Equivalence” as such term is used in this Section 5.1, shall be determined in accordance with
Section 1.409A-2(b)(2)(ii) of the Regulations and, subject to the foregoing, shall be
calculated by using the applicable actuarial assumptions set forth in the Retirement Plan.
	 
	5.2	 	A Beneficiary’s pre-retirement death benefit will be payable in accordance with the
Participant’s Distribution Schedule; provided, however, that a Participant’s failure to elect
a Distribution Schedule in accordance with Section 3.2 hereof shall be deemed an election by
the Participant for the pre-retirement death benefit hereunder to be paid in the form of a
single life annuity. If a Participant has timely elected an annuity form of

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	 	 	payment, or if the Participant has failed to elect a Distribution Schedule, resulting in a
deemed election of a single life annuity, the pre-retirement death benefit will be paid in
the form of a single life annuity, payable for the Beneficiary’s lifetime, unless, prior to
the date on which an annuity payment has been made, and within the time and in the manner
determined by the Committee, the Beneficiary elects an actuarially equivalent life annuity,
within the meaning of Section 1.409A-2(b)(2)(ii) of the Regulations. Subject to the
preceding sentence, actuarially equivalent life annuities shall be calculated by using the
applicable actuarial assumptions set forth in the Retirement Plan. The actuarially
equivalent life annuity forms available hereunder shall be those forms of life annuity set
forth in the Retirement Plan as in effect on the date of the Participant’s death. Lump sum
amounts shall be determined by using the Lump Sum Interest Rate and the Lump Sum Mortality
Table. Distribution of a Participant’s pre-retirement death benefit will commence or, in the
case of a lump sum payment, will be made in full within sixty (60) days of the date of the
Participant’s death.
	 
	5.3	 	Amounts otherwise payable under this Section will be reduced by any amount previously funded
through any trust designated for retirement and death benefits from this Plan, and by the
amount of any death benefit payable under the Funded Plan.

SECTION VI

CLAIMS PROCEDURES 

	6.1	 	Claims for Benefits. The Committee shall determine the rights of any Participant to
any deferred compensation benefits hereunder. Any Participant who believes that he has not
received the deferred compensation benefits to which he is entitled under the Plan may file a
claim in writing with the Committee. The Committee shall, no later than 90 days after the
receipt of a claim (plus an additional period of 90 days if required for processing, provided
that notice of the extension of time is given to the claimant with the first 90-day period),
either allow or deny the claim in writing.
	 
	 	 	A denial of a claim by the Committee, wholly or partially, shall be written in a manner
intended to be understood by the claimant and shall include:

	 	(a)	 	the specific reasons for the denial;
	 
	 	(b)	 	specific reference to pertinent Plan provisions on which the denial is based;
	 
	 	(c)	 	a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or information is
necessary; and
	 
	 	(d)	 	an explanation of the claim review procedure and the time limits applicable to
such procedures, including a statement of the claimant’s right to bring a civil action
under Section 502(a) of ERISA.

	6.2	 	Appeal Provisions. A claimant whose claim is denied (or his duly authorized
representative) may within 60 days after receipt of denial of a claim file with the Committee
a written request for a review of such claim. If the claimant does not file a

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	 	 	request for review of his claim within such 60-day period, the claimant shall be deemed to
have acquiesced in the original decision of the Committee on his claim, the decision shall
become final and the claimant will not be entitled to bring a civil action under Section
502(a) of ERISA. If such an appeal is so filed within such 60-day period the Company (or
its delegate) shall conduct a full and fair review of such claim. During such review, the
claimant (or the claimant’s authorized representative) shall be given the opportunity to
review all documents that are pertinent to his claim and to submit issues and comments in
writing.

	 	 	The Company shall mail or deliver to the claimant a written decision on the matter based on
the facts and the pertinent provisions of the Plan within 60 days after the receipt of the
request for review (unless special circumstances require an extension of up to 60 additional
days, in which case written notice of such extension shall be given to the claimant prior to
the commencement of such extension). Such decision shall be written in a manner intended to
be understood by the claimant, shall state the specific reasons for the decision and the
specific Plan provisions on which the decision was based and shall, to the extent permitted
by law, be final and binding on all interested persons.

SECTION VII

MISCELLANEOUS

	7.1	 	The Board, or its delegate, may, in its sole discretion, terminate, suspend or amend this
Plan at any time, in whole or in part. Notwithstanding the foregoing, any amendment to the
Plan which may result in a material financial impact to the Company will require review and
approval by the Board. However, the termination, amendment or suspension of this Plan will
not operate to decrease the benefit of (i) a retired Participant, (ii) a Participant who has
reached his Early Retirement Date, or (iii) a Beneficiary who is entitled to receive a
pre-retirement death benefit hereunder.
	 
	 	 	To the extent provided by the Board or its delegate, the Plan may be liquidated
following a termination under any of the following circumstances:

	 	(a)	 	the termination and liquidation of the Plan within twelve (12) months of a
complete dissolution of the Company taxed under Section 331 of the Code or with the
approval of a bankruptcy court pursuant to 11 U.S.C. § 503(b)(1)(A); provided that the
amounts deferred under this Plan are included in the Participants’ gross incomes in the
latest of the following years (or, if earlier, the taxable year in which the amount is
actually or constructively received): (i) the calendar year in which the Plan is
terminated; (ii) the first calendar year in which the amount is no longer subject to a
substantial risk of forfeiture; or (iii) the first calendar year in which the payment
is administratively practicable.
	 
	 	(b)	 	the termination and liquidation of the Plan pursuant to irrevocable action
taken by the Company within the thirty (30) days preceding or the twelve (12) months
following a change of control within the meaning of Section 409A of the Code; provided
that all Aggregated Plans are terminated and liquidated with respect to each
Participant that experienced such change of control, so that under the terms

11

 

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

	 	 	Notwithstanding the foregoing, the Plan shall automatically terminate, without further
action of the Company, upon Insolvency of the Company. For this purpose, Insolvency shall
mean the inability of the Company to continue as a going concern.
	 
	7.2	 	Notwithstanding any provision of the Plan to the contrary, the Committee may at any time
(without the consent of any Participant) modify, amend or terminate any or all of the
provisions of this Plan to the extent necessary to conform the provisions of the Plan with
Section 409A of the Code, regardless of whether such modification, amendment or termination of
this Plan shall adversely affect the rights of a Participant under the Plan.
	 
	7.3	 	Nothing contained herein will confer upon any Participant the right to be retained in the
service of the Company, nor will it interfere with the right of the Company to discharge or
otherwise deal with a Participant without regard to the existence of this Plan.
	 
	7.4	 	No benefit under this Plan shall be assignable or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment or encumbrances of any kind.
	 
	7.5	 	The Committee may adopt rules and regulations to assist it in the administration of the Plan
and may delegate such of its duties hereunder as it may deem advisable.
	 
	7.6	 	This Plan is established under and will be construed according to the laws of the State of
Texas.
	 
	7.7	 	The effective date of this amended and restated Plan, as signed this 12th day of December,
2008, is January 1, 2009 (except as otherwise specifically noted herein).

12

 

	 	 	 	 	 
	 	TESORO CORPORATION

 	 
	 	By:  	/s/ SUSAN A. LERETTE	 
	 	Name:  	Susan A. Lerette	 
	 	Title:  	SVP, Administration	 
	 

13exv10w2

EXHIBIT 10.2

TESORO CORPORATION

BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN

Effective January 1, 2009

 

 

TESORO CORPORATION

BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN

TABLE OF CONTENTS

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

i 

 

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

ii 

 

TESORO CORPORATION

BOARD OF DIRECTORS DEFERRED PHANTOM STOCK PLAN

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

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

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

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

ARTICLE I

DEFINITIONS

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

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

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

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

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

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

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

1

 

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

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

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

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

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

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

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

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

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

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

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

2

 

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

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

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

ARTICLE II

ELIGIBILITY AND PARTICIPATION

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

     2.2 Participation Agreements.

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

3

 

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

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

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

ARTICLE III

DEFERRAL CONTRIBUTIONS

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

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

4

 

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

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

ARTICLE IV

CREDITING ACCOUNTS

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

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

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

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

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

ARTICLE V

VESTING

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

5

 

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

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

ARTICLE VI

DISTRIBUTIONS

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

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

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

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

6

 

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

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

     6.6 Change in Time of Payments. Notwithstanding any provision of this Article VI to
the contrary, the benefits payable hereunder may, to the extent expressly provided in this Section
6.6, be paid prior to or later than the date on which they would otherwise be paid to the
Participant.

     (a) Distribution in the Event of Income Inclusion Under Code Section 409A. If
any portion of a Participant’s Account is required to be included in income by the
Participant prior to receipt due to a failure of this Plan or any Aggregated Plan to comply
with the requirements of Code Section 409A and the Regulations, the Committee may determine
that such Participant shall receive a distribution from the Plan in an amount equal to the
lesser of: (i) the portion of his or her Account required to be included in income as a
result of the failure of the Plan or any Aggregated Plan to comply with the requirements of
Code Section 409A and the Regulations, or (ii) the balance of the Participant’s Account.

     (b) Distribution Necessary to Satisfy Applicable Tax Withholding. If the
Corporation is required to withhold amounts to pay the Participant’s portion of the Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) or
3121(v)(2) with respect to amounts that are or will be paid to the Participant under the
Plan before they otherwise would be paid, the Committee may determine that such Participant
shall receive a distribution from the Plan in an amount equal to the lesser of: (i) the
amount in the Participant’s Account or (ii) the aggregate of the FICA taxes imposed and the
income tax withholding related to such amount.

     (c) Delay for Payments in Violation of Federal Securities Laws or Other Applicable
Law. In the event the Corporation reasonably anticipates that the payment of benefits
as specified hereunder would violate Federal securities laws or other applicable law, the
Committee may delay the payment under this Article VI until the earliest date at which
the Corporation reasonably anticipates that making of such payment would not cause such
violation.

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

7

 

     (e) Administrative Delay in Payment. The payment of benefits hereunder shall
begin at the date specified in accordance with the provisions of the foregoing paragraphs of
this Article VI; provided that, in the case of administrative necessity, the payment of such
benefits may be delayed up to the later of the last day of the calendar year in which
payment would otherwise be made or the 15th day of the third calendar month
following the date on which payment would otherwise be made. Further, if, as a result of
events beyond the control of the Participant (or following the Participant’s death, the
Participant’s Beneficiary), it is not administratively practicable for the Committee to
calculate the amount of benefits due to Participant as of the date on which payment would
otherwise be made, the payment may be delayed until the first calendar year in which
calculation of the amount is administratively practicable.

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

ARTICLE VII

ADMINISTRATION

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

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

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

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

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

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

8

 

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

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

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

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

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

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

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

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

ARTICLE VIII

AMENDMENT AND/OR TERMINATION

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

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

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

9

 

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

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

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

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

ARTICLE IX

UNFUNDED PLAN

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

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

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

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

ARTICLE X

MISCELLANEOUS

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

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

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

11

 

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

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

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

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

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

	 	 	 	 	 	 	 
	 	 	TESORO CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ SUSAN A. LERETTE	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	Susan A. Lerette	 	 
	 

	 	Its:	 	SVP, Administration	 	 
	 

	 	 	 	 

	 	 

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