8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 29, 2009

Tesoro Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 1-3473
(Commission File Number) 95-0862768
(IRS Employer
Identification No.)

19100 Ridgewood Parkway
San Antonio, Texas
(Address of principal
executive offices)
78259-1828
(Zip Code)

(210) 626-6000
(Registrant’s telephone
number, including area
code)

Not Applicable
(Former name or former
address, if changed since last
report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain officers (e).

The CEO Agreement

To ensure an orderly succession process for the Chief Executive Officer position, the Board of Directors (“Board”) of Tesoro Corporation approved the Fourth Amendment to the Amended and Restated Employment Agreement (the “CEO Agreement”) between Tesoro Corporation and Bruce A. Smith, President, Chairman and Chief Executive Officer.

The CEO Agreement includes the following provisions:

• Extension of the term of his employment agreement to December 31, 2011.

• During the term of the CEO Agreement, Mr. Smith, will facilitate the identification, attraction, and transition of a candidate to serve as his successor as chief executive officer. Upon the election of his successor as chief executive officer Mr. Smith will retire and, at the Board’s request, serve as non-executive Chairman of the Board for up to one-year at an annual fee of $1.00.

• Upon Mr. Smith’s identification, attraction, and transition of a successor chief executive officer, he will receive the following compensation, with any cash payable in a lump sum, six months following his retirement as president and chief executive officer:

• The amount of his unpaid base salary from the date of his retirement through the term of the CEO Agreement;

• A bonus prorated to the date of Mr. Smith’s retirement, under Tesoro’s annual incentive compensation program, payable at the Board’s discretion, based upon Mr. Smith’s performance in facilitating a smooth transition of his successor and the Company’s overall performance;

• A special bonus award representing the difference, if any, between his actual pension benefit under the Tesoro Corporation Amended and Restated Executive Security Plan (ESP) and subsection 4(f) of his Amended and Restated Employment Agreement as of his date of retirement and the ESP pension benefit he would have received had he retired effective May 31, 2009 under the terms of the ESP and subsection 4(f) of his Amended and Restated Employment Agreement; and

• Continued vesting of all stock-based awards during the term of the CEO Agreement with immediate vesting of such awards upon his retirement as president and chief executive officer and any awards so vested will be exercisable at any time during the remaining original term of each grant.

The CFO Agreement

To ensure an orderly succession process for the Chief Financial Officer position, the Board of Directors approved the Third Amendment to the Amended and Restated Employment Agreement (the “CFO Agreement”) between Tesoro Corporation and Greg Wright, Executive Vice President and Chief Financial Officer.

The CFO Agreement includes the following provisions:

• Extension of the term of his employment agreement to November 1, 2010.

• During the term of the CFO Agreement, Mr. Wright will facilitate the identification, attraction, and transition of a candidate to serve as his successor as chief financial officer. Upon the election by the Board of his successor, Mr. Wright may retire and receive the following compensation, with any cash payable in a lump sum, six months following the date of his retirement:

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• The amount of his unpaid base salary from the date of his retirement through the term of the CFO Agreement;

• A bonus prorated to the date of Mr. Wright’s retirement, under Tesoro’s annual incentive compensation program, payable at the Board’s discretion, based upon his performance in facilitating a smooth transition of his successor and the Company’s overall performance;

• A special bonus award representing the difference, if any, between Mr. Wright’s actual pension benefit under the Tesoro Corporation Amended and Restated Executive Security Plan (ESP) as of his date of retirement and the ESP pension benefit he would have received had he retired effective May 31, 2009 under the terms of the ESP; and

• Continued vesting of all stock-based awards during the term of the CFO Agreement with immediate vesting of such awards upon Mr. Wright’s retirement and any awards so vested will be exercisable at any time during the remaining original term of each grant.

Both of the above amendments are filed as exhibits to this Current Report on Form 8-K and are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

10.1	Fourth Amendment to the Amended and Restated Employment Agreement between Tesoro and Bruce A. Smith.
10.2	Third Amendment to the Amended and Restated Employment Agreement between Tesoro and Gregory A. Wright.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: August 4, 2009

TESORO CORPORATION
By:	/s/ Charles S. Parrish
	Charles S. Parrish
	Executive Vice President, General Counsel and Secretary

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Index to Exhibits

Index No.	Description
10.1	Fourth Amendment to the Amended and Restated Employment Agreement between Tesoro and Bruce A. Smith.
10.2	Third Amendment to the Amended and Restated Employment Agreement between Tesoro and Gregory A. Wright.

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EX-10.1

Exhibit 10.1

FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT

     This Fourth Amendment (“Amendment”) to the Employment Agreement dated December 3, 2003, between Tesoro Corporation (“Company”) and Bruce A. Smith (“Executive”), as amended February 2, 2006, November 1, 2006, and December 12, 2008 (“Agreement”), is entered into this 4th day of August, 2009, by and between the Company and Executive, sometimes collectively referred to herein as the “Parties.”

WITNESSETH:

     WHEREAS, the Company and Executive have previously entered into an employment agreement which has been amended on three occasions; and

     WHEREAS, the Company and Executive desire to amend the Agreement again to reflect certain changes they have agreed to.

     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. Section 2 of the Agreement is hereby amended by deleting the current language and replacing it with the following language:

     “2. TERM OF EMPLOYMENT. The term of this Agreement shall begin on the Effective Date, and shall expire and Executive’s employment with the Company shall end on December 31, 2011. 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.”

     2. Section 3 of the Agreement is hereby amended by adding the following language at the end of Section 3(a):

     “At the direction of the Board, Executive shall assist the Company in identifying and recruiting, if necessary a potential successor to the chief executive officer position. Executive further agrees to ensure that a smooth transition occurs and when the successor chief executive officer is elected by the Board, if requested by the Board, Executive shall transition from President and Chief Executive Officer to non-executive Chairman of the Board.”

     3. Section 5 of the Agreement is hereby amended by moving Section 5(f) to Section 5(g), and creating a new Section 5(f), as reflected below:

     “(f) RETIREMENT BY EXECUTIVE. Executive shall terminate his employment by retirement during the Employment Period on the date a successor chief executive officer is elected by the Board. Provided, however, Executive

FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT Page 1 of 3

shall continue to serve as Chairman of the Board for up to one (1) year after his termination of employment by retirement for $1.00 if requested by the Board. In no event shall Retirement by Executive, as provided in this Section 5(f), constitute Termination by the Company Without Cause or Termination By Executive for Good Reason, for purposes of Section 6(e) of this Agreement.”

     4. Section 6 of the Agreement is hereby amended by moving Section 6(f) to Section 6(g), Section 6(g) to Section 6(h), and creating a new Section 6(f), as reflected below:

     “(f) TERMINATION BY EXECUTIVE FOR RETIREMENT. In lieu of any other benefits under this agreement, in the event that Executive terminates his employment by retiring pursuant to Section 5(f) above, the Company shall pay Executive the amounts as described below in subsections (i), (ii), and (vi) except for the special completion bonus, and if at such time Executive has fulfilled the conditions set forth in Section 3(a) above to the satisfaction of the Board, the Company shall, in addition pay Executive the amounts as described below in subsections (iii), (iv), (v) and the special completion bonus in (vi):

     (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; provided, however, that such earned but unpaid bonuses shall be paid in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement;

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

     (iii) The amount of Executive’s Base Salary from the date of his retirement through December 31, 2011, paid in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement;

     (iv) A prorated bonus through Executive’s retirement date may be awarded at the Board’s discretion based, in part, on Executive’s performance in facilitating a smooth transition of the successor chief executive officer, and the Company’s business results. Such prorated bonus, if any, shall be paid in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement;

FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT Page 2 of 3

     (v) All of Executive’s unvested equity awards, including stock options, restricted stock, SARs, and/or phantom stock will vest upon Executive’s retirement as President and Chief Executive Officer and all such stock options, SARs and/or phantom stock along with those already vested prior to the date of such retirement shall have the full remaining original term of each grant to be exercised;

     (vi) Executive’s lump sum benefit under the Tesoro Corporation Amended and Restated Executive Security Plan shall be determined as of the date of Executive’s retirement as provided under the terms of such plan; provided, however, that if such benefit, calculated as of the date of Executive’s retirement, is less than the amount of Executive’s lump sum benefit thereunder, determined as of May 31, 2009, Executive shall receive a special completion bonus for the difference, payable in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement.”

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

TESORO CORPORATION
By:	/s/ CHARLES S. PARRISH
	CHARLES S. PARRISH
	Executive Vice President, General Counsel and Secretary
Date:	August 4, 2009
EXECUTIVE:
/s/ BRUCE A. SMITH
BRUCE A. SMITH, Executive
Date:	August 4, 2009

FOURTH AMENDMENT TO EMPLOYMENT AGREEMENT Page 3 of 3

EX-10.2

Exhibit 10.2

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

     This Third Amendment (“Amendment”) to the Employment Agreement dated August 3, 2004, between Tesoro Corporation (“Company”) and Gregory A. Wright (“Executive”), as amended February 2, 2006 and June 8, 2007 (“Agreement”), is entered into this 4th day of August, 2009, by and between the Company and Executive, sometimes collectively referred to herein as the “Parties.”

WITNESSETH:

     WHEREAS, the Company and Executive have previously entered into an employment agreement which has been amended on two occasions; and

     WHEREAS, the Company and Executive desire to amend the Agreement again to reflect certain changes they have agreed to.

     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. Section 2 of the Agreement is hereby amended by deleting the current language and replacing it with the following language:

     “2. TERM OF EMPLOYMENT. This Agreement shall begin on the Effective Date, and shall expire and Executive’s employment with the Company shall end on November 1, 2010. 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.”

     2. Section 3 of the Agreement is hereby amended by adding the following language at the end of Section 3(a):

     “At the direction of the Board, Executive shall assist the Company in identifying a potential successor chief financial officer, recruiting such successor, and transitioning such successor into the chief financial officer position.”

     3. Section 5 of the Agreement is hereby amended by moving Section 5(f) to Section 5(g), and creating a new Section 5(f), as reflected below:

     “(f) RETIREMENT BY EXECUTIVE. Executive may elect to retire and terminate his employment during the Employment Period, in the event the Board elects a successor chief financial officer to replace Executive. In no event shall Retirement by Executive, as provided in this Section 5(f), constitute Termination by the Company Without Cause or Termination By Executive for Good Reason, for purposes of Section 6(e) of this Agreement.”

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT Page 1 of 3

     4. Section 6 of the Agreement is hereby amended by moving Section 6(f) to Section 6(g), Section 6(g) to Section 6(h), and creating a new Section 6(f), as reflected below:

     “(f) TERMINATION BY EXECUTIVE FOR RETIREMENT. In lieu of any other benefits under this agreement, in the event that Executive retires and terminates his employment pursuant to Section 5(f) above, the Company shall pay Executive the amounts as described below in subsections (i), (ii) and (vi) except for the special completion bonus, and if at such time Executive has fulfilled the conditions set forth in Section 3(a) above to the satisfaction of the Board, the Company shall, in addition pay Executive the amounts as described below in subsections (iii), (iv), (v) and the special completion bonus in (vi):

     (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; provided, however, that such earned but unpaid bonuses shall be paid in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement;

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

     (iii) The amount of Executive’s Base Salary from the date of his retirement through November 1, 2010, paid in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement;

     (iv) A prorated bonus through Executive’s retirement date may be awarded at the Board’s discretion based, in part, on Executive’s performance in facilitating a smooth transition of the successor chief financial officer, and the Company’s business results. Such prorated bonus, if any, shall be paid in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement;

     (v) All of Executive’s unvested equity awards, including stock options, restricted stock, SARs, and/or phantom stock will vest upon Executive’s termination of employment by retirement and all such stock options, SARs and/or phantom stock along with those already vested prior to the date of such retirement shall have the full remaining original term of each grant to be exercised;

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT Page 2 of 3

     (vi) Executive’s lump sum benefit under the Tesoro Corporation Amended and Restated Executive Security Plan shall be determined as of the date of Executive’s retirement as provided under the terms of such plan; provided, however, that if such benefit, calculated as of the date of Executive’s retirement, is less than the amount of Executive’s lump sum benefit thereunder, determined as of May 31, 2009, Executive shall receive a special completion bonus for the difference, payable in a cash lump sum on the first business day following the end of the six (6) month period commencing on the date of Executive’s termination of employment by retirement.

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

TESORO CORPORATION
By:	/s/ CHARLES S. PARRISH
	CHARLES S. PARRISH
	Executive Vice President, General Counsel and Secretary
Date:		August 4, 2009

EXECUTIVE:
/s/ GREGORY A. WRIGHT
GREGORY A. WRIGHT, Executive
Date:	August 4, 2009

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