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): June 16, 2008

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.)
300 Concord Plaza Drive San Antonio, Texas		78216-6999 (Zip Code)
(Address of principal executive offices)

(210) 828-8484
(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.

(c) Appointment of Certain Officers.

          On June 16, 2008, the Board of Directors of Tesoro Corporation (the “Company”) promoted Otto C. Schwethelm to Senior Vice President, Chief Financial Officer and Treasurer of the Company. Mr. Schwethelm was previously elected Vice President, Chief Financial Officer on June 8, 2007. Prior to becoming Vice President, Chief Financial Officer, Mr. Schwethelm served as Vice President, Finance and Treasurer beginning in March 2006. He served as Vice President and Controller from February 2003 to March 2006 and as Vice President and Operations Controller from September 2002 to February 2003. From December 2001 to September 2002, Mr. Schwethelm served as Vice President, Shared Services of Tesoro Petroleum Companies, Inc.

(e) Compensatory Arrangements of Certain Officers.

          On June 16, 2008 the Company approved Mr. Schwethelm’s participation in the Amended and Restated Executive Security Plan (“ESP”). The ESP is a nonqualified pension plan. Under the ESP, the gross monthly retirement benefit is equal to 4% of average compensation for each of the first 10 years of service plus 2% of average compensation for each of the next 10 years of service plus 1% of average compensation for each of the next 10 years of service, for a maximum gross monthly retirement benefit of 70% of average compensation for 30 years of service. Average compensation is the monthly average of compensation over the consecutive 36-month period over the last 120 months preceding retirement that produces the highest average. Compensation includes base salary plus bonus. The monthly retirement benefit is payable in the form of a lifetime payment. At the executive’s election, a reduced benefit may be paid that continues a portion of the reduced payment over the lifetime of a beneficiary, if the beneficiary outlives the executive. The ESP is referenced as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference.

          Entry into a Material Definitive Agreement:

          On June 16, 2008 the Company entered into an Amended and Restated Management Stability Agreement (the “Agreement”) with Mr. Schwethelm. The Agreement, which was executed on June 20, 2008, but is effective as of June 16, 2008, increases the payment to Mr. Schwethelm upon a “Change of Control” as defined in the Agreement followed by termination of the his employment. The Agreement is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

10.1	Amended and Restated Executive Security Plan Effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 8, 2006, File No. 1-3473).
10.2	Amended and Restated Management Stability Agreement between the Company and Otto C. Schwethelm dated as of June 20, 2008.

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Index to Exhibits

Exhibit Number	Description
10.1	Amended and Restated Executive Security Plan Effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed February 8, 2006, File No. 1-3473).
10.2	Amended and Restated Management Stability Agreement between the Company and Otto C. Schwethelm dated as of June 20, 2008.

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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: June 20, 2008

TESORO CORPORATION
By:	/s/ Otto C. Schwethelm
	Otto C. Schwethelm
	SVP, Chief Financial Officer & Treasurer

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED
MANAGEMENT STABILITY AGREEMENT

     This Amended and Restated Management Stability Agreement is dated June 16, 2008 between Tesoro Corporation, a Delaware corporation (the “Company”), and Otto C. Schwethelm (“Employee”), and supersedes and replaces that certain Management Stability Agreement dated as of February 2, 2005.

Recitals:

     WHEREAS, the Board of Directors of the Company has determined that it is in the best interest of the Company to reduce uncertainty to certain key employees of the Company in the event of certain fundamental events involving the control or existence of the Company;

     WHEREAS, the Board of Directors of the Company has determined that an agreement protecting certain interests of key employees of the Company in the event of certain fundamental events involving the control or existence of the Company is in the best interest of the Company because it will assist the Company in attracting and retaining key employees such as this Employee; and

     WHEREAS, the Employee is relying on this Agreement and the obligations of the Company hereunder in continuing to work for the Company.

     NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

     1. Termination Following Change of Control.

     Should Employee at any time within two years of a change of control cease to be an employee of the Company (or its successor), by reason of (i) involuntary termination by the Company (or its successor) other than for “cause” (following a change of control), “cause” shall be limited to the conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse of time or otherwise, is not subject to appeal), a material breach of fiduciary duty to the Company through the misappropriation of Company funds or property) or (ii) voluntary termination by Employee for “good reason upon change of control” (as defined below), the Company (or its successor) shall pay to Employee within ten days of such termination the following severance payments and benefits:

(a)  A lump-sum payment equal to two and one-half times the base salary of the Employee at the then current rate; and

(b)  A lump-sum payment equal to (i) two and one-half times the sum of the target bonuses under all of the Company’s incentive bonus plans applicable to the Employee for the year in which the termination occurs or the year in which the change of control occurred, whichever is greater, and (ii) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses under all of the Company’s incentive bonus plans applicable to Employee for the year in which the termination occurs prorated daily based on the number of days from the beginning of the calendar year in which the termination occurs to and including the date of termination.

The Company (or its successor) shall also provide continuing coverage and benefits comparable to all life, health and disability plans of the Company for a period of 30 months from the date of termination, and Employee shall receive two and one-half years additional service credit under the current non-qualified supplemental pension plans, or successors thereto, of the Company applicable to the Employee on the date of termination.

     For purposes of this Agreement, a “change of control” shall be deemed to have occurred if (i) there shall be consummated (A) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would be converted into cash, securities or other property, other than a merger of the Company where a majority of the Board of Directors of the surviving corporation are, and for a two year period after the merger continue to be, persons who were directors of the Company immediately prior to the merger or were elected as directors, or nominated for election as directors, by a vote of at least two-thirds of the directors then still in office who were directors of the Company immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (ii) the shareholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company, or (iii) (A) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 20 percent or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and (B) at any time during a period of one year thereafter, individuals who immediately prior to the beginning of such period constituted the Board of Directors of the Company shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination by the Board of Directors for election by the Company’s shareholders of each new director during such period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period.

     For purposes of this Section 1, “good reason upon change of control” shall exist if any of the following occurs:

(i) without Employee’s express written consent, the assignment to Employee of any duties inconsistent with the employment of Employee immediately prior to the change of control, or a significant diminution of Employee’s positions, duties, responsibilities and status with the Company from those immediately prior to a change of control or a diminution in Employee’s titles or offices as in effect immediately prior to a change of control, or any removal of Employee from, or any failure to reelect Employee to, any of such positions;

(ii) a reduction by the Company in Employee’s base salary in effect immediately prior to a change of control;

(iii) the failure by the Company to continue in effect any thrift, stock ownership, pension, life insurance, health, dental and accident or disability plan in which Employee is participating or is eligible to participate at the time of the change of control (or plans providing Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee’s participation in or materially reduce Employee’s benefits under any of such plans or deprive Employee of any material fringe benefits enjoyed by Employee at the time of the change of control or the failure by the Company to provide the Employee with the number of paid vacation days to which Employee is entitled in accordance with the vacation policies of the Company in effect at the time of a change of control;

(iv) the failure by the Company to continue in effect any incentive plan or arrangement (including without limitation, the Company’s Incentive Compensation Plan and similar incentive compensation benefits) in which Employee is participating at the time of a change of control (or to substitute and continue other plans or arrangements providing the Employee with substantially

similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control;

(v) the failure by the Company to continue in effect any plan or arrangement with respect to securities of the Company (including, without limitation, any plan or arrangement to receive and exercise stock options, stock appreciation rights, restricted stock or grants thereof or to acquire stock or other securities of the Company) in which Employee is participating at the time of a change of control (or to substitute and continue plans or arrangements providing the Employee with substantially similar benefits), except as otherwise required by the terms of such plans as in effect at the time of any change of control or the taking of any action by the Company which would adversely affect Employee’s participation in or materially reduce Employee’s benefits under any such plan;

(vi) the relocation of the Company’s principal executive offices to a location outside the San Antonio, Texas, area, or the Company’s requiring Employee to be based anywhere other than at the location of the Company’s principal executive offices, except for required travel on the Company’s business to an extent substantially consistent with Employee’s present business travel obligations, or, in the event Employee consents to any such relocation of the Company’s principal executive or divisional offices, the failure by the Company to pay (or reimburse Employee for) all reasonable moving expenses incurred by Employee relating to a change of Employee’s principal residence in connection with such relocation and to indemnify Employee against any loss (defined as the difference between the actual sale price of such residence and the higher of (a) Employee’s aggregate investment in such residence or (b) the fair market value thereof as determined by a real estate appraiser reasonably satisfactory to both Employee and the Company at the time the Employee’s principal residence is offered for sale in connection with any such change of residence;

(vii) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company;

     In the event of a change of control as “change of control” is defined in any stock option plan or stock option agreement pursuant to which the Employee holds options to purchase common stock of the Company, Employee shall retain the rights to all accelerated vesting and other benefits under the terms thereof.

     The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce the terms of this Paragraph 1.

     2. Complete Agreement.

     This Agreement constitutes the entire agreement between the parties and cancels and supersedes all other agreements between the parties which may have related to the subject matter contained in this Agreement.

     1. Modification; Amendment; Waiver.

     No modification, amendment or waiver of any provisions of this Agreement shall be effective unless approved in writing by both parties. The failure at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision hereof in accordance with its terms.

     3. Governing Law; Jurisdiction.

     This Agreement and performance under it, and all proceedings that may ensue from its breach, shall be construed in accordance with and under the laws of the State of Texas.

     4. Severability.

     Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

     5. Assignment.

     The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of their respective successors, assigns, executors, administrators and heirs, provided, however, that the Company may not assign any duties under this Agreement without the prior written consent of the Employee.

     6. Limitation.

     This Agreement shall not confer any right or impose any obligation on the Company to continue the employment of Employee in any capacity, or limit the right of the Company or Employee to terminate Employee’s employment.

     7. Notices.

     All notices and other communications under this Agreement shall be in writing and shall be given in person or by telegraph, facsimile or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given when delivered personally or three days after mailing or one day after transmission of a telegram or facsimile, as the case may be, to the representative persons named below:

If to the Company:	Corporate Secretary
	Tesoro Corporation
	300 Concord Plaza Drive
	San Antonio, Texas 78216-6999
If to the Employee:	Otto C. Schwethelm

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

COMPANY:	TESORO CORPORATION
	By
	Bruce A. Smith
	Chairman of the Board of Directors,
	President and Chief Executive Officer
EMPLOYEE:	Otto C. Schwethelm