Form of Tesoro Corporation 2006 Long-Term Incentive Plan Stock Options and Restricted Shares Agreement

I am very pleased to inform you that, effective Grant Date (the "Award Date"), the Compensation Committee of the Board of Directors of Tesoro Corporation (the "Company"), pursuant to its authority under the Tesoro Corporation 2006 Long-Term Incentive Plan (the "Plan"), has approved the grant of the following long-term incentive awards (the "Awards") to you:

Award No. 1: Nonqualified stock options (the "Options") to purchase # shares of the Company's common stock at an exercise price of $XX.XX, which is the fair market value of the Company's common stock on the Award Date. You may exercise your Options at any time prior to the expiration date, to the extent you are vested in the Award, by paying the exercise price, and the applicable income and employment tax withholding(s), to the Company. This Award will vest 33 ¹/₃% on each anniversary of the Award Date. This Award will expire and no longer be exercisable on the tenth anniversary of the Award Date (i.e. Date) or, earlier, if your employment terminates prior to such date.

Award No. 2:    ## of Restricted Shares of the Company's common stock. Under this Award, you are the record owner of the shares as of the Award Date. Consequently, you will have the rights of a shareholder, including voting and dividend rights, as of the Award Date. However, if your employment with the Company terminates prior to you becoming 100% vested in this Award, you will forfeit your unvested shares. The value of the Restricted Shares at the time of vesting will be taxable to you as additional compensation. This Award will vest 33 ¹/₃% on each anniversary of the Award Date. The shares granted under this Award will remain in the custody of the Company, or its authorized delegate, until you vest in the shares. Upon vesting, the vested shares [less the number of shares withheld to cover your applicable income and employment tax withholding(s) to the Company (for 2007 grants)] will be credited to your account with Fidelity Stock Plan Services and [you will be required to remit payment of the applicable income and employment tax withholding(s) to the Company (for 2008 and 2009 grants)].

The above Awards have been granted under and are subject to the terms of the Plan. A copy of the Plan and the 2006 Long-Term Incentive Plan Summary may be viewed and printed at the Fidelity Stock Plan Services website (http://netbenefits.fidelity.com). In addition, further information concerning the terms and conditions of the Awards are included with this letter.

Approximately two to three weeks from receipt of this letter, you will be able to view your Awards on the Fidelity Stock Plan Services website. In order to exercise your Options or to receive a credit of your vested restricted shares to your account, you must log on to the Fidelity Stock Plan Services website (http://netbenefits.fidelity.com) to accept your Awards. Once you accept your Awards, you will be able to view and print the Grant Agreements, which explain the terms and conditions of your Awards. [Please be advised that your Restricted Stock Award must be accepted before the first vesting date; otherwise, your Restricted Stock Award will be forfeited (2010 Grants only)].

If this is the first Award you have been granted under the Plan, you will receive a "Welcome Kit" from Fidelity Stock Plan Services with information on how to certify and view your participant information. You must certify your participant information before you will be entitled to exercise your Options and before your vested shares will be credited to your account.

We highly value your contribution and commitment to the Company's success and believe that these Awards provide you a financial incentive that aligns with the interests of the Company's shareholders.