exv10w3



 






Exhibit 10.3




EMPLOYMENT AGREEMENT




     This EMPLOYMENT AGREEMENT (this “Agreement”) is made by and between Western Refining
GP, LLC, a Delaware limited liability company (the “Company”), and Ralph A. Schmidt
(“Executive”).



W
I T N E S S E
T H:




     WHEREAS, Executive is to be directly employed by the Company; and



     WHEREAS, the Company is desirous of directly employing Executive in an executive capacity on
the terms and conditions and for the consideration hereinafter set forth (which includes new and
additional consideration to that which Executive is currently receiving), and Executive is desirous
of being directly employed by the Company on such terms and conditions and for such consideration;



     NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations
contained herein, the Company and Executive agree as follows:



ARTICLE 1 : DEFINITIONS AND INTERPRETATIONS




     1.1 Definitions.




     (a) “Affiliate” means, with respect to any natural person, firm, partnership,
association, corporation, limited liability company, company, trust, entity, public body or
government (a “Person”), any Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such Person. The term “control”
(including the terms “controlled by” and “under common control with”) as
used in this definition means the possession, directly or indirectly, of the power to direct
or cause the direction of management and policies of a Person, whether through the ownership
of voting securities, by contract or otherwise. With respect to any natural person, the
term “Affiliate” means (1) the spouse or children (including those by adoption) and
siblings of such Person; and any trust whose primary beneficiary is such Person, such
Person’s spouse, such Person’s siblings and/or one or more of such Person’s lineal
descendants, (2) the legal representative or guardian of such Person or of any such
immediate family member in the event such Person or any such immediate family member becomes
mentally incompetent and (3) any Person controlled by or under common control with any one
or more of such Person and the Persons described in clauses (1) or (2) preceding.




     (b) “Annual Base Salary” means, as of a specified date, Executive’s annual base
salary as of such date determined pursuant to Section 4.1.




     (c) “Annual Bonus” means the amount, if any, equal to the greater of:




     (i) 75% of the Annual Base Salary;



 









 






     (ii) the annual bonus most recently paid by the Company to Executive pursuant
to Section 4.2; or




     (iii) the average of the last three annual bonuses (or the average of the last
two annual bonuses if the Executive has been employed by the Company for less than
three years) paid by the Company to Executive pursuant to Section 4.2.




Notwithstanding the foregoing, if Executive was employed by the Company for only a portion
of the year with respect to which such bonus was paid, then the “Annual Bonus” shall
equal an amount determined by annualizing the bonus received by Executive based on the ratio
of the number of days Executive was employed by the Company during such year to 365 days.




     (d) “Annual Compensation” means an amount equal to the greater of:




     (i) Executive’s Annual Base Salary at the annual rate in effect on the date of
his Involuntary Termination;




     (ii) Executive’s Annual Base Salary at the annual rate in effect 180 days prior
to the date of his Involuntary Termination; and




     (iii) Executive’s Annual Base Salary at the annual rate in effect immediately
prior to a Change of Control if Executive’s employment shall be subject to an
Involuntary Termination during the Change of Control Period.




Notwithstanding the foregoing, if Executive’s employment shall be subject to an Involuntary
Termination during the Change of Control Period, then the amount determined pursuant to the
preceding sentence shall be increased by the amount of the Annual Bonus.




     (e) “Board” means the Board of Directors of the Parent.




     (f) “Cause” means Executive




     (i) has engaged in gross negligence, gross incompetence or willful misconduct
in the performance of his duties,




     (ii) has refused, without proper reason, to perform his duties,




     (iii) has willfully engaged in conduct which is materially injurious to the
Company, the Parent or their subsidiaries (monetarily or otherwise),




     (iv) has committed an act of fraud, embezzlement or willful breach of a
fiduciary duty to WRI (including the unauthorized disclosure of confidential or
proprietary material information of WRI), or




     (v) has been convicted of, pled guilty to, or pleaded no contest to, a crime
involving fraud, dishonesty or moral turpitude.



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     (g) “Change In Duties” means:




     (i) The occurrence, prior to a Change of Control or after the expiration of a
Change of Control Period, of any one or more of the following:




     (1) a material reduction in the nature or scope of Executive’s
authorities or duties from those previously applicable to him;




     (2) a reduction in Executive’s Annual Base Salary;




     (3) a material diminution in employee benefits (including, but not
limited to, medical, dental, life insurance and long-term disability plans)
and perquisites applicable to Executive from those substantially similar to
the employee benefits and perquisites provided by WRI to executives with
comparable duties; or




     (4) a change in the location of Executive’s principal place of
employment by the Company (including its subsidiaries and the Parent) by
more than 60 miles from the location where he was principally employed;
provided, however, that such change in the location of Executive’s principal
place of employment shall not constitute a Change In Duties if the decision
to relocate was mutually acceptable to Executive and the Company prior to
such change in location.




     (ii) The occurrence, within a Change of Control Period, of any one or more of
the following:




     (1) a material reduction in the nature or scope of Executive’s
authorities or duties from those applicable to him immediately prior to the
date on which a Change of Control occurs;




     (2) a reduction in Executive’s Annual Base Salary from that provided to
him immediately prior to the date on which a Change of Control occurs;




     (3) a diminution in Executive’s eligibility to participate in bonus,
stock option, incentive award and other compensation plans that provide
opportunities to receive compensation which are the greater of (A) the
opportunities provided by the Company (including its subsidiaries and the
Parent) for executives with comparable duties or (B) the opportunities under
any such plans under which he was participating immediately prior to the
date on which a Change of Control occurs;




     (4) a material diminution in employee benefits (including, but not
limited to, medical, dental, life insurance and long-term disability plans)
and perquisites applicable to Executive from the greater of (A) the employee
benefits and perquisites provided by the Company (including its subsidiaries
and the Parent) to executives with comparable duties or (B)



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the employee benefits and perquisites to which Executive was entitled
immediately prior to the date on which a Change of Control occurs; or




     (5) a change in the location of Executive’s principal place of
employment by the Company (including its subsidiaries and the Parent) by
more than 60 miles from the location where he was principally employed
immediately prior to the date on which a Change of Control occurs; provided,
however, that such change in the location of Executive’s principal place of
employment shall not constitute a Change In Duties if the decision to
relocate was mutually acceptable to Executive and the Company prior to such
change in location.



     “Change of Control” shall be deemed to have occurred upon any of the following events:




     (i) any “person” (as defined in Section 3(a)(9) of the Exchange Act, and as
modified in Section 13(d) and 14(d) of the Exchange Act) other than (i) the Majority
Holders, (ii) any Majority Holder, (iii) any Affiliate of the Parent, (iv) any
employee benefit plan of the Parent or any of its subsidiaries, (v) a company owned,
directly or indirectly, by stockholders of the Parent in substantially the same
proportions as their ownership of the Parent, (vi) an underwriter temporarily
holding securities pursuant to an offering of such securities or (vii) those
“persons” who beneficially own securities of the Parent on the Effective Date (a
“Person”), becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the Parent representing more than 25%
of the shares of voting stock of the Parent then outstanding; provided, however,
that a Change of Control shall not occur pursuant to this clause if (i) it is in
connection with an initial public offering of the Parent’s common stock or (ii) at
such time as such Person acquires or gains such ownership or control, any of the
Majority Holders has a percentage ownership of the combined voting power of the
outstanding common stock of the Parent that is greater than such Person;




     (ii) the consummation of any merger, organization, business combination or
consolidation of the Parent or one of its subsidiaries with or into any other
entity, other than a merger, reorganization, business combination or consolidation,
which would result in the holders of the voting securities of the Parent outstanding
immediately prior thereto holding securities which represent immediately after such
merger, reorganization, business combination or consolidation more than 50% of the
combined voting power of the voting securities of the Parent or the surviving
company or the parent of such surviving company; provided, however, that a Change of
Control shall not occur pursuant to this clause (ii) as a result of any transaction
entered into in connection with the initial public offering of common stock of the
Parent;




     (iii) the consummation of a sale or disposition by WRI of all or substantially
all of WRI’s assets, other than a sale or disposition if the holders of



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the voting securities of the Parent outstanding immediately prior thereto hold
securities immediately thereafter which represent more than 50% of the combined
voting power of the voting securities of the acquiror, or parent of the acquiror, of
such assets;




     (iv) the stockholders of the Parent approve a plan of complete liquidation or
dissolution of the Parent; or




     (v) individuals who, as of the Effective Date, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election to the Board was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a result
of an election contest with respect to the election or removal of directors or other
solicitation of proxies or consents by or on behalf of a person other than the
Board.




     (h) “Change of Control Period” means, with respect to a Change of Control, the
two-year period beginning on the date upon which such Change of Control occurs.




     (i) “Code” means the Internal Revenue Code of 1986, as amended.




     (j) “Compensation Committee” means the Compensation Committee of the Board.




     (k) “Disability” means that, as a result of Executive’s incapacity due to
physical or mental illness, he shall have been absent from the full-time performance of his
duties for six consecutive months and he shall not have returned to full-time performance of
his duties within 30 days after written notice of termination is given to Executive by the
Company (provided, however, that such notice may not be given prior to 30 days before the
expiration of such six-month period).




     (l)
“Effective Date” means January 24, 2006.




     (m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.




     (n) “Involuntary Termination” means any termination of Executive’s employment
with the Company which:




     (i) does not result from a resignation by Executive (other than a resignation
pursuant to clause (ii) of this Section 1.1(n)); or




     (ii) results from a resignation by Executive on or before the date which is 60
days after the date upon which Executive receives notice of a Change in Duties;



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provided, however, that the term “Involuntary Termination” shall not include a termination
for Cause or any termination as a result of death or Disability.





     (o) “Majority Holders” means Paul L. Foster, Jeff A. Stevens, Ralph A. Schmidt,
Scott D. Weaver, RHC Holdings, L.P. and WRC Refining Company.




     (p) “Monthly Severance Amount” means an amount equal to one-twelfth of
Executive’s Annual Compensation.




     (q) “Parent” means Western Refining, Inc.




     (r) “Severance Amount” means an amount equal to two times Executive’s Annual
Compensation.




     (s) “Severance Period” means the period commencing on the date of Involuntary
Termination and continuing for 24 months thereafter.




     (t) “WRI” means the Company and its Affiliates, including, without limitation, the
Parent




     1.2 Interpretations. In this Agreement, unless a clear contrary intention appears,
(a) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other subdivision, (b) reference
to any Article or Section means such Article or Section hereof, (c) the words “including” (and with
correlative meaning “include”) means including, without limiting the generality of any description
preceding such term and (d) where any provision of this Agreement refers to action to be taken by
either party, or which such party is prohibited from taking an action, such provision shall be
applicable whether such action is taken directly or indirectly by such party.



ARTICLE 2 : EMPLOYMENT AND DUTIES





     2.1 Employment. Effective as of the Effective Date and continuing for the period of
time set forth in Section 3.1 of this Agreement, Executive’s employment by the Company
shall be subject to the terms and conditions of this Agreement.




     2.2 Positions. From and after the Effective Date, the Company shall employ Executive
in the position of Chief Operating Officer of the Company and shall cause the Parent to employ
Executive as Chief Operating Officer of the Parent, or in such other positions as the parties may
mutually agree.




     2.3 Duties and Services . Executive agrees to serve in the position(s) referred to in Section 2.2 and to perform
diligently the duties and services appertaining to such offices, as well as such additional duties
and services appropriate to such offices which the parties mutually may agree upon from time to
time. Executive’s employment shall also be subject to the policies maintained and established by
the Company and the Parent that are of general applicability to the Company’s and the Parent’s
employees, as such policies may be amended from time to time.



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     2.4 Other Interests. Executive agrees, during the period of such employment by the
Company, to devote substantially all of Executive’s business time, energy and efforts to the
business and affairs of WRI. If the amount of time that Executive devotes to the business and
affairs of WRI decreases from that set forth in the first sentence of this paragraph, Executive and
the Company agree to adjust the Annual Base Salary accordingly.




     2.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a
fiduciary duty of loyalty to act at all times in the best interests of the Company and the Parent.
In keeping with such duty, Executive shall make full disclosure to the Company and the Parent of
all business opportunities pertaining to the Company’s and the Parent’s businesses and shall not
appropriate for Executive’s own benefit business opportunities concerning the Company’s and the
Parent’s businesses.



ARTICLE 3 : TERM AND TERMINATION OF EMPLOYMENT





     3.1 Term. Unless sooner terminated pursuant to other provisions hereof, the Company
agrees to employ Executive for the period beginning on the Effective Date and ending on the third
anniversary of the Effective Date (the “Initial Expiration Date”); provided, however, that
beginning on the Initial Expiration Date, and on each anniversary of the Initial Expiration Date
thereafter, if this Agreement has not been terminated pursuant to Section 3.2 or
3.3, then said term of employment shall automatically be extended for an additional
one-year period unless on or before the date that is 180 days prior to the Initial Expiration Date
or any anniversary thereof either party shall give written notice to the other that no such
automatic extension shall occur.




     3.2 The Company’s Right To Terminate. Notwithstanding the provisions of Section
3.1, the Company shall have the right to terminate Executive’s employment under this Agreement
at any time for any of the following reasons:




     (a) upon Executive’s death;




     (b) upon Executive’s Disability;




     (c) for Cause; or




     (d) for any other reason whatsoever, in the sole discretion of the board of managers of
the Company.




     3.3 Executive’s Right To Terminate. Notwithstanding the provisions of Section
3.1 Executive shall have the right to terminate his employment under this Agreement for any of
the following reasons:




     (a) as a result of a Change In Duties; provided, however, that prior to Executive’s
termination as a result of a Change In Duties, Executive must give written notice to the
Company of the specific occurrence that resulted in the Change In Duties and such occurrence
must remain uncorrected for 10 calendar days following such written notice; or



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(b) at any time for any other reason whatsoever, in the sole discretion of Executive.




     3.4 Notice Of Termination. If the Company desires to terminate Executive’s employment
hereunder at any time prior to expiration of the term of employment as provided in Section
3.1, it shall do so by giving written notice to Executive that it has elected to terminate
Executive’s employment hereunder and stating the effective date and reason for such termination,
provided that no such action shall alter or amend any other provisions of this Agreement or rights
arising under this Agreement. If Executive desires to terminate his employment hereunder at any
time prior to expiration of the term of employment as provided in Section 3.1, he shall do
so by giving a 30-day written notice to the Company that he has elected to terminate his employment
hereunder and stating the effective date and reason for such termination, provided that no such
action shall alter or amend any other provisions of this Agreement or rights arising under this
Agreement.




     3.5 Deemed Resignations. Any termination of Executive’s employment shall constitute
an automatic resignation of Executive as an officer and director (if applicable) of the Company and
each of its Affiliates, unless Executive owns at least 10% of the issued and outstanding common
stock of the Parent, in which case such resignation shall not be deemed an automatic resignation of
Executive from the Board, and from the board of directors or similar governing body of any
corporation, limited liability company or other entity in which WRI holds an equity interest and
with respect to which board or similar governing body Executive serves as WRI’s designee or other
representative.



ARTICLE 4 : COMPENSATION AND BENEFITS





     4.1 Base Salary. During the period of this Agreement, Executive shall receive a
minimum Annual Base Salary of $420,000. Executive’s Annual Base Salary shall be reviewed by the
Compensation Committee on an annual basis, and, in the sole discretion of the Compensation
Committee, such Annual Base Salary may be increased, but not decreased, effective as of any date
determined by the Compensation Committee. Executive’s Annual Base Salary shall be paid in equal
installments in accordance with the Company’s standard policy regarding payment of compensation to
executives but no less frequently than monthly.




     4.2 Bonuses. Executive shall be eligible to participate in the Company’s and the
Parent’s annual bonus plan or plans applicable to Executive as approved from time to time by the
Board or the Compensation Committee in amounts to be determined by the Compensation Committee based
upon criteria established by the Compensation Committee.




     4.3 Other Perquisites. During the Executive’s employment hereunder, Executive shall
be afforded the following benefits as incidences of his employment:




     (a) Business and Entertainment Expenses. Subject to the Company’s standard
policies and procedures with respect to expense reimbursement as applied to its employees
generally, the Company shall no less frequently than monthly reimburse Executive for, or pay
on behalf of Executive, reasonable and appropriate expenses



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incurred by Executive for
business related purposes, including dues and fees to industry and professional
organizations and costs of entertainment and business development.




     (b) Vacation. During his employment hereunder, Executive shall be entitled to
three (3) weeks of paid vacation each calendar year (or such greater amount of vacation as
provided to employees or executives of the Company generally) and to all holidays provided
to employees of the Company generally.




     (c) Automobile. The Company shall pay Executive $750 per month as a car
allowance.




     (d) Club Dues. The Company shall pay executive’s membership dues to the El
Paso Country Club or such other comparable country club as the Company and Executive agree.




     (e) Other Company Benefits. Executive and, to the extent applicable,
Executive’s spouse, dependents and beneficiaries, shall be allowed to participate in all
benefits, plans and programs, including improvements or modifications of the same, which are
now, or may hereafter be, available to other executives or employees of the Company or the
Parent. Such benefits, plans and programs shall include, without limitation, any profit
sharing plan, thrift plan, health insurance or health care plan, life insurance, disability
insurance, pension plan, supplemental retirement plan, vacation and sick leave plan, and the
like which may be maintained by the Company or the Parent. Neither the Company nor the
Parent shall, however, by reason of this paragraph be obligated to institute, maintain or
refrain from changing, amending or discontinuing any such benefit plan or program, as long
as such changes are similarly applicable to employees generally.



ARTICLE 5 : EFFECT OF TERMINATION ON

COMPENSATION; ADDITIONAL PAYMENTS





     5.1 Termination Other Than an Involuntary Termination. If Executive’s employment
hereunder shall terminate upon expiration of the term provided in Section 3.1 hereof
because either party has provided the notice contemplated in such section, or if Executive’s
employment hereunder shall terminate for any other reason except those described in Sections
5.2 and 5.3, then all compensation and all benefits to Executive under this Agreement
shall continue to be provided until the date of such termination of employment, and such
compensation and benefits shall terminate contemporaneously with such termination of employment.




     5.2 Involuntary Termination Other Than During a Change of Control Period. If
Executive’s employment by the Company, the Parent or any subsidiary thereof or successor thereto
shall be subject to an Involuntary Termination which occurs prior to a Change of Control or after
the expiration of a Change of Control Period, then the Company shall, as additional compensation
for services rendered to the Company (including its subsidiaries and the Parent), pay to Executive
the following amounts and take the following actions after the last day of Executive’s employment
with the Company:



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     (a) Pay Executive the Monthly Severance Amount on the first day of each month
throughout the Severance Period; provided, however, that if commencement of such payments
would cause any part of the Monthly Severance Amount to be subject to additional taxes and
interest under Section 409A of the Code, then the payment of the Monthly Severance Amount
shall be deferred to the earliest date upon which such payments can commence without being
subject to such additional taxes and interest, and the first payment of the Monthly
Severance Amount shall include all amounts that would have been paid prior to the date of
such payment but for the deferral required pursuant to this sentence.




     (b) Cause Executive and those of his dependents (including Executive’s spouse) who were
covered under the Company’s or the Parent’s medical and dental benefit plans on the day
prior to Executive’s Involuntary Termination to continue to be covered under such plans (or
to receive equivalent benefits) throughout the Severance Period at no greater cost to
Executive than that applicable to a similarly situated Company or Parent employee who has
not terminated employment; provided, however, that




     (i) such coverage shall terminate if and to the extent Executive becomes
eligible to receive medical and dental coverage from a subsequent employer (and any
such eligibility shall be promptly reported to the Company by Executive),




     (ii) if Executive (and/or Executive’s spouse) would have been entitled to
retiree medical and/or dental coverage under the Company’s or the Parent’s plans had
Executive voluntarily retired on the date of such Involuntary Termination, then such coverages shall be continued as provided under such
plans, and




     (iii) such coverage to Executive (or the receipt of equivalent benefits) shall
be provided under one or more insurance policies so that reimbursement or payment of
benefits to Executive thereunder shall not result in taxable income to Executive
(or, if any such reimbursement or payment of benefits is taxable, then the Company
shall pay to Executive an amount as shall be required to hold Executive harmless
from any additional tax liability (including liability under Section 409A of the
Code) resulting from the failure by the Company to so provide insurance policies so
that reimbursement or payment of benefits to Executive thereunder shall not result
in taxable income to Executive).




     5.3 Involuntary Termination During a Change of Control Period. If Executive’s
employment by the Company, any subsidiary thereof, the Parent or any successor to any of the
foregoing shall be subject to an Involuntary Termination during a Change of Control Period, then
the Company shall, as additional compensation for services rendered to the Company (including its
subsidiaries and the Parent), pay to Executive the following amounts and take the following actions
after the last day of Executive’s employment with the Company:



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     (a) Pay Executive a lump sum cash payment in an amount equal to the Severance Amount on
or before the fifth day after the last day of Executive’s employment with the Company;
provided, however, that if the lump sum cash payment would be subject to additional taxes
and interest under Section 409A of the Code, then payment of the lump sum cash payment shall
be deferred to the earliest date upon which such amount can be paid without being subject to
such additional taxes and interest.




     (b) Cause any and all outstanding options and other non-vested awards under the
Parent’s Long-Term Incentive Plan, which are held by Executive, to become immediately
exercisable in full and cause Executive’s accrued benefits under any and all nonqualified
deferred compensation plans sponsored by the Company or the Parent to become immediately
nonforfeitable.




     (c) Cause Executive and those of his dependents (including Executive’s spouse) who were
covered under the Company’s or the Parent’s medical and dental benefit plans on the day
prior to Executive’s Involuntary Termination to continue to be covered under such plans (or
to receive equivalent benefits) throughout the Severance Period at no greater cost to
Executive than that applicable to a similarly situated Company or Parent employee who has
not terminated employment; provided, however, that




     (i) such coverage shall terminate if and to the extent Executive becomes
eligible to receive medical and dental coverage from a subsequent employer (and any
such eligibility shall be promptly reported to the Company by Executive),




     (ii) if Executive (and/or Executive’s spouse) would have been entitled to
retiree medical and/or dental coverage under the Company’s or the Parent’s plans had
Executive voluntarily retired on the date of such Involuntary Termination, then such
coverages shall be continued as provided under such plans, and




     (iii) such coverage to Executive (or the receipt of equivalent benefits) shall
be provided under one or more insurance policies so that reimbursement or payment of
benefits to Executive thereunder shall not result in taxable income to Executive
(or, if any such reimbursement or payment of benefits is taxable, then the Company
shall pay to Executive an amount as shall be required to hold Executive harmless
from any additional tax liability (including liability under Section 409A of the
Code) resulting from the failure by the Company to so provide insurance policies so
that reimbursement or payment of benefits to Executive thereunder shall not result
in taxable income to Executive).




     5.4 Interest on Late Payments. If any payment provided for in Section 5.2 or
Section 5.3 hereof is not made when due, then the Company shall pay to Executive interest
on the amount payable from the date that such payment should have been made under such Section
until such payment is made, which interest shall be calculated at 2% plus the prime or base rate
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of interest as reported from time to time in the Wall Street Journal, and shall further hold Executive
harmless from any liability under Section 409A of the Code.




     5.5 Parachute Payments. Notwithstanding anything to the contrary in this Agreement,
if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Code), and the
benefits provided for in this Article, together with any other payments and benefits which
Executive has the right to receive from WRI, would constitute a “parachute payment” (as defined in
Section 280G(b)(2) of the Code), then the benefits provided hereunder (beginning with any benefit
to be paid in cash hereunder) shall be either (1) reduced (but not below zero) so that the present
value of such total amounts and benefits received by Executive from the Company will be one dollar
($1.00) less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the
Code) and so that no portion of such amounts and benefits received by Executive shall be subject to
the excise tax imposed by Section 4999 of the Code or (2) paid in full, whichever produces the
better net after-tax position to Executive (taking into account any applicable excise tax under
Section 4999 of the Code and any other applicable taxes). The determination as to whether any such
reduction in the amount of the benefits provided hereunder is necessary shall be made by the
Compensation Committee in good faith. If a reduced cash payment is made and through error or
otherwise that payment, when aggregated with other payments and benefits from WRI used in
determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times
Executive’s base amount, then Executive shall immediately repay such excess to the Company upon
notification that an overpayment has been made. Nothing in this Section 5.5 shall require
the Company to be responsible for, or have any liability or obligation with respect to, Executive’s
excise tax liabilities under Section 4999 of the Code.




     5.6 Liquidated Damages. In light of the difficulties in estimating the damages for an
early termination of Executive’s employment under this Agreement, the Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this Article 5
shall be received by Executive as liquidated damages.




     5.7 Other Benefits. This Agreement governs the rights and obligations of Executive
and the Company with respect to Executive’s base salary and certain perquisites of employment.
Except as expressly provided herein, Executive’s rights and obligations both during the term of his
employment and thereafter with respect to stock options, restricted stock, incentive and deferred
compensation, life insurance policies insuring the life of Executive and other benefits under the
plans and programs maintained by the Company or the Parent shall be governed by the separate
agreements, plans and other documents and instruments governing such matters.



ARTICLE 6 : PROTECTION OF CONFIDENTIAL INFORMATION





     6.1 Disclosure to and Property of the Company. All information, designs, ideas,
concepts, improvements, product developments, discoveries and inventions, whether patentable or
not, that are conceived, made, developed or acquired by Executive, individually or in conjunction
with others, during the period of Executive’s employment by the Company (whether during business
hours or otherwise and whether on the Company’s premises or otherwise) that relate to WRI’s
business, trade secrets, products or services (including, without limitation, all such information
relating to corporate opportunities, product specification, compositions,



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manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations,
opinions, interpretations, acquisition prospects, the identity of customers or their requirements,
the identity of key contacts within a customer’s organizations or within the organization of
acquisition prospects, marketing and merchandising techniques, business plans, computer software or
programs, computer software and database technologies, prospective names and marks) (collectively,
the “Confidential Information”) shall be disclosed to WRI and are and shall be the sole and
exclusive property of WRI. Moreover, all documents, videotapes, written presentations, brochures,
drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications,
computer programs, e-mail, voice mail, electronic databases, maps, drawings, architectural
renditions, models and all other writings or materials of any type embodying any of such
information, ideas, concepts, improvements, discoveries, inventions and other similar forms of
expression (collectively, “Work Product”) are and shall be the sole and exclusive property
of WRI. Upon Executive’s termination of employment with the Company, for any reason, Executive
shall promptly deliver such Confidential Information and Work Product, and all copies thereof, to
WRI.




     6.2 Disclosure to Executive. WRI has and will disclose to Executive, or place
Executive in a position to have access to or develop, Confidential Information and Work Product of
WRI; and/or has and will entrust Executive with business opportunities of WRI; and/or has and will place Executive in a
position to develop business goodwill on behalf of WRI. Executive agrees to preserve and protect
the confidentiality of all Confidential Information or Work Product of WRI.




     6.3 No Unauthorized Use or Disclosure. Executive agrees that he will not, at any time
during or after Executive’s employment by the Company, make any unauthorized disclosure of, and
will prevent the removal from WRI’s premises of, Confidential Information or Work Product of WRI,
or make any use thereof, except in the carrying out of Executive’s responsibilities during the
course of Executive’s employment with the Company. Executive shall use commercially reasonable
efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by
him under this Agreement to observe the terms and conditions set forth herein as though each such
person or entity was bound hereby. Executive shall have no obligation under this Agreement to keep
confidential any Confidential Information if and to the extent that disclosure thereof is
specifically required by law; provided, however, that in the event disclosure is required by
applicable law, Executive shall provide WRI with prompt notice of such requirement prior to making
any such disclosure so that WRI may seek an appropriate protective order. At the request of WRI at
any time, Executive agrees to deliver to WRI all Confidential Information that he may possess or
control. Executive agrees that all Confidential Information of WRI (whether now or hereafter
existing) conceived, discovered or made by him during the period of Executive’s employment by the
Company exclusively belongs to WRI (and not to Executive), and Executive will promptly disclose
such Confidential Information to WRI and perform all actions reasonably requested by WRI to
establish and confirm such exclusive ownership. Affiliates of the Company, including, without
limitation, the Parent, shall be third-party beneficiaries of Executive’s obligations under this
Article 6. As a result of Executive’s employment by the Company, Executive may also from
time to time have access to, or knowledge of, Confidential Information or Work Product of third
parties, such as customers, suppliers, partners, joint venturers and the like, of WRI. Executive
also agrees to preserve and protect the confidentiality of such third-party Confidential



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Information and Work Product to the same extent, and on the same basis, as WRI’s Confidential
Information and Work Product.




     6.4 Ownership by the Company. If, during Executive’s employment by the Company,
Executive creates any work of authorship fixed in any tangible medium of expression that is the
subject matter of copyright (such as videotapes, written presentations, computer programs, e-mail,
voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company’s business, products or services, whether such work
is created solely by Executive or jointly with others (whether during business hours or otherwise
and whether on the Company’s premises or otherwise), including any Work Product, the Company shall
be deemed the author of such work if the work is prepared by Executive in the scope of Executive’s
employment; or, if the work is not prepared by Executive within the scope of Executive’s employment
but is specially ordered by the Company as a contribution to a collective work, as a part of an
audiovisual work, as a translation, as a supplementary work, as a compilation, or as an
instructional text, then the work shall be considered to be work made-for-hire, and the Company
shall be the author of the work. If such work is neither prepared by Executive within the scope
of Executive’s employment nor a work specially ordered that is deemed to be a work
made-for-hire, then Executive hereby agrees to assign, and by these presents does assign, to the
Company all of Executive’s worldwide right, title and interest in and to such work and all rights
of copyright therein.




     6.5 Assistance By Executive. During the period of Executive’s employment by the
Company and thereafter, Executive shall reasonably assist the Company and its nominee, at any time,
in (a) the protection of WRI’s worldwide right, title and interest in and to Work Product, (b) the
execution of all formal assignment documents requested by WRI or its nominee and (c) the execution
of all lawful oaths and applications for patents and registration of copyright in the United States
and foreign countries.




     6.6 Remedies. Executive acknowledges that money damages would not be a sufficient
remedy for any breach of this Article 6 by Executive, and WRI shall be entitled to enforce
the provisions of this Article 6 by terminating payments then owing to Executive under this
Agreement or otherwise and to specific performance and injunctive relief as remedies for such
breach or any threatened breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach of this Article 6 but shall be in addition to all remedies available at law or
in equity, including the recovery of damages from Executive and his agents.



     ARTICLE
7 : NON-COMPETE Acknowledgments. Executive acknowledges that WRI has
engaged, and that WRI will continue to engage, in the business of refining, transporting and/or
marketing (either wholesale or retail) petroleum products by pipeline, truck or other methods (the
“Business”) in (a) that portion of Texas which is West of U.S. Interstate Highway 35 (as it may be
renamed or redesignated in the future), (b) New Mexico, (c) Arizona and (d) Juarez, Mexico
(collectively, the “Territory”).




     7.2 Restriction. Employee covenants and agrees that, during the term of Employee’s
employment with the Company and for a period of twenty-four (24) months following the termination
of such employment (the “Restricted Period”), for any reason, Executive will not:



14









 






     (a) directly or indirectly (whether as principal, agent, independent contractor,
partner or otherwise) own, manage, operate, control, participate in, perform services for or
otherwise carry on a business similar to or competitive with the Business anywhere in the
Territory or in any other state in the United States in which WRI or any Affiliate of WRI
has refined or sold petroleum products within the period of twelve (12) months prior to the
termination of such employment; or




     (b) induce or attempt to persuade any employee, agent, customer or supplier of WRI or
any Affiliate of WRI to terminate such employment, agency or business relationship in order
to enter into any such relationship on behalf of any other business organization.




     7.3 Stock Ownership. Notwithstanding anything in this Article 7 to the
contrary, Executive shall not be prohibited from owning in excess of 2% in the aggregate of any
class of capital stock of any corporation if such stock is publicly traded and listed on any
national or regional stock exchange or on the NASDAQ market system.



ARTICLE 8 : MISCELLANEOUS





     8.1 Indemnification. If Executive shall obtain any money judgment or otherwise
prevail with respect to any litigation brought by Executive or the Company to enforce or interpret
any provision contained herein, the Company, to the fullest extent permitted by applicable law,
hereby indemnifies Executive for his reasonable attorneys’ fees, other reasonable professional fees
and disbursements incurred in such litigation and hereby agrees (i) to pay in full all such fees
and disbursements and (ii) to pay prejudgment interest on any money judgment obtained by Executive
from the earliest date that payment to him should have been made under this Agreement until such
judgment shall have been paid in full, which interest shall be calculated at 2% plus the prime or
base rate of interest as reported from time to time in the Wall Street Journal.




     8.2 Payment Obligations Absolute. Except as specifically provided in Section
6.6, the Company’s obligation to pay (or cause one of its subsidiaries or the Parent to pay)
Executive the amounts and to make the arrangements provided in this Agreement shall be absolute and
unconditional and shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Company (including its
subsidiaries and the Parent) may have against him or anyone else. All amounts payable by the
Company (including its subsidiaries and the Parent hereunder) shall be paid without notice or
demand. Executive shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and, except as provided in
Section 5.2(b) or 5.3(c) hereof, the obtaining of any such other employment shall
in no event effect any reduction of the Company’s obligations to make (or cause to be made) the
payments and arrangements required to be made under this Agreement.




     8.3 Notices. For purposes of this Agreement, notices and all other communications
provided in this Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by United States registered or certified mail, return



15









 







receipt requested, postage prepaid, or when sent by recognized overnight delivery service, addressed as
follows:


If to the Company :


Western Refining GP, LLC

6500 Trowbridge Drive

El Paso, Texas 79905

Attention: Chairman of the Board of Directors


If to Executive :


c/o Western Refining, Inc.

6500 Trowbridge Drive

El Paso, Texas 79905


or to such other address as either party may furnish to the other in writing in accordance
herewith, except that notices or changes of address shall be effective only upon receipt.





     8.4 Applicable Law. This Agreement is entered into under, and shall be governed for
all purposes by, the laws of the State of Texas, without reference to its choice of law provisions.




     8.5 No Waiver. No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time.




     8.6 Severability. Any provision in this Agreement which is prohibited or
unenforceable in any jurisdiction by reason of applicable law shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without invalidating or
affecting the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.




     8.7 Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together will constitute one and the same
agreement.




     8.8 Withholding of Taxes and Other Employee Deductions. The Company may withhold from
any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes
as may be required pursuant to any law or governmental regulation or ruling and all other normal
employee deductions made with respect to the Company’s employees generally.




     8.9 Headings. The paragraph headings have been inserted for purposes of convenience
and shall not be used for interpretive purposes.




     8.10 Gender and Plurals. Wherever the context so requires, the masculine gender
includes the feminine or neuter, and the singular number includes the plural and conversely.



16









 







     8.11 Assignment. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor of the Company, by merger or otherwise. This Agreement shall also be
binding upon and inure to the benefit of Executive and his estate. If Executive shall die prior to
full payment of amounts due pursuant to this Agreement, such amounts shall be payable pursuant to
the terms of this Agreement to his estate. The Company may assign this Agreement to a successor
business, the Parent or any Affiliate or subsidiary of the Company upon written notice to
Executive. Executive shall not have any right to pledge, hypothecate, anticipate or assign this
Agreement or the rights hereunder, except by will or the laws of descent and distribution.




     8.12 Entire Agreement. This Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to such subject matter.
Without limiting the scope of the preceding sentence, all understandings and agreements preceding
the date of execution of this Agreement and relating to the subject matter hereof are hereby null
and void and of no further force and effect, including, without limitation, all prior employment
and severance agreements, if any, by and between the Company and Executive. Any modification of
this Agreement will be effective only if it is in writing and signed by the party to be charged.



[SIGNATURE PAGE FOLLOWS]




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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the
Effective Date.



	 	 	 
	 

	THE COMPANY:
	 
	 	 
	 

	WESTERN REFINING GP, LLC
	 
	 	 
	 

	By:	 /s/ Paul L. Foster
	 

	 	 
	 
	 

	Name:	 Paul L. Foster
	 

	 	 
	 
	 

	Title:	 President and Chief Executive
Officer
	 

	 	 
	 
	 	 
	 

	EXECUTIVE
	 
	/s/ Ralph A. Schmidt
	 

	 
	 

	Ralph A. Schmidt







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