Exhibit 10.1

 

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November 24, 2015

 

Re: OFFER OF EMPLOYMENT

 

Dear Mr. Smith:

 

On behalf of Warren Resources, Inc. (“Warren” or the “Company”), I am pleased to
extend this offer of employment to you effective as of your Start Date (as
defined below), and look forward to you joining Warren. I am confident you will
find your position with Warren both challenging and rewarding.

 

The basic terms are as follows:

 

Start Date: Wednesday, November 25, 2015.

 

Job Title: Senior Vice President and Chief Financial Officer. For the avoidance
of doubt, you will also be principal financial officer for purposes of
Section 16 of the Securities Exchange Act of 1934.

 

Job Location:  The Company’s headquarters, or, until the six month anniversary
of his Start Date, such other locations as the CEO deems appropriate in the best
interests of the Company.

 

Responsibilities: You will be responsible for performing the duties and
responsibilities as are commensurate and consistent with your positions as Chief
Financial Officer and will devote your full working time, attention and efforts
to the Company and to discharging the responsibilities of your position, and
such other duties and responsibilities as may be assigned from time to time by
the Company which relate to the business of the Company. You will report
directly to the Company’s Chief Executive Officer (“CEO”) and board of directors
(the “Board”). You agree to comply with the Company’s standard policies and
procedures, including the Employee Handbook previously delivered and accepted by
you, and with all applicable laws and regulations.

 

Annual Base Salary: $325,000, payable bi-weekly in 26 equal installments less
all required or elected taxes and other withholdings.

 

Sign-On Equity Compensation Grant: Effective as of the date upon which your
commence employment with the Company, you will be granted an award of
performance-vested restricted stock units (“RSUs”) with respect to a total of
450,000 shares of Warren common stock (“Shares”), which will be granted pursuant
to and subject to the terms of the Warren 2010 Stock Incentive Plan (as amended,
the “Plan”) and an award agreement evidencing the grant of the RSUs (the “Award
Agreement”).  You will be provided with the Award Agreement evidencing your
grant of RSUs as soon as practicable following your Start Date.

 

The Award Agreement will provide that the RSUs will vest and be settled in the
form of Shares, subject to your continued employment, on each of the first three
anniversaries of your start date based upon the following schedule:

 

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Time Period

 

20-Day Average Stock
Price*

 

RSUs Performance-
Vesting**

 

First three years of Start Date

 

$2.00 or Greater

 

75,000

 

First three years of Start Date

 

$4.00 or Greater

 

150,000

 

Second or third year following Start Date

 

$6.00 or Greater

 

225,000

 

Total

 

 

 

450,000

 

 

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* Determined based upon the average closing price of the Company’s Shares on
twenty consecutive Trading Days which all occur during the time period set forth
above.

 

** RSUs which have Performance Vested will remain subject to time-based vesting
and will be settled, subject to your continued employment, in equal installments
on each subsequent anniversary of your Start Date such that the entire
incremental amount vesting in connection with a specific Stock Price milestone
will be settled as of third anniversary of your Start Date.

 

If any of the Stock Price milestones set forth in the table above has not been
achieved as of the third anniversary of the Start Date, all RSUs which have not
performance-vested at such time will be forfeited and cease to remain
outstanding and will not be eligible for any accelerated vesting upon your
termination.

 

In addition, the Award Agreement will also reflect the potential accelerated
vesting of a portion of the RSUs upon certain qualifying terminations of your
employment, as more fully described below.

 

Annual Bonus: At the end of each calendar year from and after 2016, you will be
considered for a bonus of up to 140% of your annual base salary based on Company
and individual performance. As with all bonus compensation at Warren, whether
you are awarded a bonus and, if so, the amount of any bonus is within the sole
and exclusive discretion of Warren and subject to the approval of the
Compensation Committee of the Board (the “Compensation Committee”). Any bonuses
Warren decides to award for a calendar year will be paid no later than March 15
of the following year. For 2016, your performance metrics will include minimum
liquidity and leverage ratio requirements. Remaining Company performance metrics
will be similar to those applicable to other executives, and will include an
individual and a company performance element.  You must be actively employed by
Warren at the time the bonus is actually paid to be considered eligible to
receive the bonus.  You will not be eligible to receive an annual bonus for
2015.

 

Other Long-Term Incentives: You will be eligible to participate in the Plan,
along with other employees of Warren, and may be considered for annual equity
compensation awards, in the amount and subject to the terms and conditions as
determined by the Compensation Committee.

 

Vacation and Benefits: You shall be entitled to take four weeks of paid annual
vacation (‘‘Vacation Time”) during each calendar year of employment, plus three
personal days and five days of sick leave (“PTO”), all in accordance with the
Warren Resources Employee Handbook , which you acknowledge receiving and
reviewing as shown by your signature on Exhibit A hereto.  Subject to and in
accordance with applicable eligibility requirements, you will be eligible to
participate in such employee benefit plans, policies, programs and arrangements
as are generally provided to the Company’s most senior executives from time to
time, which benefits currently include health and dental insurance plans and a
401(k) retirement plan.

 

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Severance Benefits: You will be eligible to participate and receive benefits
pursuant to the terms of the Warren Resources Inc. Executive Severance Plan (as
amended from time to time, the “Severance Plan”) as a “Tier 2 Employee”.  In
addition, the Award Agreement will address the treatment of the RSUs in the
event of termination of employment.

 

Severance Amounts shall be payable within 60 days following termination in
accordance with the terms of the Severance Plan and, consistent with the terms
of the Severance Plan shall be conditioned upon your execution (and
non-revocation) of a release of claims in the time provided to do so.  Pro-Rata
Bonus shall be payable at the same time as Annual Bonus is otherwise payable.

 

For purposes of your participation in the Severance Plan and any accelerated
vesting of your Award Agreement, your resignation for “Good Reason “ shall mean
a resignation of employment by you if, without your prior written consent, you
have: (i) incurred a material and adverse reduction in your authority, duties or
responsibilities at the Company or a successor thereto (with respect to a
termination in connection with a Change of Control (as defined in the Severance
Plan relative to authority, duties or responsibilities immediately prior to the
Change of Control), (ii) incurred a material reduction in your annual base
salary or bonus opportunity (except for reductions in connection with a general
reduction in annual salary or bonus opportunity for all executives of the
Company by an average percentage that is not less than the percentage reduction
of your salary or bonus, as applicable); (iii) experienced a material diminution
in the authority, duties, or responsibilities of the supervisor to whom the you
are required to report, including a requirement that the you report to a
corporate officer or employee instead of reporting directly to the CEO or Board;
or (iv) suffered a material breach of this letter agreement by the Company.

 

Notwithstanding the foregoing, for purposes of this letter agreement and the
Severance Plan, you will not be considered to have resigned for Good Reason
unless (i) you notify the Company in writing of the existence of the condition
which you believe constitutes Good Reason within ninety (90) days of the initial
existence of such condition (which notice specifically identifies such
condition), (ii) the Company fails to remedy such condition within thirty (30)
days after the date on which it receives such notice (the “Remedial Period”),
and (iii) you actually terminate your employment within one year following the
initial existence of the Good Reason condition.  If you terminate employment
before the expiration of the Remedial Period, then your termination will not be
considered to be resignation for Good Reason.

 

“Change in Control” and “Cause” with respect to the items set forth in this
letter agreement shall have the meaning set forth in the Severance Plan.

 

Except as may lower the economic benefits due to you under the paragraph
entitled “Severance” above, Warren reserves the exclusive right to amend, modify
or terminate any of the foregoing plans in its sole discretion.

 

Section 280G Matters:  The Severance Plan will also be amended to provide that
if you become entitled to any amounts which would potentially be subject to the
excise tax on “excess parachute payments” pursuant to Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”), then such amounts shall
be reduced to the amount that is one dollar less than three times your “base
amount” (as determined pursuant to Section 280G of the Code), solely to the
extent the Company determines such reduction would put you in a better financial
position after payment of all taxes (inclusive of any excise taxes on such
amounts).

 

Section 409A Matters:  Notwithstanding anything to the contrary contained
herein, this letter agreement is intended to satisfy or be exempt from the
requirements of Section 409A of the Code, and the Treasury Regulations and other
guidance thereunder.  Accordingly, all provisions herein, or incorporated by
reference herein, shall be construed and interpreted to satisfy or be exempt
from the requirements of Code Section

 

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409A.  Further, for purposes of Code Section 409A, each payment of compensation
under this letter agreement or the Severance Plan shall be treated as a separate
payment of compensation.  For purposes of Section 409A of the Code, to the
extent applicable, to the extent that you are a “specified employee” within the
meaning of the Treasury Regulations issued pursuant to Section 409A of the Code
as of your separation from service and to the limited extent necessary to avoid
the imputation of any tax, penalty or interest pursuant to Section 409A of the
Code, no amount which is subject to Section 409A of the Code and is payable on
account of your separation from service shall be paid to you before the date
(the “Delayed Payment Date”) which is the first day of the seventh month after
your separation from service or, if earlier, the date of your death following
such separation from service.  All such amounts that would, but for the
immediately preceding sentence, become payable prior to the Delayed Payment Date
will be accumulated and paid on the Delayed Payment Date.  No interest will be
paid by the Company with respect to any such delayed payments.  Separation from
service, termination from employment and similar phrases used in this letter
agreement or the Severance Plan shall mean a “separation from service” within
the meaning of the Treasury Regulations issued pursuant to Section 409A of the
Code.

 

Indemnification and Insurance:  During the term of your employment, the Company
will provide you with indemnification and advancement of expenses to fullest
extent permitted by law and its bylaws and other organizational documents, as
amended from time to time.  In addition, the Company will also maintain Director
and Officer Liability insurance coverage at levels reasonable and customary for
companies of comparable size.

 

Entire Agreement:  Unless expressly provided herein, this letter agreement and
the Exhibits hereto represent the entire agreement between you and Warren
regarding your employment and supersedes all prior communications and
agreements, whether written or oral.

 

Employment at Will: Although Warren hopes for a lasting relationship with you,
your employment with the Company is and will remain strictly “at will”. This
means that both Warren and you have the absolute right to terminate your
employment at any time, with or without notice and with or without cause,
subject to any termination benefits due pursuant to this letter agreement, the
Award Agreement or the Severance Plan.

 

Background Check and Right to Work: Your employment is contingent upon the
successful completion of reference and background checks, drug-screening checks
and investigations prior to employment. For the avoidance of doubt, those have
now been completed, but the Company reserves the right to renew such checks in
the ordinary course or as circumstances require. You have represented to Warren
that you are not bound by any employment contract, restrictive covenant or other
restriction preventing you from entering into this employment relationship or
carrying out your responsibilities to Warren, as contemplated hereby.

 

Restrictive Covenant Agreement:  As a condition of your employment and the
amounts and benefits provided for under this letter agreement and the Severance
Plan, simultaneously with your execution of this letter agreement, you must
execute and agree to be bound by the Restrictive Covenant Agreement attached
hereto as Exhibit B.

 

Governing Law:  This letter agreement shall be governed by the laws of the State
of New York, without regard to conflict of law principles.

 

[Signature Page Follows]

 

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Please confirm your acceptance of these terms by signing below and returning a
copy of this letter to me via electronic mail at the following address: 
                                                              .

 

 

Very truly yours,

 

 

 

 

 

 

 

 

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

 

 

 

By:

/s/ Dominick D’Alleva

 

 

 

Name: Dominick D’Alleva

 

 

 

Title:   Chairman of the Board of Directors

 

 

 

 

 

 

Accepted and agreed to

 

 

this 24th day of November, 2015:

 

 

 

 

 

 

 

 

/s/ Frank T. Smith, Jr.

 

 

Frank T. Smith, Jr.

 

 

 

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