Exhibit 10.2

 

RESTRICTED STOCK AWARD AGREEMENT

 

WARREN RESOURCES, INC.

 

AGREEMENT made as of the        of                    (the “Grant Date”),
between Warren Resources, Inc. (the “Company”), a Maryland corporation, and
Philip A. Epstein (the “Participant”).

 

WHEREAS, the Company has adopted the Warren Resources, Inc. 2010 Stock Incentive
Plan (the “Plan”) to promote the interests of the Company by providing an
incentive for employees, directors and consultants of the Company or its
Subsidiaries;

 

WHEREAS, the Company and the Participant are parties to that certain Executive
Employment Agreement dated December 3, 2012 (the “Employment Agreement”);

 

WHEREAS, in accordance with the Employment Agreement and pursuant to the
provisions of the Plan, the Company desires to offer to the Participant shares
of the Company’s common stock, $.0001 par value per share (“Common Stock”), all
on the terms and conditions hereinafter set forth; and

 

WHEREAS, the parties hereto understand and agree that any terms used and not
otherwise defined herein have the meanings ascribed to such terms in the
Employment Agreement or the Plan, as applicable; provided that if there is any
disagreement between the definition of a term that is provided in both the Plan
and the Employment Agreement, then the definition provided in the Employment
Agreement shall supersede the definition provided in the Plan.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

1.                                      Terms of Grant.  The Participant hereby
accepts the offer of the Company to issue to the Participant, in accordance with
the terms of the Plan and this Agreement, 695,000 shares of the Company’s Common
Stock (such shares, subject to adjustment pursuant to Section 12 of the Plan and
Subsection 2.1(g) hereof, the “Granted Shares”) at a per share purchase price of
$.0001 (the “Purchase Price”), which shall be paid to the Company by Participant
no later than thirty (30) days following the Grant Date.  Failure to pay the
Purchase Price as provided for herein will result in an automatic termination of
this Agreement and the rights to the Participant hereunder.

 

2.1.                            Lapsing Forfeiture Right.

 

(a)                                 Lapsing Forfeiture Right.  Except as set
forth in Subsections 2.1(b) and 2.1(c) hereof, all of the Granted Shares are
unvested and shall be subject to a lapsing forfeiture right on the part of the
Company until they have become vested in accordance with this
Section 2.1(a) (the “Lapsing Forfeiture Right”).  Any Granted Shares that remain
subject to the Lapsing Forfeiture Right (x) as of the date the Participant is no
longer an employee of the Company or a Subsidiary, the Participant (or the
Participant’s Survivor), or (y) on the date that is the last

 

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business day immediately preceding the fifth anniversary of the Effective Date
(as such term is defined in the Employment Agreement) (each date in (x) and (y),
the “Termination Date”), shall be forfeited to the Company (or its designee) on
the Termination Date.

 

The Company’s Lapsing Forfeiture Right is as follows:  the Granted Shares will
vest and the Company’s Lapsing Forfeiture Right shall lapse based on the average
closing trading price (“ACTP”) of the Company’s Common Stock over any period of
thirty (30) consecutive trading days (a “Thirty Day Period”) occurring during
the period commencing on the Effective Date and ending on the last business day
occurring on or before the fifth anniversary of the Effective Date.

 

Whenever the ACTP achieves a price set forth in the first column below (a “Price
Target”), the number of Granted Shares becoming vested shall be as follows:

 

Price Targets

 

Number of Granted Shares
Becoming Vested

 

Aggregate Granted Shares
Vested

 

$4

 

115,833

 

115,833

 

$5

 

96,528

 

212,361

 

$6

 

96,528

 

308,889

 

$7

 

96,528

 

405,417

 

$8

 

96,528

 

501,944

 

$9

 

96,528

 

598,472

 

$10

 

96,528

 

695,000

 

 

In the event of any change in capitalization affecting the Common Stock of the
Company as described in section 12 of the Plan, the number of shares of Common
Stock covered by each outstanding Award shall be subject to adjustment as
therein provided, and the Price Targets shall  adjusted accordingly.

 

(b)                                 Effect of a Termination by the Company
without Cause or resignation by the Participant for Good Reason. 
Notwithstanding anything to the contrary contained in this Agreement, in the
event of the Company terminates the Participant’s employment without Cause (as
such term is defined in the Employment Agreement), or the Participant resigns
for Good Reason (as such term is defined in the Employment Agreement), then,
only to the extent that none of the Granted Shares has vested and remain subject
to the Company’s Lapsing Forfeiture Right, 115,833 Granted Shares will be deemed
vested and no longer subject to the Company’s Lapsing Forfeiture Right as of the
Termination Date.

 

(c)                              Effect of Change of Control.  Notwithstanding
the provisions in subsection 2.1(a) above, in the event of a Change of Control
(as such term is defined in the Employment Agreement), the Granted Shares shall
become vested and no longer subject to the Company’s Lapsing Forfeiture Right
based upon the price at which the Change of Control occurs, as if such price
constituted the ACTP for a Thirty Day Period; provided that for a price between
whole dollar amounts, a marginal number of Granted Shares vesting shall be
determined based on a straight line interpolation between whole dollar amounts. 
Any Granted Shares that do not vest upon the Change of Control shall continue to
be held subject to vesting based upon the Price Targets in subsection 2.1(a),
provided that if the Company’s Common Stock is no longer publicly traded,
vesting shall be determined annually within ninety (90) days  following the end
of each fiscal year of the Company based on the fair market value of the
Company’s Common

 

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Stock determined by a nationally recognized independent accounting firm using
valuation factors that are consistent with Section 409A of the Code and Treas.
Reg. §1.409A-1(b)(iv)(B).

 

(d)                                 Escrow.  The Granted Shares issued to the
Participant hereunder which from time to time are subject to the Lapsing
Forfeiture Right shall be held in escrow, together with a stock power duly
executed by the Participant, by the Company as provided in this Subsection
2.1(d).  As the Granted Shares become vested from time to time the Company shall
promptly release from escrow and deliver to the Participant the Granted Shares
and the stock power as to which the Company’s Lapsing Forfeiture Right has
lapsed.  In the event of forfeiture to the Company of Granted Shares subject to
the Lapsing Forfeiture Right, the Company shall release from escrow and cancel
the number of Granted Shares so forfeited.  Any cash or securities distributed
in respect of the Granted Shares held in escrow, including, without limitation,
ordinary cash dividends or shares issued as a result of stock splits, stock
dividends or other recapitalizations (“Retained Distributions”), shall also be
held in escrow in the same manner as the Granted Shares and all Retained
Distributions shall be forfeited to the Company or released from escrow and
delivered to the Participant, as the case may be, at such time and in such
manner as the Granted Shares to which such Retained Distributions so relate. All
ordinary cash dividends retained hereunder shall, during the period in which
such dividends are retained by the Company, be deposited into an account at a
financial institution selected by the Company, which shall not be required to
bear interest or be segregated in a separate account.

 

(e)                                  Prohibition on Transfer.  The Participant
recognizes and agrees that all Granted Shares and Retained Distributions which
are subject to the Lapsing Forfeiture Right may not be sold, transferred,
assigned, hypothecated, pledged, encumbered or otherwise disposed of, whether
voluntarily or by operation of law, other than to the Company (or its designee).
 The Company shall not be required to transfer any Granted Shares or Retained
Distributions on its books which shall have been sold, assigned or otherwise
transferred in violation of this Subsection 2.1(e), or to treat as the owner of
such Granted Shares or Retained Distributions, or to accord the right to vote as
such owner or to pay dividends to, any person or organization to which any such
Granted Shares or Retained Distributions shall have been so sold, assigned or
otherwise transferred, in violation of this Subsection 2.1(e).  This Subsection
2.1(e) shall not apply to a transfer of the Participant’s Granted Shares and
Retained Distributions, solely for estate planning purposes (i) to a Relative of
the Participant; (ii) to the trustee of a trust principally for the benefit of
the Participant or a Relative of the Participant; (iii) to a legal entity, all
interests in which are beneficially owned by any of the persons in clauses
(i) and (ii) inclusive; (iv) under a will or the rules of intestacy; or (v) from
a trust principally for the benefit of a person and that person’s Relatives to
the trust’s beneficiaries.  The term “Relative” means (a) a spouse; or (b) a
child or remoter issue, a brother, sister, niece or nephew, or the spouse of any
of them.

 

(f)                                   Failure to Deliver Granted Shares to be
Forfeited.  In the event that the Granted Shares to be forfeited to the Company
under this Agreement are not in the Company’s possession pursuant to Subsection
2.1(d) above or otherwise and the Participant or the Participant’s Survivor
fails to deliver such Granted Shares to the Company (or its designee), the
Company may immediately take such action as is appropriate to transfer record
title of such Granted Shares from the Participant to the Company (or its
designee) and to treat the Participant and such Granted Shares in all respects
as if delivery of such Granted Shares had been made as required by this
Agreement.  The Participant hereby irrevocably grants the Company a power of
attorney which shall be coupled with an interest for the purpose of effectuating
the preceding sentence.

 

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(g)                                  Adjustments.  The Plan contains provisions
covering the treatment of Common Stock in a number of contingencies such as
stock splits and mergers.  Provisions in the Plan for adjustment with respect to
the Common Stock and the related provisions with respect to successors to the
business of the Company are hereby made applicable hereunder and are
incorporated herein by reference.

 

2.2                         General Restrictions on Transfer of Granted Shares. 
The Participant acknowledges and agrees that neither the Company, its
shareholders nor its directors and officers, has any duty or obligation to
disclose to the Participant any material information regarding the business of
the Company or affecting the value of the Granted Shares before, at the time of,
or following the Participant’s Termination, including, without limitation, any
information concerning plans for the Company to make a public offering of its
securities or to be acquired by or merged with or into another firm or entity.

 

3.                                      Securities Law Compliance.  The
Participant specifically acknowledges and agrees that any sales of Granted
Shares shall be made in accordance with the requirements of the Securities Act. 
The Company currently has an effective registration statement on file with the
Securities and Exchange Commission with respect to the Granted Shares.  The
Company intends to maintain this registration statement but has no obligation to
do so.  If the registration statement ceases to be effective for any reason, you
will not be able to transfer or sell any of the Granted Shares issued to you
pursuant to this Agreement unless exemptions from registration under applicable
securities laws are available.  The Company shall not be obligated to either
issue the Granted Shares or permit the resale of any Granted Shares if such
issuance or resale would violate any securities law, rule or regulation.

 

4.                                      Legend.  In addition to any legend
required pursuant to the Plan, all certificates representing the Granted Shares
issued to the Participant pursuant to this Agreement shall have endorsed thereon
a legend substantially as follows:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET
FORTH IN A RESTRICTED STOCK AWARD AGREEMENT DATED AS OF DECEMBER 5, 2012 WITH
THIS COMPANY, A COPY OF WHICH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE
OFFICES OF THE COMPANY OR WILL BE MADE AVAILABLE UPON REQUEST.”

 

5.                                      Rights as a Stockholder.  The
Participant shall have all the rights of a stockholder with respect to the
Granted Shares, including voting and dividend rights, subject to the transfer
and other restrictions set forth herein, including pursuant to Section 2.1(d)
hereof and in the Plan.

 

6.                                      Incorporation of the Plan.  The
Participant specifically understands and agrees that the Granted Shares issued
under the Plan are being sold to the Participant pursuant to the Plan, a copy of
which Plan the Participant acknowledges he or she has read and understands and
by which Plan he or she agrees to be bound.  The provisions of the Plan are
incorporated herein by reference.

 

7.                                      Tax Liability of the Participant and
Payment of Taxes. The Participant acknowledges and agrees that any income or
other taxes due from the Participant with respect to the Granted Shares issued
pursuant to this Agreement, including, without limitation, the Lapsing
Forfeiture Right, shall be the Participant’s responsibility.  Without limiting
the foregoing, the Participant agrees that, to the extent that the lapsing of
restrictions on disposition of any of the

 

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Granted Shares or the declaration of dividends on any such shares before the
lapse of such restrictions on disposition results in the Participant’s being
deemed to be in receipt of earned income under the provisions of the Code, the
Company shall be entitled to immediate payment from the Participant of the
amount of any tax required to be withheld by the Company unless the Participant
has elected share withholding.

 

Upon execution of this Agreement, the Participant may file an election under
Section 83 of the Code.  The Participant acknowledges that if he or she does not
file such an election, as the Granted Shares are released from the Lapsing
Forfeiture Right in accordance with Section 2.1, the Participant will have
income for tax purposes equal to the Fair Market Value of the Granted Shares at
such date, less the price paid for the Granted Shares by the Participant.  The
Participant has been given the opportunity to obtain the advice of his or her
tax advisors with respect to the tax consequences of the purchase of the Granted
Shares and the provisions of this Agreement.

 

Pursuant to Section 3.2 of the Employment Agreement, the Executive shall have
the right to elect to have the Company withhold from that number of Vested
Shares to pay any federal, state, or local taxes as required by law to be
withheld with respect to the vesting or delivery of the Vested Shares pursuant
to the Plan.

 

8.                                      No Obligation to Maintain Relationship. 
Except as provided in the Employment Agreement, the Participant acknowledges
that:  (i) the Company is not by the Plan or this Agreement obligated to
continue the Participant as an employee, director or Consultant of the Company
or Subsidiary; (ii) the Plan is discretionary in nature and may be suspended or
terminated by the Company at any time; (iii) the grant does not by itself create
any contractual or other right to receive future grants of Common Stock, or
benefits in lieu of Common Stock; (iv) other than with respect to the Company’s
grant of the Second Tranche (as such term is defined in the Employment
Agreement) on January 2, 2013, all determinations with respect to any such
future grants, including, but not limited to, the times when Common Stock shall
be granted, the number of Common Stock to be granted, the purchase price, and
the time or times when each share of Common Stock shall be free from a lapsing
repurchase or forfeiture right, will be at the sole discretion of the Company;
(v) the Participant’s participation in the Plan is voluntary; and (vi) the
Granted Shares are not part of normal or expected compensation for purposes of
calculating any severance, resignation, redundancy, end of service payments,
bonuses, long-service awards, pension or retirement benefits or similar
payments.

 

9.                                      Notices.  Any notices required or
permitted by the terms of this Agreement or the Plan shall be given by
recognized courier service, facsimile, registered or certified mail, return
receipt requested, addressed as follows:

 

If to the Company:

 

Warren Resources, Inc.

1114 Avenue of The Americas, 34th Floor

New York, NY  10013

Attn:  General Counsel

 

If to the Participant:

 

Philip A. Epstein

33 Harrison St.

New York, NY 10013

 

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or to such other address or addresses of which notice in the same manner has
previously been given.  Any such notice shall be deemed to have been given on
the earliest of receipt, one business day following delivery by the sender to a
recognized courier service, or three business days following mailing by
registered or certified mail.

 

10.                               Benefit of Agreement.  Subject to the
provisions of the Plan and the other provisions hereof, this Agreement shall be
for the benefit of and shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.

 

11.                               Governing Law.  This Agreement shall be
construed and enforced in accordance with the laws of the State of Maryland,
without giving effect to the conflict of law principles thereof.  For the
purpose of litigating any dispute that arises under this Agreement, whether at
law or in equity, the parties hereby consent to exclusive jurisdiction in New
York and agree that such litigation shall be conducted in the state courts of
New York County, New York or the federal courts of the United States for the
Southern District of New York.

 

12.                               Severability.  If any provision of this
Agreement is held to be invalid or unenforceable by a court of competent
jurisdiction, then such provision or provisions shall be modified to the extent
necessary to make such provision valid and enforceable, and to the extent that
this is impossible, then such provision shall be deemed to be excised from this
Agreement, and the validity, legality and enforceability of the rest of this
Agreement shall not be affected thereby.

 

13.                               Entire Agreement.  This Agreement, together
with the Plan and the applicable terms of the Employment Agreement constitutes
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof.  No statement,
representation, warranty, covenant or agreement not expressly set forth in this
Agreement shall affect or be used to interpret, change or restrict the express
terms and provisions of this Agreement provided, however, in any event, this
Agreement shall be subject to and governed by the Plan.

 

14.                               Modifications and Amendments; Waivers and
Consents.  The terms and provisions of this Agreement may be modified or amended
as provided in the Plan.  Except as provided in the Plan, the terms and
provisions of this Agreement may be waived, or consent for the departure
therefrom granted, only by written document executed by the party entitled to
the benefits of such terms or provisions.  No such waiver or consent shall be
deemed to be or shall constitute a waiver or consent with respect to any other
terms or provisions of this Agreement, whether or not similar.  Each such waiver
or consent shall be effective only in the specific instance and for the purpose
for which it was given, and shall not constitute a continuing waiver or consent.

 

15.                               Consent of Spouse/Domestic Partner.  If the
Participant has a spouse or a domestic partner as of the date of this Agreement,
the Participant’s spouse or domestic partner shall execute a Consent of
Spouse/Domestic Partner in the form of Exhibit A hereto, effective as of the
date hereof.  Such consent shall not be deemed to confer or convey to the spouse
or domestic partner any rights in the Granted Shares that do not otherwise exist
by operation of law or the agreement of the parties.  If the Participant
subsequent to the date hereof, marries,

 

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remarries or applies to the Company for domestic partner benefits, the
Participant shall, not later than 60 days thereafter, obtain his or her new
spouse’s/domestic partner’s acknowledgement of and consent to the existence and
binding effect of all restrictions contained in this Agreement by having such
spouse/domestic partner execute and deliver a Consent of Spouse/Domestic Partner
in the form of Exhibit A.

 

16.                               Counterparts.  This Agreement may be executed
in one or more counterparts, and by different parties hereto on separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

17.                               Data Privacy.  By entering into this
Agreement, the Participant:  (i) authorizes the Company and each Subsidiary, and
any agent of the Company or any Subsidiary administering the Plan or providing
Plan recordkeeping services, to disclose to the Company or any of its
Subsidiaries such information and data as the Company or any such Subsidiary
shall request in order to facilitate the grant of the Granted Shares and the
administration of the Plan; and (ii) authorizes the Company and each Subsidiary
to store and transmit such information in electronic form for the purposes set
forth in this Agreement.

 

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

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

 

 

WARREN RESOURCES, INC.

 

 

 

 

 

By:

 

 

Name: David E. Fleming

 

Title:    Senior Vice President & General Counsel

 

 

 

 

 

PARTICIPANT:

 

 

 

 

 

 

 

Print name: Philip A. Epstein

 

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EXHIBIT A

 

CONSENT OF SPOUSE/DOMESTIC PARTNER

 

I,                                                         , spouse or domestic
partner of                                                           ,
acknowledge that I have read the RESTRICTED STOCK AWARD AGREEMENT dated as of
December 5, 2012 (the “Agreement”) to which this Consent is attached as
Exhibit A and that I know its contents.  Capitalized terms used and not defined
herein shall have the meanings assigned to such terms in the Agreement.  I am
aware that by its provisions the Granted Shares granted to my spouse/domestic
partner pursuant to the Agreement are subject to a Lapsing Forfeiture Right in
favor of Warren Resources, Inc. (the “Company”) and that, accordingly, I may be
required to forfeit to the Company any or all of the Granted Shares of which I
may become possessed as a result of a gift from my spouse/domestic partner or a
court decree and/or any property settlement in any domestic litigation.

 

I hereby agree that my interest, if any, in the Granted Shares subject to the
Agreement shall be irrevocably bound by the Agreement and further understand and
agree that any community property interest I may have in the Granted Shares
shall be similarly bound by the Agreement.

 

I agree to the Lapsing Forfeiture Right described in the Agreement and I hereby
consent to the forfeiture of the Granted Shares to the Company by my
spouse/domestic partner or my spouse/domestic partner’s legal representative in
accordance with the provisions of the Agreement.  Further, as part of the
consideration for the Agreement, I agree that at my death, if I have not
disposed of any interest of mine in the Granted Shares by an outright bequest of
the Granted Shares to my spouse/domestic partner, then the Company shall have
the same rights against my legal representative to exercise its rights to the
Granted Shares with respect to any interest of mine in the Granted Shares as it
would have had pursuant to the Agreement if I had acquired the Granted Shares
pursuant to a court decree in domestic litigation.

 

I AM AWARE THAT THE LEGAL, FINANCIAL AND RELATED MATTERS CONTAINED IN THE
AGREEMENT ARE COMPLEX AND THAT I AM FREE TO SEEK INDEPENDENT PROFESSIONAL
GUIDANCE OR COUNSEL WITH RESPECT TO THIS CONSENT.  I HAVE EITHER SOUGHT SUCH
GUIDANCE OR COUNSEL OR DETERMINED AFTER REVIEWING THE AGREEMENT CAREFULLY THAT I
WILL WAIVE SUCH RIGHT.

 

Dated as of the                day of                                 , 20    .

 

 

 

 

Print name:

 

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