EXHIBIT 4.1


 


SUBSCRIPTION AND REGISTRATION RIGHTS
AGREEMENT


 


 


Warren Resources, Inc.


489 Fifth Avenue, 32nd
Floor


New York, New York  10017


 


Gentlemen and Ladies:


 


The
undersigned desires to invest in Warren Resources, Inc. (the “Company”) on the
terms and conditions described in this Subscription And Registration Rights
Agreement (the “Subscription Agreement”) and the Company’s Confidential Private
Placement Memorandum dated January 21, 2004 (the “Memorandum”).  Pursuant to the terms described in the Memorandum
and in this Subscription Agreement, the Company is offering to subscribers who
are accredited investors up to 2,800,000 Units, with each Unit consisting of
one share of the Company’s common stock, par value $0.0001 per share (the
“Common Shares”), .25 Class A Warrants to purchase one Common Share at an
exercise price of $10.00 per share, and .25 Class B Warrants to purchase one
Common Share at an exercise price of $12.50 per share.  The Units are offered at the price of $7.00
per Unit (the “Offering Price”) for an aggregate of up to $19,600,000 (the
“Offering”).  The Class A Warrants and
Class B Warrants (collectively, the “Warrants”) will be exercisable during the
period beginning one year after the date of their issuance and ending five
years after the date of their issuance. 
The Warrants will terminate, if not exercised, five years from the date
of their issuance. The undersigned shall be entitled to registration rights for
the Common Shares, including the Common Shares issuable upon exercise of the
Warrants, as further described in this Subscription Agreement. In the event
that the Company’s Common Shares have not commenced public trading within one
year after the closing of the Offering, the Company shall issue an additional
..05 Class A Warrants and .05 Class B Warrants to the undersigned for each Unit
purchased in this Offering by the undersigned.


 


1.                                       Subscription


 


(a)                                  Subject
to and in accordance with the terms and conditions of this Subscription
Agreement, the undersigned hereby offers to purchase
                       
Units.  In accordance with the
Irrevocable Instruction Letter, incorporated herein as Exhibit A, the
undersigned shall deliver to the Company the full purchase price of
$                       
(the “Purchase Price”) for the subscription for the Units in the form of a
check or wire transfer to the Company. 
It is understood by the undersigned that the Company reserves the right
in its sole discretion to reject all or any part of any subscription.  After completion of the Offering, the
undersigned will be notified promptly by the Company whether the undersigned’s
subscription has been accepted.


 


(b)  As more fully described in each of the
undersigned’s Warrant Agreements, the exercise price of each Warrant and the
number of Common Shares issuable upon the exercise of a Warrant is subject to
adjustment in the event of: (i) any subdivision or combination of the Company’s
outstanding common stock; or (ii) any distribution by the Company to holders of
common stock of a stock dividend, or assets (other than cash dividends payable
out of retained earnings).


 


2.                                       Representations
And Warranties Of The Undersigned


 


The
undersigned hereby represents and warrants to, and agrees with, the Company as
follows:


 

















 


(i)                                     the
undersigned can bear the economic risk of losing the undersigned’s entire
investment;


 


(ii)                                  the
undersigned is acquiring the Units for its own account and not with a view to,
or for resale in connection with, a distribution of the Units, or of the Common
Shares or Warrants included in the Units, in violation of the Securities Act of
1933 (the “1933 Act”);


 


(iii)                               the undersigned’s
overall commitments to investments that are not readily marketable is not
disproportionate to the undersigned’s net worth and the undersigned’s
investment in the Units will not cause such overall commitments to become
excessive;


 


(iv)                              the
undersigned’s financial condition is such that the undersigned is under no
present or contemplated future need to dispose of any portion of the Units to
satisfy any existing or contemplated undertaking, need or indebtedness;


 


(v)                                 the
undersigned has adequate means of providing for the undersigned’s current needs
and personal contingencies and has no need for liquidity in the undersigned’s
investment in the Units; and


 


(vi)                              the
undersigned has sufficient knowledge and experience in business and financial
matters to evaluate, and has evaluated, the merits and risks of this
investment.


 


(b)                                 The
address set forth below on the signature page of this Subscription Agreement is
the undersigned’s true and correct principal office, and the undersigned has no
present intention of relocating its principal office to any other state or
jurisdiction.


 


(c)                                  The undersigned is an “accredited investor” as
that term is defined in Rule 501 of Regulation D, as promulgated under the
1933 Act because the undersigned meets one
of the following criteria (if the undersigned is not an “accredited
investor”, place an “X” in the following blank:
          ):


 


(i)                                     An
individual with a net worth, individually or jointly with the undersigned’s
spouse, of $1,000,000; or


 


(ii)                                  An
individual with income in excess of $200,000 in each of the two most recent
years, or joint income with the undersigned’s spouse in excess of $300,000 in
each of those years, and the undersigned has a reasonable expectation of
reaching the same income level in the current year; or


 


(iii)                               An individual who is an
officer or director of the Company; or


 


(iv)                              A
corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities offered, with total
assets in excess of $5,000,000; or


 


(v)                                 A
trust with total assets in excess of $5,000,000 not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D, as
promulgated under the 1933 Act; or


 


2

















 


(vi)                              An
entity in which all of the equity owners are accredited investors.


 


(d)                                 The undersigned confirms that all documents, records
and books pertaining to an investment in the Units that have been requested by
the undersigned have been made available or delivered to the undersigned.  Without limiting the foregoing, the
undersigned has received and reviewed the Memorandum together with the
following documents:  (a) Summary of
Evaluation of Proved Oil and Gas Reserves effective December 31, 2002
utilizing December 31, 2002 pricing, as prepared by Williamson Petroleum
Consultants, Inc; (b) the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2002; (c) the Company’s Quarterly Reports on Forms
10-Q for each of the quarters ended March 31, 2003, June 30, 2003 and
September 30, 2003; (d) the Company’s Proxy Statement on Schedule 14A
relating to the Company’s Annual Meeting of Shareholders on May 21,
2003;  and (e) any other documents
included with the Memorandum, and the undersigned has had the opportunity to
discuss the acquisition of the Units with the Company.  The undersigned has obtained or been given
access to all information concerning the Company that the undersigned has
requested.  As a result of its review of
the Company, including the review of the materials provided to the undersigned,
the undersigned understands, among other things, the following:  the Company has limited financial resources,
has had periods when it has incurred negative cash flow, and has had periods
when it has not operated at a profit; and the Company has not concurrently, and
may not in the future, receive additional investment funds.  The undersigned further represents that the
undersigned is cognizant of the operations, financial condition and
capitalization of the Company; is cognizant of the intended use of proceeds
from this financing, and has available full information concerning the
Company’s affairs to evaluate the merits and risks of an investment in the
Units.


 


(e)                                  The
undersigned has had the opportunity to ask questions of, and receive answers
from, the Company concerning the terms of an investment in the Units and to
receive additional information necessary to verify the accuracy of the
information delivered to the undersigned.


 


(f)                                    The
undersigned understands that the issuance of the Units has not been registered
under the 1933 Act or any state securities laws in reliance on an exemption for
private offerings and no U.S. federal or state agency has made any finding or
determination as to the fairness of this investment or any recommendation or
endorsement of the offering of the Units.


 


(g)                                 The
undersigned acknowledges that, in making the decision to purchase the Units, it
has relied solely upon independent investigations made by it.


 


(h)                                 The
undersigned has the full right, power and authority to enter into this
Subscription Agreement and to carry out and consummate the transactions
herein.  This Subscription Agreement
constitutes the legal, valid and binding obligation of the undersigned.


 


(i)                                     The
undersigned represents that an investment in the Units is a suitable investment
for the undersigned.


 


(j)                                     The
undersigned acknowledges and is aware that the following legend will be
imprinted on  the certificate(s)
representing the Common Shares and the Warrants subscribed to by the
undersigned (including those Common Shares exercisable upon exercise of the
Warrants):


 


3

















 


“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE “1933 ACT”), AND ARE ‘RESTRICTED SECURITIES’ AS THAT
TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
1933 ACT.”


 


(k)                                  The undersigned acknowledges and is aware of the
following, in addition to other information included in the information
provided to the undersigned:


 


(i)                                     The
Units and the securities included in the Units constitute a speculative
investment and involve a high degree of risk of loss by the undersigned of the
undersigned’s total investment.


 


(ii)                                  There
are substantial restrictions on the transferability of the Units.  The Units, the Common Shares, the Warrants,
and the Common Shares issuable upon exercise of the Warrants cannot be
transferred, pledged, hypothecated, sold or otherwise disposed of unless they
are registered under the 1933 Act, or an exemption from such registration is
available and established to the satisfaction of the Company; except as
provided in Section 3 below, investors in the Offering have no rights to
require that any transfer of the Units be registered under the 1933 Act; there
is a limited public market for the Company’s common stock; and accordingly, the
undersigned may have to hold the Units indefinitely;  and it may not be possible for the undersigned to liquidate the
undersigned’s investment in the Company.


 


(l)                                     The undersigned understands and agrees that the
Company is relying upon the accuracy, completeness, and truth of the
undersigned’s representations, warranties, agreements, and certifications
contained in this Subscription Agreement, in determining the undersigned’s
suitability as an investor in the Company and in establishing compliance with
federal and state securities laws.  The
undersigned understands that any incomplete, inaccurate, or untruthful
response, or the breach of the undersigned’s representations, warranties,
agreements, or certifications may result in the undersigned or the Company, or
both, being in violation of federal or state securities laws, and any person,
including the Company, who suffers damage as a result may have a claim against
the undersigned for damages.  The undersigned
also acknowledges that the undersigned is indemnifying the Company and others
for any such losses in accordance with Section 5 of this Subscription
Agreement.


 


The foregoing representations and warranties are true
and accurate in all material respects as of the date hereof and shall survive
the delivery of the subscription amount and the completed Subscription
Agreement.


 


3.                                       Registration
Rights


 


The Common Shares
purchased in connection with the Offering and the Common Shares issuable upon
exercise of the Warrants issued in connection with the Offering constitute
“Registrable Shares”, which are entitled to the registration rights described
below.


 


(a)                                  At
any time after the earlier to occur of (i) 170 days after the closing of the
initial public offering of the Company’s common stock, and (ii) one year after
the closing of this private placement


 


4

















 


Offering, the Company
shall, as soon as practicable thereafter, file with the SEC a registration
statement covering the sale by the undersigned of the Registrable Shares
purchased in this Offering by the undersigned. 
The Company will undertake reasonable best efforts to cause the
registration statement to become effective with the SEC as soon as possible
after its filing.  Notwithstanding the
foregoing, the Company shall not be obligated to effect more than one
registration under this Section 3.


 


(b)                                 The
Company’s obligations contained in this Section 3 shall be conditioned
upon timely receipt by the Company in writing of such information as the
Company reasonably may require from the undersigned to be included in the
registration statement.  Such
information shall be provided to the Company in writing within 10 days after
the request for that information by the Company.


 


(c)                                  All
registration expenses incurred by the Company in connection with any
registration, qualification or compliance pursuant to this Section 3,
including printing expenses, fees and disbursements of the Company’s counsel,
and registration and filing fees relating to the sale of the Registrable Shares
to be registered on behalf of the undersigned pursuant to this Section 3,
shall be borne by the Company.  All
selling expenses, including commissions, allocable to the sale of the
Registrable Shares registered on behalf of the undersigned and all costs of the
undersigned’s legal counsel and other advisors shall be borne by the
undersigned.


 


(d)                                 In
the case of a registration effected by the Company on behalf of the undersigned
pursuant to this Section 3, the Company shall keep the undersigned advised
in writing as to the initiation of such registration and as to the completion
thereof.  At its expense, the Company
will keep such registration continuously effective for a period ending on the
earlier to occur of the date: (i) that is two years after the date on which the
registration statement becomes effective with the SEC;  (ii) on which the undersigned is eligible to
sell the Registrable Shares pursuant to Rule 144(k) under the Securities Act,
or the successor to such provision; or (iii) on which the undersigned has
completed the distribution described in the registration statement relating
thereto.


 


(e)                                  The
Company has previously existing registration rights obligations to holders (the
“Preferred Holders”) of its 8% Cumulative Convertible Preferred Stock (the
“Preferred Stock”) which require the following limitations on the registration
rights granted hereunder to the undersigned:


 


(i)                                     Commencing
six months after the completion of an initial public offering by the Company,
the Preferred Holders may request a registration statement covering all or any
portion of the Common Stock received or receivable upon exercise of the
Preferred Stock (the “Converted Shares”). 
No securities other than the Converted Shares may be included in this
registration statement without the prior written consent of a majority of the
Preferred Holders that requested the registration statement.  In addition, from the date of filing of such
registration statement and until the withdrawal or abandonment, or until 90
days after the effective date, of that registration statement, the Company
cannot file or cause to be effected any other registration of any of its equity
securities.


 


(ii)                                  Commencing
six months after the completion of an initial public offering by the Company,
the Preferred Holders of at least 50 percent of the Preferred Stock may request
and obtain piggyback rights for Converted Shares on a registration statement
filed by the Company.  If this
registration statement is an underwritten secondary registration, and the
managing underwriters advise the Company in writing of their opinion that the
number of securities requested to be included in that registration exceeds the
number that can be sold in an orderly manner in that offering within a price
range acceptable to the Company and the holders of a


 


5

















 


majority of the Converted
Shares requested to be included in such registration, the Company shall include
in such registration the Preferred Stock requested to be included and the
Registrable Shares acquired in this Offering, pro rata among the holders of all
such securities on the basis of the number of securities owned by each such
holder.


 


(f)                                    In
the case of a registration effected by the Company on behalf of the undersigned
pursuant to this Section 3, the Company shall use its best efforts to
register and qualify the securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions within the
United States as the undersigned may reasonably request that allow registration
by coordination and to do any and all other acts and things which may be
necessary or advisable to enable the undersigned to complete such proposed sale
or other distribution by the undersigned of Registrable Shares in any such
jurisdiction; provided however, that in no event shall the Company be obligated
to register or qualify under the blue sky laws of any state in which the common
stock of the Company currently is not qualified for resale, or be obligated to
register or qualify the securities in any jurisdiction which would require the
Company to qualify to do business or to file a general consent to service of
process in any jurisdiction where it shall not then be qualified.


 


(g)                                 The
Company shall prepare and file with the SEC such amendments and supplements to
the registration statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the 1933 Act with respect to
the disposition of all Registrable Shares; shall furnish to the undersigned
such number of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other documents
(including, without limitation, prospectus amendments and supplements as are
prepared by the Company) as the undersigned may reasonably request in order to
facilitate the disposition of the Registrable Shares; shall notify the
undersigned, at any time when a prospectus relating to such registration
statement is required to be delivered under the 1933 Act;shall immediately
notify the undersigned of the happening of any event as a result of which the
prospectus included in or relating to such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading; and, thereafter, the Company will promptly
prepare (and, when completed, give notice to the undersigned) a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Shares, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading; provided that upon such notification
by the Company, the undersigned will not offer or sell Registrable Shares under
the registration statement until the Company has notified the undersigned that
it has prepared a supplement or amendment to such prospectus and delivered copies
of such supplement or amendment to the undersigned (it being understood and
agreed by the Company that the foregoing proviso shall in no way diminish or
otherwise impair the Company’s obligation to promptly prepare a prospectus
amendment or supplement as above provided and deliver copies of same as above
provided).


 


(h)                                 To
the fullest extent permitted by law, the Company will indemnify and hold
harmless the undersigned, each officer, director, fiduciary, employee, member,
general partner and limited partner (and affiliates thereof) of the
undersigned, each broker or other person acting on behalf of the undersigned
and each person, if any, who controls the undersigned within the meaning of the
1933 Act, against any loss, claim, damage or liability (or action in respect
thereof) to which the undersigned may become subject, under the 1933 Act, or
otherwise, insofar as any such loss, claim, damage or liability (or action in
respect thereof) is caused by any untrue statement or alleged untrue statement
of any material facts contained in the registration statement, any prospectus
contained in the registration statement, or any amendment or supplement
thereto, or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements made therein not misleading, or arises out of the failure
of any representations or warranties of the Company contained herein to be true


 


6

















 


and correct and the
Company will reimburse on demand the undersigned, such broker or other person
acting on behalf of the undersigned or such officer, director, fiduciary,
employee, member, general partner, limited partner, affiliate or controlling
person for any legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action.  Notwithstanding
the foregoing provisions of this paragraph, the Company will not be liable in
any such case to the extent that any such loss, claim, damage, expense or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by the undersigned or any agent or other representative
of the undersigned.  If the
indemnification provided for in this Section 3 from the indemnifying party
is applicable by its terms but unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations.  The
relative faults of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or related to
information supplied by, such indemnifying party or indemnified party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action.


 


(i)                                     The
undersigned will indemnify and hold harmless the Company and any underwriter
(as defined in the 1933 Act) for the Company and each person, if any, who
controls the Company or such underwriter against any loss, claim, damage or
liability (or action in respect thereof) to which the Company or such
underwriter or controlling person may become subject, under the 1933 Act or
otherwise, insofar as any such loss, claim, damage or liability (or action in
respect thereof) is caused by any untrue statement or alleged untrue statement
or omission or alleged omission made in conformity with information furnished
by the undersigned or any agent or other representative of the undersigned or
other representative of the undersigned for use in the registration statement.


 


4.                                       Public Trading of Common Stock


 


If the
common stock of the Company has not commenced public trading within one year
after the closing of this private placement Offering, then the Company shall
issue an additional .05 Class A Warrants and an additional .05 Class B Warrants
to the undersigned for each Unit purchased in this Offering by the undersigned.


 


5.                                       Indemnification


 


Both
the Company and the undersigned acknowledge and understand the meaning and
legal consequences of the representations, warranties, agreements, and
certifications contained above, and the Company and the undersigned hereby
agree to indemnify and hold harmless the other party (including, without
limitation, its respective managers, officers, directors, representatives and
agents) from and against any and all loss, damage, or liability due to or
arising out of a breach of any representation, warranty, agreement, or
certification, or the inaccuracy of any statement, of the Company or the
undersigned, as the case may be, 
contained in this Subscription Agreement or any other document submitted
by the Company or the undersigned in connection with the undersigned’s
subscription for the Units.  The
foregoing notwithstanding, nothing in this Subscription Agreement, including
the representations, warranties, agreements and certifications contained above,
shall be deemed to constitute a waiver of any rights that the undersigned may
have under the 1933 Act and other federal and state securities laws.


 


7

















 


6.                                       Miscellaneous


 


(a)                                  This
Subscription Agreement may be executed in one or more counterparts all of which
taken together shall constitute a single instrument.


 


(b)                                 This
Subscription Agreement shall be governed and construed as binding upon the
parties hereto, and their respective successors, and no other person shall have
any right or obligation hereunder.  This
subscription shall be irrevocable, and may not be assigned by the
undersigned.  Subject to the foregoing,
this Subscription Agreement shall be binding upon and inure to the benefit of
the heirs, executors, administrators, legal representatives, successors and
assigns of the undersigned.


 


(c)                                  This
Subscription Agreement constitutes the entire agreement between the undersigned
and the Company with respect to the subject matter of this Subscription
Agreement and supersedes all prior and contemporaneous agreements between the
undersigned and the Company with respect to the subject matter of this
Subscription Agreement.


 


(d)                                 This
Subscription Agreement will be construed and enforced in accordance with and
governed by the laws of the State of Delaware,
except for matters arising under the 1933 Act, without reference to principles
of conflicts of law.


 


With
such full understandings and acknowledgements, the undersigned does hereby
affirm the undersigned’s subscription to the purchase of the Units being
offered by the Company as described herein and in the Memorandum.  The undersigned does further acknowledge the
undersigned’s understandings of all the terms and provisions of this
Subscription Agreement and, upon acceptance of this Subscription Agreement by
the Company, agrees to be bound by all the terms and conditions of this
Subscription Agreement.


 


[continued on signature page]


 


8

















 


SIGNATURE
PAGE


 


 


	
  Date:

  	
  February 3,
  2004

  	
   

  	
   

  
	
   

  	
   

  
	
  [legal
  name of client account]

  	
   

  
	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name of
  Entity

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Printed Name and
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  City, State,
  Postal or Zip Code, Country

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tax
  Identification Number

  	
   

  
	
   

  	
   

  
	
  STATE OF

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  )

  	
   

  
									



 


On this 3rd day of February, 2004, before
me personally
appeared                          ,
who being duly sworn by me, acknowledged that (s)he executed the foregoing
instrument in the name of said entity, that (s)he had the authority to execute
the same, and that (s)he executed the same as the act and deed of said entity
for the uses and purposes therein stated.


 


My commission expires:                    


 


 


	
   

  	
   

  	
   

  	
   

  
	
  Notary Public

  	
  Address

  



 


This subscription is accepted by Warren Resources,
Inc.  on this
            day of
                 ,
2004.


 


	
   

  	
  WARREN
  RESOURCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							



 


9