Document:

EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (this “Agreement”),
dated effective as of March 1, 2004, by and between Warren Resources,
Inc., a New York corporation (the “Company”), and Lloyd Davies (the “Employee”).

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to employ the
Employee upon the terms and conditions set forth in this Agreement; and

 

WHEREAS, the Employee desires to accept an
offer of employment with the Company upon the terms and conditions set forth
herein;

 

NOW, THEREFORE, in consideration of the
premises and the respective covenants and agreements of the parties herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:

 

1.                                       Employment.  The Company hereby agrees to employ the
Employee, and the Employee hereby agrees to serve the Company, on the terms and
conditions hereinafter set forth in this Agreement.

 

2.                                       Term.  This Agreement, and the employment of
the Employee by the Company hereunder, will commence on the date hereof (the “Effective
Date”) and terminate on March 1, 2005 (the “Initial Term”), subject to
termination as set forth herein (the “Employment Period”).  As used herein, the term “Employment Year”
shall mean each consecutive twelve (12) month period during the Employment Period
commencing on the Effective Date, or the yearly anniversary thereof, as the
case may be. Effective on the first anniversary of the Effective Date, this
Agreement shall be automatically extended indefinitely until the Company or the
Employee shall give ninety (90) days prior written notice to the other party
that it or he, as the case may be, in its or his sole discretion, wishes to
terminate this Agreement.

 

3.                                       Position
and Duties.  Subject to
the provisions of this Section 3, during the Employment Period, the
Employee shall serve as the Executive Vice President of the Company and
Chairman and Chief Executive Officer of the Company’s wholly-owned subsidiary
Warren E&P, Inc., a New Mexico corporation (“Warren E&P”), and shall
faithfully perform the duties and responsibilities normally associated with
such positions, subject to the oversight and direction of the Chief Executive
Officer of the Company and the Board of Directors of the Company.

 

 

4.                                       Place of
Employment.  Generally,
the Employee will fulfill all duties and responsibilities to the Company as set
forth herein from the current principal place of business of Warren E&P,
located at 123 West 1st Street, Casper, Wyoming, or the Company,
located at 489 Fifth Avenue, New York, New York, or to any other place where
the principal place of business of Warren E&P or the Company may be
relocated.

 

5.                                       Best
Efforts.  The Employee’s
employment with the Company shall be sixty (60%) percent time and the Employee
shall devote his best efforts and sixty (60%) percent of his business time
exclusively to the performance of his duties and responsibilities as set forth
in this Agreement, which duties and responsibilities shall be performed
competently, carefully and faithfully. 
Except as provided below, the Employee shall not, while an employee of
the Company and without the prior written consent of the Company, engage in any
other gainful occupation or activity which conflicts with or impinges upon the
full and faithful performance of the Employee’s duties, or otherwise violates
any other term or provision of this Agreement. 
It is expressly understood and agreed, however, that the provisions of
this Section 5 shall not be construed to prevent the Employee from
pursuing any other activity or profession in the 40% of the time not devoted to
the Company, including investing for his own account or pursuing charitable or
civic activities; provided, that such activities do not impair the
performance by the Employee of his duties and responsibilities hereunder, or
otherwise violate any provision of this Agreement, and that Employee shall not
become employed by or affiliated with another company in the oil and gas
industry.

 

6.                                       The
Employee’s Compensation.

 

(a)                                  Salary.  During the Employment Period, for the
services described herein the Company shall pay to the Employee an annual base
salary of $200,000.00 (as adjusted pursuant to the terms hereof, the “Base
Compensation”). The Base Compensation shall be increased on each
anniversary date of this Agreement by any increases in the cost of living based
on the changes in the “Consumer Price Index” as published from time to time by
the U.S. Department of Commerce for the New York City metropolitan area. The
Base Compensation will be paid to the Employee in accordance with the normal payroll
practices of the Company in effect from time to time, less all required
withholdings for benefits, federal, state and local taxes, if any.  The amount of the Base Compensation may, in
the Company’s discretion, be increased by the Company on an annual basis during
the Employment Period.  All increases to
the Base Compensation, if any, shall be based on the condition of the Company’s
business and results of operations and the Company’s evaluation of the Employee’s
individual performance for the relevant period.  Any increases made to the Base Compensation shall be in the
discretion of the Company.

 

(b)                                 Incentive
Bonus Compensation.  In
addition to the Base Compensation to which the Employee is entitled under
Section 6(a), the Employee shall be eligible to be awarded incentive bonus
compensation (the “Bonus Compensation”) with respect to each calendar year or
portion thereof during which the Employee was employed by the Company hereunder
equal to up to and including 100% of the Employee’s Base Compensation.  The criteria for determining the amount of
the Bonus Compensation shall

 

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be determined by mutual
agreement between the Employee and the Chief Executive Officer of the Company
and shall by approved by the Compensation Committee of the Board of Directors.
Incentive Bonus Compensation shall be paid within 90 days following the
end of the calendar year.

 

(c)                                  Options.  Employee shall be entitled to participate in
the Company’s Equity Incentive Plan (the “Equity Incentive Plan”), and
will be awarded 60,000 options thereunder, exercisable at the price of $7.00
per share of common stock for a period ending five years after the date of
grant of the option (the “Options”). The Options shall vest and be subject to
immediate exercise as follows: 20,000 on the date hereof; 20,000 one year after
the date hereof and 20,000 two years after the date hereof. The grant of such
Options shall be documented with a formal award letter from the Company to the
Employee setting forth the terms and conditions of Employee’s Options.

 

7.                                       The
Employee’s Benefits.  As
an employee of the Company, the Employee shall be entitled to receive and enjoy
the following benefits during the Employment Period:

 

(a)                                  Participation
in Company Benefit Plans.  The
Employee shall be entitled to participate in and to receive benefits generally
available to senior executives under those certain employee benefit plans and
arrangements which may be offered by the Company from time to time during the
Employment Period, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements by the
Company.  The Company shall provide full
medical, hospitalization and dental insurance coverage for the Employee.

 

(b)                                 Vacations.  The Employee shall be entitled to 60% of
four (4) weeks of paid vacation per Employment Year, provided that any
vacations are to be taken at times mutually agreeable to the Company and the
Employee.  In addition to the foregoing,
the Employee shall be entitled to receive all paid holidays given by the
Company to its employees generally. If Employee has not used his accrued but
unused vacation days during an Employment Year, such days may not be carried
over to another and shall be deemed waived by the Employee. Any accrued but
unused vacation days in an Employment Year shall be reimbursed in cash to
Employee upon a termination of his employment Without Cause hereunder.

 

(c)                                  Business
Expense Reimbursement. 
The Company shall promptly reimburse or pay the Employee for all
reasonable and necessary business expenses paid or incurred by the Employee in
performing his duties and responsibilities hereunder; provided, that,
the Employee shall have (i) submitted such reasonable documentation as may be
requested by the Company in accordance with the reimbursement policies of the
Company in effect from time to time and (ii) obtained the prior approval of the
Company for all charges in excess of $5,000.

 

8.                                       Termination
of Employment.  The
Employee’s employment with the Company may be terminated as follows:

 

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(a)                                  With
Cause.  The Employee’s
employment with the Company may be terminated by the Company at any time for
“Cause.”  As used herein, the term “Cause”
shall refer to the following: (i) theft, fraud, dishonesty, gross negligence or
willful malfeasance by the Employee in connection with the performance of his
duties hereunder (collectively, “Theft Events”); (ii) a material breach or
failure to fulfill and perform the Employee’s duties hereunder, which breach or
failure is not cured to the reasonable satisfaction of the Company within
forty-five (45) days after written demand from the Company (if such breach is
at all curable during such time in the reasonable determination of the Company;
failing such determination, “Cause” shall have occurred upon the occurrence of
such breach or failure); (iii) conviction of a felony or a crime involving
moral turpitude; (iv) habitual neglect of duties or misconduct in the
performance of the Employee’s duties and responsibilities hereunder following
an initial notice of warning from the Company with respect thereto; or (v) a
repeated or ongoing failure to comply with the reasonable directions and
instructions of management of the Company in connection with the performance of
the Employee’s duties and responsibilities hereunder following an initial
notice of warning from the Company with respect thereto.  Upon termination for Cause, all rights of
the Employee under this Agreement shall immediately terminate and the Company
shall have no further obligations.  A
termination of the Employee’s employment with the Company by the Employee upon
his voluntary resignation or voluntary retirement shall be treated as a
termination for Cause hereunder.  In
connection therewith, the Employee covenants and agrees not to voluntarily
resign or voluntarily retire without providing the Company with ninety (90)
days’ prior written notice. Upon a termination for Cause, Employee shall
receive in full satisfaction of all amounts due to him an amount equal to the
remainder of Base Compensation through date of termination. Notwithstanding any
of the foregoing, in the event that the Company has terminated Employee’s
employment on account of a Theft Event, the Company shall be entitled to
withhold from any amounts otherwise due to Employee under this
Subsection 8(a) the amount of monetary damages incurred by the Company
from such Theft Event which shall be quantified and determined in writing by
the Company within 90 days after the date of termination. The Employee agrees
that his eligibility to receive any and all amounts described in this
Section 8(a) shall be subject to and contingent upon the Employee’s
execution of a full and complete general release in favor of the Company and
its affiliated persons and entities, satisfactory to the Company in its sole
discretion.

 

(b)                                 Without
Cause.  The Employee’s
employment with the Company may be terminated by the Company at any time
without Cause, but in the event of any such termination pursuant to this
Section 8(b), the Company will pay, in addition to any other amounts due
hereunder, the Employee severance pay in an amount equal to the greater of (i)
the balance of all of Employee’s remaining and unpaid Base Compensation due for
the balance of the then existing term hereunder, or (ii) 90 days of Base
Compensation, payable upon execution and delivery of the release described
below, less all required withholdings and in accordance with then current
payroll practices of the Company and applicable law or regulation. In addition,
Employee shall receive any accrued but unpaid vacation time for the current
Employment Year. The Employee agrees that his eligibility to receive any and
all amounts described in this Section 8(b) shall be subject to and
contingent upon the Employee’s execution of a full and complete general

 

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release in favor of the
Company and its affiliated persons and entities, satisfactory to the Company in
its sole discretion.

 

(c)                                  Termination
for Death or Disability.  The
Employee’s employment hereunder shall terminate immediately upon the Employee’s
death or Disability.  For purposes of
the preceding sentence, the term “Disability” shall mean the Employee’s
inability, by reason of physical or mental incapacity (determined by a licensed
physician reasonably acceptable to the Employee and the Company), to perform
the essential functions of his job, with or without a reasonable accommodation
by the Company, for an aggregate of ninety (90) days during any twelve (12)
month period, provided further that during any such continuous period, the
Employee’s Base Compensation payable under Section 6(a) shall be reduced
by the amount, if any, of payments to the Employee under any short-term or
long-term disability insurance policy, plan or program maintained by the
Company.  During any period when the
Employee implicitly or explicitly purports to be unable to perform his duties
hereunder by reason of physical or mental illness, incapacity or disability,
the Employee, at the request and expense of Company, shall submit to one or
more examinations by a physician of the Company’s choice. A termination of the
Employee’s employment with the Company due to any of the foregoing provisions
of this Section 8(c) shall be treated as a termination without Cause
hereunder.

 

(d)                                 Termination
by Employee for Good Reason.   Employee shall have the right to terminate this Agreement for
“Good Reason”. The following events affecting Employee shall constitute “Good
Reason” within the meaning of this Agreement: (i) if Employee, at any time
during the Employment Period (except during a period of Disability), has
suffered a material change or diminution in duties and responsibilities from those
contemplated herein, or (ii) if there is a Change of Control Event, as defined
below.

 

For purposes of this
Employment Agreement, a “Change of Control” shall mean the happening of any of
the following:

 

(i)                                     the
acquisition by any person or group deemed a person under Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”) (other
than the Company and its subsidiaries as determined immediately prior to that
date) of beneficial ownership, directly or indirectly (with beneficial
ownership determined as provided in Rule 13d-3, or any successor rule, under
the Exchange Act), of a majority of the total combined voting power of all
classes of stock of the Company having the right under ordinary circumstances
to vote at an election of the Board of Directors of the Company, if such person
or group deemed a person was not a beneficial owner of at least five percent
(5%) of such total combined voting power of the Company on the date of this
Agreement;

 

(ii)                                  the
election to the Board of Directors of the Company of members as a result of
which a majority of the Board of Directors shall consist of persons who are not
members of the Board of Directors as of the Effective Date (including Employee
as a member of the Board of Directors as of the Effective Date), except in the
event that such slate of Directors is proposed by the management of the
Company;

 

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(iii)                               the
date of approval by the stockholders of the Company of an agreement providing
for the merger or consolidation of the Company with another corporation or
other entity where (x) stockholders of the Company immediately prior to such
merger or consolidation would not beneficially own following such merger or
consolidation shares entitling such stockholders to 50% or more of all votes
(without consolidation of the rights of any class of stock to elect directors
by a separate class vote) to which all stockholders of the surviving
corporation would be entitled in the election of directors, or (y) where the
members of the Board of Directors, immediately prior to such merger or
consolidation, would not, immediately after such merger or consolidation,
constitute a majority of the board of directors of the surviving corporation;
or

 

(iv)                              the
sale of all or substantially all of the assets of the Company.

 

(e)                                  Status
upon Termination.  The
termination of this Agreement, and the Employee’s employment hereunder, for any
reason whatsoever shall constitute the Employee’s effective termination and
resignation from any other positions or duties with the Company and all of its
affiliates.

 

(f)                                    Effect of
Termination.

 

(i)                                     In
the event of a termination of the Employee’s employment with the Company
hereunder for any reason, in addition and subject to the provisions of Sections
8(a), 8(b), 8(c) and 8(d), the Employee shall be entitled to receive all Base
Compensation and accrued benefits owing through the date of termination in
accordance with the Company’s normal practices then in effect.

 

(ii)                                  In
the event of a termination of the Employee’s employment without Cause pursuant
to Sections 8(b), 8(c) or 8(d) above, the Company shall also pay the Employee
severance compensation in accordance with Section 8(b) above.  Furthermore, if the Employee is terminated
without Cause, or the employment ceases under Section 8(c) or 8(d), all
unvested options granted to the Employee pursuant to the Equity Incentive Plan
shall become fully vested and be kept in effect for 90 days following the
Employee’s termination of employment.

 

(iii)                               In
the event of a termination of the Employee’s employment with the Company
hereunder for Cause pursuant to Section 8(a) above, all rights of the
Employee under this Agreement shall immediately terminate and the Company shall
have no further obligations hereunder, subject to Section 8(f)(i) above
and this provision. Furthermore, if the Employee is terminated for Cause, all
unvested options granted to the Employee pursuant to the Equity Inventive Plan
shall terminate.

 

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9.                                       Noncompetition
and Confidentiality.

 

(a)                                  Noncompetition.  During the Employment Period and, in the
case of a termination of the Employee’s employment for Cause, for a period of
six (6) months following the date of termination of employment, or, in the case
of a termination of the Employee’s employment without Cause, for a period of
one day following the date of termination of employment (the “Covered Period”),
the Employee agrees not to engage in any Competitive Activity within the States
of New York, California, New Mexico, Texas and Wyoming.  As used herein, the term “Competitive
Activity” shall mean the following: 
(i) providing competitive services, other than on behalf of the Company,
to any Customer (as defined below); (ii) serving as an officer, director,
employee, consultant, advisor, agent or representative of, or otherwise
associating in any other capacity with, any person, corporation, partnership,
limited liability company, sole proprietorship, association or other business
enterprise, other than the Company, engaged in the business of oil and gas
exploration, drilling and production or any other business in which the Company
is engaged (each, a “Competitive Enterprise”), or engaging individually
in any Competitive Enterprise; (iii) owning or acquiring, directly or
indirectly, any interest in any Competitive Enterprise (provided, however,
the Employee shall be allowed to passively own for investment purposes,
directly or indirectly, no more than ten percent (10%) of the issued and
outstanding publicly traded securities of any issuer engaged in a Competitive
Enterprise); (iv) soliciting or inducing any partner, stockholder, member,
principal, director, officer, employee, consultant, agent or other
representative of the Company or one or more affiliates to leave the employ or
retention of the Company or such affiliate or hiring away any of the foregoing
persons; and/or (v) encouraging, requesting or advising, explicitly or
implicitly, any Customer or supplier of the Company or one or more of its
affiliates to withdraw, curtail or cancel its business relationships with the
Company or any affiliate thereof (unless expressly requested to do so by the
Company as part of the Employee’s employment services provided hereunder).

 

As used in this
Section 9, the term “Customer” shall include any person who is or
was a customer of the Company or an affiliate thereof at any time during the
period commencing with the Employment Period through the end of the Covered
Period.

 

(b)                                 Confidentiality.  During the Employment Period and for a
period of three (3) years thereafter, the Employee shall not, except as may
otherwise be required by law, directly or indirectly disclose to any person or
entity, or use or cause to be used in any manner adverse to the interests of
the Company or any affiliate thereof, any Confidential Information (as defined
below in this Section 9(b)).  The
Employee agrees that, upon the termination of his employment with the Company for
any reason, all Confidential Information (other than a copy of this Agreement
and any other agreements that have been personally executed by the Employee
other than in his capacity as an officer of the Company) and duplicates thereof
in the possession or control of the Employee, in any form or format, including,
without limitation, written, visual, audio, electronic or magnetic formats,
shall forthwith be returned to the Company and shall not be retained by the
Employee or furnished or communicated to any third party in any form
whatsoever.

 

As used in this
Section 9(b), the term “Confidential Information” shall mean the
following:  (i) information disclosed to
the Employee or known by the Employee as a consequence of the Employee’s
relationship with the Company or any Affiliate thereof, as

 

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defined below, not
generally known in the Company’s business, about the Company’s or an
Affiliate’s employees, customers, directors, officers, partners, shareholders,
advertising methods, public relations methods, business plans, operations,
methods, processes and forecasts, vendors, finances, trade marks, trade
secrets, source code, patent applications, manuals, designs, technical
specifications and other intellectual property; (ii) information disclosed to
the Employee or known by the Employee as a consequence of the Employee’s
relationship with the Company or any Affiliate thereof, not generally known in
the businesses in which the customers of the Company or its affiliates are or
may be engaged, about the products, processes, operations, trade information
and services of any such customer; or (iii) information disclosed to the
Employee by the Company or any of its affiliate which is marked as
“confidential” or, if communicated verbally, is followed up by written
correspondence designating such information as “confidential.” Affiliate shall
mean any person or entity that directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company.

 

(c)                                  Severability.  The invalidity or nonenforceability of
any provision of this Section 9 in any respect shall not affect the
validity or enforceability of the other provisions of this Section 9 in
any other respect, or of any other provision of this Agreement.  In the event that any provision of this
Section 9 shall be held invalid or unenforceable by a court of competent
jurisdiction by reason of the geographic or business scope or the duration
thereof or for any other reason, such invalidity or unenforceability shall
attach only to the particular aspects of such provision found invalid or
unenforceable as applied and shall not affect or render invalid or
unenforceable any other provision of this Section 9 or the enforcement of
such provision in other circumstances, and this Section 9 shall be
construed as if the geographic or business scope or the duration of such
provision or other basis on which such provision has been challenged had been
more narrowly drafted so as not to be invalid or unenforceable.

 

10.                                 Business
Opportunities.  During
the Employment Period, the Employee agrees to bring all business opportunities
to the Company relating to or otherwise associated with the business or
businesses then conducted by the Company or each affiliate thereof, or business
or businesses proposed to be conducted by the Company.

 

11.                                 Rights to
Work Product. The Employee agrees that all work performed by the
Employee pursuant hereto shall be the sole and exclusive property of the
Company, in whatever stage of development or completion.  With respect to any copyrightable works
prepared in whole or in part by the Employee pursuant to this Agreement,
including compilations of lists or data, the Employee agrees that all such
works will be prepared as “work-for-hire” within the meaning of the Copyright
Act of 1976, as amended (the “Act”), of which the Company shall be
considered the “author” within the meaning of the Act.  In the event (and to the extent) that such
works or any part or element thereof is found as a matter of law not to be a
“work-for-hire” within the meaning of the Act, the Employee hereby assigns to
the Company the sole and exclusive right, title and interest in and to all such
works, and all copies of any of them, without further consideration, and
agrees, to the extent reasonable under the circumstances, to cooperate with the
Company to register, and from time to time to enforce, all patents, copyrights
and other rights and protections relating to such works in any and all
countries.

 

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To that end, the Employee
agrees to execute and deliver all documents requested by the Company in
connection therewith, and the Employee hereby irrevocably designates and
appoints the Company as the Employee’s agent and attorney-in-fact to act for
and on behalf of the Employee and in the Employee’s stead to execute, register
and file any such applications, and to do all other lawfully permitted acts to
further the registration, protection and issuance of patents, copyrights or similar
protections with the same legal force and effect as if executed by the
Employee.  The Company shall reimburse
the Employee for all reasonable costs and expenses incurred by the Employee
pursuant to this Section 11.

 

12.                                 No
Disparaging Statements. 
During the Term of employment and for one (1) year after termination of
this Agreement for any reason whatsoever, the Employee and the Company agree to
refrain from making any disparaging statements, either orally or in writing,
about the other party (and, on the part of the Employee, about any affiliate of
the Company, or any directors, officers, shareholders, employees, agents or
other representatives of the Company or any affiliate thereof).

 

13.                                 Survival.  The provisions of Sections 8(b), 8(c),
8(d), 8(f), 9, 11, 12, 14, 15, 16 and 17 hereof shall survive the termination
of this Agreement for the applicable time period necessary to fully effectuate
the provisions of such sections.

 

14.                                 Compliance
With Other Agreements.  The
Employee and the Company each hereby represent and warrant to the other that
the execution and delivery of this Agreement and the performance of such
party’s obligations hereunder will not, with or without the giving of notice
and/or the passage of time, (i) violate any judgment, writ, injunction or order
of any court, arbitrator or governmental agency applicable to such party, or
(ii) conflict with, result in the breach of any provision of or the termination
of, or constitute a default under, any agreement to which such party is a party
or by which such party is or may be bound. 
The parties agree to indemnify and hold harmless each other from any
liability, judgment or claim incurred, entered or made against such party based
on its reliance on the representations and warranties made in this
Section 14, including all costs and expenses and attorney’s fees incurred
or paid by such party in connection with the foregoing.

 

15.                                 Injunctive
Relief.  The Employee
acknowledges and agrees that the Company and its affiliates are engaged in a
highly competitive business and that the protections of the Company and each
such affiliate set forth in Sections 9, 10 and 11 of this Agreement are fair
and reasonable and are of vital concern to the Company and its affiliates.  Further, the Employee acknowledges and
agrees that monetary damages for any violation of such Sections will not
adequately compensate the Company and its affiliates with respect to any such
violation.  Therefore, in the event of a
breach by the Employee of any of the terms and provisions contained in Sections
9, 10 or 11 hereof, the Company shall be entitled to institute legal
proceedings to enforce the specific performance of this Agreement by the
Employee and to enjoin the Employee from any further violations.  The remedies available to the Company
pursuant to this Section 15 may be exercised cumulatively by the Company
in conjunction with all other rights and remedies provided by law.

 

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16.                                 Arbitration
Of Disputes.  If any
dispute shall arise between the Employee and the Company in connection with
this Agreement, and such dispute cannot be resolved amicably by the parties,
the same shall be conclusively and finally resolved by binding
arbitration.  Any party hereto may
commence an arbitration proceeding by providing written notice to the other
party requesting the arbitration of an unresolved dispute.  Each such dispute, if any, shall be
submitted to an arbitrator acceptable to both parties.  If either the Employee or the Company
refuses or neglects to agree to appoint an arbitrator within thirty (30) days
after receipt of written notice from the other party requesting the other party
to do so, the American Arbitration Association may appoint such
arbitrator.  The arbitrator shall be
experienced in the subject matter of the dispute. Except as otherwise
specifically set forth herein, the arbitrators shall conduct the arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.  The decision in writing of
the arbitrator, when filed with the parties hereto, shall be final and binding
on both parties.  Judgment may be
entered upon the final decision of the arbitrator in any court having
jurisdiction.  Such arbitration shall
take place in New York, New York.

 

Notwithstanding anything
to the contrary contained in this Section 16, nothing shall prohibit the
Company or Employee from pursuing all legal and equitable remedies available to
the Company or Employee in order to enforce the provisions of Sections 9, 10
and 11 of this Agreement.  To the extent
that any court action is permitted consistent with or to enforce this
Agreement, the parties hereby consent to the jurisdiction of the federal or
state courts sitting in any state where the Company maintains an office.  Accordingly, with respect to any such court
action, all of the parties hereto (a) submit to the personal jurisdiction of
such courts, (b) consent to service of process and (c) waive any other
requirement (whether imposed by statute, rule of court, or otherwise) with
respect to personal jurisdiction or service of process.

 

17.                                 Amendment;
Waiver; Discharge.  No
provision of this Agreement may be amended, waived or discharged unless such
amendment, waiver or discharge is agreed to in writing and signed by the
Employee and a duly authorized representative of the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.

 

18.                                 Validity.  The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.

 

19.                                 Notices.  All notices, demands and other
communications provided for in this Agreement shall be in writing and shall be
delivered by hand or sent via fax transmission (with written fax confirmation)
or mailed postage prepaid or by registered, certified or express mail or
reputable overnight courier service, charges prepaid, and shall be deemed given
when so delivered, if delivered by hand, or upon receipt of reasonably adequate
fax confirmation, if faxed, or, if mailed, five (5) business days after mailing
(or

 

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one (1) business day in
the case of express mail or overnight courier service), addressed as follows:

 

If to the Employee:

 

Lloyd Davies

3340 Creekview Drive

Bonita Springs, FL 34134

 

If to the Company:

 

Warren Resources, Inc.

489 Fifth Avenue

32nd Floor

New York, NY 10016

Attention:  Chief Executive Officer

(Fax):  (212) 697-9466

(Tel.):  (212) 697-9660

 

or to such other address
or person as any party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.

 

20.                                 Headings.  All headings contained in this Agreement are
for reference purposes only and shall not in any way effect the meaning or
interpretation of any provision or provisions of this Agreement.

 

21.                                 Entire
Agreement.  This
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, understandings, arrangements, communications,
representations or warranties, whether oral or written, by any party or
representative of any party hereto.

 

22.                                 Assignment
and Transfer.  The
Employee’s rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, and any purported assignment, transfer
or delegation thereof shall be void. 
This Agreement shall inure to the benefit of, and be binding upon and
enforceable by, any purchaser of substantially all of the Company’s assets, any
corporate successor to the Company or any assignee thereof.

 

23.                                 Counterparts.  This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.

 

11

 

24.                                 Governing
Law.  The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of New York without regard to its conflicts
of law principles.

 

 

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

 

	
   

  	
  WARREN RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Norman F. Swanton

  	
   

  
	
   

  	
   

  	
  Name:  Norman F. Swanton

  
	
   

  	
   

  	
  Title:  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Lloyd Davies

  	
   

  
	
   

  	
   

  	
   

  	
  Lloyd Davies

  	
   

  
						

 

12EXHIBIT
10.2

 

AMENDMENT TO EMPLOYMENT
AGREEMENT

 

This First Amendment
(“Amendment”) is made and entered into effective as of January 1, 2004
(the “Effective Date”) to the Employment Agreement referenced below by and
between Warren Resources, Inc. (“Company” or “Employer”), and Norman F.
Swanton, an individual (“Employee”) (together the “Parties”).

 

RECITALS

 

WHEREAS, the Parties had
entered into an Employment Agreement effective on January 1, 2001 (the
“Original Agreement”); and

 

WHEREAS, the Parties now
want to amend the Original Agreement to make such changes as are specifically
covered herein and as specifically identified in italics.

 

AGREEMENT

 

NOW, THEREFORE, for good
and valuable consideration, and in consideration of the mutual covenants and
conditions herein set forth, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:

 

Section  6
(b) is hereby deleted and revised to read in its entirety as follows:

 

(b)                                 Incentive Bonus Compensation. 
In addition to the Base Compensation to which the Employee is entitled
under Section 6(a), the Employee shall be eligible to be awarded incentive
bonus compensation (the “Bonus Compensation”) with respect to each calendar
year or portion thereof during which the Employee was employed by the Company
hereunder equal to up to and including 100% of the Employee’s Base
Compensation.  The criteria for
determining the amount of the Bonus Compensation shall be determined by mutual
agreement between the Employee and the Compensation Committee of the Board of
Directors and be approved by the Board of Ditrectors. Incentive Bonus
Compensation shall be paid within 90 days following the end of the
calendar year.

 

Section 8(f) is
hereby deleted and revised to read in its entirety as follows:

 

(f)                                    Effect of Termination.

 

(i)                                     In the event of a termination of the
Employee’s employment with the Company hereunder for any reason, in addition
and subject to the provisions of Sections 8(a), 8(b), 8(c) and 8(d), the
Employee shall be entitled to receive all Base Compensation and accrued
benefits owing through the date of termination in accordance with the Company’s
normal practices then in effect.

 

 

(ii)                                  In the event of a termination of the
Employee’s employment without Cause pursuant to Sections 8(b), 8(c) or 8(d)
above, the Company shall also pay the Employee severance compensation in
accordance with Section 8(b) above. 
Furthermore, if the Employee is terminated without Cause, or the
employment ceases under Section 8(c) or 8(d), all unvested options granted
to the Employee pursuant to the Equity Incentive Plan shall become fully
vested.

 

(iii)                               In the event of a termination of the
Employee’s employment with the Company hereunder for Cause pursuant to
Section 8(a) above, all rights of the Employee under this Agreement shall
immediately terminate and the Company shall have no further obligations
hereunder, subject to Section 8(f)(i) above and this provision.
Furthermore, if the Employee is terminated for Cause, all unvested options
granted to the Employee pursuant to the Equity Inventive Plan shall terminate.

 

**************

 

Except as set forth in
this Amendment, the Original Agreement shall remain in full force and effect
and references in the Original Agreement to “this Agreement”, “hereunder”,
“herein”, “hereof”, and words of like effect shall mean the Original Agreement
as so amended by this Amendment.

 

This Amendment may be
executed in one or more counterparts and/or by facsimile, each of which shall
be deemed an original and all of which signed counterparts, taken together,
shall constitute one instrument.

 

IN WITNESS WHEREOF, the
Parties have executed this Amendment as of the Effective Date referenced above.

 

 

	
   

  	
  EMPLOYER:

  
	
   

  	
   

  
	
   

  	
  WARREN RESOURCES, INC.

  
	
   

  	
   

  
	
   

  	
  By:
  /s/ Timothy A. Larkin

  	
   

  
	
   

  	
  Name:
  Timothy A. Larkin

  
	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Norman F. Swanton

  	
   

  
	
   

  	
  Norman
  F. Swanton

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