Document:

Exhibit 10.2

 

WARREN RESOURCES, INC.

1114 Avenue of the Americas

New York, NY 10036

 

INCENTIVE STOCK OPTION GRANT

 

[DATE]

 

Re:                        Grant of Incentive Stock Option

 

Reference is made to the 2010 Stock Incentive Plan, as amended (the “Plan”), of Warren Resources, Inc., a Maryland corporation (the “Corporation”), which has been adopted by the Corporation’s board of directors and shareholders in order to advance the interests of the Corporation’s stockholders by enhancing the ability of the Corporation to attract, retain and motivate persons who make (or are expected to make) important contributions to the Corporation by providing such persons with equity ownership opportunities and performance-based incentives, thereby better aligning the interests of such persons with those of the Corporation’s stockholders. The terms of the Plan shall be deemed a part of this letter agreement as if fully set forth herein.  A copy will be provided to you with this letter agreement or, if a copy is not so provided, upon your request.  Unless the context otherwise requires, all terms defined in the Plan shall have the same meaning when used herein.

 

1.                                      The Grant

 

The Corporation hereby grants to you (“Holder”), as a matter of separate inducement and not in lieu of any salary or other compensation for your services, the right and option to purchase (the “Option”), in accordance with the terms and conditions set forth in the Plan, an aggregate of [                ] shares of Common Stock of the Corporation (the “Option Shares”) at a price of $[         ] per share (the “Exercise Price”), subject to the limitations set forth herein and in the Plan.  It is agreed that the Exercise Price is at least 100% of the Fair Market Value of an Option Share on the date of grant.  The Option is intended to be an incentive stock option within the meaning of section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a nonstatutory stock option.  Further, if for any reason this Option (or portion thereof) shall not qualify as an incentive stock option, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a nonstatutory stock option granted under the Plan.

 

2.                                      Exercise

 

Subject to the provisions and limitations contained herein and of the relevant provisions of the Plan and until the termination of the Option as provided for herein, you may exercise the Option, on a cumulative basis, as follows:

 

(a)                                 One-third (1/3rd) of the total number of Option Shares may be purchased by you on [1st anniversary of grant date];

 

1

 

(b)                                 One-third (1/3rd) of the total number of Option Shares may be purchased by you on [2nd anniversary of grant date]; and

 

(c)                                  One-third (1/3rd) of the total number of Option Shares may be purchased by you on [3rd anniversary of grant date];

 

provided that you remain continuously employed with the Corporation through such exercise date; and provided further, that in the event your employment with the Corporation is terminated by the Corporation without Cause or by you for Good Reason prior to the Option becoming fully exercisable, the Option shall become exercisable as to an additional number of Option Shares equal to the number of Option Shares becoming exercisable on the next exercise date.  Notwithstanding Section 13 of the Plan, the Option shall become fully exercisable upon a Change of Control; provided that Holder remains continuously employed with the Corporation until such event. For purposes of this Agreement, “Good Reason,” “Cause” and “Change of Control” shall have the meanings given such terms in, and the right to terminate for Good Reason shall only be exercised in accordance with, that certain Executive Employment Agreement entered into by and between the Grantee and the Corporation as of December 3, 2012, as amended (the “Employment Agreement”).

 

If the Option is not exercised for the total number of Option Shares available for purchase during such period, the Option shall not thereby terminate as to such unexercised portion, but shall be cumulative.  In no event shall you exercise the Option for a fraction of a share. The unexercised portion of the Option, if any, will automatically and without notice terminate and become null and void on [5th anniversary of grant date] at 5:00 pm (Eastern Time).

 

Except as otherwise specifically provided for in the Employment Agreement and below, this Option shall terminate three (3) months (excluding any stock trading blackout days) after Holder ceases to be employed by the Corporation, unless such termination is due to Holder’s death or Disability, in which case this Option shall terminate twelve (12) months after Holder ceases to be employed by the Corporation.  Also except as otherwise specifically provided for in the Employment Agreement, upon a Change of Control, this Option shall terminate on the earlier of (A) one (1) year from the date of consummation of a Change of Control and (B) March 7, 2019. Notwithstanding the foregoing sentences, in no event may this Option be exercised after the expiration date as provided above.

 

Subject to applicable exercise restrictions set forth in Section 6(d) of the Plan, this Option may be exercised, in whole or in part, by giving written notice of exercise to the Corporation substantially in the form set forth on Schedule A, specifying the number of shares to be purchased. The notice shall be accompanied by payment in full of the Exercise Price. The Exercise Price may be paid by any of the following methods, subject to the restrictions set forth in the Plan:

 

(i) in cash, by certified or cashier’s check, by money order or by personal check (if approved by the Corporation) of an amount equal to the aggregate Exercise Price of the shares of Common Stock to which such exercise relates; or

 

(ii) by delivery of shares of Common Stock already owned by the Holder and held by the Holder for a minimum of six months, which shares, including any cash tendered therewith, have an aggregate Fair Market Value equal to the aggregate Exercise Price of the shares of Common Stock to which such exercise relates; or

 

(iii) by delivery by the Holder of a properly executed notice, together with a copy of the Holder’s irrevocable instruction to a broker-dealer acceptable to the Corporation to deliver promptly to the

 

2

 

Corporation the amount of sale or loan proceeds sufficient to pay such exercise price. In connection therewith, the Corporation may enter into agreements for coordinated procedures with one or more securities brokerage firms.

 

Under no circumstance shall the allocation of Option Fair Market Value described above be deemed a loan to the Holder by the Corporation.

 

3.                                      Transferability

 

The Option is not transferable, either in whole or in part, by you otherwise than by will or the laws of descent and distribution and is exercisable, during your lifetime, only by you. Except as set forth in the preceding sentence, the Option may not be assigned, transferred, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar proceeding.  Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof or of the Plan, and the levy of any attachment or similar proceeding upon the Option, shall be null and void and without effect.

 

4.                                      Registration

 

Unless there is in effect a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the issuance of the Option Shares (and, if required, there is available for delivery a prospectus meeting the requirements of section (10)(a)(3) of the Securities Act), you will, upon the exercise of the Option (a) represent and warrant to the Corporation and agree, in each case, in writing that (i) the Option Shares then being purchased by you pursuant to the Option are being acquired for your own account, for investment only and not with a view to the resale or distribution thereof, and (ii) that any subsequent offer for sale or sale of any such Option Shares shall be made either pursuant to (x) a registration statement on an appropriate form under the Securities Act, which registration statement shall have become effective and shall be current with respect to the Option Shares being offered and sold, or (y) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption, you shall, prior to any offer for sale or sale of such Option Shares, obtain a favorable written opinion from counsel for or approved by the Corporation as to the availability of such exemption and (b) agree that the certificates evidencing such Option Shares shall bear a legend to the effect of the foregoing.

 

5.                                      Withholding Taxes

 

By your acceptance hereof, you hereby (i) agree to reimburse the Corporation or any subsidiary corporation or parent corporation of the Corporation by which you are employed for any federal, state or local taxes required by any government to be withheld or otherwise deducted by such corporation in respect of your exercise of the Option, (ii) authorize the Corporation or any subsidiary corporation or parent corporation of the Corporation by which you are employed to withhold from any cash compensation paid to you or in your behalf, an amount sufficient to discharge any federal, state and local taxes imposed on the Corporation, or the subsidiary corporation or parent corporation of the Corporation by which you are employed, and which otherwise has not been reimbursed by you, in respect of your exercise of the Option and (iii) agree that the corporation by which you are employed, may, in its discretion, hold the stock certificate to which you are entitled upon exercise of the Option, as security for the payment of the aforementioned withholding tax liability, until cash sufficient to pay that liability has been accumulated, and may, in its discretion, effect such withholding by retaining Option Shares issuable upon the exercise of the Option having a fair market value on the date of exercise (as determined under Section 15 of the Plan) which is equal to the amount to be withheld.

 

3

 

6.                                      Grant Subject to Plan; Conflict

 

This grant is subject to all the terms, conditions, limitations and restrictions contained in the Plan.  In the event of any conflict or inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan shall be controlling.

 

7.                                      Section 409A.

 

Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with the requirements of Section 409A of the Code. The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Section 409A of the Code.

 

8.                                      Miscellaneous

 

(a)                                 This grant is not a contract of employment and the terms of your employment shall not be affected hereby or by any agreement referred to herein except to the extent specifically so provided herein or therein.  Nothing herein shall be construed to impose any obligation on the Corporation, the Subsidiary or on any other subsidiary corporation or parent corporation thereof to continue your employment, and it shall not impose any obligation on your part to remain in the employ of the Subsidiary or of any subsidiary corporation or parent corporation thereof.

 

(b)                                 You agree to notify the Corporation immediately upon any “disqualifying disposition” (as defined in section 421(b) of the Code) made by you of Option Shares purchased hereunder.

 

(c)                                  You or your permitted transferees under Section 4 hereof shall have the right to act as stockholders of the Corporation only with respect to Option Shares the Exercise Price for which has been paid in full to the Corporation.

 

(d)                                 You hereby represent that you have received a copy of the Plan and that you have had ample opportunity to review the Plan and ask questions with respect thereto.

 

Please indicate your acceptance of all the terms and conditions of the Option and the Plan by signing and returning a copy of this letter to the Corporate Secretary of the Corporation.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
WARREN RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

AGREED TO AND ACCEPTED:

 

HOLDER:

 

4

 

	
 
    	
 
    
	
Name: Philip A. Epstein
    

 

5

 

SCHEDULE A

 

[FORM OF EXERCISE]

 

[Date of Exercise]

 

Warren Resources, Inc.

1114 Avenue of the Americas

34th Floor

New York, NY 10036

 

Attention:  Corporate Secretary

 

Re:                       2010 Stock Incentive Plan

 

Dear Sir:

 

I am the holder of an Incentive Stock Option granted to me under the above-referenced Plan by Warren Resources, Inc. (the “Corporation”) on March 7, 2014 to purchase shares of the common stock of the Corporation (the “Shares”).  I hereby exercise such option with respect to            Shares, the total purchase price for which is $                , and I enclose check payable to the order of the Corporation in the amount of $                , representing the total purchase price for the Shares.  The certificate or certificates representing the Shares should be registered in my name and should be [delivered to me] [forwarded to me at the address indicated below].

 

I hereby authorize the Corporation or any subsidiary or parent corporation by which I am employed to withhold from any cash compensation paid to me, or in my behalf, an amount sufficient to discharge any federal, state and local wage withholding taxes imposed on the Corporation, or the subsidiary or parent corporation by which I am employed, in respect of my exercise of the option or my disposition of any Shares acquired pursuant thereto.  I agree that the corporation by which I am employed, may, in its discretion, hold the stock certificate to which I am entitled upon exercise of such option, as security for the payment of the aforementioned withholding tax liability, until cash sufficient to pay that liability has been accumulated.

 

I hereby confirm that such Shares remain fully subject to the terms of the Plan including, without limitation, those relating to share transfer restrictions.

 

6

 

Please acknowledge receipt of the exercise of my stock option on the attached copy of this letter.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Signature
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Please Print Name
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address
    

 

RECEIPT ACKNOWLEDGED:

 

WARREN RESOURCES, INC

 

 

	
By
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

7Exhibit 10.3

 

WARREN RESOURCES, INC.

 

RESTRICTED STOCK UNIT AGREEMENT

 

THIS AGREEMENT, dated as of [           ] (“Grant Date”) by and between

Warren Resources, Inc., a Maryland Corporation (“Corporation”), and Philip A. Epstein (“Grantee”), is entered into as follows:

 

WHEREAS, the Corporation has established the 2010 Stock Incentive Plan, as amended from time to time (the “Plan”), a copy of which can be found on the Securities and Exchange Commission Web Site at:

 

http://www.sec.gov/Archives/edgar/data/892986/000104746910003498/a2197906zdef14a.htm

 

or by written or telephonic request to the Corporation Secretary, and which Plan is made a part hereof; and

 

WHEREAS, the Compensation Committee of the Board of Directors of the Corporation (“Committee”) determined that the Grantee be granted stock units subject to the restrictions stated below, and as hereinafter set forth;

 

NOW, THEREFORE, the parties hereby agree as follows:

 

1.  Grant of Restricted Stock Units.

 

Subject to the terms and conditions of this Agreement and of the Plan, the Corporation hereby issues to the Grantee on the Grant Date an Award consisting of, in the aggregate, [            ] Restricted Stock Units (the “Restricted Stock Units”). Each Restricted Stock Unit represents the right to receive one share of Common Stock (“Shares”), subject to the terms and conditions set forth in this Agreement and the Plan. The Restricted Stock Units shall be credited to a separate account maintained on the books and records of the Corporation (“Account”). All amounts credited to the Account shall continue for all purposes to be part of the general assets of the Corporation. Capitalized terms that are used but not defined herein have the meaning ascribed to them in the Plan. On any date, the value of each Unit shall equal the fair market value of a share of the Corporation’s Common Stock). For purposes of this Agreement, “fair market value” shall be deemed to be the mean of the highest and lowest quoted selling prices for a share of Stock on that date as reported on The NASDAQ Stock Market, Inc.

 

2.  Vesting Schedule.

 

Except as otherwise provided herein, the interest of the Grantee in the Restricted Stock Units shall vest (net of shares withheld for applicable tax withholdings):

 

1/3rd on [1st anniversary of grant date],

1/3rd on [2nd anniversary of grant date], and

1/3rd on [3rd anniversary of grant date],

 

so as to be 100% vested on [3rd anniversary of grant date], conditioned upon the Grantee’s continued employment with the Corporation as of each vesting date.  Notwithstanding the foregoing sentence and Section 8(d) of the Plan, in the event the Grantee’s employment with the Corporation is terminated by the Corporation without Cause or by the Grantee for Good Reason prior to the Grantee’s interest in the Restricted Stock Units fully vesting, the Grantee’s interest in the Restricted Stock Units shall vest as to an additional number of Restricted Stock Units equal to the number of Restricted Stock Units vesting on the next vesting date.  Notwithstanding Section 13 of the Plan, the Grantee’s interest in the Restricted Stock Units shall fully vest upon a Change of Control; provided that the Grantee remains continuously employed with the Corporation until such event.  For purposes of this Agreement, “Good Reason,” “Cause” and “Change of Control” shall have the meanings given such terms in, and the right to terminate for Good

 

1

 

Reason shall only be exercised in accordance with, that certain Executive Employment Agreement entered into by and between the Grantee and the Corporation as of December 3, 2012, as amended.

 

3.  Restrictions.

 

(a)  The Restricted Stock Units granted hereunder may not be sold, pledged or otherwise transferred and may not be subject to lien, garnishment, attachment or other legal process. The period of time between the date hereof and the date the Restricted Stock Units become vested is referred to herein as the “Restriction Period.”

 

(b)  If the Grantee’s employment with the Corporation is terminated by the Corporation for any reason, as a result of the Grantee’s death or Disability, or voluntarily by the Grantee, the balance of the Restricted Stock Units subject to the provisions of this Agreement which have not vested at the time of the Grantee’s termination of employment shall be forfeited by the Grantee.

 

4.  Dividends.

 

If on any date the Corporation shall pay any dividend on the Stock (other than a dividend payable in Stock), the number of Restricted Stock Units credited to the Grantee’s Account shall as of such date be increased by an amount equal to: (a) the product of the number of Restricted Stock Units credited to the Grantee’s Account as of the record date for such dividend, multiplied by the per share amount of any dividend (or, in the case of any dividend payable in property other than cash, the per share value of such dividend, as determined in good faith by the Board of Directors of the Corporation), divided by (b) the fair market value of a share of Stock on the payment date of such dividend. In the case of any dividend declared on Stock which is payable in Stock, the number of Restricted Stock Units credited to the Grantee shall be increased by a number equal to the product of (x) the aggregate number of Restricted Stock Units that have been credited to the Grantee’s Account through the related dividend record date, multiplied by (y) the number of shares of Stock (including any fraction thereof) payable as a dividend on a share of Stock.

 

5.  Changes in Stock.

 

In the event of any change in the number and kind of outstanding shares of Stock by reason of any recapitalization, reorganization, merger, consolidation, stock split or any similar change affecting the Stock (other than a dividend payable in Stock) the Corporation shall make an appropriate adjustment in the number and terms of the Restricted Stock Units credited to the Grantee’s Account so that, after such adjustment, the Restricted Stock Units shall represent a right to receive the same consideration (or if such consideration is not available, other consideration of the same value) that the Grantee would have received in connection with such recapitalization, reorganization, merger, consolidation, stock split or any similar change if he had owned on the applicable record date a number of shares of Stock equal to the number of Restricted Stock Units credited to the Grantee’s Account prior to such adjustment.

 

6.  Form and Timing of Payment.

 

The Corporation shall issue to the Grantee a number of Shares equal to the aggregate number of vested Restricted Stock Units credited to the Grantee on each vesting date and/or vesting event in accordance with Section 2 hereof.

 

7.  Taxes.

 

The Grantee shall be liable for any and all taxes, including withholding taxes, arising out of this grant or the vesting of Restricted Stock Units hereunder. Unless the Grantee makes payment of the withholding in cash, a portion of the Stock subject to each Unit having a fair market value equal to the Corporation’s withholding obligation will be withheld to cover required taxes, and the net number of shares of Stock will be paid to the Grantee.

 

2

 

8.  Application of Section 409A of the Internal Revenue Code.

 

This Agreement, including the right to receive Corporation Stock upon satisfaction of the Vesting Schedule, is intended to be exempt from the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) pursuant to the short-term deferral exemption thereunder, and this Agreement, including the right to receive Corporation Stock upon the satisfaction of the Vesting Schedule, shall be interpreted on a basis consistent with such intent.

 

Notwithstanding any provision in this Agreement to the contrary, if the Grantee is a “specified employee” (as defined in section 409A of the Code) and it is necessary to postpone the commencement of any payments otherwise payable under this Agreement to prevent any accelerated or additional tax under section 409A of the Code, then the Corporation will postpone the payment until five (5) days after the end of the six-month period following the original payment date. If the Grantee dies during the postponement period prior to the payment of postponed amount, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Grantee’s estate within sixty (60) days after the date of the Grantee’s death. The determination of who is a specified employee, including the number and identity of persons considered specified employees and the identification date, shall be made by the Committee in accordance with the provisions of sections 416(i) and 409A of the Code.

 

In no event shall the Grantee, directly or indirectly, designate the calendar year of payment. This Agreement may be amended without the consent of the Grantee in any respect deemed by the Committee to be necessary in order to preserve compliance with section 409A of the Code or other applicable law

 

9.  Grant Subject to Plan; Conflict

 

This grant is subject to all the terms, conditions, limitations and restrictions contained in the Plan.  In the event of any conflict or inconsistency between the terms hereof and the terms of the Plan, the terms of the Plan shall be controlling

 

10.  Miscellaneous.

 

(a)  This grant is not a contract of employment and the terms of your employment shall not be affected hereby or by any agreement referred to herein except to the extent specifically so provided herein or therein.  Nothing herein shall be construed to impose any obligation on the Corporation, the Subsidiary or on any other subsidiary corporation or parent corporation thereof to continue your employment, and it shall not impose any obligation on your part to remain in the employ of the Subsidiary or of any subsidiary corporation or parent corporation thereof.

 

(b)  All amounts credited to the Grantee’s Account under this Agreement, until vested, shall continue for all purposes to be a part of the general assets of the Corporation. The Grantee’s interest in the Account shall make him only a general, unsecured creditor of the Corporation.

 

(c)   The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

 

(d)  Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to the Grantee at her address then on file with the Corporation.

 

(e) You hereby represent that you have received a copy of the Plan and that you have had ample opportunity to review the Plan and ask questions with respect thereto.

 

(f)  This Agreement and the Plan constitute the entire agreement of the parties with respect to the subject matter hereof.

 

3

 

	
 
    	
WARREN   RESOURCES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

 

AGREED TO AND ACCEPTED:

	
 
    
	
 
    
	
 
    	
 
    
	
Grantee
    

 

4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00230-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00230-of-00352.parquet"}]]