Document:

Exhibit 10.1

 

RENEWAL DEMAND PROMISSORY NOTE

 

	
$1,056,885.00
    	
September 25, 2015
    

 

FOR VALUE RECEIVED, The Bank of New York Mellon Trust Company, N.A., solely in its capacity as trustee for the TEL OFFSHORE TRUST, a trust formed under the laws of the State of Texas, having an address at 919 Congress Avenue, Austin, Texas 78701 (“Borrower”), promises to pay ON DEMAND to the order of THE BANK OF NEW YORK MELLON (“Lender”), whose address is 919 Congress Avenue, Austin, Texas 78701, at said address or such other address as may be designated in writing by the holder hereof from time to time, the principal sum of ONE MILLION FIFTY-SIX THOUSAND EIGHT HUNDRED EIGHTY-FIVE AND No/100 Dollars ($1,056,885.00), together with interest on said principal, at a rate equal to one-half percent (0.5%) per annum, provided, however, that in no event shall such rate exceed the maximum legal rate of interest permitted by applicable law.

 

This Note evidences an extension of credit for borrowed money authorized under Section 6.08 of the Trust Agreement dated as of January 1, 1983, by and among Tenneco Offshore Company, Inc., Texas Commerce Bank National Association, Horace C. Bailey, Joseph C. Broadus and F. Arnold Daum.

 

This note is in partial renewal and replacement, but not in extinguishment, of the indebtedness originally evidenced by that certain demand promissory note in the original principal amount of THREE HUNDRED SIXTY-THREE THOUSAND AND NO/100 Dollars ($363,000.00), dated October 1, 2014, executed by Borrower and payable to the order of Lender, bearing interest and due and payable as therein provided.

 

All amounts outstanding under this Note will be due and payable in cash on the earliest to occur of (i) the date written demand for payment is made by Lender or (ii) December 31, 2016.  Borrower promises to pay interest on the outstanding and unpaid principal amount of this Note at a rate per annum equal to one-half percent (0.5%).  All interest due hereunder shall be calculated on the basis of the actual number of days elapsed in the related interest accrual period over a year of 365 or 366 days, as the case may be.

 

Borrower may prepay any outstanding principal and accrued and unpaid interest under this Note, in whole or in part, at any time without penalty.

 

To the extent the maximum non-usurious interest rate which Borrower is permitted by law to contract or agree to pay (the “Maximum Rate”) as provided in this Note is determined by reference to the laws of the State of Texas, the Maximum Rate shall be determined by reference to the indicated (weekly) rate ceiling (as defined and described in Chapter 303 of the Texas Finance Code, as amended) at the applicable time in effect.  For purposes of this Note, Borrower and Lender expressly acknowledge and agree that all agreements by Borrower to pay any amounts under this Note, or contracted for, charged, taken, reserved, or received with respect to the debt, including, without limitation, any interest as provided herein or late charges, which are or are deemed to be interest under applicable law shall in each instance include the agreement of Borrower and Lender that the aggregate of all sums agreed to be paid are hereby expressly

 

 

limited to, and shall be reduced to an amount equal to the amount of interest at the Maximum Rate (the “Maximum Lawful Amount”).  It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply with applicable state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than under state law) and that this paragraph shall control every other covenant and agreement in this Note.  If the applicable law (state or federal) is ever judicially interpreted so as to render usurious any amount called for under this Note, or contracted for, charged, taken, reserved, or received with respect to the debt, or if any prepayment results in Borrower having paid any interest in excess of that permitted by applicable law, then it is Lender’s express intent that all excess amounts theretofore collected by Lender shall be credited on the principal balance of this Note and all other debt and the provisions of this Note immediately be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new documents, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder.  All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the debt shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the debt until payment in full so that the rate or amount of interest on account of the debt does not exceed the maximum non-usurious rate from time to time in effect and applicable to the debt for so long as the debt is outstanding.

 

In the event of default in the payment of any installment of principal or interest when due hereunder, or upon failure in performance of any covenant, agreement, or obligation to be performed under any documents executed in connection with this Note, Lender may declare the entirety of this Note, principal and interest, immediately due and payable without further notice, but failure to exercise said option shall not constitute a waiver on the part of Lender of the right to exercise the same at any other time.

 

In the event default is made in the payment of this Note in whatever manner its maturity may be brought about, and it is placed in the hands of an attorney for collection, or is collected through probate, bankruptcy or other proceedings, Borrower promises to pay all reasonable amounts actually incurred by Lender for court costs and attorneys’ fees in connection therewith.

 

Borrower waives grace, notice, demand, presentment for payment, notice of non-payment, protest, notice of protest, notice of intention to accelerate, notice of acceleration of the indebtedness due hereunder and all other notice, filing of suit and diligence in collecting this Note, and the enforcing of any of the security rights of Lender, and consent and agree that the time of payment hereof may be extended without notice at any time and from time to time, and for periods of time, whether or not for a term or terms in excess of the original term hereof, without notice or consideration to, or consent from, any of them.  Time is of the essence hereof.

 

Any liability hereunder is the liability of the TEL Offshore Trust alone and is in no respect whatsoever the obligation of the trustees or owners of units of the TEL Offshore Trust.  Lender is dealing with the TEL Offshore Trust and is doing so in reliance solely upon the assets of the TEL Offshore Trust and not upon the trustees or such owners of units and neither the trustees nor such owners of units of the TEL Offshore Trust shall have any personal liability to Lender.

 

2

 

THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.

 

EXECUTED to be effective the day and year first written above.

 

	
 
    	
TEL   OFFSHORE TRUST
    
	
 
    	
 
    
	
 
    	
By:
    	
The   Bank of New York Mellon Trust Company, N.A, its trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Michael J. Ulrich
    
	
 
    	
 
    	
Michael   J. Ulrich
    
	
 
    	
 
    	
Vice   President
    

 

Signature Page to Renewal Demand Promissory NoteExhibit 10.1

 

Dear Mr. Skelly,

 

In recognition of your continuing contributions and loyalty to Warren Resources, Inc. (the “Company”) in the critical months ahead, this letter agreement sets forth the retention bonus payments that the Company will provide to you and the terms and conditions of those payments.

 

1.              Retention Payments.  Provided that you remain actively employed in good standing by the Company as of March 31, 2016 (the “Retention Date”), the Company agrees that you will be entitled to receive the following payments and benefits (collectively, the “Retention Benefits”):

 

a.              Cash Retention. A lump sum cash payment equal to $412,500, less all applicable authorized and required deductions and withholdings (the “Cash Retention”); and

 

b.              COBRA Retention. Provided you elect to continue your medical care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) upon a subsequent separation of your employment that occurs within one year following the Retention Date, and such separation is not due to a termination for Cause, the Company will either pay or reimburse you, at its election, for the premiums associated with such continued coverage on the first of each month commencing on the first of the month following such separation and continuing until the earlier of (i) the date that you become covered by the medical plan of a subsequent employer, (ii) the date you are no longer eligible for continued medical coverage pursuant to COBRA, and (iii) the ninth month of COBRA coverage (inclusive) (the “COBRA Retention”).

 

2.              Payment of Your Retention Payments in the Event of a Termination of Employment. Notwithstanding the general requirement that you must remain in the employment of the Company until the Retention Date in order to be eligible to receive payment of your Retention Benefits, if, prior to the Retention Date, your employment is terminated by the Company without Cause or by you for Good Reason (as such terms are defined in Exhibit A hereto), you will remain entitled to receive the Retention Benefits.  To exercise your right to terminate for Good Reason, you must provide written notice to the Company of your belief that Good Reason exists within 90 days of the initial existence of the condition(s) giving rise to Good Reason, and that notice shall describe the condition(s) believed to constitute Good Reason.  The Company shall have 30 days to remedy the Good Reason condition(s).  If not remedied within that 30-day period, you may terminate your employment for Good Reason; provided, however, that such termination must occur prior to the Retention Date.

 

By this letter, the Company is notifying you of its intent to close its New York City office where you are employed and move its headquarters to Denver, Colorado.  If you terminate your employment as a result of such intended relocation prior to the Retention Date, you will be entitled to receive a lump sum cash payment equal to $275,000, plus the COBRA Retention (collectively, the “Office Closure Severance Benefits”).  To exercise such right to terminate, you must provide written notice to the Company of your intent to terminate your employment, and actually terminate your employment, prior to the Retention Date.

 

 

3.              Payment and Release. The right to payment of any Retention Benefits or Office Closure Severance Benefits (each, a “Benefit”) will be contingent on the timely execution and delivery of a waiver and release in a form acceptable to and provided by the Company (the “Release”) and your non-revocation of the Release.  The lump sum cash portion of any Benefit will be payable to you within 14 days following the Release becoming irrevocable, subject to your execution and delivery of the Release by the 50th day following the date of your termination of employment or the Retention Date, as applicable.  If you fail to timely execute the required Release as prescribed above or you revoke the Release during any applicable revocation period, you will not be eligible to receive payment of any portion of your Benefit and it will be forfeited in full.

 

COBRA Retention payments will be payable as set forth under Section 1(b) above; provided that no COBRA Retention payments will be made prior to delivery of the Release and expiration of the revocation period in relation thereto.  In the event that payments are due under 1(b) prior to delivery of the Release and expiration of the revocation period, they will be provided as reimbursements to you on the first payroll date that occurs after your delivery of the Release and expiration of the revocation period in relation thereto.

 

4.              Miscellaneous.  The following additional terms apply:

 

a.              Any ambiguities and interpretive questions regarding the terms of this letter agreement will be resolved by the Company in its sole discretion and the Company’s decisions in such matters will be final and binding

 

b.              The payment of the lump sum cash portion of any Benefit is intended to qualify for the short-term deferral exception to Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder and, accordingly, full payment of the lump sum cash portion of any Benefit shall in all events be made to you not later than March 15 of the calendar year following the calendar year in which such amounts are no longer subject to a substantial risk of forfeiture within the meaning of the rules and regulations under Section 409A.  Further, this agreement shall be interpreted such that it is in compliance with Section 409A.

 

c.               Your employment is “at will” and, subject to the terms of this letter agreement, your employment may be terminated by you or the Company at any time for any reason.  Except as expressly provided under the terms of this letter agreement or any other binding written plan or agreement applicable to you, the Company reserves the right to change the terms and conditions of your employment, including the terms of your compensation and benefits, at any time.  This letter agreement is not intended to be, and should not be construed as, a contract of employment for any specific period of time.

 

d.              This letter agreement constitutes the entire agreement between the Company and you concerning the subject matter hereof and may only be modified by a written agreement executed by the Company and you.

 

e.               This agreement may be executed in one or more counterparts, all of which taken together shall be deemed to constitute one and the same original.

 

f.                This agreement shall be governed by the laws of New York, without regard to any conflicts of laws.

 

g.               Except as specifically provided herein, upon your execution of this letter agreement, you

 

 

hereby waive any and all rights to any severance payments or benefits, including the accelerated vesting of any equity awards, under any plans, agreements, programs or other arrangements of the Company to which you are a party and/or a participant.

 

We look forward to your acceptance of this letter agreement, which you can indicate by promptly signing, dating and returning a copy of this letter agreement to me.

 

 

	
Very truly yours,
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Lance Peterson
    	
 
    	
 
    
	
Lance Peterson
    	
 
    	
 
    
	
Warren   Resources, Inc.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Accepted and Agreed:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Stewart Skelly
    	
 
    	
October 15, 2015
    
	
 
    	
 
    	
 
    
	
Stewart Skelly
    	
 
    	
Date
    

 

 

EXHIBIT A

 

Attachment to Letter Agreement: Definitions

 

“Cause” shall mean the following, as determined by the Company in its sole discretion:

 

(i)            the willful breach or habitual neglect of assigned duties related to the Company, including compliance with Company policies;

 

(ii)           conviction (including any plea of nolo contendere) of the employee of any felony or crime involving dishonesty or moral turpitude;

 

(iii)          any act of personal dishonesty knowingly taken by the employee in connection with his responsibilities as an employee and intended to result in personal enrichment of the employee or any other person;

 

(iv)          bad faith conduct that is materially detrimental to the Company;

 

(v)           inability of the employee to perform the employee’s duties due to alcohol or illegal drug use;

 

(vi)          the employee’s failure to comply with any legal written directive of the Board of Directors of the Company; or

 

(vii)         any act or omission of the employee which is of substantial detriment to the Company because of the employee’s intentional failure to comply with any statute, rule or regulation, except any act or omission believed by the employee in good faith to have been in or not opposed to the best interest of the Company (without intent of the employee to gain, directly or indirectly, a profit to which the employee was not legally entitled) and except that Cause shall not mean bad judgment or negligence other than habitual neglect of duty.

 

“Good Reason” means that employee, without employee’s express, written consent, has:

 

(i)            incurred a material reduction in authority, duties or responsibilities at the Company or a successor employer (with respect to a termination in connection with a Change of Control, relative to authority, duties or responsibilities immediately prior to the Change of Control);

 

(ii)           incurred a material reduction in annual salary or bonus opportunity (except for reductions in connection with a general reduction in annual salary for all similarly situated employees of the Company by an average percentage that is not less than the percentage reduction of employee’s annual salary);

 

(iii)          a material diminution in the authority, duties, or responsibilities of the supervisor to whom the employee is required to report, including a requirement that the employee report to a corporate officer or employee instead of reporting directly to the Company’s Chief Executive Officer;

 

(iv)          a material diminution in the budget over which the employee retains authority; or

 

(v)           suffered a material breach of this Agreement by the Company or a successor employer.

 

 

“Change of Control” and all other defined terms used in the definitions set forth in this Exhibit A shall have the meanings set forth in the Executive Severance Plan dated April 13, 2015.

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