Employment Agreement - Warren Resources Inc. and Jack B. King
[Warren Resources, Inc. letterhead]
May 2, 2001
Jack B. King
Vice President - National Sales Director
Warren Resources, Inc.
2512 Chambers Road, Suite 107
Re: 2001 Cash Compensation
Dear Jack:
As the National Sales Director of Warren Resources, Inc., (the Company), you
will be responsible for the overall supervision of the private placement sales
of the Company's drilling fund investment products by the Company's national
wholesaler network (Wholesaler Network). Your duties shall include creating new
and maintaining existing relationships with the Broker Dealer community in
connection with the Company's private placement of drilling funds by the
Wholesaler Network. You will report directly to me as the CEO.
Additionally, you will continue to be a regional wholesaler generally covering
the Southwest and Hawaii as set forth in Schedule C, hereto. However, it is
recognized that you may need to alter the composition of the wholesale
territories in consultation with me as circumstances dictate during 2001.
Your cash compensation for 2001 will consist of the following, (1) base
compensation of $16,666.67 per month to be recovered by the Company solely out
of the incentive compensation earned by you and (2) the balance of your
incentive cash compensation in excess of base compensation as set forth in the
Attachment A, hereto.
Your incentive cash compensation for 2001 shall be based upon the drilling funds
raised by the Wholesaler Network during 2001 as follows: (1) an override of 0.3%
of drilling funds raised nationally by the Wholesaler Network, (2) an amount
based upon the sliding scale set forth in Attachment A, hereto, for drilling
funds raised in your sales territory and (3) an override for the first two years
of 0.25% of drilling funds raised nationally by the Wholesaler Network for all
new Broker Dealers you personally add to the Wholesaler Network.
<PAGE>
The Company will provide you with a budget of 1.7% of all drilling funds raised
nationally by the Wholesaler Network for agreed marketing expenses under your
control (See Schedule B). You may use your own credit card(s) or a credit card
provided to you by the Company. You are required to submit reimbursable and
non-reimbursable expense reports on a timely basis along with receipts for all
items in accordance with the Company's expense reimbursement policies. If the
total agreed marketing expenses for 2001, net of reimbursements made to the
Company, exceed 1.7% of drilling funds raised nationally by the Wholesaler
Network, you shall reimburse the difference to the Company out of your incentive
compensation. If the total expenses for 2001, net of reimbursements, are less
than 1.7% of drilling funds raised nationally by the Wholesaler Network, the
difference shall be added to your incentive compensation.
The Company shall continue to provide you with a health insurance plan for you
and your dependents. You will continue to participate in the Company's 401-k
Retirement Plan in which the Company has agreed to match 50% of your
contributions up to 6% of your annual compensation.
Please sign and return one copy of this letter to indicate your acceptance of
the terms of employment for calendar year 2001. The term of this contract ends
December 31, 2001.
Sincerely, ACCEPTED:
/s/ Norman F. Swanton /s/ Jack B. King
---------------------------
Norman F. Swanton Jack B. King
Chief Executive Officer 5-7-01
& Chairman of the Board -------
Date
<PAGE>
ATTACHMENT A
($30 million)
Drilling funds raised Compensation Compensation Cumulative
in territory percentage earned compensation
----------------------------- ----------------------------- ----------------------------- -----------------------------
$1 - 7.5 million 1.00% 75,000 75,000
$7.5 - $15 million 1.50% 112,500 187,500
over $15 million 2.00% 300,000 487,500
Drilling funds raised nationally by all wholesalers (assume $65 million)
all funds 0.30% 195,000 682,500
New Broker Dealers introduced by Jack King (assume $4 million):
all funds 0.25% 10,000 692,500
/s/ NS /s/ JK
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<PAGE>
ATTACHMENT B
Generally, all marketing expenses will be included in your 2001 budget.
Items specifically excluded include the following:
Printing and artwork related to brochures
New York mailing expenses, including all UPS charges
Items specifically included include the following:
Advertising
Due diligence expenses, including FSX, Nationwide and IPA
Hotels, lodging
Airfare, transportation
Auto expenses
Mileage
Parking
Tolls
Tips
Meals and Entertainment
Car rental
Seminars, conferences, including national broker dealer conferences
Office rents
Utilities
Computer hardware, software and maintenance
Professional education
Medical insurance
Furniture
Telephone, pager, cellphone
Office supplies
Subscriptions
Memberships, dues
Gifts, awards
Michael Hughes' salary and bonus
Christy's salary and bonus
All overrides
/s/ NS /s/ JK
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<PAGE>
ATTACHMENT C
Regional territory description
Hawaii
California
Nevada
Colorado
New Mexico
Arizona
Consulting relationships
Northpoint - CPAs
Lido - Kushner
National territory
All states
All CBM Joint Venture Transactions consummated by National Wholesaler Network
(excluding NFS)
All Syndicated Drilling Funds Transactions consummated by National Wholesaler
Network through the Company's broker dealer network, including broker dealers
who have become the Company's underwriters
/s/ NS /s/ JK
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