NOTE F—COMMITMENTS AND CONTINGENCIES

General Commitments

The Company has entered into various commitments and operating agreements related to development and production of certain oil and gas properties. It is management's belief that such commitments, as stated below, will be met without significant adverse impact to the Company's financial position or results of operations.

The Company has entered into employment agreements with certain key executives. Under the terms of these agreements, certain executives are entitled to termination compensation up to two years annual salary if terminated without cause or in the event of a change in control. At December 31, 2012, the maximum termination compensation for all executives is approximately $2.2 million.

Trust Indenture Agreements

Under certain Trust Indenture Agreements, the Company has purchased zero coupon U.S. Treasury Bonds to secure repayment of the outstanding principal amount of debentures when due at maturity. At December 31, 2012 and 2011, the face amounts of U.S. Treasury Bonds securing the Company's obligation under the Trust Indenture Agreements were $1.6 million and $1.7 million, respectively, and the market values of these U.S. Treasury Bonds were approximately $1.4 million and $1.3 million, respectively (see Note B).

Leases

The Company leases corporate office space in New York City, which expires in January 2023. The Company's oil and gas administrative office in Casper, Wyoming occupies 5,555 square feet under a lease which expires in November 2015. The Company leases field office space in Rawlins, Wyoming, which expires in March 2015. The Company leases office space in Roswell, New Mexico, which expires in May 2013. The Company leases office space in Long Beach, California which expires in April 2020.

Future minimum annual rental payments, which are subject to escalation and include utility charges as of December 31, 2012, are as follows:

	(in thousands)

Year ending December 31:
2013	$	827
2014		516
2015		487
2016		423
2017		435
Thereafter		1,063

	$	3,751

Rent expense under these leases was approximately $698 thousand, $718 thousand and $728 thousand for the years ended December 31, 2012, 2011 and 2010, respectively.

Legal Proceedings

In 2005, Warren recorded a provision for $1.8 million relating to a contingent liability that the Company may face as a result of a lawsuit originally filed in 1998 by Gotham Insurance Company in the 81st Judicial District Court of Frio County, Texas (Gotham Insurance Company v. Pedeco, Inc., et al.,) seeking a refund of approximately $1.8 million paid by Gotham and other insurers under an insurance policy issued for a well blow-out that occurred in 1997. After several appeals to the Texas Court of Appeals and the Texas Supreme Court, the case was remanded to the trial court for further proceedings. Both parties filed Motions for Summary Judgment in mid-2009, and on November 19, 2009, the trial court heard oral arguments on both Motions for Summary Judgment. On January 22, 2010, the court granted Gotham's Motion for Summary Judgment for restitution in the amount of $1,823,156 and also awarded prejudgment interest at the rate of 5% per annum in the amount of $976,011. As a result of the January 2010 Summary Judgment, Warren recorded an additional provision of $1.3 million in the fourth quarter of 2009 relating to this contingent liability. On July 7, 2010, Warren E&P posted a supersedeas bond with the court and commenced to appeal the order of the trial court to the Texas Court of Appeals. The San Antonio Court of Appeals assigned and transferred this appeal to the El Paso Court of Appeals. Based on extensions given by the El Paso Court of Appeals, the Frio County District Court Clerk certified and filed the Record on Appeal on October 26, 2010. On March 14, 2011, Warren filed its appellate brief with the El Paso Court of Appeals. Gotham filed its response to Warren's brief on May 31, 2011. Warren replied to Gotham's response on June 23, 2011. The El Paso Court of Appeals held oral arguments of the case on January 12, 2012. On April 18, 2012 the Texas Court of Appeals reversed the judgment of the trial court and rendered its appellate decision in favor of Warren ruling that Gotham Insurance take nothing against Warren. Additionally, the Texas Court of Appeals ordered that Warren can recover all costs of the appeal from Gotham Insurance. In response to the April 18, 2012 ruling, on June 4, 2012, Gotham filed a petition with the Texas Supreme Court seeking a review of the ruling. On September 26, 2012, Warren filed a reply brief in opposition to Gotham's petition. The Court asked for further briefing and on December 18, 2012 Gotham filed a brief on the merits of their appeal. On February 6, 2013, Warren filed its brief in response to Gotham's brief. As of this date, Warren does not know whether the Supreme Court will request additional briefs or pleadings from either party or authorize oral arguments on the merits of the appeal. Furthermore, we do not anticipate a ruling, order or response from the Texas Supreme Court in the near future. In the event the Texas Supreme Court reverses the Texas Court of Appeals ruling and finds in Gotham's favor, Warren would be responsible for the final judgment in the amount of $2,967,070.10, plus post-judgment interest, court costs and attorney's fees.

The Company is a party to various other matters of litigation arising in the normal course of business. Management believes that the ultimate outcome of the matters will not have a material effect on the Company's financial condition or results of operations.