Exhibit 10.2
CALLON PETROLEUM COMPANY
PERFORMANCE SHARE AWARD AGREEMENT
     THIS AGREEMENT is entered into this 1st day of June, 2009, between Callon
Petroleum Company, a Delaware corporation (the “Company”) and Steven B. Hinchman
(“Grantee”), an employee of the Company. The Compensation Committee (the
“Committee”) of the Company has authorized the grant of shares of common stock
of the Company, par value $0.01 per share (“Shares”), set forth below to
Grantee.
     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties do hereby agree as follows:
     1. Grant. Subject to all of the terms, conditions and provisions of this
Agreement, the Company hereby grants 100,000 Shares (the “Time Shares”) and
100,000 Shares (the “Performance Shares”) of common stock. Shares issued shall
consist of authorized but unissued shares or issued shares of common stock
reacquired by the Company. The Company will issue only such number of shares of
the Company net of the number of shares sufficient to satisfy tax withholding
requirements valued at the average of the opening and closing NYSE market price
on the date of vesting unless Grantee elects to pay such withholdings in cash on
terms acceptable to the Company.
     2. Time Shares Vesting. Subject to paragraphs (4), (5), (6), and
(7) hereof, the Time Shares shall vest 100% and become freely tradable on the
fourth anniversary following the award date, provided that Grantee maintains
continuous employment through such anniversary date. If the Company terminates
Grantee’s employment without Cause prior to such fourth anniversary date, the
Time Shares will vest in proportion to such elapsed time from the award date to
the termination date.
     3. Performance Shares Adjustment. The Performance Shares shall be subject
to an adjustment in accordance with the procedures and calculations as explained
in Exhibit A attached to and deemed a part of this Agreement (the “Adjusted
Performance Shares”).
     4. Change in Control. Notwithstanding paragraph (2) and (3) hereof, upon
involuntary termination of employment (other than for “Cause”, as defined
herein) within twenty-four (24) months immediately following a Change in
Control, all unvested portions of the Time Shares shall automatically vest and
the Performance Shares shall be adjusted in accordance with the peer company
comparison from the date of this award to the date of termination. For purposes
hereof, a “Change in Control” shall have occurred if any of the following occur:
(a) Change in Ownership. A change in ownership of the Company occurs on the date
that any “Person” (as defined in below), other than (1) the Company or any of
its subsidiaries, (2) a trustee or other fiduciary holding securities under an

 

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employee benefit plan of the Company or any of its Affiliates, (3) an
underwriter temporarily holding stock pursuant to an offering of such stock, or
(4) a corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of the
Company’s stock, acquires ownership of the Company’s stock that, together with
stock held by such Person, constitutes more than fifty percent (50%) of the
total fair market value or total voting power of the Company’s stock. However,
if any Person is considered to own already more than fifty percent (50%) of the
total fair market value or total voting power of the Company’s stock, the
acquisition of additional stock by the same Person is not considered to be a
Change of Control; or
(b) Change in Effective Control. Even though the Company may not have undergone
a change in ownership under paragraph (a) above, a change in the effective
control of the Company occurs on the date during any twelve (12) month period
when a majority of members of the Board of Directors (the “Board”) is replaced
by directors whose appointment or election is not endorsed by a majority of the
Board before the date of the appointment or election; provided, however, that
any such director shall not be considered to be endorsed by the Board if his or
her initial assumption of office occurs as a result of an actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Change in Ownership of Substantial Portion of Assets. A change in the
ownership of a substantial portion of the Company’s assets occurs on the date
that a Person acquires (or has acquired during the twelve (12) month period
ending on the date of the most recent acquisition by such Person) assets of the
Company, that have a total gross fair market value equal to at least eighty
percent (80%) of the total gross fair market value of all of the Company’s
assets immediately before such acquisition or acquisitions. However, there is no
Change in Control when there is such a transfer to an entity that is controlled
by the shareholders of the Company immediately after the transfer, through a
transfer to (i) a shareholder of the Company (immediately before the asset
transfer) in exchange for or with respect to the Company’s stock; (ii) an
entity, at least fifty percent (50%) of the total value or voting power of the
stock of which is owned, directly or indirectly, by the Company; (iii) a Person
that owns directly or indirectly, at least fifty percent (50%) of the total
value or voting power of the Company’s outstanding stock; or (iv) an entity, at
least fifty percent (50%) of the total value or voting power of the stock of
which is owned by a Person that owns, directly or indirectly, at least fifty
percent (50%) of the total value or voting power of the Company’s outstanding
stock.

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For purposes of this paragraph (4),
(i) “Person” shall have the meaning given in Section 7701(a)(1) of the Internal
Revenue Code of 1986, as amended (the “Code”). Person shall include more than
one Person acting as a group as defined by the final Treasury Regulations issued
under Section 409A of the Code.
(ii) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Securities Exchange Act of 1934, as amended.
     The provisions of this paragraph (4) shall be interpreted in accordance
with the requirements of the final Treasury Regulations issued under
Section 409A of the Code, it being the intent of the parties that this paragraph
(4) shall be in compliance with the requirements of said Section of the Code and
said Regulations.
     5. Termination of Employment upon Death. Notwithstanding paragraph
(2) hereof, in the event Grantee’s employment with the Company is terminated due
to the death of Grantee, all unvested portions of the Time Shares and the
Performance Shares shall automatically vest and become freely tradable by
Grantee’s estate or by a person who acquires the rights to the Time Shares and
the Performance Shares by bequest or inheritance.
     6. Termination of Employment upon Disability or Retirement. Notwithstanding
paragraph (2) hereof, in the event Grantee’s employment with the Company is
terminated due to the Disability or Retirement of Grantee, all unvested portions
of the Time Shares and the Performance Shares shall automatically vest and
become freely tradable. For purposes hereof, “Disability” of Grantee shall be
the physical or mental inability of Grantee to carry out the normal and usual
duties of his employment on a full-time basis for an entire period of six
(6) continuous months together with the reasonable likelihood as determined by
the Board (excluding Grantee) of the Company that Grantee, upon the advice of a
qualified physician, will be unable to carry out the normal and usual duties of
his employment. For purposes hereof, “Retirement” shall be the voluntary
termination of employment from the Company on any date after Grantee attains the
normal retirement age of seventy (70) years.
     7. Termination of Employment for Cause. Notwithstanding paragraph
(2) hereof, if Grantee’s employment is terminated for Cause, upon written Notice
of Termination for Cause given by the Company to Grantee, all unvested portions
of the Time Shares and the Performance Shares granted hereunder shall be
cancelled, shall not vest and shall be returned to the Company. As used herein,
“Cause” shall mean any of the following events: (i) misconduct or neglect of
duties which in the business judgment of the Board (excluding Grantee) has
adversely affected the Company; (ii) the commission by Grantee of an act of
fraud or embezzlement; (iii) the commission by Grantee of

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any other action with the intent to injure the Company; (iv) theft or conviction
of a felony or any crime involving dishonesty or moral turpitude; (v) Grantee
having misappropriated the property of the Company; (vi) Grantee having violated
any law or regulation relating to the business of the Company which results in
injury to the Company; or (vii) failure or refusal to perform employment duties
(other than any such failure resulting from Grantee’s incapacity due to physical
or mental illness).
     Termination for Cause shall require the vote of a majority of the members
of the Committee, excluding Grantee.
     8. Involuntary Termination without Cause. Notwithstanding paragraph
(3) hereof, upon involuntary termination of employment without Cause, all
unvested portions of the Performance Shares shall be adjusted in accordance with
the peer company comparison from the date of this award to the date of
termination.
     9. Termination of Employment. For purposes of paragraphs (4), (5), (6), and
(8) hereof, such termination of employment shall constitute a “separation from
service” (as such term is defined in final Treasury Regulations issued under
Section 409A of the Code and any other guidance issued thereunder).
Notwithstanding paragraph (2) hereof, if Grantee’s employment with the Company
is terminated other than pursuant to paragraphs (4), (5), (6), and (8) hereof,
all unvested portions of the Shares granted hereunder shall be cancelled, shall
not vest and shall be returned to the Company.
     10. Notice of Termination. Any termination of Grantee’s employment by the
Company or by Grantee (other than termination pursuant to paragraph (5) above)
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth the facts and circumstances to provide a basis
for termination of Grantee’s employment under the provision so indicated.
     11. No Employment Commitment. Grantee acknowledges that neither the grant
of Time Shares, Performance Shares and if applicable, Adjusted Performance
Shares nor the execution of this Agreement by the Company shall be interpreted
or construed as imposing upon the Company an obligation to retain his services
for any stated period of time, which employment shall continue to be at the
pleasure of the Company at such compensation as it shall determine, unless
otherwise provided in a written employment agreement.
     12. Non-Transferability, Voting Rights and Dividends. The unvested portion
of the Time Shares, Performance Shares and if applicable, Adjusted Performance
Shares granted hereunder may not be sold, assigned, transferred, pledged, or
otherwise encumbered. The unvested portion of the Time Shares, Performance
Shares and if applicable, Adjusted Performance Shares shall not have

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any rights as a stockholder, including the right to dividends, with respect
thereto unless and until certificates for shares of common stock are issued to
him or her.
     13. Grantee’s Agreement. Grantee expressly and specifically agrees that:
          (a) With respect to the calendar year in which the Time Shares,
Performance Shares and if applicable, Adjusted Performance Shares vest, Grantee
shall include in his gross income for federal income tax the fair market value
equal to the average of the opening and closing price NYSE market price of the
common stock on the date of vesting;
          (b) Unless otherwise specifically provided in a written employment
agreement, the grant of Time Shares, Performance Shares and if applicable,
Adjusted Performance Shares is special incentive compensation which shall not be
taken into account as “wages” or “salary” in determining the amount of payment
or benefit to Grantee under any 401(k), pension plan, thrift, stock or deferred
compensation plan of the Company, as the case may be; and
          (c) On behalf of Grantee’s beneficiary, such grant shall not affect
the amount of any life insurance coverage available to such beneficiary under
any life insurance plan covering employees of the Company or any subsidiary.
     14. Delivery of Shares. The delivery of Shares which vest under the terms
of this Agreement shall be made upon the earlier of: (a) sixty (60) days
following the date on which the right to such Shares vests under paragraph
(2) hereof, or (iii) the date of Grantee’s termination of employment under
paragraphs (4), (5), (6), or (8) hereof.
     15. Six Month Delay. To the extent (i) any delivery of Shares to which
Grantee becomes entitled under this Agreement in connection with Grantee’s
termination of employment with the Company constitute deferred compensation
subject to Section 409A of the Code, and (ii) Grantee is deemed at the time of
such termination of employment to be a “specified employee” under Section 409A
of the Code, then such delivery shall not be made or commence until the earliest
of (A) the expiration of the six (6) month period measured from the date of
Grantee’s “separation from service” (as such term is defined in final Treasury
Regulations issued under Section 409A of the Code and any other guidance issued
thereunder) with the Company; or (B) the date of Grantee’s death following such
separation from service. Upon the expiration of the applicable deferral period,
any delivery which would have otherwise been made during that period in the
absence of this paragraph (15) shall be delivered to Grantee or Grantee’s
beneficiary. Grantee has reviewed with Grantee’s own tax advisors the tax
consequences of this Agreement and the transactions contemplated hereby. Grantee
is relying solely on his or her tax advisors and not on any statements or
representations of the Company or any of its agents and understands that Grantee
(and not the Company) shall be responsible for Grantee’s own tax

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liability that may arise as a result of this Agreement or the transactions
contemplated hereby, except as otherwise specifically provided in this
Agreement.
     16. Adjustment of Number of Shares and Related Matters.
          (a) In the event of any change in the outstanding common stock by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, the Board
in its sole discretion may appropriately adjust the number of shares of common
stock subject to this Agreement, and any and all other matters deemed
appropriate by the Board, including the types of securities subject to this
Agreement.
          (b) The existence of this Agreement shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company’s capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the common stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
          (c) After a merger of one or more corporations into the Company, or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, unless otherwise provided by the
Board, the number of shares of common stock, other securities or consideration
to be received with respect to unvested Shares shall continue to be subject to
this Agreement, including vesting provisions thereof.
          (d) If the Company has a Change in Control (as defined above) under
circumstances where the Company is not the surviving corporation, while unvested
Shares remain outstanding, then the Board may waive any limitations set forth in
or imposed pursuant to this Agreement with respect to the Shares such that the
vesting of such Shares shall occur upon such Change in Control.
     17. Rights as Shareholder. Grantee will have no rights as a shareholder
with respect to any shares covered by this Agreement until the issuance of a
certificate or certificates to Grantee for the Shares. Grantee, by his execution
of this Agreement, agrees to execute any documents requested by the Company in
connection with the issuance of a certificate or certificates for the Shares.
Except as otherwise provided in paragraph (16) hereof, no adjustment shall be
made for dividends or other rights for which the record date is prior to the
issuance of such certificate or certificates.
     18. Grantee’s Representations. Notwithstanding any of the provisions
hereof, Grantee hereby agrees that the Company will not be obligated to issue
any Shares to Grantee hereunder, if the issuance of such Shares shall constitute
a violation by Grantee or the Company of any provision

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of any law or regulation of any governmental authority. Any determination in
this connection by the Company shall be final, binding, and conclusive. The
obligations of the Company and the rights of Grantee are subject to all
applicable laws, rules, and regulations.
     19. Grantee’s Acknowledgments. Grantee hereby accepts this Agreement
subject to all the terms and provisions hereof. Grantee hereby agrees to accept
as binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under this
Agreement.
     20. Law Governing. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Delaware (excluding any
conflict of laws rule or principle of Delaware law that might refer the
governance, construction, or interpretation of this agreement to the laws of
another state).
     21. Legal Construction. In the event that any one or more of the terms,
provisions, or agreements that are contained in this Agreement shall be held by
any arbitrator to be invalid, illegal, or unenforceable in any respect for any
reason, the invalid, illegal, or unenforceable term, provision, or agreement
shall not affect any other term, provision, or agreement that is contained in
this Agreement and this Agreement shall be construed in all respects as if the
invalid, illegal, or unenforceable term, provision, or agreement had never been
contained herein.
     22. Covenants and Agreements as Independent Agreements. Each of the
covenants and agreements that are set forth in this Agreement shall be construed
as a covenant and agreement independent of any other provision of this
Agreement. The existence of any claim or cause of action of Grantee against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants and agreements that
are set forth in this Agreement.
     23. Entire Agreement. This Agreement supersedes any and all other prior
understandings and agreements, either oral or in writing, between the parties
with respect to the subject matter hereof and constitute the sole and only
agreements between the parties with respect to the said subject matter. All
prior negotiations and agreements between the parties with respect to the
subject matter hereof are merged into this Agreement. Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone acting
on behalf of any party, which are not embodied in this Agreement and that any
agreement, statement or promise that is not contained in this Agreement shall
not be valid or binding or of any force or effect.
     24. Parties Bound. The terms, provisions, and agreements that are contained
in this Agreement shall apply to, be binding upon, and inure to the benefit of
the parties and their respective

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heirs, executors, administrators, legal representatives, and permitted
successors and assigns, subject to the limitation on assignment expressly set
forth herein.
     25. Modification. No change or modification of this Agreement shall be
valid or binding upon the parties unless the change or modification is in
writing and signed by the parties.
     26. Headings. The headings that are used in this Agreement are used for
reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this
Agreement.
     27. Gender and Number. Words of any gender used in this Agreement shall be
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.
     28. Notice. Any notice or other communication required or given hereunder
shall be in writing and shall be deemed to have been effectively given only if
delivered personally or sent by certified or registered mail, postage prepaid,
to the Company at its principal office and to Grantee at his address as listed
on the Company’s records or to such other address as the parties shall designate
in writing.
     29. Tax Requirements. The Company makes no commitment or guarantee that any
federal, state or local, tax treatment, United States or foreign, will apply or
be available to Grantee. Grantee is hereby advised to consult immediately with
his own tax advisor regarding the tax consequences of this Agreement, including,
without limitation, any possible tax consequences of this Agreement in
connection with Section 409A of the Code. The Company shall have the power and
the right to deduct or withhold, or require Grantee to remit to the Company, an
amount sufficient to satisfy any federal, state, and local taxes, domestic or
foreign, required by law or regulations to be withheld with respect to any
taxable event arising in connection with the Shares. With respect to tax
withholding required upon the vesting of the Shares, or upon any other taxable
event arising as a result of the Shares, Grantee may elect, subject to the
approval of the Company in its discretion, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold the number of
Shares having a fair market value on the date the tax is to be determined equal
to the minimum withholding taxes which could be imposed on the transaction, as
determined by the Company. All such elections shall be made in writing, signed
by Grantee, and shall be subject to any restrictions or limitations that the
Company, in its discretion, deems appropriate. The Company, in its discretion,
may require that any payments due under this paragraph (29) be made prior to the
delivery of any certificate representing shares of common stock. The Company
may, in its sole discretion, withhold any taxes due in connection with the
Shares from any other cash remuneration otherwise paid by the Company to
Grantee.

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[Signature page follows]

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IN WITNESS WHEREOF, this Agreement is executed and entered into effective on the
day and year first above expressed.

                     
 
                    ATTEST:       CALLON PETROLEUM COMPANY    
 
                   
By:
  /s/ Robert A. Mayfield       By:   /s/ Fred L. Callon    
 
                   
 
  Robert A. Mayfield
Corporate Secretary           Fred L. Callon
Chief Executive Officer    

            Agreed to and Accepted
GRANTEE
      By:   /s/ Steven B. Hinchman         Steven B. Hinchman             

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Exhibit A
Calculation of
Performance Shares Adjustment
     Subject to (2) and (3) below, on June 1, 2012, Callon’s “Total Shareholder
Return” will be calculated and compared to the same calculated total shareholder
return of the selected group of peer companies listed below. The number of
Performance Shares awarded will be retroactively adjusted in accordance with
payout percentage based on Callon’s relative ranking with the peer companies as
shown in the table below.
     For purposes of this calculation, Callon’s total shareholder return and
that of the peer companies will be adjusted if necessary for stock splits and
the percent increase or decrease will be calculated as follows:
(EP + CD) - BP = % increase or decrease
BP
Ending price (EP) — equals the average daily closing price on the NYSE during
the month of April 2012.
Beginning price (BP) — equals the NYSE closing price on June 1, 2009.
Cash Dividends (CD) — equals the cash dividends paid from June 1, 2009 thru
December 31, 2011.
     The resulting percentage for Callon and the peer companies will then be
ranked. Based on the relative ranking, the number of Performance Shares awarded
will be adjusted in accordance with the following table:

      Rank   Adjustment 1 or 2   150% 3 or 4   125% 5, 6 or 7   100% 8 or 9  
50% 10 or 11   0%

Peer Companies
ATP Oil and Gas Corp.
Energy XXI
Brigham Exploration Co.

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Mariner Energy Inc.
Newfield Exploration Co.
Petroquest Energy Inc.
Plains Exploration & Production Co.
Stone Energy Co.
Swift Energy Co.
W & T Offshore Inc.
Vesting provisions applicable to Adjusted Performance Shares:
(1) Subject to (2) and (3) below, Adjusted Performance Shares shall vest 100%
and become freely tradable on the third anniversary following the award date.
(2) Upon an involuntary termination of employment (other than for Cause),
including an involuntary termination of employment (other than for Cause) within
twenty-four (24) months immediately following a Change in Control, or upon Death
or termination of employment due to Disability of Grantee, the performance
period will end on the effective date of the event and the adjustment described
above will be calculated. The Adjusted Performance Shares shall vest 100% and
become freely tradable on that date.
(3) Upon Retirement on any date after Grantee attains the normal retirement age
of 70 years, the performance period will end on the effective date of the event
and the adjustment described above will be calculated. The Adjusted Performance
Shares shall vest 100% and become freely tradable on that date.
(4) For purposes of paragraphs (2) and (3) hereof, such termination of
employment shall constitute a “separation from service” (as such term is defined
in final Treasury Regulations issued under Section 409A of the Code and any
other guidance issued thereunder). Notwithstanding paragraph (1) hereof, if
Grantee’s employment with the Company is terminated other than pursuant to
paragraphs (2) or (3) hereof, all unvested portions of the Adjusted Performance
Shares granted hereunder shall be cancelled, shall not vest and shall be
returned to the Company.
Note: In the event one or more of the listed peer companies is involved in a
merger/acquisition, the named peer company(s) will be adjusted either by
replacing said peer company(s) with a suitable replacement or in the event no
suitable replacement is determined, said peer company(s) will drop to the bottom
of the ranking.

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