ex10_1.htm


    
      

    

    
      Exhibit
10.1

    

    


    


    AMENDMENT
NO. 1 TO

     

    SEVERANCE
COMPENSATION AGREEMENT

     

    THIS AMENDMENT is entered into
as of December 31, 2008 by and between Fred L. Callon (“Executive”)
and Callon Petroleum Company (the “Company”).

     

    WITNESSETH
THAT:

     

    WHEREAS, Executive and the
Company have previously entered into the Severance Compensation Agreement dated
April 15, 2008 (the “Agreement”);
and

     

    WHEREAS, Executive and the
Company desire to amend the Agreement for compliance with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”).

     

    NOW, THEREFORE, effective as
of December 31, 2008, the Agreement is amended as follows:

     

    


     

    
      	
               
      

            	
              1.

            	
              Section
      3.5 of the Agreement is hereby deleted in its entirety and replaced with
      the following:

            


    

    


     

    3.5            Date of Termination. “Date of
Termination” shall mean: (i) if this Agreement is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that Executive
shall not have returned to the performance of his duties on a full-time basis
during such thirty (30) day period); or (ii) if Executive’s employment is
terminated pursuant to Section 3.3 or if Executive’s employment is terminated
for any other reason, the date Executive incurs a “separation from service” (as
such term is defined in final Treasury Regulations issued under Code Section
409A and any other guidance issued thereunder).

     

    
      	
               
      

            	
              2.

            	
              The
      last paragraph of Section 4.2(b) of the Agreement is hereby deleted in its
      entirety and replaced with the
following:

            


    

     

    If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall
furnish Executive with an opinion that he has substantial authority not to
report any Excise Tax on his federal income tax return. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that a
Gross-Up Payment which will not have been made by Callon should have been made
(“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that Callon exhausts its remedies pursuant to Section 4.2(c) and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Callon to or for the benefit of
Executive, but in no event later than the end of Executive’s taxable year next
following Executive’s taxable year in which he remits the related
taxes.

     

    
      
         


      

      
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              3.

            	
              Section
      5.1(a) of the Agreement is hereby deleted in its entirety and replaced
      with the following:

            


    

     

    
      	
               
      

            	
              (a)

            	
              Notwithstanding
      any provision to the contrary in any stock option agreement, restricted
      stock agreement, or other applicable agreement that may be outstanding
      between Executive and Callon, all outstanding units, stock options,
      incentive stock options, performance shares, performance awards, stock
      appreciation rights, career shares, bridge shares, and shares of
      restricted stock (the “Stock
      Rights”) then held by Executive shall immediately become
      exercisable and Executive shall become one hundred percent (100%) vested
      in such Stock Rights held by or for the benefit of Executive; provided,
      however, that such Stock Rights shall not be accelerated if it would be an
      impermissible acceleration under Section 409A of the Code.  In
      the event that, and to the extent that, Callon is unable to provide for
      acceleration of vesting in accordance with this paragraph as a result of
      the provisions in existence prior to a Change of Control of any plan or
      agreement, Callon shall provide in lieu thereof a lump sum cash payment
      equal to the difference between the total value of such outstanding Stock
      Rights as of the Executive’s Date of Termination and the total value of
      the Stock Rights in which the Executive is vested as of the Executive’s
      Date of Termination, payable within the time specified in Section 4.1(a).
      The value of such accelerated vesting in the Executive’s Stock Rights
      shall be determined by the Board in good faith based on a valuation
      performed by an independent consultant mutually agreed to by the Board and
      Executive.

            


    

     

    Notwithstanding
the above provisions of this Section 5.1(a), no accelerated vesting or cash out
shall apply to any agreement to the extent such acceleration or cash out would
cause the compensation payable thereunder to fail to qualify as
“performance-based compensation” under Section 162(m)(4)(C) of the
Code.

     

    
      	
               
      

            	
              4.

            	
              A
      new Article 16 is added to the Agreement as
  follows:

            


    

     

    Six Month Delay.  To
the extent (i) any payment or benefit to which Executive becomes entitled under
this Agreement in connection with Executive’s termination of employment with
Callon constitutes deferred compensation subject to Code Section 409A, and (ii)
Executive is deemed at the time of such termination of employment to be a
“specified employee” under Code Section 409A, then such payment or benefit shall
not be made or commence until the earliest of (A) the expiration of the six (6)
month period measured from the date of Executive’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 Callon; or (B) the date
of Executive’s death following such separation from service.  Upon the
expiration of the applicable deferral period, any payment or benefit which would
have otherwise been made during that period in the absence of this Article 16
shall be made to Executive or Executive’s beneficiary.  Executive has
reviewed with Executive’s own tax advisors the tax consequences of this
Agreement and the transactions contemplated hereby.  Executive is
relying solely on his or her tax advisors and not on any statements or
representations of Callon or any of its agents and understands that Executive
(and not Callon) shall be responsible for Executive’s own tax liability that may
arise as a result of this Agreement or the transactions contemplated hereby,
except as otherwise specifically provided in this Agreement.

     

    
      
         


      

      
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              5.

            	
              This
      Amendment may be executed in any number of counterparts, each of which
      shall be an original, and all of which together shall constitute one
      agreement.

            


    

    


     

    IN WITNESS WHEREOF, Executive
has executed this Agreement, and the Company has caused these presents to be
executed in its name and on its behalf, as of the date first written
above.

     

     

    
      
        
          
            	 
      	
                    Fred
      L. Callon

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	
                     

                  
	 
      	 
      	 
      
	 
      	
                    Callon
      Petroleum Company

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	
                     

                  
	 
      	
                    Name:  Fred
      L. Callon

                  
	 
      	
                    Title:  President

                  


          

        

      

    

     

     

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