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                                                                   EXHIBIT 10.14

                        SEVERANCE COMPENSATION AGREEMENT

         THIS AGREEMENT is made and entered into as of January 1, 2002, by and
between Callon Petroleum Company, a Delaware corporation (together with its
subsidiaries, "CALLON") and John S. Weatherly ("EXECUTIVE").

                                   WITNESSETH:

         WHEREAS, Callon recognizes that the current business environment makes
it difficult to attract and retain highly qualified executives unless a certain
degree of security can be offered to such individuals against organizational and
personnel changes which frequently follow a Change of Control (as defined below)
of a corporation; and

         WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and their families; and

         WHEREAS, Callon desires to assure fair treatment of its key executives
in the event of a Change of Control and to allow them to make critical career
decisions without undue time pressure and financial uncertainty, thereby
increasing their willingness to remain with Callon notwithstanding the outcome
of a possible Change of Control transaction; and

         WHEREAS, Callon recognizes that its key executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in a Change of Control of Callon and believes that it is in the
best interest of Callon and its stockholders for such key executives to be in a
position, free from personal financial and employment considerations, to be able
to assess objectively and pursue aggressively the interests of Callon and its
stockholders in making these evaluations and carrying on such negotiations; and

         WHEREAS, the Board of Directors of Callon (the "BOARD") believes it is
essential to provide the Executive with compensation arrangements upon a Change
of Control which provide the Executive with individual financial security and
which are competitive with those of other corporations, and in order to
accomplish these objectives, the Board has caused Callon to enter into this
Agreement.

         NOW, THEREFORE, in consideration of the mutual premises and conditions
contained herein, the parties hereto agree as follows:

         1. TERM. This Agreement shall terminate, except to the extent that any
obligation of Callon hereunder remains unpaid as of such time, upon the earliest
of:

                           (i) January 1, 2005; provided, however, that,
         commencing on January 1, 2005 and on each anniversary date thereafter
         (each such date, an "ANNIVERSARY DATE"), the expiration date under this
         clause (i) shall automatically be extended for one additional year
         unless, immediately prior to such Anniversary Date, either party shall

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         have given written notice that it does not wish to extend this
         Agreement, but in no event shall the expiration date under this clause
         be earlier than the second anniversary of the effective date of a
         Change of Control;

                           (ii) the termination of the Executive's employment
         with Callon based on death, Disability (as defined in Section 3.1
         hereof) or Cause (as defined in Section 3.2 hereof); and

                           (iii) the voluntary resignation of the Executive for
         any reason other than Good Reason (as defined in Section 3.3).

         2. CHANGE OF CONTROL. Except as provided herein, no benefits shall be
payable hereunder unless there shall have been a Change of Control of Callon as
defined below, and Executive's employment by Callon shall thereafter have been
terminated within two (2) years of the date of such Change of Control in
accordance with Section 3. For purposes hereof, a "CHANGE OF CONTROL" or "CHANGE
OF CONTROL OF CALLON" shall mean any one of the following: (i) any person or
group of persons acting in concert (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) shall have become the beneficial owner of more
than 50% of the outstanding common stock of Callon; (ii) the stockholders of
Callon shall cause a change in a majority of the members of the Board within a
twelve-month period, provided, however, that the election of a newly-elected
director shall not be deemed to be a change in the membership of the Board if
the nomination for election by Callon's stockholders of such new director was
approved by the vote of two-thirds of the directors then still in office who
were directors at the beginning of such twelve-month period; or (iii) Callon or
its stockholders shall enter into an agreement to dispose of all or
substantially all of the assets or outstanding capital stock of Callon in any
manner (including, but not limited to, by means of sale, merger, reorganization
or liquidation). A Change of Control will not result from the issuance of common
stock or other securities of Callon to creditors of Callon in connection with
the restructuring of Callon's indebtedness, or from transactions entered into
pursuant to or during the pendency of a voluntary or involuntary case or
proceeding by or against Callon under the Federal Bankruptcy Code or any
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, if such transactions are related to such case or proceeding, or
from the appointment at any time of a custodian, receiver, liquidator, assignee,
trustee or sequestrator of Callon.

         Notwithstanding the foregoing provisions of this Section 2, if the
Executive's employment with Callon is terminated in accordance with the
provisions of Section 3 prior to the date on which a Change of Control occurs,
and it is reasonably demonstrated that such termination (i) was at the request
of a third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with a Change of Control, then for
all purposes hereof, such termination shall be deemed to have occurred following
a Change of Control.

         3. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE OF CONTROL. If any of the
events described in Section 2 constituting a Change of Control of Callon shall
have occurred, Executive shall be entitled to the benefits provided in Section
5, and upon the subsequent termination of his employment the benefits provided
in Section 4, provided

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that such termination occurs within two (2) years of a Change of Control of
Callon (unless such termination is on account of Executive's death, in which
case such termination must occur within six (6) months of a Change of Control of
Callon), unless such termination is (a) because of his "DISABILITY" (as defined
in Section 3.1), (b) by Callon for "Cause" (as defined in Section 3.2), or (c)
by Executive other than for "GOOD REASON" (as defined in Section 3.3).

                  3.1 Disability. If, upon the disability of Executive, which,
         for purposes of this Agreement shall be the physical or mental
         inability of Executive 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 that Executive, upon the advice of a qualified physician,
         will be unable to carry out the normal and usual duties of his
         employment on a full-time basis for the following continuous period of
         six (6) months, and within thirty (30) days after written Notice of
         Termination (as hereinafter defined) is given, Executive shall not have
         returned to the full time performance of his duties, Callon may
         terminate Executive's employment for "DISABILITY."

                  3.2 Cause. For the purposes hereof, Callon shall have "CAUSE"
         to terminate Executive's employment hereunder upon (i) willful
         misconduct or intentional and continual neglect of duties which in the
         good faith or reasonable judgment of the Board (excluding Executive)
         has materially adversely affected Callon; provided, however, that
         Executive shall have first received written notice from such Board
         advising of the acts or omissions that constitute the misconduct or
         neglect of duties, and such misconduct or neglect of duties continues
         after Executive shall have had a reasonable opportunity to correct the
         same; (ii) theft or conviction of a felony or any crime involving
         dishonesty or moral turpitude; provided, however, that Executive shall
         have first received written notice from the Board advising of the acts
         or omissions that constitute the failure or refusal to substantially
         perform duties, and such failure or refusal continues after Executive
         shall have had a reasonable opportunity to correct the same, (iii) the
         filing of a voluntary or involuntary case or proceeding by or against
         Callon under the Federal Bankruptcy Code or any applicable federal or
         state bankruptcy, insolvency, reorganization or other similar law, or
         the appointment of a custodian, receiver, liquidator, assignee, trustee
         or sequestrator of Callon, or (iv) the acquisition by Callon's
         creditors of all or substantially all of Callon's assets through
         foreclosure or other judicial means.

                  3.3 Good Reason. Executive may terminate his employment for
         Good Reason. For purposes of this Agreement, "GOOD REASON" shall mean:

                                    (a) following a Change of Control, the
                  failure of the Board of Directors to re-elect Executive as
                  Chief Financial Officer of Callon, or Executive's removal from
                  such office, or at any time during the term of employment,
                  Callon's failure to vest Executive with the powers and
                  authority of Chief Financial Officer of Callon, except in
                  connection with a termination for Cause as contemplated by
                  Section 3.2 of this Agreement;

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                                    (b) following a Change of Control, a
                  significant change in the scope, nature or status of
                  Executive's responsibilities or employment prerogatives;

                                    (c) following a Change of Control, an
                  attempted or actual reduction in Executive's base salary as in
                  effect on the date of a Change of Control or as the same may
                  be increased from time to time thereafter or a failure by
                  Callon to increase Executive's salary from time to time or to
                  pay Executive a bonus at a level comparable to the level of
                  salary increases or bonuses (based on the average of the three
                  preceding years) paid prior to a Change of Control, determined
                  by consistent application of the bonus formula utilized to
                  establish bonus payments during the preceding three years;

                                    (d) following a Change of Control,
                  Executive's relocation by Callon to any place other than a
                  location within the Natchez, Mississippi area, except for a
                  relocation consented to by Executive or a relocation to the
                  greater Houston, Texas area if all reasonable costs of
                  relocation, including moving expenses, costs of selling a
                  principal residence (and, if requested by Executive, the
                  purchase of such principal residence at its value as appraised
                  by a qualified appraiser selected by Executive) are paid or
                  provided for by Callon. If Executive is required to relocate
                  to an area with a higher cost of living than the cost of
                  living in the Natchez, Mississippi area as reflected by a
                  consumer price index or other measure of the cost of living
                  selected by Executive and approved by Callon, which approval
                  shall not be unreasonably withheld, Executive's salary in
                  effect at the time of the relocation shall be increased to an
                  amount to reflect such cost of living increase;

                                    (e) following a Change of Control, the
                  failure by Callon to continue in effect any compensation plan
                  in which Executive participates unless an equitable
                  arrangement (embodied in an ongoing substitute or alternative
                  plan) has been made with respect to such plan in connection
                  with a Change of Control, or the failure of Callon to continue
                  Executive's participation therein or the taking of any action
                  by Callon which would materially and adversely affect
                  Executive's participation in any such plan or reduce
                  Executive's benefits thereunder;

                                    (f) following a Change of Control, the
                  failure by Callon to continue to provide Executive with
                  benefits not less, in the aggregate, than those enjoyed under
                  any of Callon's pension, life insurance, medical, health and
                  accident, or disability plans in which Executive was
                  participating at the time of a Change of Control or the taking
                  of any action by Callon which would directly or indirectly
                  materially reduce any such benefits;

                                    (g) the failure of Callon to obtain a
                  satisfactory agreement from any successor or parent thereof to
                  assume and agree to perform this Agreement;

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                                    (h) any purported termination of Executive's
                  employment with Callon which is not effected pursuant to a
                  Notice of Termination satisfying the requirements of Section
                  3.4 hereof (and for purposes of this Agreement, no such
                  purported termination shall be effective); and

                                    (i) termination of employment by reason of
                  the Executive's death or Disability, at any time during the
                  six month period beginning on the 1st day after the effective
                  date of a Change of Control.

                  3.4 Notice of Termination. Any termination pursuant to the
         foregoing provisions of this Section (including termination due to
         Executive's death) shall be communicated by written Notice of
         Termination to the other party hereto. For purposes hereof, a "NOTICE
         OF TERMINATION" shall mean a notice which shall indicate the specific
         termination provision herein relied upon and shall set forth in
         reasonable detail the facts and circumstances claimed to provide a
         basis for termination of Executive's employment under the provision so
         indicated. In the event that Executive seeks to terminate his
         employment with Callon pursuant to Section 3.3, he must communicate his
         written Notice of Termination to Callon within sixty (60) days of being
         notified of such action or actions by Callon which constitute Good
         Reason for termination.

                  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); (ii) if Executive's employment is
         terminated pursuant to Section 3.3, the date specified in the Notice of
         Termination; and (iii) if Executive's employment is terminated for any
         other reason, the date on which a Notice of Termination is given.

         4. COMPENSATION UPON TERMINATION.

                  4.1 Termination Without Cause or for Good Reason. If
         Executive's employment is terminated (including termination due to
         Executive's death) other than pursuant to Sections 3.1 or 3.2 or if
         Executive shall terminate his employment for Good Reason, then, subject
         to Section 4.2, Executive shall be entitled, if such termination
         occurred within two (2) years of a Change of Control (or in the case of
         termination due to Executive's death, if such termination occurred
         within six (6) months of a Change of Control), to the following
         benefits:

                                    (a) Callon shall pay to the Executive in a
                  lump sum, in cash, on or before the fifth day following the
                  Date of Termination, an amount equal to three (3.0) times the
                  sum of (A) the Executive's annual base salary as in effect
                  immediately prior to the Change of Control or, if higher, in
                  effect immediately prior to the Date of Termination and (B)
                  the greater of (i) the average bonus (under all Callon bonus
                  plans for which the Executive is eligible) earned with respect
                  to the three most recently completed full fiscal years or (ii)
                  the target bonus (under all Callon bonus plans for which the
                  Executive is eligible) for the

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                  fiscal year in which the Change of Control occurs, based on a
                  forecast that has been approved by the Board of the results
                  for the fiscal year in which the Change of Control occurs.

                                    (b) Callon shall, at its expense, maintain
                  in full force and effect for Executive's continued benefit
                  until 36 months after the Date of Termination all life,
                  disability, medical, dental, accident and health insurance
                  coverage to which Executive was entitled immediately prior to
                  the Notice of Termination. In the event that Executive's
                  participation in any such coverage is barred under the general
                  terms and provisions of the plans and programs under which
                  such coverage is provided, or any such coverage is
                  discontinued or the benefits thereunder materially reduced,
                  Callon shall provide or arrange to provide Executive with
                  benefits substantially similar to those which Executive was
                  entitled to receive under such coverage immediately prior to
                  the Notice of Termination. At the end of the period of
                  coverage herein above provided for, Executive shall have the
                  option to have assigned to Executive at no cost and with no
                  apportionment of prepaid premiums, any assignable insurance
                  owned by Callon and relating specifically to Executive and
                  Executive shall be entitled to all health and similar benefits
                  that are or would have been made available to Executive under
                  law.

         4.2 Limitation on Payments.

                                    (a) Whether or not the Executive becomes
                  entitled to the payments under Section 4.1 hereof, if any of
                  the payments or benefits received or to be received by the
                  Executive in connection with a Change of Control or the
                  Executive's termination of employment (whether pursuant to the
                  terms of this Agreement or any other plan, arrangement or
                  agreement with Callon, any person whose actions result in a
                  Change of Control or any person affiliated with Callon or such
                  person) (such payments or benefits, excluding the Gross-Up
                  Payment, being hereinafter referred to as the "TOTAL
                  PAYMENTS") would be subject to the excise tax imposed under
                  Section 4999 of the Code (the "EXCISE TAX"), Callon shall pay
                  to the Executive an additional amount (the "GROSS-UP PAYMENT")
                  such that the net amount retained by the Executive, after
                  deduction of any Excise Tax on the Total Payments and any
                  federal, state and local income and employment taxes and
                  Excise Tax upon the Gross-Up Payment, shall be equal to the
                  Total Payments. For purposes of determining the amount of the
                  Gross-Up Payment, the Executive shall be deemed to pay federal
                  income taxes at the highest marginal rate of federal income
                  taxation in the calendar year in which the Gross-Up Payment is
                  to be made and state and local income taxes at the highest
                  marginal rates of taxation in the state and locality of the
                  residence of the Executive on the Date of Termination, net of
                  the maximum reduction in federal income taxes which could be
                  obtained from deduction of such state and local taxes.

                                    (b) All determinations required to be made
                  under this Section 4.2, including whether a Gross-Up Payment
                  is required and the amount of

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                  such Gross-Up Payment, shall be made by the independent
                  accounting firm which served as Callon's auditor immediately
                  prior to the Change of Control (the "ACCOUNTING FIRM"), which
                  shall provide detailed supporting calculations both to Callon
                  and the Executive within fifteen (15) business days after the
                  Date of Termination, if applicable, or such earlier time as is
                  requested by Callon. In the event that the Accounting Firm is
                  also serving as accountant or auditor for the individual,
                  entity, or group effecting the Change of Control, the
                  Executive may appoint another nationally recognized public
                  accounting firm to make the determinations required hereunder
                  (which accounting firm shall then be referred to as the
                  Accounting Firm hereunder), by giving written notice of such
                  appointment to Callon within five (5) business days after the
                  Date of Termination. All fees and expenses of the Accounting
                  Firm shall be borne solely by Callon and it shall be Callon's
                  obligation to cause the Accounting Firm to take any actions
                  required hereby.

                  If the Accounting Firm determines that no Excise Tax is
                  payable by the Executive, it shall furnish the 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 the 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 the
                  Executive.

                                    (c) The Executive shall notify Callon in
                  writing of any claim by the Internal Revenue Service that, if
                  successful, would require the payment by Callon of the
                  Gross-Up Payment. Such notification shall be given as soon as
                  practicable but no later than ten (10) business days after the
                  Executive receives notice of such claim and shall apprise
                  Callon of the nature of such claim and the date on which such
                  claim is requested to be paid. The Executive shall not pay
                  such claim prior to the expiration of the thirty (30) day
                  period following the date on which he or she gives such notice
                  to Callon (or such shorter period ending on the date that any
                  payment of taxes with respect to such claim is due). If Callon
                  notifies the Executive in writing prior to the expiration of
                  such period that it desires to contest such claim, the
                  Executive shall:

                                    (i)      give Callon any information
                                             reasonably requested by Callon
                                             relating to such claim,

                                    (ii)    take such action in connection with
                                            contesting such claim as Callon
                                            shall reasonably request in writing
                                            from time to time, including,
                                            without limitation, accepting legal

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                                            representation with respect to such
                                            claim by an attorney reasonably
                                            selected by Callon,

                                    (iii)    cooperate with Callon in good faith
                                             in order to effectively contest
                                             such claim, and

                                    (iv)     permit Callon to participate in any
                                             proceedings relating to such claim,
                                             provided, however, that Callon
                                             shall bear and pay directly all
                                             costs and expenses (including
                                             additional interest and penalties)
                                             incurred in connection with such
                                             contest and shall indemnify and
                                             hold the Executive harmless, on an
                                             after-tax basis, for any Excise Tax
                                             or income tax, including interest
                                             and penalties with respect thereto,
                                             imposed as a result of such
                                             representation and payment of costs
                                             and expenses. Without limitation on
                                             the foregoing provisions of this
                                             Section 4.2(c), Callon shall
                                             control all proceedings taken in
                                             connection with such contest and,
                                             at its sole option, may pursue or
                                             forgo any and all administrative
                                             appeals, proceedings, hearings and
                                             conferences with the taxing
                                             authority in respect of such claim
                                             and may, at its sole option, either
                                             direct the Executive to pay the tax
                                             claimed and sue for a refund, or
                                             contest the claim in any
                                             permissible manner, and the
                                             Executive agrees to prosecute such
                                             contest to a determination before
                                             any administrative tribunal, in a
                                             court of initial jurisdiction and
                                             in one or more appellate courts, as
                                             Callon shall determine; provided,
                                             however, that if Callon directs the
                                             Executive to pay such claim and sue
                                             for a refund, Callon shall advance
                                             the amount of such payment to the
                                             Executive, on an interest-free
                                             basis and shall indemnify and hold
                                             the Executive harmless, on an
                                             after-tax basis, from any Excise
                                             Tax or income tax, including
                                             interest or penalties with respect
                                             thereto, imposed with respect to
                                             such advance or with respect to any
                                             imputed income with respect to such
                                             advance; and further provided that
                                             any extension of the statute of
                                             limitations relating to payment of
                                             taxes for the taxable year of the
                                             Executive with respect to which
                                             such contested amount is claimed to
                                             be due is limited solely to such
                                             contested amount. Furthermore,
                                             Callon's control of the contest
                                             shall be limited to issues with
                                             respect to which a Gross-Up Payment
                                             would be payable hereunder and the
                                             Executive shall be entitled to
                                             settle or contest, as the case may
                                             be, any other issue raised by the
                                             Internal Revenue Service or any
                                             other taxing authority.

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                                    (d) If, after the receipt by the Executive
                  of an amount advanced by Callon pursuant to Section 4.2(c),
                  the Executive becomes entitled to receive any refund with
                  respect to such claim, the Executive shall (subject to
                  Callon's complying with the requirements of Section 4.2(c))
                  promptly pay to Callon the amount of such refund (together
                  with any interest paid or credited thereon after taxes
                  applicable thereto). If, after the receipt by the Executive of
                  an amount advanced by Callon pursuant to Section 4.2(c), a
                  determination is made that the Executive shall not be entitled
                  to any refund with respect to such claim and Callon does not
                  notify the Executive in writing of its intent to contest such
                  denial of refund prior to the expiration of thirty days after
                  such determination, then such advance shall be forgiven and
                  shall not be required to be repaid and the amount of such
                  advance shall offset, to the extent thereof, the amount of
                  Gross-Up Payment required to be paid.

                  4.3 No Mitigation or Set-off of Amounts Payable Hereunder.
         Executive shall not be required to mitigate the amount of any payment
         provided for in this Section 4 by seeking other employment or
         otherwise, nor shall the amount of any payment provided for in this
         Section 4 be reduced by any compensation earned by Executive as the
         result of employment by another employer after the Date of Termination,
         or otherwise. Callon's obligations hereunder also shall not be affected
         by any set-off, counterclaim, recoupment, defense or other claim, right
         or action which Callon may have against Executive.

         5. STOCK OPTION AND OTHER PLANS.

                  5.1 Acceleration of Benefits. If a Change of Control occurs:

                                    (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 100% vested in
                  such stock rights held by or for the benefit of Executive. 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. 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.

                                    (b) Notwithstanding any provision to the
                  contrary in any stock option agreement that may be outstanding
                  between Executive and Callon,

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                  Executive's right to exercise any previously unexercised
                  options under any such stock option agreement shall not
                  terminate until the latest date on which the option granted
                  under such agreement would expire under the terms of such
                  agreement but for Executive's termination of employment. In
                  the event that, and to the extent that, Callon is unable to
                  provide for the extension of the expiration date of such
                  options 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
                  value of such extension Callon is unable to provide; such
                  values of such accelerated vesting and exercisability 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.

         6. SUCCESSORS; BINDING AGREEMENT.

                  6.1 Successors of Callon. Callon will require any successor
         (whether direct or indirect, by purchase, merger, consolidation or
         otherwise) to all or substantially all of the business and/or assets of
         Callon, by agreement in form and substance satisfactory to Executive,
         expressly to assume and agree to perform this Agreement in the same
         manner and to the same extent that Callon would be required to perform
         it if no such succession had taken place. Failure of Callon to obtain
         such agreement prior to the effectiveness of any such succession shall
         be a breach hereof and shall entitle Executive to compensation from
         Callon in the same amount and on the same terms as Executive would be
         entitled hereunder if Executive terminated his employment for Good
         Reason, except that for purposes of implementing the foregoing, the
         date on which any such succession becomes effective shall be deemed the
         Date of Termination. As used herein, "CALLON PETROLEUM COMPANY" shall
         mean Callon as hereinbefore defined and any successor to its business
         and/or assets as aforesaid which executes and delivers the agreement
         provided for in this Section 6 or which otherwise becomes bound by all
         the terms and provisions hereof by operation of law.

                  6.2 Executive's Heirs, etc. This Agreement shall inure to the
         benefit of and be enforceable by Executive's personal or legal
         representatives, executors, administrators, successors, heirs,
         distributees, devisees and legatees. If Executive should die while any
         amounts would still be payable to him hereunder as if he had continued
         to live, all such amounts, unless otherwise provided herein, shall be
         paid in accordance with the terms hereof to his designee or, if there
         be no such designee, to his estate.

         7. Notice. For the purposes hereof, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to Callon
at its principal place of business and to Executive at his address as shown on
the records of Callon, provided that all notices to Callon shall be directed to
the attention of the Chief Executive Officer of Callon with a copy to the
Secretary of Callon, or to such other address provided in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.

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         8. Miscellaneous. No provisions hereof may be amended, modified, waived
or discharged unless such amendment, waiver, modification or discharge is agreed
to in writing and signed by Executive and such officer as may be specifically
designated by the Board (which shall in any event include Callon's Chief
Executive Officer). No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision
hereof to be performed by such other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly herein.

         9. Validity. The invalidity or unenforceability of any provisions
hereof shall not affect the validity or enforceability of any other provision
hereof, which shall remain in full force and effect.

         10. Legal Expenses. Callon agrees to pay, upon written demand therefor
by Executive, all legal fees and expenses which Executive may reasonably incur
as a result of any dispute or contest (regardless of the outcome thereof) by or
with Callon or others regarding the validity or enforceability of, or liability
under, any provision hereof (including as a result of any contest about the
amount of any payment pursuant to Section 4.2), plus in each case interest at
the "applicable Federal rate" (as defined in Section 1274(d) of the Code). In
any such action brought by Executive for damages or to enforce any provisions
hereof, he shall be entitled to seek both legal and equitable relief and
remedies, including, without limitation, specific performance of Callon's
obligations hereunder, in his sole discretion.

         11. Continuation of Salary During Dispute. In the event of any dispute
or contest by or with Callon or others regarding the validity or enforceability
of, or liability under, any provision hereof (including as a result of any
contest about the amount of any payments pursuant to Section 4), and upon
written demand by the Executive, Callon shall continue to pay the Executive his
or her base salary and maintain all life, disability, medical, dental, accident
and health insurance coverage in effect immediately prior to the date of such
dispute. Said periodic payments shall be made in accordance with Callon's normal
payroll practices. Payments shall continue until final resolution of such
dispute or contest either by an agreement between the Executive and Callon or
final order of a court with proper jurisdiction. In the event that Callon
substantially prevails in such dispute, the Executive shall be obligated to
repay to Callon all amounts he or she has received for base salary under this
Section 11 (after taxes applicable thereto) plus interest at the "applicable
Federal rate" (as defined in Section 1274(d) of the Code).

         12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE LAWS OF THE STATE OF MISSISSIPPI.

                                       11
<PAGE>

         14. Captions and Gender. The use of captions and section headings
herein is for purposes of convenience only and shall not effect the
interpretation or substance of any provisions contained herein. Similarly, the
use of the masculine gender with respect to pronouns herein is for purposes of
convenience and includes either sex who may be a signatory.

                            [SIGNATURE PAGE FOLLOWS]

                                       12
<PAGE>

IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and year first above written.

                                         CALLON PETROLEUM COMPANY

                                         By:
                                            -----------------------------------
                                                  Fred L. Callon

                                         Title:   Chief Executive Officer
                                               --------------------------------

                                         EXECUTIVE

                                         --------------------------------------
                                                  John S. Weatherly
                                                  Chief Financial Officer

                                       13<PAGE>
                                                                   EXHIBIT 10.15

                        SEVERANCE COMPENSATION AGREEMENT

         THIS AGREEMENT is made and entered into as of January 1, 2002, by and
between Callon Petroleum Company, a Delaware corporation (together with its
subsidiaries, "CALLON") and Fred L. Callon ("EXECUTIVE").

                                   WITNESSETH:

         WHEREAS, Callon recognizes that the current business environment makes
it difficult to attract and retain highly qualified executives unless a certain
degree of security can be offered to such individuals against organizational and
personnel changes which frequently follow a Change of Control (as defined below)
of a corporation; and

         WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and their families; and

         WHEREAS, Callon desires to assure fair treatment of its key executives
in the event of a Change of Control and to allow them to make critical career
decisions without undue time pressure and financial uncertainty, thereby
increasing their willingness to remain with Callon notwithstanding the outcome
of a possible Change of Control transaction; and

         WHEREAS, Callon recognizes that its key executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in a Change of Control of Callon and believes that it is in the
best interest of Callon and its stockholders for such key executives to be in a
position, free from personal financial and employment considerations, to be able
to assess objectively and pursue aggressively the interests of Callon and its
stockholders in making these evaluations and carrying on such negotiations; and

         WHEREAS, the Board of Directors of Callon (the "BOARD") believes it is
essential to provide the Executive with compensation arrangements upon a Change
of Control which provide the Executive with individual financial security and
which are competitive with those of other corporations, and in order to
accomplish these objectives, the Board has caused Callon to enter into this
Agreement.

         NOW, THEREFORE, in consideration of the mutual premises and conditions
contained herein, the parties hereto agree as follows:

         1. TERM. This Agreement shall terminate, except to the extent that any
obligation of Callon hereunder remains unpaid as of such time, upon the earliest
of:

                           (i) January 1, 2005; provided, however, that,
         commencing on January 1, 2005 and on each anniversary date thereafter
         (each such date, an "ANNIVERSARY DATE"), the expiration date under this
         clause (i) shall automatically be extended for one additional year
         unless, immediately prior to such Anniversary Date, either party shall

<PAGE>

         have given written notice that it does not wish to extend this
         Agreement, but in no event shall the expiration date under this clause
         be earlier than the second anniversary of the effective date of a
         Change of Control;

                           (ii) the termination of the Executive's employment
         with Callon based on death, Disability (as defined in Section 3.1
         hereof) or Cause (as defined in Section 3.2 hereof); and

                           (iii) the voluntary resignation of the Executive for
         any reason other than Good Reason (as defined in Section 3.3).

         2. CHANGE OF CONTROL. Except as provided herein, no benefits shall be
payable hereunder unless there shall have been a Change of Control of Callon as
defined below, and Executive's employment by Callon shall thereafter have been
terminated within two (2) years of the date of such Change of Control in
accordance with Section 3. For purposes hereof, a "CHANGE OF CONTROL" or "CHANGE
OF CONTROL OF CALLON" shall mean any one of the following: (i) any person or
group of persons acting in concert (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934) shall have become the beneficial owner of more
than 50% of the outstanding common stock of Callon; (ii) the stockholders of
Callon shall cause a change in a majority of the members of the Board within a
twelve-month period, provided, however, that the election of a newly-elected
director shall not be deemed to be a change in the membership of the Board if
the nomination for election by Callon's stockholders of such new director was
approved by the vote of two-thirds of the directors then still in office who
were directors at the beginning of such twelve-month period; or (iii) Callon or
its stockholders shall enter into an agreement to dispose of all or
substantially all of the assets or outstanding capital stock of Callon in any
manner (including, but not limited to, by means of sale, merger, reorganization
or liquidation). A Change of Control will not result from the issuance of common
stock or other securities of Callon to creditors of Callon in connection with
the restructuring of Callon's indebtedness, or from transactions entered into
pursuant to or during the pendency of a voluntary or involuntary case or
proceeding by or against Callon under the Federal Bankruptcy Code or any
applicable federal or state bankruptcy, insolvency, reorganization or other
similar law, if such transactions are related to such case or proceeding, or
from the appointment at any time of a custodian, receiver, liquidator, assignee,
trustee or sequestrator of Callon.

         Notwithstanding the foregoing provisions of this Section 2, if the
Executive's employment with Callon is terminated in accordance with the
provisions of Section 3 prior to the date on which a Change of Control occurs,
and it is reasonably demonstrated that such termination (i) was at the request
of a third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with a Change of Control, then for
all purposes hereof, such termination shall be deemed to have occurred following
a Change of Control.

         3. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE OF CONTROL. If any of the
events described in Section 2 constituting a Change of Control of Callon shall
have occurred, Executive shall be entitled to the benefits provided in Section
5, and upon the subsequent termination of his employment the benefits provided
in Section 4, provided

                                       2
<PAGE>

that such termination occurs within two (2) years of a Change of Control of
Callon (unless such termination is on account of Executive's death, in which
case such termination must occur within six (6) months of a Change of Control of
Callon), unless such termination is (a) because of his "DISABILITY" (as defined
in Section 3.1), (b) by Callon for "Cause" (as defined in Section 3.2), or (c)
by Executive other than for "GOOD REASON" (as defined in Section 3.3).

                  3.1 Disability. If, upon the disability of Executive, which,
         for purposes of this Agreement shall be the physical or mental
         inability of Executive 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 that Executive, upon the advice of a qualified physician,
         will be unable to carry out the normal and usual duties of his
         employment on a full-time basis for the following continuous period of
         six (6) months, and within thirty (30) days after written Notice of
         Termination (as hereinafter defined) is given, Executive shall not have
         returned to the full time performance of his duties, Callon may
         terminate Executive's employment for "DISABILITY."

                  3.2 Cause. For the purposes hereof, Callon shall have "CAUSE"
         to terminate Executive's employment hereunder upon (i) willful
         misconduct or intentional and continual neglect of duties which in the
         good faith or reasonable judgment of the Board (excluding Executive)
         has materially adversely affected Callon; provided, however, that
         Executive shall have first received written notice from such Board
         advising of the acts or omissions that constitute the misconduct or
         neglect of duties, and such misconduct or neglect of duties continues
         after Executive shall have had a reasonable opportunity to correct the
         same; (ii) theft or conviction of a felony or any crime involving
         dishonesty or moral turpitude; provided, however, that Executive shall
         have first received written notice from the Board advising of the acts
         or omissions that constitute the failure or refusal to substantially
         perform duties, and such failure or refusal continues after Executive
         shall have had a reasonable opportunity to correct the same, (iii) the
         filing of a voluntary or involuntary case or proceeding by or against
         Callon under the Federal Bankruptcy Code or any applicable federal or
         state bankruptcy, insolvency, reorganization or other similar law, or
         the appointment of a custodian, receiver, liquidator, assignee, trustee
         or sequestrator of Callon, or (iv) the acquisition by Callon's
         creditors of all or substantially all of Callon's assets through
         foreclosure or other judicial means.

                  3.3 Good Reason. Executive may terminate his employment for
         Good Reason. For purposes of this Agreement, "GOOD REASON" shall mean:

                                    (a) following a Change of Control, the
                  failure of the Board of Directors to re-elect Executive as
                  Chief Executive Officer of Callon, or Executive's removal from
                  such office, or at any time during the term of employment,
                  Callon's failure to vest Executive with the powers and
                  authority of Chief Executive Officer of Callon, except in
                  connection with a termination for Cause as contemplated by
                  Section 3.2 of this Agreement;

                                       3
<PAGE>

                                    (b) following a Change of Control, a
                  significant change in the scope, nature or status of
                  Executive's responsibilities or employment prerogatives;

                                    (c) following a Change of Control, an
                  attempted or actual reduction in Executive's base salary as in
                  effect on the date of a Change of Control or as the same may
                  be increased from time to time thereafter or a failure by
                  Callon to increase Executive's salary from time to time or to
                  pay Executive a bonus at a level comparable to the level of
                  salary increases or bonuses (based on the average of the three
                  preceding years) paid prior to a Change of Control, determined
                  by consistent application of the bonus formula utilized to
                  establish bonus payments during the preceding three years;

                                    (d) following a Change of Control,
                  Executive's relocation by Callon to any place other than a
                  location within the Natchez, Mississippi area, except for a
                  relocation consented to by Executive or a relocation to the
                  greater Houston, Texas area if all reasonable costs of
                  relocation, including moving expenses, costs of selling a
                  principal residence (and, if requested by Executive, the
                  purchase of such principal residence at its value as appraised
                  by a qualified appraiser selected by Executive) are paid or
                  provided for by Callon. If Executive is required to relocate
                  to an area with a higher cost of living than the cost of
                  living in the Natchez, Mississippi area as reflected by a
                  consumer price index or other measure of the cost of living
                  selected by Executive and approved by Callon, which approval
                  shall not be unreasonably withheld, Executive's salary in
                  effect at the time of the relocation shall be increased to an
                  amount to reflect such cost of living increase;

                                    (e) following a Change of Control, the
                  failure by Callon to continue in effect any compensation plan
                  in which Executive participates unless an equitable
                  arrangement (embodied in an ongoing substitute or alternative
                  plan) has been made with respect to such plan in connection
                  with a Change of Control, or the failure of Callon to continue
                  Executive's participation therein or the taking of any action
                  by Callon which would materially and adversely affect
                  Executive's participation in any such plan or reduce
                  Executive's benefits thereunder;

                                    (f) following a Change of Control, the
                  failure by Callon to continue to provide Executive with
                  benefits not less, in the aggregate, than those enjoyed under
                  any of Callon's pension, life insurance, medical, health and
                  accident, or disability plans in which Executive was
                  participating at the time of a Change of Control or the taking
                  of any action by Callon which would directly or indirectly
                  materially reduce any such benefits;

                                    (g) the failure of Callon to obtain a
                  satisfactory agreement from any successor or parent thereof to
                  assume and agree to perform this Agreement;

                                       4
<PAGE>

                                    (h) any purported termination of Executive's
                  employment with Callon which is not effected pursuant to a
                  Notice of Termination satisfying the requirements of Section
                  3.4 hereof (and for purposes of this Agreement, no such
                  purported termination shall be effective); and

                                    (i) termination of employment by reason of
                  the Executive's death or Disability, at any time during the
                  six month period beginning on the 1st day after the effective
                  date of a Change of Control.

                  3.4 Notice of Termination. Any termination pursuant to the
         foregoing provisions of this Section (including termination due to
         Executive's death) shall be communicated by written Notice of
         Termination to the other party hereto. For purposes hereof, a "NOTICE
         OF TERMINATION" shall mean a notice which shall indicate the specific
         termination provision herein relied upon and shall set forth in
         reasonable detail the facts and circumstances claimed to provide a
         basis for termination of Executive's employment under the provision so
         indicated. In the event that Executive seeks to terminate his
         employment with Callon pursuant to Section 3.3, he must communicate his
         written Notice of Termination to Callon within sixty (60) days of being
         notified of such action or actions by Callon which constitute Good
         Reason for termination.

                  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); (ii) if Executive's employment is
         terminated pursuant to Section 3.3, the date specified in the Notice of
         Termination; and (iii) if Executive's employment is terminated for any
         other reason, the date on which a Notice of Termination is given.

         4. COMPENSATION UPON TERMINATION.

                  4.1 Termination Without Cause or for Good Reason. If
         Executive's employment is terminated (including termination due to
         Executive's death) other than pursuant to Sections 3.1 or 3.2 or if
         Executive shall terminate his employment for Good Reason, then, subject
         to Section 4.2, Executive shall be entitled, if such termination
         occurred within two (2) years of a Change of Control (or in the case of
         termination due to Executive's death, if such termination occurred
         within six (6) months of a Change of Control), to the following
         benefits:

                                    (a) Callon shall pay to the Executive in a
                  lump sum, in cash, on or before the fifth day following the
                  Date of Termination, an amount equal to three (3.0) times the
                  sum of (A) the Executive's annual base salary as in effect
                  immediately prior to the Change of Control or, if higher, in
                  effect immediately prior to the Date of Termination and (B)
                  the greater of (i) the average bonus (under all Callon bonus
                  plans for which the Executive is eligible) earned with respect
                  to the three most recently completed full fiscal years or (ii)
                  the target bonus (under all Callon bonus plans for which the
                  Executive is eligible) for the

                                       5
<PAGE>

                  fiscal year in which the Change of Control occurs, based on a
                  forecast that has been approved by the Board of the results
                  for the fiscal year in which the Change of Control occurs.

                                    (b) Callon shall, at its expense, maintain
                  in full force and effect for Executive's continued benefit
                  until 36 months after the Date of Termination all life,
                  disability, medical, dental, accident and health insurance
                  coverage to which Executive was entitled immediately prior to
                  the Notice of Termination. In the event that Executive's
                  participation in any such coverage is barred under the general
                  terms and provisions of the plans and programs under which
                  such coverage is provided, or any such coverage is
                  discontinued or the benefits thereunder materially reduced,
                  Callon shall provide or arrange to provide Executive with
                  benefits substantially similar to those which Executive was
                  entitled to receive under such coverage immediately prior to
                  the Notice of Termination. At the end of the period of
                  coverage herein above provided for, Executive shall have the
                  option to have assigned to Executive at no cost and with no
                  apportionment of prepaid premiums, any assignable insurance
                  owned by Callon and relating specifically to Executive and
                  Executive shall be entitled to all health and similar benefits
                  that are or would have been made available to Executive under
                  law.

         4.2 Limitation on Payments.

                                    (a) Whether or not the Executive becomes
                  entitled to the payments under Section 4.1 hereof, if any of
                  the payments or benefits received or to be received by the
                  Executive in connection with a Change of Control or the
                  Executive's termination of employment (whether pursuant to the
                  terms of this Agreement or any other plan, arrangement or
                  agreement with Callon, any person whose actions result in a
                  Change of Control or any person affiliated with Callon or such
                  person) (such payments or benefits, excluding the Gross-Up
                  Payment, being hereinafter referred to as the "TOTAL
                  PAYMENTS") would be subject to the excise tax imposed under
                  Section 4999 of the Code (the "EXCISE TAX"), Callon shall pay
                  to the Executive an additional amount (the "GROSS-UP PAYMENT")
                  such that the net amount retained by the Executive, after
                  deduction of any Excise Tax on the Total Payments and any
                  federal, state and local income and employment taxes and
                  Excise Tax upon the Gross-Up Payment, shall be equal to the
                  Total Payments. For purposes of determining the amount of the
                  Gross-Up Payment, the Executive shall be deemed to pay federal
                  income taxes at the highest marginal rate of federal income
                  taxation in the calendar year in which the Gross-Up Payment is
                  to be made and state and local income taxes at the highest
                  marginal rates of taxation in the state and locality of the
                  residence of the Executive on the Date of Termination, net of
                  the maximum reduction in federal income taxes which could be
                  obtained from deduction of such state and local taxes.

                                    (b) All determinations required to be made
                  under this Section 4.2, including whether a Gross-Up Payment
                  is required and the amount of

                                       6
<PAGE>

                  such Gross-Up Payment, shall be made by the independent
                  accounting firm which served as Callon's auditor immediately
                  prior to the Change of Control (the "ACCOUNTING FIRM"), which
                  shall provide detailed supporting calculations both to Callon
                  and the Executive within fifteen (15) business days after the
                  Date of Termination, if applicable, or such earlier time as is
                  requested by Callon. In the event that the Accounting Firm is
                  also serving as accountant or auditor for the individual,
                  entity, or group effecting the Change of Control, the
                  Executive may appoint another nationally recognized public
                  accounting firm to make the determinations required hereunder
                  (which accounting firm shall then be referred to as the
                  Accounting Firm hereunder), by giving written notice of such
                  appointment to Callon within five (5) business days after the
                  Date of Termination. All fees and expenses of the Accounting
                  Firm shall be borne solely by Callon and it shall be Callon's
                  obligation to cause the Accounting Firm to take any actions
                  required hereby.

                  If the Accounting Firm determines that no Excise Tax is
                  payable by the Executive, it shall furnish the 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 the 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 the
                  Executive.

                                    (c) The Executive shall notify Callon in
                  writing of any claim by the Internal Revenue Service that, if
                  successful, would require the payment by Callon of the
                  Gross-Up Payment. Such notification shall be given as soon as
                  practicable but no later than ten (10) business days after the
                  Executive receives notice of such claim and shall apprise
                  Callon of the nature of such claim and the date on which such
                  claim is requested to be paid. The Executive shall not pay
                  such claim prior to the expiration of the thirty (30) day
                  period following the date on which he or she gives such notice
                  to Callon (or such shorter period ending on the date that any
                  payment of taxes with respect to such claim is due). If Callon
                  notifies the Executive in writing prior to the expiration of
                  such period that it desires to contest such claim, the
                  Executive shall:

                                    (i)      give Callon any information
                                             reasonably requested by Callon
                                             relating to such claim,

                                    (ii)    take such action in connection with
                                            contesting such claim as Callon
                                            shall reasonably request in writing
                                            from time to time, including,
                                            without limitation, accepting legal

                                       7
<PAGE>

                                            representation with respect to such
                                            claim by an attorney reasonably
                                            selected by Callon,

                                    (iii)    cooperate with Callon in good faith
                                             in order to effectively contest
                                             such claim, and

                                    (iv)     permit Callon to participate in any
                                             proceedings relating to such claim,
                                             provided, however, that Callon
                                             shall bear and pay directly all
                                             costs and expenses (including
                                             additional interest and penalties)
                                             incurred in connection with such
                                             contest and shall indemnify and
                                             hold the Executive harmless, on an
                                             after-tax basis, for any Excise Tax
                                             or income tax, including interest
                                             and penalties with respect thereto,
                                             imposed as a result of such
                                             representation and payment of costs
                                             and expenses. Without limitation on
                                             the foregoing provisions of this
                                             Section 4.2(c), Callon shall
                                             control all proceedings taken in
                                             connection with such contest and,
                                             at its sole option, may pursue or
                                             forgo any and all administrative
                                             appeals, proceedings, hearings and
                                             conferences with the taxing
                                             authority in respect of such claim
                                             and may, at its sole option, either
                                             direct the Executive to pay the tax
                                             claimed and sue for a refund, or
                                             contest the claim in any
                                             permissible manner, and the
                                             Executive agrees to prosecute such
                                             contest to a determination before
                                             any administrative tribunal, in a
                                             court of initial jurisdiction and
                                             in one or more appellate courts, as
                                             Callon shall determine; provided,
                                             however, that if Callon directs the
                                             Executive to pay such claim and sue
                                             for a refund, Callon shall advance
                                             the amount of such payment to the
                                             Executive, on an interest-free
                                             basis and shall indemnify and hold
                                             the Executive harmless, on an
                                             after-tax basis, from any Excise
                                             Tax or income tax, including
                                             interest or penalties with respect
                                             thereto, imposed with respect to
                                             such advance or with respect to any
                                             imputed income with respect to such
                                             advance; and further provided that
                                             any extension of the statute of
                                             limitations relating to payment of
                                             taxes for the taxable year of the
                                             Executive with respect to which
                                             such contested amount is claimed to
                                             be due is limited solely to such
                                             contested amount. Furthermore,
                                             Callon's control of the contest
                                             shall be limited to issues with
                                             respect to which a Gross-Up Payment
                                             would be payable hereunder and the
                                             Executive shall be entitled to
                                             settle or contest, as the case may
                                             be, any other issue raised by the
                                             Internal Revenue Service or any
                                             other taxing authority.

                                       8
<PAGE>

                                    (d) If, after the receipt by the Executive
                  of an amount advanced by Callon pursuant to Section 4.2(c),
                  the Executive becomes entitled to receive any refund with
                  respect to such claim, the Executive shall (subject to
                  Callon's complying with the requirements of Section 4.2(c))
                  promptly pay to Callon the amount of such refund (together
                  with any interest paid or credited thereon after taxes
                  applicable thereto). If, after the receipt by the Executive of
                  an amount advanced by Callon pursuant to Section 4.2(c), a
                  determination is made that the Executive shall not be entitled
                  to any refund with respect to such claim and Callon does not
                  notify the Executive in writing of its intent to contest such
                  denial of refund prior to the expiration of thirty days after
                  such determination, then such advance shall be forgiven and
                  shall not be required to be repaid and the amount of such
                  advance shall offset, to the extent thereof, the amount of
                  Gross-Up Payment required to be paid.

                  4.3 No Mitigation or Set-off of Amounts Payable Hereunder.
         Executive shall not be required to mitigate the amount of any payment
         provided for in this Section 4 by seeking other employment or
         otherwise, nor shall the amount of any payment provided for in this
         Section 4 be reduced by any compensation earned by Executive as the
         result of employment by another employer after the Date of Termination,
         or otherwise. Callon's obligations hereunder also shall not be affected
         by any set-off, counterclaim, recoupment, defense or other claim, right
         or action which Callon may have against Executive.

         5.  STOCK OPTION AND OTHER PLANS.

                  5.1 Acceleration of Benefits. If a Change of Control occurs:

                                    (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 100% vested in
                  such stock rights held by or for the benefit of Executive. 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. 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.

                                    (b) Notwithstanding any provision to the
                  contrary in any stock option agreement that may be outstanding
                  between Executive and Callon,

                                       9
<PAGE>

                  Executive's right to exercise any previously unexercised
                  options under any such stock option agreement shall not
                  terminate until the latest date on which the option granted
                  under such agreement would expire under the terms of such
                  agreement but for Executive's termination of employment. In
                  the event that, and to the extent that, Callon is unable to
                  provide for the extension of the expiration date of such
                  options 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
                  value of such extension Callon is unable to provide; such
                  values of such accelerated vesting and exercisability 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.

         6. SUCCESSORS; BINDING AGREEMENT.

                  6.1 Successors of Callon. Callon will require any successor
         (whether direct or indirect, by purchase, merger, consolidation or
         otherwise) to all or substantially all of the business and/or assets of
         Callon, by agreement in form and substance satisfactory to Executive,
         expressly to assume and agree to perform this Agreement in the same
         manner and to the same extent that Callon would be required to perform
         it if no such succession had taken place. Failure of Callon to obtain
         such agreement prior to the effectiveness of any such succession shall
         be a breach hereof and shall entitle Executive to compensation from
         Callon in the same amount and on the same terms as Executive would be
         entitled hereunder if Executive terminated his employment for Good
         Reason, except that for purposes of implementing the foregoing, the
         date on which any such succession becomes effective shall be deemed the
         Date of Termination. As used herein, "CALLON PETROLEUM COMPANY" shall
         mean Callon as hereinbefore defined and any successor to its business
         and/or assets as aforesaid which executes and delivers the agreement
         provided for in this Section 6 or which otherwise becomes bound by all
         the terms and provisions hereof by operation of law.

                  6.2 Executive's Heirs, etc. This Agreement shall inure to the
         benefit of and be enforceable by Executive's personal or legal
         representatives, executors, administrators, successors, heirs,
         distributees, devisees and legatees. If Executive should die while any
         amounts would still be payable to him hereunder as if he had continued
         to live, all such amounts, unless otherwise provided herein, shall be
         paid in accordance with the terms hereof to his designee or, if there
         be no such designee, to his estate.

         7. Notice. For the purposes hereof, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to Callon
at its principal place of business and to Executive at his address as shown on
the records of Callon, provided that all notices to Callon shall be directed to
the attention of the Chief Executive Officer of Callon with a copy to the
Secretary of Callon, or to such other address provided in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.

                                       10
<PAGE>

         8. Miscellaneous. No provisions hereof may be amended, modified, waived
or discharged unless such amendment, waiver, modification or discharge is agreed
to in writing and signed by Executive and such officer as may be specifically
designated by the Board (which shall in any event include Callon's Chief
Executive Officer). No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision
hereof to be performed by such other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly herein.

         9. Validity. The invalidity or unenforceability of any provisions
hereof shall not affect the validity or enforceability of any other provision
hereof, which shall remain in full force and effect.

         10. Legal Expenses. Callon agrees to pay, upon written demand therefor
by Executive, all legal fees and expenses which Executive may reasonably incur
as a result of any dispute or contest (regardless of the outcome thereof) by or
with Callon or others regarding the validity or enforceability of, or liability
under, any provision hereof (including as a result of any contest about the
amount of any payment pursuant to Section 4.2), plus in each case interest at
the "applicable Federal rate" (as defined in Section 1274(d) of the Code). In
any such action brought by Executive for damages or to enforce any provisions
hereof, he shall be entitled to seek both legal and equitable relief and
remedies, including, without limitation, specific performance of Callon's
obligations hereunder, in his sole discretion.

         11. Continuation of Salary During Dispute. In the event of any dispute
or contest by or with Callon or others regarding the validity or enforceability
of, or liability under, any provision hereof (including as a result of any
contest about the amount of any payments pursuant to Section 4), and upon
written demand by the Executive, Callon shall continue to pay the Executive his
or her base salary and maintain all life, disability, medical, dental, accident
and health insurance coverage in effect immediately prior to the date of such
dispute. Said periodic payments shall be made in accordance with Callon's normal
payroll practices. Payments shall continue until final resolution of such
dispute or contest either by an agreement between the Executive and Callon or
final order of a court with proper jurisdiction. In the event that Callon
substantially prevails in such dispute, the Executive shall be obligated to
repay to Callon all amounts he or she has received for base salary under this
Section 11 (after taxes applicable thereto) plus interest at the "applicable
Federal rate" (as defined in Section 1274(d) of the Code).

         12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE LAWS OF THE STATE OF MISSISSIPPI.

                                       11
<PAGE>

         14. Captions and Gender. The use of captions and section headings
herein is for purposes of convenience only and shall not effect the
interpretation or substance of any provisions contained herein. Similarly, the
use of the masculine gender with respect to pronouns herein is for purposes of
convenience and includes either sex who may be a signatory.

                            [SIGNATURE PAGE FOLLOWS]

                                       12
<PAGE>

IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the day
and year first above written.

                                             CALLON PETROLEUM COMPANY

                                             By:
                                                -------------------------------
                                                      Fred L. Callon

                                             Title:   Chief Executive Officer
                                                   ----------------------------

                                             By:
                                                -------------------------------
                                                      John S. Callon

                                             Title:   Chairman
                                                   ----------------------------

                                             EXECUTIVE

                                             ----------------------------------
                                                      Fred L. Callon
                                                      Chief Executive Officer

                                       13

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