Document:

exv10w1

Exhibit 10.1

CALLON PETROLEUM COMPANY

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

     THIS NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is entered into this 1st day
of June, 2009, between Callon Petroleum Company, a Delaware corporation (the “Company”) and
Steven B. Hinchman (“Grantee”), an employee of the Company. The Compensation Committee of
the Company (the “Committee”) has this day authorized the grant of the option set forth below to
Grantee.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties do
hereby agree as follows:

     1. Grant of Option. Subject to all of the terms, conditions and provisions of this Agreement,
the Company hereby grants to Grantee a nonqualified stock option (the “Option”) pursuant to which
Grantee shall have the right and option to purchase from the Company all or any part of an
aggregate of 500,000 shares of the common stock of the Company, $.01 par value per share
(the “Common Stock”), which shares shall consist of authorized but unissued shares or issued shares
reacquired by the Company. The Option is intended to comply with the provisions governing
nonqualified stock options under the final Treasury Regulations issued on April 17, 2007, in order
to exempt the Option from application of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”).

     2. Option Price. The option or purchase price payable by Grantee to the Company in exercise
of the Option shall be $2.755 per share, being the average opening and closing price of the Common
Stock of the Company on this date (the “Grant Date”). Upon exercise of the Option, the Grantee
shall pay to the Company, in full, the option price for the shares of Common Stock issuable
pursuant to such exercise with cash or Common Stock (valued at fair market value on the date of
such exercise). For purposes of exercise of the Option, fair market value shall mean the closing
price of the Common Stock of the Company on the date of exercise.

     3. Vesting. Subject to paragraphs (4), (5), (6), (7), (8), (9), and (10) hereof, Grantee
shall be eligible to exercise that portion of the Option becoming vested pursuant to the vesting
schedule set forth below:

	 	(a)	 	166,666 of the gross option shares on such date that the
Company’s Common Stock closes above $5.00 per share on the NYSE for a period of
twenty (20) consecutive trading days;
	 
	 	(b)	 	166,667 of the gross option shares on such date that the
Company’s Common Stock closes above $10.00 per share on the NYSE for a period
of twenty (20) consecutive trading days; and
	 
	 	(c)	 	166,667 of the gross option shares on such date that the
Company’s Common Stock closes above $15.00 per share on the NYSE for a period
of twenty (20) consecutive trading days.

 

 

     4. Change in Control. Notwithstanding paragraph (3) hereof, upon a Change in Control, all
unvested portions of the Option shall automatically vest. For purposes hereof, a “Change in
Control” shall have occurred if any of the following occur:

	 	(a)	 	Change in Ownership. A change in ownership of the
Company occurs on the date that any “Person” (as defined in below), other than
(1) the Company or any of its subsidiaries, (2) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
Affiliates, (3) an underwriter temporarily holding stock pursuant to an
offering of such stock, or (4) a corporation owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as their
ownership of the Company’s stock, acquires ownership of the Company’s stock
that, together with stock held by such Person, constitutes more than fifty
percent (50%) of the total fair market value or total voting power of the
Company’s stock. However, if any Person is considered to own already more than
fifty percent (50%) of the total fair market value or total voting power of the
Company’s stock, the acquisition of additional stock by the same Person is not
considered to be a Change of Control; or
	 
	 	(b)	 	Change in Effective Control. Even though the Company
may not have undergone a change in ownership under paragraph (a) above, a
change in the effective control of the Company occurs on the date during any
twelve (12) month period when a majority of members of the Board of Directors
(the “Board”) is replaced by directors whose appointment or election is not
endorsed by a majority of the Board before the date of the appointment or
election; provided, however, that any such director shall not be considered to
be endorsed by the Board if his or her initial assumption of office occurs as a
result of an actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
	 
	 	(c)	 	Change in Ownership of Substantial Portion of Assets.
A change in the ownership of a substantial portion of the Company’s assets
occurs on the date that a Person acquires (or has acquired during the twelve
(12) month period ending on the date of the most recent acquisition by such
Person) assets of the Company, that have a total gross fair market value equal
to at least eighty percent (80%) of the total gross fair market value of all of
the Company’s assets immediately before such acquisition or acquisitions.
However, there is no Change in Control when there is such a transfer to an
entity that is controlled by the shareholders of the Company immediately after
the transfer, through a transfer to (i) a shareholder of the Company

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	 	 	 	(immediately before the asset transfer) in exchange for or with respect to
the Company’s stock; (ii) an entity, at least fifty percent (50%) of the
total value or voting power of the stock of which is owned, directly or
indirectly, by the Company; (iii) a Person that owns directly or indirectly,
at least fifty percent (50%) of the total value or voting power of the
Company’s outstanding stock; or (iv) an entity, at least fifty percent (50%)
of the total value or voting power of the stock of which is owned by a
Person that owns, directly or indirectly, at least fifty percent (50%) of
the total value or voting power of the Company’s outstanding stock.

     For purposes of this paragraph (4),

	 	(i)	 	“Person” shall have the meaning given in Section 7701(a)(1) of
the Code. Person shall include more than one Person acting as a group as
defined by the final Treasury Regulations issued under Section 409A of the
Code.
	 
	 	(ii)	 	“Affiliate” shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Securities Exchange Act of 1934, as
amended.

     The provisions of this paragraph (4) shall be interpreted in accordance with the requirements
of the final Treasury Regulations issued under Section 409A of the Code, it being the intent of the
parties that this paragraph (4) shall be in compliance with the requirements of said Section of the
Code and said Regulations.

     5. Termination of Employment upon Death. Notwithstanding paragraph (3) hereof, in the event
Grantee’s employment with the Company is terminated due to the death of Grantee, the Option granted
pursuant to this Agreement shall be deemed to be one hundred percent (100%) vested on the date of
death and may be exercised by Grantee’s estate, or by a person who acquires the right to exercise
such Option by bequest or inheritance or by reason of the death of Grantee, provided that such
option exercise occurs within the earlier of (i) the remaining term of the Option under paragraph
(12), and (ii) one (1) year after Grantee’s death.

     6. Termination of Employment upon Disability or Retirement. Notwithstanding paragraph (3)
hereof, in the event Grantee’s employment with the Company is terminated due to the Disability or
Retirement of Grantee, all unvested portions of the Option granted pursuant to this Agreement shall
automatically vest and become freely exercisable. For purposes hereof, “Disability” of Grantee
shall be the physical or mental inability of Grantee to carry out the normal and usual duties of
his employment on a full-time basis for an entire period of six (6) continuous months together with
the reasonable likelihood as determined by the Board (excluding Grantee) of the Company that
Grantee, upon the advice of a qualified physician, will be unable to carry out the normal and usual
duties of his employment. For purposes hereof,

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“Retirement” shall be the voluntary termination of
employment from the Company on any date after Grantee attains the normal retirement age of seventy
(70) years.

     7. Termination of Employment for Good Reason. Notwithstanding paragraph (3) hereof, in the
event Grantee’s employment with the Company is terminated for Good Reason, all unvested portions of
the Option shall automatically vest and shall be exercisable until the earlier of (a) the remaining
term of the Option under paragraph (12), and (b) one (1) year following the effective date of
termination. For purposes hereof, “Good Reason” shall mean: (i) Grantee is assigned any
responsibilities or duties materially inconsistent with his position, duties, responsibilities and
status with the Company as in effect at the date of this Agreement or subsequent thereto; or his
title or offices as in effect at the date of this Agreement or as Grantee may be appointed or
elected by the Chief Executive Officer or Board in the future are changed; or Grantee is required
to report to or be directed by any person other than the Chief Executive Officer and the Board;
(ii) there is a reduction in the salary of Grantee (as such salary shall have been increased from
time to time) payable to Grantee; (iii) failure by the Company or any successor to the Company or
its assets to continue to provide to Grantee any material benefit, bonus, profit sharing,
incentive, remuneration or compensation plan, stock ownership or purchase plan, stock option plan,
life insurance, disability plan, pension plan or retirement plan in which Grantee was entitled to
participate in as at the date of this Agreement or subsequent thereto, or the taking by the Company
of any action that materially and adversely affects Grantee’s participation in or materially
reduces his rights or benefits under or pursuant to any such plan or the failure by the Company to
increase or improve such rights or benefits on a basis consistent with practices in effect prior to
the date of this Agreement or with practices implemented subsequent to the date of this Agreement
with respect to the executive employees of the Company generally, whichever is more favorable to
Grantee, but excluding such action that is required by law; (iv) without Grantee’s consent, the
Company requires Grantee to relocate to any city or community other than one within a fifty (50)
mile radius of Natchez, Mississippi or Houston, Texas, except for required travel on the Company’s
business to an extent substantially consistent with Grantees’ business obligations under this
Agreement; (v) a failure by the Company to comply with any material provision of this Agreement
which has not been cured within ten (10) days after notice of such noncompliance has been given by
Grantee to the Company; (vi) there is a Change in Control; or (vii) any purported termination of
Grantee’s employment with the Company which is not effected pursuant to a Notice of Termination
satisfying the requirements of paragraph (11) hereof (and for purposes of this Agreement, no such
purported termination shall be effective).

     8. Termination of Employment for Cause. Notwithstanding paragraph (3) hereof, if Grantee’s
employment is terminated for “Cause,” upon written Notice of Termination for Cause given by the
Company to Grantee, the Option granted hereunder shall terminate and Grantee shall no longer have
the right and option to purchase from the Company any vested or unvested portion of the Option. As
used herein, “Cause” shall mean any of the following events: (i) willful misconduct

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or intentional
and continual neglect of duties which in the business judgment of the Board (excluding Grantee) has
materially adversely affected the Company; provided, however, that Grantee shall have first
received written notice from such Board advising Grantee of the acts or
omissions that constitute the misconduct or neglect of duties, and such misconduct or neglect of
duties continues after Grantee shall have had a reasonable opportunity to correct the same; (ii)
the commission by Grantee of an act of fraud or embezzlement; (iii) the commission by Grantee of
any other action with the intent to injure the Company; (iv) theft or conviction of a felony or any
crime involving dishonesty or moral turpitude; (v) Grantee having misappropriated the property of
the Company; (vi) Grantee having willfully violated any law or regulation relating to the business
of the Company which results in material injury to the Company; or (vii) willful and continual
failure or refusal to substantially perform employment duties (other than any such failure
resulting from Grantee’s incapacity due to physical or mental illness); provided, however, that
Grantee shall have first received written notice from the Board advising Grantee of the acts or
omissions that constitute the failure or refusal to substantially perform duties, and such failure
or refusal continues after Grantee shall have had a reasonable opportunity to correct the same.
Termination for Cause shall require the vote of a majority of the members of the Company’s Board of
Directors.

     For purposes of this paragraph, no act, or failure to act, on Grantee’s part shall be
considered “willful” unless done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, Grantee shall not be deemed to have been terminated for cause
without (i) reasonable notice to Grantee setting forth the reasons for the Company’s intention to
terminate for cause, (ii) an opportunity for Grantee, together with his counsel, to be heard before
the Board, and (iii) delivery to Grantee of a Notice of Termination as defined in paragraph (11)
hereof from the Board finding that in the good faith opinion of the Board, Grantee was guilty of
conduct set forth above in clause (i), (ii), (iii), (iv), (v), (vi), or (vii) of the preceding
paragraph, and specifying the particulars thereof in detail.

     9. Termination of Employment for Other Reasons. Notwithstanding paragraph (3) hereof, if the
Grantee’s employment with the Company is terminated other than pursuant to paragraphs (5), (6), (7)
or (8), all vested portions of the Option shall be exercisable until the earlier of (a) the
expiration of the remaining term of the Option under paragraph (12), and (b) thirty (30) days of
the date of termination. All unvested portions of the Option shall terminate at the date of
termination.

     10. Termination of Employment. Notwithstanding paragraph (3) hereof, if Grantee’s employment
with the Company is terminated other than pursuant to paragraphs (5), (6), or (7) hereof, all
unvested portions of the Option granted hereunder shall be cancelled, shall not vest and shall be
returned to the Company.

     11. Notice of Termination. Any termination of Grantee’s employment by the Company

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or by
Grantee (other than termination pursuant to paragraph (5) above) shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Grantee’s employment under the
provision so indicated.

     12. Exercise Period/Term. Except as set forth in paragraphs (4), (5), (6), and (7), the
Option shall become first exercisable according to the terms of paragraph (3) hereof. The Option
may be exercised only if the Common Stock or other securities issuable upon such exercise are duly
registered under the Securities Act of 1933 and applicable state securities laws, or unless the
issuance is exempt from such registrations. Any portion of the Option that remains unexercised
after the tenth (10th) anniversary of the grant shall expire.

     13. Manner of Exercise. Subject to such administrative regulations as the Board may from
time to time adopt, the Option may be exercised by the delivery of written notice to the Board
setting forth the number of shares of Common Stock with respect to which the Option is to be
exercised, the date of exercise thereof (the “Exercise Date”), which shall be at least three (3)
days after giving such notice unless an earlier time shall have been mutually agreed upon. On the
Exercise Date, Grantee shall deliver to the Company consideration with a value equal to the total
option price of the shares to be purchased, payable as follows: (a) cash, check, bank draft, or
money order payable to the order of the Company; (b) Common Stock owned by Grantee on the Exercise
Date, valued at its fair market value on the Exercise Date, and which Grantee has not acquired from
the Company within six (6) months prior to the Exercise Date; and/or (c) in any other form of valid
consideration that is acceptable to the Board in its sole discretion.

Upon payment of all amounts due from Grantee, the Company shall cause certificates for the optioned
shares then being purchased to be delivered to Grantee at its principal business office within ten
(10) business days after the Exercise Date.

If Grantee fails to pay for any of the optioned shares specified in such notice or fails to accept
delivery thereof, then the Option, and right to purchase such optioned shares may be forfeited at
the election, and in the sole discretion, of the Company.

     14. Who May Exercise. Subject to the terms and conditions set forth in paragraphs (5) and (6)
above, the Option may be exercised only by Grantee, or by Grantee’s guardian or personal or legal
representative, during the lifetime of the Grantee.

     15. No Fractional Shares. The Option may be exercised only with respect to full shares, and
no fractional share of stock shall be issued.

     16. Adjustment of Number of Optioned Shares and Related Matters.

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	 	(a)	 	In the event of any change in the outstanding Common Stock by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, the Board
in its sole
discretion may appropriately adjust the number of shares of Common Stock
subject to the Option, and any and all other matters deemed appropriate by
the Board, including the option price and the types of securities subject to
the Option.
	 
	 	(b)	 	The existence of this Agreement shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company’s capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
	 
	 	(c)	 	If, while the Option is outstanding, the Company shall effect a
subdivision or consolidation of shares or other increase or reduction in the
number of shares of the Common Stock outstanding without receiving compensation
therefor in money, services or property, then, subject to the provisions, if
any, in this Agreement (a) in the event of an increase in the number of such
            shares outstanding, the number of shares of Common Stock then subject to the
Option hereunder shall be proportionately increased; and (b) in the event of a
decrease in the number of such shares outstanding the number of shares then
available for the Option hereunder shall be proportionately decreased.
	 
	 	(d)	 	After a merger of one or more corporations into the Company, or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, Grantee shall, at no additional
cost, be entitled upon exercise of the Option to receive (subject to any
required action by stockholders) in lieu of the number of shares as to which
the Option shall then be so exercisable, the number and class of shares of
stock, other securities or consideration to which Grantee would have been
entitled to receive pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, Grantee
had been the holder of record of a number of shares of the Company equal to the
number of shares as to which the Option had been exercisable.

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	 	(e)	 	If the Company has a Change in Control (as defined above)
under circumstances where the Company is not the surviving corporation, while
the Option remains outstanding and unexercised, then the Board may direct that
any of the following shall occur:

	 	(i)	 	If the successor entity is willing to assume
the obligation to deliver shares of stock or other securities after the
effective date of the Change in Control, Grantee shall be entitled to
receive, upon the exercise of the Option and payment of the option
price, in lieu of shares of Common Stock, such shares of stock or other
securities as Grantee would have been entitled to receive had the
Option been exercised immediately prior to the Change in Control, and
the terms of the Option shall apply as nearly as practicable to the
shares of stock or other securities purchasable upon exercise of the
Option following such Change in Control;
	 
	 	(ii)	 	The Board may waive any limitations set forth
in or imposed pursuant to this Agreement with respect to the Option
such that the Option shall become exercisable prior to the record or
effective date of such Change in Control; and/or
	 
	 	(iii)	 	The Board may cancel the Option as of the
effective date of any such Change in Control provided that prior notice
of such cancellation shall be given to Grantee at least thirty (30)
days prior to the effective date of such Change in Control, and Grantee
shall have the right to exercise the Option in full during a period of
not less than thirty (30) days prior to the effective date of such
Change in Control.

	 	(f)	 	Except as herein provided, the issuance by the Company of
Common Stock or any other shares of capital stock or securities convertible
into shares of capital stock, for cash, property, labor done or other
consideration, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock then
subject to the Option.

     17. No Employment Commitment. Grantee acknowledges that neither the grant of the Option nor
the execution of this Agreement by the Company shall be interpreted or construed as imposing upon
the Company an obligation to retain his services for any stated period of time, which employment
shall continue to be at the pleasure of the Company at such compensation as it shall determine,
unless otherwise provided in a written employment agreement.

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     18. Non-Transferability. The Option granted hereunder is not transferable or assignable by
Grantee except by will or the laws of descent and distribution.

     19. Grantee’s Agreement. Grantee expressly and specifically agrees that:

	 	(a)	 	With respect to the calendar year in which any portion of the
Option is
exercised, Grantee shall include in his gross income for federal income tax
purposes the amount, if any, by which the fair market value (as determined
by the Board, in its sole discretion) of the stock issuable on the Exercise
Date exceeds the option price; and
	 
	 	(b)	 	The grant of the Option is special incentive compensation which
shall not be taken into account as “wages” or “salary” in determining the
amount of payment or benefit to Grantee under any pension, thrift, stock or
deferred compensation plan of the Company; and
	 
	 	(c)	 	On behalf of Grantee’s beneficiary, such grant shall not affect
the amount of any life insurance coverage available to such beneficiary under
any life insurance plan covering employees of the Company.

     20. Rights as Shareholder. Grantee will have no rights as a shareholder with respect to any
shares covered by the Option until the issuance of a certificate or certificates to Grantee for the
optioned shares. Grantee, by his execution of this Agreement, agrees to execute any documents
requested by the Company in connection with the issuance of a certificate or certificates for the
optioned shares. Except as otherwise provided in paragraph (16) hereof, no adjustment shall be
made for dividends or other rights for which the record date is prior to the issuance of such
certificate or certificates.

     21. Grantee’s Representations. Notwithstanding any of the provisions hereof, Grantee hereby
agrees that he will not exercise the Option granted hereby, and that the Company will not be
obligated to issue any shares to Grantee hereunder, if the exercise thereof or the issuance of such
shares shall constitute a violation by Grantee or the Company of any provision of any law or
regulation of any governmental authority. Any determination in this connection by the Company
shall be final, binding, and conclusive. The obligations of the Company and the rights of Grantee
are subject to all applicable laws, rules, and regulations.

     22. Grantee’s Acknowledgments. Grantee hereby accepts the Option subject to all the terms and
provisions hereof. Grantee hereby agrees to accept as binding, conclusive, and final all decisions
or interpretations of the Committee or the Board, as appropriate, upon any questions arising under
this Agreement.

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     23. Law Governing. This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State of Delaware (excluding any conflict of laws rule or principle of
Delaware law that might refer the governance, construction, or interpretation of this agreement to
the laws of another state).

     24. Legal Construction. In the event that any one or more of the terms, provisions, or
agreements that are contained in this Agreement shall be held by any arbitrator to be invalid,
illegal,
or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term,
provision, or agreement shall not affect any other term, provision, or agreement that is contained
in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal,
or unenforceable term, provision, or agreement had never been contained herein.

     25. Covenants and Agreements as Independent Agreements. Each of the covenants and agreements
that are set forth in this Agreement shall be construed as a covenant and agreement independent of
any other provision of this Agreement. The existence of any claim or cause of action of Grantee
against the Company, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the covenants and agreements that are set forth in
this Agreement.

     26. Entire Agreement. This Agreement supersedes any and all other prior understandings and
agreements, either oral or in writing, between the parties with respect to the subject matter
hereof and constitute the sole and only agreements between the parties with respect to the said
subject matter. All prior negotiations and agreements between the parties with respect to the
subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges
that no representations, inducements, promises, or agreements, orally or otherwise, have been made
by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement
and that any agreement, statement or promise that is not contained in this Agreement shall not be
valid or binding or of any force or effect.

     27. Parties Bound. The terms, provisions, and agreements that are contained in this Agreement
shall apply to, be binding upon, and inure to the benefit of the parties and their respective
heirs, executors, administrators, legal representatives, and permitted successors and assigns,
subject to the limitation on assignment expressly set forth herein.

     28. Modification. No change or modification of this Agreement shall be valid or binding upon
the parties unless the change or modification is in writing and signed by the parties.

     29. Headings. The headings that are used in this Agreement are used for reference and
convenience purposes only and do not constitute substantive matters to be considered in construing
the terms and provisions of this Agreement.

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     30. Gender and Number. Words of any gender used in this Agreement shall be held and construed
to include any other gender, and words in the singular number shall be held to include the plural,
and vice versa, unless the context requires otherwise.

     31. Notice. Any notice or other communication required or given hereunder shall be in writing
and shall be deemed to have been effectively given only if delivered personally or sent by
certified or registered mail, postage prepaid, to the Company at its principal office and to
Grantee at
his address as listed on the Company’s records or to such other address as the parties shall
designate in writing.

     32. Tax Requirements. The Company makes no commitment or guarantee that any federal, state or
local, tax treatment, United States or foreign, will apply or be available to Grantee. Grantee is
hereby advised to consult immediately with his own tax advisor regarding the tax consequences of
this Agreement, including, without limitation, any possible tax consequences of this Agreement in
connection with Section 409A of the Code. The Company shall have the power and the right to deduct
or withhold, or require Grantee to remit to the Company, an amount sufficient to satisfy any
federal, state, and local taxes, domestic or foreign, required by law or regulations to be withheld
with respect to any taxable event arising in connection with the Option. With respect to tax
withholding required upon the exercise of the Option, or upon any other taxable event arising as a
result of the Option, Grantee may elect, subject to the approval of the Company in its discretion,
to satisfy the withholding requirement, in whole or in part, by having the Company withhold the
number of shares having a fair market value on the date the tax is to be determined equal to the
minimum withholding taxes which could be imposed on the transaction, as determined by the Company.
All such elections shall be made in writing, signed by Grantee, and shall be subject to any
restrictions or limitations that the Company, in its discretion, deems appropriate. The Company,
in its discretion, may require that any payments due under this paragraph (32) be made prior to the
delivery of any certificate representing shares of Common Stock. The Company may, in its sole
discretion, withhold any taxes due in connection with the Option from any other cash remuneration
otherwise paid by the Company to Grantee.

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

	 	 	 	 	 	 	 	 	 
	ATTEST:	 	CALLON PETROLEUM COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert A. Mayfield
	 	By:
	 	/s/ Fred L. Callon	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Robert A. Mayfield
	 	 	 	Fred L. Callon	 	 
	 

	 	Corporate Secretary
	 	 	 	Chief Executive Officer	 	 

	 	 	 	 	 
	 	GRANTEE

 	 
	 	/s/ Steven B. Hinchman
 	 
	 	Steven B. Hinchman 	 
	 

-12-exv10w2

Exhibit 10.2

CALLON PETROLEUM COMPANY

PERFORMANCE SHARE AWARD AGREEMENT

     THIS AGREEMENT is entered into this 1st day of June, 2009, between Callon Petroleum
Company, a Delaware corporation (the “Company”) and Steven B. Hinchman (“Grantee”), an
employee of the Company. The Compensation Committee (the “Committee”) of the Company has
authorized the grant of shares of common stock of the Company, par value $0.01 per share
(“Shares”), set forth below to Grantee.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties do
hereby agree as follows:

     1. Grant. Subject to all of the terms, conditions and provisions of this Agreement, the
Company hereby grants 100,000 Shares (the “Time Shares”) and 100,000 Shares (the
“Performance Shares”) of common stock. Shares issued shall consist of authorized but unissued
shares or issued shares of common stock reacquired by the Company. The Company will issue only
such number of shares of the Company net of the number of shares sufficient to satisfy tax
withholding requirements valued at the average of the opening and closing NYSE market price on the
date of vesting unless Grantee elects to pay such withholdings in cash on terms acceptable to the
Company.

     2. Time Shares Vesting. Subject to paragraphs (4), (5), (6), and (7) hereof, the Time Shares
shall vest 100% and become freely tradable on the fourth anniversary following the award date,
provided that Grantee maintains continuous employment through such anniversary date. If the
Company terminates Grantee’s employment without Cause prior to such fourth anniversary date, the
Time Shares will vest in proportion to such elapsed time from the award date to the termination
date.

     3. Performance Shares Adjustment. The Performance Shares shall be subject to an adjustment in
accordance with the procedures and calculations as explained in Exhibit A attached to and deemed a
part of this Agreement (the “Adjusted Performance Shares”).

     4. Change in Control. Notwithstanding paragraph (2) and (3) hereof, upon involuntary
termination of employment (other than for “Cause”, as defined herein) within twenty-four (24)
months immediately following a Change in Control, all unvested portions of the Time Shares shall
automatically vest and the Performance Shares shall be adjusted in accordance with the peer company
comparison from the date of this award to the date of termination. For purposes hereof, a “Change
in Control” shall have occurred if any of the following occur:

(a) Change in Ownership. A change in ownership of the Company occurs on the
date that any “Person” (as defined in below), other than (1) the Company or any of
its subsidiaries, (2) a trustee or other fiduciary holding securities under an

 

 

employee benefit plan of the Company or any of its Affiliates, (3) an underwriter
temporarily holding stock pursuant to an offering of such stock, or (4) a
corporation owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as
their ownership of the Company’s stock, acquires ownership of the Company’s stock
that, together with stock held by such Person, constitutes more than fifty percent
(50%) of the total fair market value or total voting power of the Company’s stock.
However, if any Person is considered to own already more than fifty percent (50%) of
the total fair market value or total voting power of the Company’s stock, the
acquisition of additional stock by the same Person is not considered to be a Change
of Control; or

(b) Change in Effective Control. Even though the Company may not have
undergone a change in ownership under paragraph (a) above, a change in the effective
control of the Company occurs on the date during any twelve (12) month period when a
majority of members of the Board of Directors (the “Board”) is replaced by directors
whose appointment or election is not endorsed by a majority of the Board before the
date of the appointment or election; provided, however, that any such director shall
not be considered to be endorsed by the Board if his or her initial assumption of
office occurs as a result of an actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

(c) Change in Ownership of Substantial Portion of Assets. A change in the
ownership of a substantial portion of the Company’s assets occurs on the date that a
Person acquires (or has acquired during the twelve (12) month period ending on the
date of the most recent acquisition by such Person) assets of the Company, that have
a total gross fair market value equal to at least eighty percent (80%) of the total
gross fair market value of all of the Company’s assets immediately before such
acquisition or acquisitions. However, there is no Change in Control when there is
such a transfer to an entity that is controlled by the shareholders of the Company
immediately after the transfer, through a transfer to (i) a shareholder of the
Company (immediately before the asset transfer) in exchange for or with respect to
the Company’s stock; (ii) an entity, at least fifty percent (50%) of the total value
or voting power of the stock of which is owned, directly or indirectly, by the
Company; (iii) a Person that owns directly or indirectly, at least fifty percent
(50%) of the total value or voting power of the Company’s outstanding stock; or (iv)
an entity, at least fifty percent (50%) of the total value or voting power of the
stock of which is owned by a Person that owns, directly or indirectly, at least
fifty percent (50%) of the total value or voting power of the Company’s outstanding
stock.

-2-

 

For purposes of this paragraph (4),

(i) “Person” shall have the meaning given in Section 7701(a)(1) of the
Internal Revenue Code of 1986, as amended (the “Code”). Person shall
include more than one Person acting as a group as defined by the final
Treasury Regulations issued under Section 409A of the Code.

(ii) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Securities Exchange Act of 1934, as amended.

     The provisions of this paragraph (4) shall be interpreted in accordance with the requirements
of the final Treasury Regulations issued under Section 409A of the Code, it being the intent of the
parties that this paragraph (4) shall be in compliance with the requirements of said Section of the
Code and said Regulations.

     5. Termination of Employment upon Death. Notwithstanding paragraph (2) hereof, in the event
Grantee’s employment with the Company is terminated due to the death of Grantee, all unvested
portions of the Time Shares and the Performance Shares shall automatically vest and become freely
tradable by Grantee’s estate or by a person who acquires the rights to the Time Shares and the
Performance Shares by bequest or inheritance.

     6. Termination of Employment upon Disability or Retirement. Notwithstanding paragraph (2)
hereof, in the event Grantee’s employment with the Company is terminated due to the Disability or
Retirement of Grantee, all unvested portions of the Time Shares and the Performance Shares shall
automatically vest and become freely tradable. For purposes hereof, “Disability” of Grantee shall
be the physical or mental inability of Grantee to carry out the normal and usual duties of his
employment on a full-time basis for an entire period of six (6) continuous months together with the
reasonable likelihood as determined by the Board (excluding Grantee) of the Company that Grantee,
upon the advice of a qualified physician, will be unable to carry out the normal and usual duties
of his employment. For purposes hereof, “Retirement” shall be the voluntary termination of
employment from the Company on any date after Grantee attains the normal retirement age of seventy
(70) years.

     7. Termination of Employment for Cause. Notwithstanding paragraph (2) hereof, if Grantee’s
employment is terminated for Cause, upon written Notice of Termination for Cause given by the
Company to Grantee, all unvested portions of the Time Shares and the Performance Shares granted
hereunder shall be cancelled, shall not vest and shall be returned to the Company. As used herein,
“Cause” shall mean any of the following events: (i) misconduct or neglect of duties which in the
business judgment of the Board (excluding Grantee) has adversely affected the Company; (ii) the
commission by Grantee of an act of fraud or embezzlement; (iii) the commission by Grantee of

-3-

 

any other action with the intent to injure the Company; (iv) theft or conviction of a felony or any
crime involving dishonesty or moral turpitude; (v) Grantee having misappropriated the property of
the Company; (vi) Grantee having violated any law or regulation relating to the business of the
Company which results in injury to the Company; or (vii) failure or refusal to perform employment
duties (other than any such failure resulting from Grantee’s incapacity due to physical or mental
illness).

     Termination for Cause shall require the vote of a majority of the members of the Committee,
excluding Grantee.

     8. Involuntary Termination without Cause. Notwithstanding paragraph (3) hereof, upon
involuntary termination of employment without Cause, all unvested portions of the Performance
Shares shall be adjusted in accordance with the peer company comparison from the date of this
award to the date of termination.

     9. Termination of Employment. For purposes of paragraphs (4), (5), (6), and (8) hereof, such
termination of employment shall constitute a “separation from service” (as such term is defined in
final Treasury Regulations issued under Section 409A of the Code and any other guidance issued
thereunder). Notwithstanding paragraph (2) hereof, if Grantee’s employment with the Company is
terminated other than pursuant to paragraphs (4), (5), (6), and (8) hereof, all unvested portions
of the Shares granted hereunder shall be cancelled, shall not vest and shall be returned to the
Company.

     10. Notice of Termination. Any termination of Grantee’s employment by the Company or by
Grantee (other than termination pursuant to paragraph (5) above) shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth the facts and circumstances to provide a basis for
termination of Grantee’s employment under the provision so indicated.

     11. No Employment Commitment. Grantee acknowledges that neither the grant of Time Shares,
Performance Shares and if applicable, Adjusted Performance Shares nor the execution of this
Agreement by the Company shall be interpreted or construed as imposing upon the Company an
obligation to retain his services for any stated period of time, which employment shall continue to
be at the pleasure of the Company at such compensation as it shall determine, unless otherwise
provided in a written employment agreement.

     12. Non-Transferability, Voting Rights and Dividends. The unvested portion of the Time
Shares, Performance Shares and if applicable, Adjusted Performance Shares granted hereunder may not
be sold, assigned, transferred, pledged, or otherwise encumbered. The unvested portion of the Time
Shares, Performance Shares and if applicable, Adjusted Performance Shares shall not have

-4-

 

any rights as a stockholder, including the right to dividends, with respect thereto unless and until
certificates for shares of common stock are issued to him or her.

     13. Grantee’s Agreement. Grantee expressly and specifically agrees that:

          (a) With respect to the calendar year in which the Time Shares, Performance Shares and if
applicable, Adjusted Performance Shares vest, Grantee shall include in his gross income for federal
income tax the fair market value equal to the average of the opening and closing price NYSE market
price of the common stock on the date of vesting;

          (b) Unless otherwise specifically provided in a written employment agreement, the grant of
Time Shares, Performance Shares and if applicable, Adjusted Performance Shares is special incentive
compensation which shall not be taken into account as “wages” or “salary” in determining the amount
of payment or benefit to Grantee under any 401(k), pension plan, thrift, stock or deferred
compensation plan of the Company, as the case may be; and

          (c) On behalf of Grantee’s beneficiary, such grant shall not affect the amount of any life
insurance coverage available to such beneficiary under any life insurance plan covering employees
of the Company or any subsidiary.

     14. Delivery of Shares. The delivery of Shares which vest under the terms of this Agreement
shall be made upon the earlier of: (a) sixty (60) days following the date on which the right to
such Shares vests under paragraph (2) hereof, or (iii) the date of Grantee’s termination of
employment under paragraphs (4), (5), (6), or (8) hereof.

     15. Six Month Delay. To the extent (i) any delivery of Shares to which Grantee becomes
entitled under this Agreement in connection with Grantee’s termination of employment with the
Company constitute deferred compensation subject to Section 409A of the Code, and (ii) Grantee is
deemed at the time of such termination of employment to be a “specified employee” under Section
409A of the Code, then such delivery shall not be made or commence until the earliest of (A) the
expiration of the six (6) month period measured from the date of Grantee’s “separation from
service” (as such term is defined in final Treasury Regulations issued under Section 409A of the
Code and any other guidance issued thereunder) with the Company; or (B) the date of Grantee’s death
following such separation from service. Upon the expiration of the applicable deferral period, any
delivery which would have otherwise been made during that period in the absence of this paragraph
(15) shall be delivered to Grantee or Grantee’s beneficiary. Grantee has reviewed with Grantee’s
own tax advisors the tax consequences of this Agreement and the transactions contemplated hereby.
Grantee is relying solely on his or her tax advisors and not on any statements or representations
of the Company or any of its agents and understands that Grantee (and not the Company) shall be
responsible for Grantee’s own tax

-5-

 

liability that may arise as a result of this Agreement or the
transactions contemplated hereby, except as otherwise specifically provided in this Agreement.

     16. Adjustment of Number of Shares and Related Matters.

          (a) In the event of any change in the outstanding common stock by reason of a stock dividend
or distribution, recapitalization, merger, consolidation, split-up, combination, exchange of shares
or the like, the Board in its sole discretion may appropriately adjust the number of shares of
common stock subject to this Agreement, and any and all other matters deemed appropriate by the
Board, including the types of securities subject to this Agreement.

          (b) The existence of this Agreement shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company’s capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the common stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or otherwise.

          (c) After a merger of one or more corporations into the Company, or after a consolidation of
the Company and one or more corporations in which the Company shall be the surviving corporation,
unless otherwise provided by the Board, the number of shares of common stock, other securities or
consideration to be received with respect to unvested Shares shall continue to be subject to this
Agreement, including vesting provisions thereof.

          (d) If the Company has a Change in Control (as defined above) under circumstances where the
Company is not the surviving corporation, while unvested Shares remain outstanding, then the Board
may waive any limitations set forth in or imposed pursuant to this Agreement with respect to the
Shares such that the vesting of such Shares shall occur upon such Change in Control.

     17. Rights as Shareholder. Grantee will have no rights as a shareholder with respect to any
shares covered by this Agreement until the issuance of a certificate or certificates to Grantee for
the Shares. Grantee, by his execution of this Agreement, agrees to execute any documents requested
by the Company in connection with the issuance of a certificate or certificates for the Shares.
Except as otherwise provided in paragraph (16) hereof, no adjustment shall be made for dividends or
other rights for which the record date is prior to the issuance of such certificate or
certificates.

     18. Grantee’s Representations. Notwithstanding any of the provisions hereof, Grantee hereby
agrees that the Company will not be obligated to issue any Shares to Grantee hereunder, if the
issuance of such Shares shall constitute a violation by Grantee or the Company of any provision

-6-

 

of any law or regulation of any governmental authority. Any determination in this connection by the
Company shall be final, binding, and conclusive. The obligations of the Company and the rights of
Grantee are subject to all applicable laws, rules, and regulations.

     19. Grantee’s Acknowledgments. Grantee hereby accepts this Agreement subject to all the terms
and provisions hereof. Grantee hereby agrees to accept as binding, conclusive, and final all
decisions or interpretations of the Committee or the Board, as appropriate, upon any questions
arising under this Agreement.

     20. Law Governing. This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State of Delaware (excluding any conflict of laws rule or principle of
Delaware law that might refer the governance, construction, or interpretation of this agreement to
the laws of another state).

     21. Legal Construction. In the event that any one or more of the terms, provisions, or
agreements that are contained in this Agreement shall be held by any arbitrator to be invalid,
illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable
term, provision, or agreement shall not affect any other term, provision, or agreement that is
contained in this Agreement and this Agreement shall be construed in all respects as if the
invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.

     22. Covenants and Agreements as Independent Agreements. Each of the covenants and agreements
that are set forth in this Agreement shall be construed as a covenant and agreement independent of
any other provision of this Agreement. The existence of any claim or cause of action of Grantee
against the Company, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of the covenants and agreements that are set forth in
this Agreement.

     23. Entire Agreement. This Agreement supersedes any and all other prior understandings and
agreements, either oral or in writing, between the parties with respect to the subject matter
hereof and constitute the sole and only agreements between the parties with respect to the said
subject matter. All prior negotiations and agreements between the parties with respect to the
subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges
that no representations, inducements, promises, or agreements, orally or otherwise, have been made
by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement
and that any agreement, statement or promise that is not contained in this Agreement shall not be
valid or binding or of any force or effect.

     24. Parties Bound. The terms, provisions, and agreements that are contained in this Agreement
shall apply to, be binding upon, and inure to the benefit of the parties and their respective

-7-

 

heirs, executors, administrators, legal representatives, and permitted successors and assigns,
subject to the limitation on assignment expressly set forth herein.

     25. Modification. No change or modification of this Agreement shall be valid or binding upon
the parties unless the change or modification is in writing and signed by the parties.

     26. Headings. The headings that are used in this Agreement are used for reference and
convenience purposes only and do not constitute substantive matters to be considered in construing
the terms and provisions of this Agreement.

     27. Gender and Number. Words of any gender used in this Agreement shall be held and construed
to include any other gender, and words in the singular number shall be held to include the plural,
and vice versa, unless the context requires otherwise.

     28. Notice. Any notice or other communication required or given hereunder shall be in writing
and shall be deemed to have been effectively given only if delivered personally or sent by
certified or registered mail, postage prepaid, to the Company at its principal office and to
Grantee at his address as listed on the Company’s records or to such other address as the parties
shall designate in writing.

     29. Tax Requirements. The Company makes no commitment or guarantee that any federal, state or
local, tax treatment, United States or foreign, will apply or be available to Grantee. Grantee is
hereby advised to consult immediately with his own tax advisor regarding the tax consequences of
this Agreement, including, without limitation, any possible tax consequences of this
Agreement in connection with Section 409A of the Code. The Company shall have the power and the
right to deduct or withhold, or require Grantee to remit to the Company, an amount sufficient to
satisfy any federal, state, and local taxes, domestic or foreign, required by law or regulations to
be withheld with respect to any taxable event arising in connection with the Shares. With respect
to tax withholding required upon the vesting of the Shares, or upon any other taxable event arising
as a result of the Shares, Grantee may elect, subject to the approval of the Company in its
discretion, to satisfy the withholding requirement, in whole or in part, by having the Company
withhold the number of Shares having a fair market value on the date the tax is to be determined
equal to the minimum withholding taxes which could be imposed on the transaction, as determined by
the Company. All such elections shall be made in writing, signed by Grantee, and shall be subject
to any restrictions or limitations that the Company, in its discretion, deems appropriate. The
Company, in its discretion, may require that any payments due under this paragraph (29) be made
prior to the delivery of any certificate representing shares of common stock. The Company may, in
its sole discretion, withhold any taxes due in connection with the Shares from any other cash
remuneration otherwise paid by the Company to Grantee.

-8-

 

[Signature page follows]

-9-

 

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

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 
	ATTEST:	 	 	 	CALLON PETROLEUM COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert A. Mayfield
	 	 	 	By:
	 	/s/ Fred L. Callon	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Robert A. Mayfield

Corporate Secretary
	 	 	 	 	 	Fred L. Callon

Chief Executive Officer	 	 

	 	 	 	 	 
	 	Agreed to and Accepted

GRANTEE

 	 
	 	By:  	/s/ Steven B. Hinchman
 	 
	 	 	Steven B. Hinchman 	 
	 	 	 	 
	 

-10-

 

Exhibit A

Calculation of

Performance Shares Adjustment

     Subject to (2) and (3) below, on June 1, 2012, Callon’s “Total Shareholder Return” will be
calculated and compared to the same calculated total shareholder return of the selected group of
peer companies listed below. The number of Performance Shares awarded will be retroactively
adjusted in accordance with payout percentage based on Callon’s relative ranking with the peer
companies as shown in the table below.

     For purposes of this calculation, Callon’s total shareholder return and that of the peer
companies will be adjusted if necessary for stock splits and the percent increase or decrease will
be calculated as follows:

(EP + CD) - BP  = % increase or decrease

BP

Ending price (EP) — equals the average daily closing price on the NYSE during the month of
April 2012.

Beginning price (BP) — equals the NYSE closing price on June 1, 2009.

Cash Dividends (CD) — equals the cash dividends paid from June 1, 2009 thru
December 31, 2011.

     The resulting percentage for Callon and the peer companies will then be ranked. Based on the
relative ranking, the number of Performance Shares awarded will be adjusted in accordance with the
following table:

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

Peer Companies

ATP Oil and Gas Corp.

Energy XXI

Brigham Exploration Co.

-11-

 

Mariner Energy Inc.

Newfield Exploration Co.

Petroquest Energy Inc.

Plains Exploration & Production Co.

Stone Energy Co.

Swift Energy Co.

W & T Offshore Inc.

Vesting provisions applicable to Adjusted Performance Shares:

(1) Subject to (2) and (3) below, Adjusted Performance Shares shall vest 100% and
become freely tradable on the third anniversary following the award date.

(2) Upon an involuntary termination of employment (other than for Cause), including
an involuntary termination of employment (other than for Cause) within twenty-four
(24) months immediately following a Change in Control, or upon Death or termination
of employment due to Disability of Grantee, the performance period will end on the
effective date of the event and the adjustment described above will be calculated.
The Adjusted Performance Shares shall vest 100% and become freely tradable on that
date.

(3) Upon Retirement on any date after Grantee attains the normal retirement age of
70 years, the performance period will end on the effective date of the event and the
adjustment described above will be calculated. The Adjusted Performance Shares
shall vest 100% and become freely tradable on that date.

(4) For purposes of paragraphs (2) and (3) hereof, such termination of employment
shall constitute a “separation from service” (as such term is defined in final
Treasury Regulations issued under Section 409A of the Code and any other guidance
issued thereunder). Notwithstanding paragraph (1) hereof, if Grantee’s employment
with the Company is terminated other than pursuant to paragraphs (2) or (3) hereof,
all unvested portions of the Adjusted Performance Shares granted hereunder shall be
cancelled, shall not vest and shall be returned to the Company.

Note: In the event one or more of the listed peer companies is involved in a merger/acquisition,
the named peer company(s) will be adjusted either by replacing said peer company(s) with a suitable
replacement or in the event no suitable replacement is determined, said peer company(s) will drop
to the bottom of the ranking.

-12-

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