Document:

Exhibit
10.2

 

EXECUTION VERSION

 

SECOND AMENDMENT TO

SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN

 

THIS
SECOND AMENDMENT TO SUPPLEMENTAL MANAGEMENT RETIREMENT PLAN (this “Second Amendment ”)
is made and entered into as of the 17th day of April, 2008, by STATION CASINOS, INC., a Nevada
corporation, with its principal offices located at 1505 South Pavilion Center
Drive, Las Vegas, Nevada  89135 (the “Company”).

 

WHEREAS, the Company adopted a Supplemental Management Retirement Plan effective
as of November 30, 1994 and amended as of November 7, 2007 (the “Plan”); and

 

WHEREAS, the Company now desires to amend the
Plan as provided herein.

 

NOW,
THEREFORE, effective
as of April 17, 2008, the Plan is amended as follows:

 

1.                                       Section 2(f) of the Plan is hereby amended in full to
read as follows:

 

“Early Retirement Date” shall mean the date on which
the Participant attains age 60.

 

2.                                       Section 2(h) of the Plan is here by amended in full to
read as follows:

 

“Normal Retirement Date” shall mean the date on which
the Participant attains age 65.

 

3.                                       Section 6 of the Plan is hereby amended in full to
read as follows:

 

The number “55” is deleted and the number “60” is
inserted in lieu thereof.

 

4.                                       Section 8 of the Plan is hereby amended in full to
read as follows:

 

The number “60” is deleted and the number “65” is
inserted in lieu thereof.

 

5.                                       Section 9 of the Plan is hereby amended in full to
read as follows:

 

The number “60” is deleted and the number “65” is
inserted in lieu thereof.

 

6.                                       Capitalized terms not otherwise defined in
this Second Amendment shall have the meanings set forth in the Plan.

 

7.                                       Except as expressly amended by this
Second Amendment, all other terms and provisions of the Plan shall remain
unaltered, are hereby reaffirmed, and shall continue in full force and effect.

 

8.                                       This Second Amendment may be executed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same document, with the same 

 

 

effect as if all parties
had signed on the same page.

 

[Signature Page Follows]

 

2

 

IN
WITNESS WHEREOF, the
Company has executed this Second Amendment effective as of the date written
above.

 

 

 

	
   

  	
  STATION
  CASINOS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Thomas
  M. Friel

  
	
   

  	
   

  	
  Title:
  

  	
  Executive
  Vice President, Chief

  
	
   

  	
   

  	
   

  	
  Accounting
  Officer and Treasurerex10_1.htm

    
      

    

    

    
      Exhibit
10.1

    

    

    Severance
Compensation Agreement

     

    THIS AGREEMENT is made and
entered into as of April 18, 2008, by and between Callon Petroleum Company,
a Delaware corporation (together with its subsidiaries, “Callon”)
and Fred L.
Callon, as the current Chief Executive
Officer, (“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:

     

    Article 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:

     

    
      	
               
      

            	
              (a)

            	
              December
      31, 2008; provided, however, that, commencing on December 31, 2008 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 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;

            

    

     

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (b)

            	
              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

            

    

     

    
      	
               
      

            	
              (c)

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

            

    

     

    Article 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 after 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 fifty percent (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 (12) 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 (2/3) of the directors then still in office who were
directors at the beginning of such twelve (12) 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.

     

    If the
Executive’s employment with Callon is terminated in accordance with the
provisions of Section 3 within the six (6) month period prior to the date on
which a Change of Control is effective, 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.

     

    Notwithstanding
the foregoing provisions of Section 2, with respect to any payment hereunder
that is (i) subject to Section 409A of the Code and (ii) a Change of Control
which would accelerate the timing of payment thereof, the term “Change of
Control” shall mean a change in the ownership or effective control of the
Company, or in the ownership of a substantial portion of the assets of the
Company as defined Section 409A of the Code and the authoritative guidance
issued thereunder, but only to the extent inconsistent with the above definition
and as necessary to comply with Section 409A as determined by the
Company.

     

    
      
        
           

        

        
          2

          
            

          

        

        
           

        

      

    

    

    Article 3. Termination of
Employment Following a 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 that such termination occurs within two (2)
years following 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 following 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:

     

    
      
        
           

        

        
          3

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (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;

            

    

     

    
      	
               
      

            	
              (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 (3) 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 (3)
      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;

            

    

     

    
      	
               
      

            	
              (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 pursuant to
      Article 7;

            

    

     

    
      
        
           

        

        
          4

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (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); or (ii) if Executive’s employment is
terminated pursuant to Section 3.3 or if the Executive’s employment is
terminated for any other reason, the date the Executive Separates from
Service.

     

    3.6          Reimbursement of Expenses. To
the extent this Agreement provides for the reimbursement of expenses which are
not specifically excluded from Code Section 409A, (i) such expenses shall
be eligible for reimbursement for the lifetime of the Executive, (ii) the
amount of expenses eligible for reimbursement during the Executive’s taxable
year shall not affect the expenses eligible for reimbursement in any other
taxable year and (iii) the reimbursement shall be made not later than by
December 31st of the
year following the calendar year in which such expense was incurred by the
Executive.

     

    Article 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
Sections 4.1(c) and 4.2, and provided that the Executive signs a general release
in a form provided by Callon that releases Callon from any and all claims that
the Executive may have, and the Executive affirmatively agrees not to violate
the provisions of Article 6, the Executive shall be entitled, if such
termination occurred within two (2) years following the effective date of a
Change of Control (or in the case of termination due to Executive’s death, if
such termination occurred within six (6) months following the effective date of
a Change of Control), to the following benefits:

     

    
      
        
           

        

        
          5

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (a)

            	
              Callon
      shall pay to the Executive in a lump sum, in cash, on the date which is
      six (6) months following his Date of Termination, an amount equal to three (3) times
      the sum of: (i) 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 (ii) the greater of: (A)
      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 (B) the target bonus (under all Callon bonus plans for
      which the Executive is eligible) for the 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 thirty-six (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
      (i) 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 (ii) 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.  The continued coverage under this Section
      4.1(b) shall be provided in a manner that is intended to satisfy an
      exception to Section 409A of the Code, and therefore not treated as an
      arrangement providing for nonqualified deferred compensation that is
      subject to taxation under Section 409A, including (i) providing such
      benefits on a nontaxable basis to Executive, (ii) providing for the
      reimbursement of medical expenses incurred during the time period during
      which Executive would be entitled to continuation coverage under a group
      health plan of the Company pursuant to Section 4980B of the Code (i.e., COBRA
      continuation coverage), (iii) providing that such benefits constitute the
      reimbursement or provision of in-kind benefits payable at a specified time
      or pursuant to a fixed schedule as permitted under Section 409A and the
      authoritative guidance thereunder, or (4) such other manner as determined
      by the Company in compliance with an exception from being treated as
      nonqualified deferred compensation subject to Section
  409A.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Callon’s
      obligation to pay severance amounts due to the Executive pursuant to this
      Section 4.1, to the extent not already paid, shall cease
      immediately and such payments will be forfeited if the Executive violates
      any condition described in Sections 6.1, 6.2 or 6.3 after the Date of
      Termination. To the extent already paid, should the Executive violate any
      condition described in Sections 6.1, 6.2 or 6.3 after the Date of
      Termination, the severance amounts provided hereunder shall be repaid in
      their entirety by the Executive to Callon with interest at the “applicable
      federal rate” (as defined in Section 1274(d) of the Code), and all
      rights to such payments shall be
forfeited.

            

    

     

    
      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    

    

    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. Callon shall pay to the
      Executive the Gross-Up Payment by the end of the Executive’s taxable year
      next following the Executive’s taxable year in which he remits the related
      taxes. 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 rate 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 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.

            

    

     

    
      
        
           

        

        
          7

          
            

          

        

        
           

        

      

    

    

    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 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 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, in accordance with the provisions of Section 3.6, 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

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (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 (30) 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.

     

    
      
        
           

        

        
          9

          
            

          

        

        
           

        

      

    

    

    Article 5. Stock Options 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 one hundred percent (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, payable within the time
      specified in Section 4.1(a). The value of such accelerated vesting in the
      Executive’s stock rights shall be determined by the Board in good faith
      based on a valuation performed by an independent consultant mutually
      agreed to by the Board and
Executive.

            

    

     

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

     

    
      	
            	
              (b)

            	
              Notwithstanding
      any provision to the contrary in any stock option agreement that may be
      outstanding between Executive and Callon, 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 payable within the time
      specified in Section 4.1(a).  The 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.

            

    

     

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

    

    Article 6. Noncompetition,
Nonsolicitation, Nondisclosure of Trade Secrets, Nonpublic Information, and
Ownership

     

    6.1          Noncompetition. The Executive
agrees that during the term of the Executive’s employment with Callon and for a
period of one year after the Date of Termination or cessation of the Executive’s
employment with Callon for any reason whatsoever, he will not, directly or
indirectly, compete with Callon by providing services to any other person,
partnership, association, corporation, or other entity that is an “Oil and Gas
Business” in any geographic location where Callon currently operates. As used
herein, an “Oil and Gas Business” means owning, managing, acquiring, attempting
to acquire, soliciting the acquisition of, operating, controlling, or developing
Oil and Gas interests or engaging in or being connected with, as a principal,
owner, officer, director,  employee, shareholder, promoter,
consultant, contractor, partner, member, joint venture, agent, equity owner or
in any other capacity whatsoever, any of the foregoing activities of the oil and
gas exploration and production business. The parties agree that the above
restrictions on competition are completely severable and independent agreements
supported by good and valuable consideration and, as such, shall survive the
termination of this Agreement for whatever reason. The parties further agree
that any invalidity or unenforceability of any one or more of such restrictions
on competition shall not render invalid or unenforceable any remaining
restrictions on competition. Additionally, should a court of competent
jurisdiction determine that the scope of any provision of this Section 6.1 is
too broad to be enforced as written, the parties intend that the court reform
the provision to such narrower scope as it determines to be reasonable and
enforceable.

     

    6.2.          Nonsolicitation. During the
term of the Executive’s employment with Callon and for a period of (three (3)
years) after the Date of Termination with Callon for any reason whatsoever, the
Executive shall not, on his own behalf or on behalf of any other person,
partnership, association, corporation, or entity: (a) directly, indirectly, or
through a third party hire or cause to be hired; (b) directly, indirectly, or
through a third party solicit; or (c) in any manner attempt to influence or
induce any employee of Callon or its subsidiaries or affiliates to leave the
employment of Callon or its subsidiaries or affiliates, nor shall he use or
disclose to any person, partnership, association, corporation, or other entity
any information obtained concerning the names and addresses Callon’s employees.
The parties agree that the above restrictions on hiring and solicitation are
completely severable and independent agreements supported by good and valuable
consideration and, as such, shall survive the termination of this Agreement for
whatever reason. The parties further agree that any invalidity or
unenforceability of any one or more such restrictions on hiring and solicitation
shall not render invalid or unenforceable any remaining restrictions on hiring
and solicitation. Additionally, should a court of competent jurisdiction
determine that the scope of any provision of this Section 6.2 is too broad to be
enforced as written, the parties intend that the court reform the provision to
such narrower scope as it determines to be reasonable and
enforceable.

     

    6.3.          Nondisclosure of Trade Secrets.
Callon promises to disclose to the Executive and the Executive
acknowledges that in and as a result of his employment by Callon, he will
receive, make use of, acquire, have access to and/or become familiar with,
various trade secrets and proprietary and confidential information of Callon,
its subsidiaries, and affiliates, including, but not limited to, processes,
computer programs, compilations of information, records, financial information,
sales reports, sales procedures, customer requirements, pricing techniques,
customer lists, method of doing business, identities, locations, performance and
compensation levels of employees, and other confidential information
(collectively, “Trade
Secrets”) which are owned by Callon, its subsidiaries, and/or affiliates
and regularly used in the operation of its business, and as to which Callon, its
subsidiaries, and/or affiliates take precautions to prevent dissemination to
persons other than certain directors, officers, and employees. The Executive
acknowledges and agrees that the Trade Secrets:

     

    
      
        
           

        

        
          11

          
            

          

        

        
           

        

      

    

    

    
      	
               
      

            	
              (a)

            	
              Are
      secret and not known in the
industry;

            

    

     

    
      	
               
      

            	
              (b)

            	
              Give
      Callon or its subsidiaries or affiliates an advantage over competitors who
      do not know or use the Trade
Secrets;

            

    

     

    
      	
               
      

            	
              (c)

            	
              Are
      of such value and nature as to make it reasonable and necessary to protect
      and preserve the confidentiality and secrecy of the Trade Secrets;
      and

            

    

     

    
      	
               
      

            	
              (d)

            	
              Are
      valuable, special, and unique assets of Callon or its subsidiaries or
      affiliates, the disclosure of which could cause substantial injury and
      loss of profits and goodwill to Callon or its subsidiaries or
      affiliates.

            

    

     

    The
Executive promises not to use in any way or disclose any of the Trade Secrets
and confidential and proprietary information, directly or indirectly, either
during or after the term of his employment, except as required in the course of
his employment with Callon, if required in connection with a judicial or
administrative proceeding, or if the information becomes public knowledge other
than as a result of an unauthorized disclosure by the Executive. All files,
records, documents, information, data, and similar items relating to the
business of Callon, whether prepared by the Executive or otherwise coming into
his possession, will remain the exclusive property of Callon and may not be
removed from the premises of Callon under any circumstances without the prior
written consent of Callon (except in the ordinary course of business during the
Executive’s period of active employment under this Agreement), and in any event
must be promptly delivered to Callon upon termination of the Executive’s
employment with Callon. The Executive agrees that upon his receipt of any
subpoena, process, or other requests to produce or divulge, directly or
indirectly, any Trade Secrets to any entity, agency, tribunal, or person,
whether received during or after the term of the Executive’s employment with
Callon, the Executive shall timely notify and promptly hand deliver a copy of
the subpoena, process, or other request to Callon. For this purpose, the
Executive irrevocably nominates and appoints Callon (including any attorney
retained by Callon), as his true and lawful attorney-in-fact, to act in the
Executive’s name, place, and stead to perform any act that the Executive might
perform to defend and protect against any disclosure of any Trade
Secrets.

     

    The
parties agree that the above restrictions on confidentiality and disclosure are
completely severable and independent agreements supported by good and valuable
consideration and, as such, shall survive the termination of this Agreement for
whatever reason. The parties further agree that any invalidity or
unenforceability of any one or more of such restrictions on confidentiality and
disclosure shall not render invalid or unenforceable any remaining restrictions
on confidentiality and disclosure. Additionally, should a court of competent
jurisdiction determine that the scope of any provision of this Section 6.3 is
too broad to be enforced as written, the parties intend that the court reform
the provision to such narrower scope as it determines to be reasonable and
enforceable.

     

    
      
        
           

        

        
          12

          
            

          

        

        
           

        

      

    

    

    6.4          Ownership. The Executive
agrees that all inventions, copyrightable material, business and/or technical
information, marketing plans, customer lists, and trade secrets which arise out
of the performance of this Agreement are the property of Callon.

     

    Article 7. Successors;
Binding Agreement

     

    7.1          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, the date on which any such succession becomes
effective shall be deemed the Date of Termination; provided however, that such
compensation shall be paid to Executive only if such successor is a considered
to be a successor to Callon by reason of a Change of Control.  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.

     

    7.2          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.

     

    Article 8.
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.

     

    Article 9.
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.

     

    
      
        
           

        

        
          13

          
            

          

        

        
           

        

      

    

    

    Article 10.
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.

     

    Article 11. Legal
Expenses

     

    In
accordance with the provisions of Section 3.6, Callon agrees to pay, upon
written demand therefore 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 interest on such legal fees and expenses 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.

     

    Article 12. Continuation of
Salary during Dispute

     

    In the
event of Executive’s termination of employment, if there is 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 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 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).

     

    Article 13.
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.

     

    Article 14. Governing
Law

    

    
      
        
           

        

        
          14

          
            

          

        

        
           

        

      

    

    

    This
Agreement shall be governed by and construed under the laws of the State of
Mississippi.

     

    Article 15. 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.]

    

    
      
        
           

        

        
          15

          
            

          

        

        
           

        

      

    

    

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

     

    
      	
              CALLON
      PETROLEUM COMPANY

            	 
      
	 
      	 
      	 
      
	
              By:

            	
              /s/ Fred L.
      Callon

            	 
      
	 
      	
              Fred
      L. Callon

            	 
      
	 
      	
              Chief
      Executive Officer

            	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              EXECUTIVE

            	 
      
	 
      	 
      	 
      
	
              By:

            	
              /s/ Fred L.
      Callon

            	 
      
	 
      	
              Fred
      L. Callon

            	 
      
	 
      	
              Chief
      Executive Officer

            	 
      

    

     

     

    16

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