CALLON PETROLEUM COMPANY
PERFORMANCE SHARE AWARD AGREEMENT
THIS AGREEMENT is
entered into this 1 st 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.
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For purposes of
this paragraph (4),
(i) “
Person ” shall have the meaning given in
Section 7701(a)(1) of the Internal Revenue Code of 1986, as
amended (the “ Code ”). Person shall include
more than one Person acting as a group as defined by the final
Treasury Regulations issued under Section 409A of the
Code.
(ii) “
Affiliate ” shall have the meaning set forth in
Rule 12b-2 promulgated under Section 12 of the Securities
Exchange Act of 1934, as amended.
The provisions of
this paragraph (4) shall be interpreted in accordance with the
requirements of the final Treasury Regulations issued under
Section 409A of the Code, it being the intent of the parties
that this paragraph (4) shall be in compliance with the
requirements of said Section of the Code and said
Regulations.
5.
Termination of Employment upon Death . Notwithstanding
paragraph (2) hereof, in the event Grantee’s employment
with the Company is terminated due to the death of Grantee, all
unvested portions of the Time Shares and the Performance Shares
shall automatically vest and become freely tradable by
Grantee’s estate or by a person who acquires the rights to
the Time Shares and the Performance Shares by bequest or
inheritance.
6.
Termination of Employment upon Disability or Retirement .
Notwithstanding paragraph (2) hereof, in the event Grantee’s
employment with the Company is terminated due to the Disability or
Retirement of Grantee, all unvested portions of the Time Shares and
the Performance Shares shall automatically vest and become freely
tradable. For purposes hereof, “ Disability ” of
Grantee shall be the physical or mental inability of Grantee to
carry out the normal and usual duties of his employment on a
full-time basis for an entire period of six (6) continuous
months together with the reasonable likelihood as determined by the
Board (excluding Grantee) of the Company that Grantee, upon the
advice of a qualified physician, will be unable to carry out the
normal and usual duties of his employment. For purposes hereof,
“ Retirement ” shall be the voluntary
termination of employment from the Company on any date after
Grantee attains the normal retirement age of seventy
(70) years.
7.
Termination of Employment for Cause . Notwithstanding
paragraph (2) hereof, if Grantee’s employment is
terminated for Cause, upon written Notice of Termination for Cause
given by the Company to Grantee, all unvested portions of the Time
Shares and the Performance Shares granted hereunder shall be
cancelled, shall not vest and shall be returned to the Company. As
used herein, “ Cause ” shall mean any of the
following events: (i) misconduct or neglect of duties which in
the business judgment of the Board (excluding Grantee) has
adversely affected the Company; (ii) the commission by Grantee
of an act of fraud or embezzlement; (iii) the commission by
Grantee of
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any other
action with the intent to injure the Company; (iv) theft or
conviction of a felony or any crime involving dishonesty or moral
turpitude; (v) Grantee having misappropriated the property of
the Company; (vi) Grantee having violated any law or
regulation relating to the business of the Company which results in
injury to the Company; or (vii) failure or refusal to perform
employment duties (other than any such failure resulting from
Grantee’s incapacity due to physical or mental
illness).
Termination for
Cause shall require the vote of a majority of the members of the
Committee, excluding Grantee.
8.
Involuntary Termination without Cause. Notwithstanding
paragraph (3) hereof, upon involuntary termination of
employment without Cause, all unvested portions of the Performance
Shares shall be adjusted in accordance with the peer company
comparison from the date of this award to the date of
termination.
9.
Termination of Employment . For purposes of paragraphs (4),
(5), (6), and (8) hereof, such termination of employment shall
constitute a “separation from service” (as such term is
defined in final Treasury Regulations issued under
Section 409A of the Code and any other guidance issued
thereunder). Notwithstanding paragraph (2) hereof, if
Grantee’s employment with the Company is terminated other
than pursuant to paragraphs (4), (5), (6), and (8) hereof, all
unvested portions of the Shares granted hereunder shall be
cancelled, shall not vest and shall be returned to the
Company.
10.
Notice of Termination . Any termination of Grantee’s
employment by the Company or by Grantee (other than termination
pursuant to paragraph (5) above) shall be communicated by
written Notice of Termination to the other party hereto. For
purposes of this Agreement, a “ Notice of Termination
” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth the facts and circumstances to provide a basis for
termination of Grantee’s employment under the provision so
indicated.
11. No
Employment Commitment . Grantee acknowledges that neither the
grant of Time Shares, Performance Shares and if applicable,
Adjusted Performance Shares nor the execution of this Agreement by
the Company shall be interpreted or construed as imposing upon the
Company an obligation to retai
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