8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report

December 31, 2008

(Date of earliest event reported)

Callon Petroleum Company

(Exact name of registrant as specified in its charter)

Delaware	001-14039	64-0844345
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification Number)

200 North Canal St.

Natchez, Mississippi  39120

(Address of principal executive offices, including zip code)

(601) 442-1601

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 5 — Corporate Governance and Management

Item 5.02  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers\

On April 18, 2008, Callon Petroleum Company entered into severance compensation agreements with Fred L. Callon, Chairman and Chief Executive Officer, B.F. Weatherly, Executive Vice President and Chief Financial Officer, Stephen F. Woodcock, Vice President, Thomas E. Schwager, Vice President, and Rodger W. Smith, Vice President and Treasurer.  On December 31, 2008 these severance agreements were amended as necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (collectively “Section 409A”).  The amendments were primarily to clarify (i) when the executive officer’s employment will be deemed to have terminated and (ii) when the separation payment, if any, is to be made following termination of employment, including to defer the payment for six months and one day in situations where the payment would otherwise not be exempt from Section 409A and a delay would be required by Section 409A.

The foregoing description of the severance compensation agreements is not complete and is qualified in its entirety by reference to the full text of the agreements, copies of which are filed as Exhibits 10.1 and 10.2 respectively to this Current Report on Form 8-K and incorporated herein by reference.

Section 9 — Financial Statements and Exhibits

Item 9.01.  Financial Statements and Exhibits

(c)  Exhibits
Exhibit Number	Title of Document
10.1	Amendment No. 1 to Severance Compensation Agreement executed on December 31, 2008 by and between Fred L. Callon and Callon Petroleum Company.
10.2	Form of Amendment No.1 to Severance Compensation Agreement by and between Callon Petroleum Company and its executive officers.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Callon Petroleum Company
January 5, 2009	By:	/s/  B. F. Weatherly
		B.F. Weatherly
		Executive Vice President and
		Chief Financial Officer

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Exhibit Index

Exhibit Number	Title of Document
10.1	Amendment No. 1 to Severance Compensation Agreement executed on December 31, 2008 by and between Fred L. Callon and Callon Petroleum Company.
10.2	Form of Amendment No. 1 to Severance Compensation Agreement by and between Callon Petroleum Company and its executive officers.

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 1 TO

SEVERANCE COMPENSATION AGREEMENT

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

WITNESSETH THAT:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Fred L. Callon

By:

Callon Petroleum Company

By:

Name:  Fred L. Callon

Title:  President

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EX-10.2

Exhibit 10.2

Form of Amendment No. 1 to Severance Compensation Agreement

AMENDMENT NO. 1 TO

SEVERANCE COMPENSATION AGREEMENT

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

WITNESSETH THAT:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Grantee]

By:

Callon Petroleum Company

By:

Name:  Fred L. Callon

Title:  President

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