Item 1.01. Entry into a Material Definitive Agreement.
Big Star Purchase Agreement
On April 19, 2016, Callon
Petroleum Company (Callon or the Company) and its wholly owned subsidiary, Callon Petroleum Operating Company (CPOC, and together with the Company, the Company Parties), entered into a purchase and
sale agreement (the Big Star Purchase Agreement) with BSM Energy LP, Crux Energy, LP and Zaniah Energy, LP (collectively, the Sellers) for the purchase of certain oil and gas producing properties and undeveloped acreage in
the Midland Basin (the Big Star Acquisition) for total consideration of $220 million in cash (the Cash Consideration) and 9,333,333 shares of the Companys common stock (the Equity Consideration), subject to
customary purchase price adjustments in accordance with the Big Star Purchase Agreement. In connection with the execution of the Big Star Purchase Agreement, the Company has agreed to pay the Sellers a deposit in the amount of $16.5 million
(the
Deposit)
to a third party escrow agent within two business days of the date of the Big Star Purchase Agreement.
Upon
closing of the Big Star Acquisition, the Company will assume operatorship of over 80% of the acquired acreage and own an estimated 81% average working interest (61% average net revenue interest).
Consummation of the Big Star Acquisition is subject to various conditions, including, among others (1) the accuracy of the representations and warranties of
the parties as of the closing date, (2) the performance of various covenants and agreements of the parties through the closing date, (3) the execution of certain ancillary documents, (4) limitation on the net sum of all purchase price adjustments
made pursuant to the Big Star Purchase Agreement, and (5) other closing conditions. The Big Star Acquisition is expected to close on May 26, 2016.
The
Big Star Purchase Agreement contains certain termination rights for CPOC and the Sellers, including (i) if the closing has not occurred on or prior to June 16, 2016 through no fault of the terminating party; and (ii) if any of the conditions to
closing specified in the Big Star Purchase Agreement are not satisfied by the closing date through no fault of the terminating party.
If the Sellers
terminate the Big Star Purchase Agreement because the Company Parties have failed to satisfy conditions to closing through no fault of the Sellers and the conditions to closing of the Company Parties have been satisfied or waived, Sellers are
entitled to retain the Deposit as liquidated damages as its sole remedy. Similarly, if CPOC terminates the Big Star Purchase Agreement because the Sellers have failed to satisfy conditions to closing through no fault of the Company Parties and
the conditions to closing of Sellers have been satisfied or waived, the Company Parties are entitled to the return of the Deposit as liquidated damages as its sole remedy.
As a condition to the closing of the Big Star Acquisition, the Company has agreed to enter into a registration rights agreement (the Registration Rights
Agreement) at the closing of the Big Star Acquisition, under which the Company will agree to register with the Securities and Exchange Commission the shares constituting the Equity Consideration. The Company will agree to use reasonable best
efforts to file a resale registration statement and to cause such registration statement to be declared effective within 30 days from the closing of the Big Star Acquisition. The Sellers will also be entitled to piggyback registration rights under
the Registration Rights Agreement. Under the terms of the Registration Rights Agreement, if the Company registers any of its securities either for its own account or for the account of other security holders, the holders of the Equity Consideration
are entitled to include their shares in the registration, provided that they elect to include a minimum of $10 million of such shares in the aggregate in the registration statement. The underwriters of any underwritten offering have the right to
limit the number of shares registered by the sellers, subject to certain limitations.
The foregoing description of the Big Star Purchase Agreement is
qualified in its entirety by reference to the text of the Big Star Purchase Agreement, which is filed herewith as Exhibit 2.1 to this Report and is incorporated in this Report by reference.