Callon Petroleum Company (NYSE:CPE) (‘Callon') entered into a definitive agreement to acquire Carrizo Oil & Gas Inc. (NasdaqGS:CRZO) (‘Carrizo') for $1.3 billion on July 14, 2019. Under the terms of the agreement, holders of Carrizo common stock, restricted stock, performance shares and restricted stock units (except for units issued to new hires after July 14, 2019 and another employee) will receive a fixed exchange ratio of 2.05 Callon shares for each share of Carrizo common stock they own. Each restricted stock unit award granted to a certain employee and to new hires after July 14, 2019 will be assumed by Callon and converted into a restricted stock unit award of Callon based on the exchange ratio and otherwise subject to the same terms and conditions. Each stock appreciation right (‘SAR') relating to Carrizo common stock outstanding will automatically be cancelled and converted into a vested stock appreciation right covering shares of Callon common stock based on the exchange ratio. The exercise price per share of the converted Callon SAR will be equal to the exercise price per share of the Carrizo SAR divided by the exchange ratio. The right of a holder of Carrizo's outstanding warrants to acquire shares of Carrizo common stock will, in accordance with the applicable warrant agreement, be converted into the right to acquire the amount of Callon common stock that such holder would have received upon exercise of such warrants immediately prior to the effective time. Pursuant to the terms of the agreement, if Carrizo obtains receipt of the affirmative vote or written consent of the holders of a majority of the outstanding shares of Carrizo's 8.875% redeemable preferred stock, then each issued and outstanding share of Carrizo preferred stock will be converted into the right to receive one share of a newly created series of 8.875% redeemable preferred stock of Callon with substantially the same terms as the Carrizo preferred stock. If the Carrizo preferred shareholder approval is not obtained, then Carrizo will redeem each issued and outstanding share of Carrizo preferred stock for an amount in cash equal to the applicable secondary company redemption price. The all-stock transaction is intended to be tax-free to Carrizo shareholders. On November 13, 2019, Callon Petroleum and Carrizo Oil & Gas announced an amendment to the existing terms of their agreement for Callon to acquire Carrizo in an all-stock transaction. Under the amended terms, Carrizo shareholders will receive 1.75 shares of Callon common stock for each share of Carrizo common stock they own. Following the close of the transaction, Callon shareholders will own approximately 54% of the combined company, and Carrizo shareholders will own approximately 46% on a fully diluted basis. With the amended exchange ratio, Callon shareholders will own approximately 58% of the combined company and Carrizo shareholders will own approximately 42% on a fully diluted basis. JPMorgan Chase Bank, N.A. and BofA Merrill Lynch provided underwritten financing to Callon to support the transaction. Carrizo shall be required to pay Callon a termination fee of $47.4 million while Callon may be required to pay Carrizo a fee of up to $57 million in the event of termination of the transaction under certain circumstances. As of November 14, 2019, the sell side termination fee was reduced to $20 million. Upon closing, the Board of Directors of the combined company will consist of 11 members, including Callon's eight current Board members and three to be appointed from the Board of Carrizo. The combined company will be led by Callon's executive management team and will remain headquartered in Houston, Texas.

The transaction is subject to customary closing conditions and regulatory approvals, including the approval of shareholders of both Carrizo and Callon, either Carrizo preferred shareholder approval having been obtained or a designated deposit having been made and redemption of preferred stock having occurred, effectiveness of the registration statement on form S-4 pursuant to which the consideration shares of Callon common stock are registered with the Securities and Exchange Commission, authorization for listing of Callon consideration shares on the New York Stock Exchange, expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Act and delivery of opinions of counsel to Carrizo and Callon to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986. Neither the obtaining of financing nor any refinancing of existing indebtedness by any person is a condition to the closing of the transaction. Concurrently with the execution of the agreement, each member of Carrizo's board of directors, in his or her capacity as a shareholder, Callon entered into a voting and support agreement with Callon to vote all shares of Carrizo common stock beneficially owned in favor of the approval of the agreement. The transaction has been unanimously approved by the Boards of Directors at both Callon and Carrizo. Federal Trade Commission has granted early termination notice on August 6, 2019. On September 9, 2019, Paulson & Co. Inc. (‘Paulson'), as manager of funds holding 9.5% stake in Callon, sent a letter informing Callon that Paulson plans to vote its shares against the proposed acquisition of Carrizo. The special meeting of shareholders of Callon Petroleum Company will be held on November 14, 2019 to approve the transaction. As of October 9, 2019, the registration statement was declared effective. As on November 14, 2019, the shareholder meeting has been rescheduled to December 20, 2019. As of November 18, 2019, Paulson & Co. Inc. no longer opposes the transaction and will vote its shares in favor of the transaction. The transaction is expected to close during the fourth quarter of 2019. The transaction is expected to be immediately accretive to free cash flow per share in 2020 with positive free cash flow generation of over $100 million at current strip pricing.

J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC served as financial advisors to Callon in connection with the transaction. William H. Aaronson and Camila Panama of Davis Polk represented J.P. Morgan Securities LLC which acted as the financial advisors to Callon in connection with the transaction. Sean Wheeler, Doug Bacon, Anthony Speier, Alex Rose and Lanchi Huynh, Jennifer Rainey Singh, Lindsey Jaquillard, Camille Walker, Zach Savrick, Meghan Dupre, Cameron McCollum, Zack Montgomery, Eilidh Reid, David Wheat, William Dong, Mary Kogut Brawley, Will Bos, Brandon Elliot, Jordan Roberts, Mahalia Burford, Scott Price, Laura Gallo, Annemarie Mierzejewski, Terry Bokosha, Trevor Crowley, Ian John, Carla Hine, Christina Shin, Evan Turnage, Asheesh Goel, Nick Niles, Paul Tanaka, James Dolphin, Alexandra Mihalas, Adria Crowe, Michael Schulman of Kirkland & Ellis LLP acted as legal advisors to Callon. RBC Capital Markets LLC and Lazard Frères & Co. LLC acted as the financial advisors to Carrizo in connection with the transaction. Gene Oshman, Jim Marshall, Lakshmi Ramanathan, Sunil Jamal, Steven Lackey, Jack Chadderdon, Rob Fowler, Gabriela Alvarez, Derek Green, Jon Lobb, Dominick Constantino, Andrew Thomison and Thomas Fina of Baker Botts LLP acted as legal advisors to Carrizo. Innisfree M&A Inc. acted as the information agent to Callon. Innisfree will receive a fee of approximately $0.05 million for its services. MacKenzie Partners, Inc. acted as the information agent to Carrizo and will receive a fee of approximately $25,000 for its services. Callon has agreed to pay J.P. Morgan a fee of $15 million, of which $3 million became payable to J.P. Morgan upon delivery of its opinion, and the remainder of which will become payable only if the merger is consummated.