Exhibit 10.1

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
as of July 3, 2008, by and between CREDO Petroleum Corporation, a Colorado
corporation (the “Company”), and RCH Energy Opportunity Fund II, LP, a Delaware
limited partnership (the “Purchaser”).

 

WHEREAS, the Company and Purchaser are parties to that certain Stock Purchase
Agreement dated June 3, 2008 (the “Purchase Agreement”); and

 

WHEREAS, as a condition of closing the transactions contemplated by the Purchase
Agreement, the Company has agreed to provide the Purchaser with registration
rights as set forth below.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein and for other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree with each other as follows:

 

1.             Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth below:

 

“Agreement” has the meaning set forth in the preamble hereto.

 

“Commission” means the United States Securities and Exchange Commission or any
other United States federal agency at the time administering the Securities Act.

 

“Common Stock” means the Company’s common stock, par value $0.10 per share, or
any other shares of capital stock or other securities of the Company into which
such stock may be reclassified or changed, including by reason of a merger,
consolidation, reorganization or recapitalization.  If the Common Stock is so
reclassified or changed, or if the Company pays a dividend or makes a
distribution on the Common Stock in shares of capital stock, or subdivides (or
combines) its outstanding shares of Common Stock into a greater (or smaller)
number of shares of Common Stock, a share of Common Stock shall be deemed to be
such number of shares of stock and amount of other securities to which a holder
of a share of Common Stock outstanding immediately prior to such change,
reclassification, exchange, dividend, distribution, subdivision or combination
would be entitled.

 

“Default Date” has the meaning set forth in Section 7(b).

 

“Delayed Filing Date” has the meaning set forth in Section 2(d).

 

“Delay Period” has the meaning set forth in Section 4(a).

 

“Demand Notice” has the meaning set forth in Section 2(a).

 

“Demand Registration” has the meaning set forth in Section 2(a).

 

“End of Suspension Notice” has the meaning set forth in Section 4(b).

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.

 

“Filing Date” has the meaning set forth in Section 2(d).

 

“Form S-1” has the meaning set forth in Section 2(c)(4).

 

“Form S-3” has the meaning set forth in Section 2(c)(4).

 

“Holder” means a person who owns Registrable Securities and is either the
Purchaser or a Person to whom the rights of a Holder hereunder have been duly
assigned or transferred.

 

“Holder Indemnified Parties” has the meaning set forth in Section 6(a).

 

“Liquidated Damages” has the meaning set forth in Section 7(a).

 

“Liquidated Damages Amount” has the meaning set forth in Section 7(a).

 

“Losses” has the meaning set forth in Section 6(a).

 

“Misstatement/Omission” has the meaning set forth in Section 6(a).

 

“Outstanding Registrable Securities” means the securities of the Company that
qualify as Registrable Securities at the time of delivery of a Demand Notice.

 

“Person” means any natural person, corporation, partnership, firm, association,
trust, government, governmental agency, limited liability company or any other
entity, whether acting in an individual, fiduciary or other capacity.

 

“Piggyback Registration” has the meaning set forth in Section 3(a).

 

“Prospectus” means the prospectus included in any Registration Statement, all
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.

 

“Purchase Agreement” has the meaning set forth in the recitals hereto.

 

“Purchaser” has the meaning set forth in the preamble hereto.

 

“Registrable Securities” means the shares of Common Stock owned by the Purchaser
as of the date hereof; provided, however, that if as a result of any
reclassification, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or other similar transaction or event, any capital stock,
evidence of indebtedness, warrants, options, rights or other securities
(collectively, “Other Securities”) are issued or transferred to a Holder in
respect of Registrable Securities held by the Holder, references herein to
Registrable Securities shall be deemed to include such Other Securities;
provided, further, that, as to any particular Registrable Securities, such
securities will cease to be Registrable Securities when (i) they have been sold
pursuant to an offering registered under the Securities Act, (ii) they have been
sold pursuant to Rule 144 (or any successor provision) under

 

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the Securities Act or (iii) they have been sold to any Person to whom the rights
under this Agreement are not assigned in accordance with this Agreement.

 

“Registration Statement” means any registration statement of the Company under
the Securities Act that covers any of the Registrable Securities, including the
related Prospectus, amendments and supplements to such registration statement
(including pre- and post-effective amendments), all exhibits, and all materials
incorporated by reference or deemed to be incorporated by reference in such
registration statement or Prospectus.

 

“Requesting Holders” has the meaning set forth in Section 2(a).

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.

 

“Share Purchase Price” means the price per share of Common Stock paid by the
Purchaser pursuant to the Purchase Agreement.

 

“Suspension Event” has the meaning set forth in Section 4(b).

 

“Suspension Notice” has the meaning set forth in Section 4(b).

 

“Target Effective Date” has the meaning set forth in Section 2(e).

 

2.             Demand Registrations.

 

(a)           Right to Demand.  Upon the terms and subject to the conditions of
this Agreement, Holders owning at least a majority of the Outstanding
Registrable Securities (the “Requesting Holders”) shall have the right, by
written notice delivered to the Company (the “Demand Notice”), to request that
the Company register for resale under and in accordance with the provisions of
the Securities Act the number of Registrable Securities designated by such
Holders (a “Demand Registration”).  Promptly following its receipt of a Demand
Notice, the Company will notify all other Holders of the proposed registration
and allow them the opportunity to include Registrable Securities in such
registration.  Holders that elect to participate in such registration shall
provide written notice of such election to the Company within five days of their
receipt of notice from the Company.

 

(b)           Underwriting.  If the Requesting Holders intend to distribute the
Registrable Securities described in the Demand Notice in an underwritten
offering, they shall so advise the Company in the Demand Notice.  In that event,
the underwriters for such offering will be selected jointly by a majority of the
Requesting Holders and the Company. Notwithstanding anything herein to the
contrary, the Company shall not be obligated to support an underwritten offering
in the manner contemplated by Sections 4(c)(11), (12) or (13) or otherwise,
unless the anticipated aggregate offering price to the public in the relevant
offering is reasonably expected to be at least $20.0 million, except that the
foregoing limitation shall not exempt the Company from having to support at
least one underwritten offering.

 

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(c)           Limits on Demand Registrations.

 

(1)           The Company shall not be required to register any Registrable
Securities pursuant to this Section 2 unless the anticipated aggregate offering
price to the public in the relevant offering is expected to be at least $10.0
million.

 

(2)           The Company shall not be obligated to effect more than one Demand
Registration in any 12-month period.

 

(3)           The Company shall not be obligated to file a Registration
Statement with respect to a Demand Registration within 90 days of the completion
of any underwritten offering of the Company’s securities.

 

(4)           Holders shall be entitled to have a total of one Demand
Registration effected on Form S-1 (including any successor form, “Form S-1”) and
a total of two Demand Registrations on Form S-3 (including any successor Form,
“Form S-3”) at any time when the Company is eligible to use such form.  A Demand
Registration effected on Form S-1 shall not reduce the number of available
Demand Registrations pursuant to the foregoing sentence if a Registration
Statement with respect thereto does not become effective under the Securities
Act and remain effective for at least one hundred-eighty (180) days (excluding
any Delay Period), or until the completion of the distribution of the
Registrable Securities thereunder, whichever is earlier.

 

(d)           Filing of Registration Statement.  Subject to Section 4(a), as
soon as practicable, but in any event within 60 days of the date on which the
Company receives a Demand Notice (the “Filing Date”) (unless a Delay Period is
in effect, in which case within 60 days of the termination of the Delay Period,
the “Delayed Filing Date”), the Company shall file with the Commission a
Registration Statement on the appropriate form for the registration and sale of
the Registrable Securities specified in such Demand Notice, together with the
number of Registrable Securities requested to be included in the Demand
Registration by other Holders.

 

(e)           Effectiveness of Registration Statement.  The Company shall use
its commercially reasonable efforts to (i) cause a Registration Statement filed
pursuant to Section 2(d) to be declared effective by the Commission as soon as
reasonably practicable but in no event later than 180 days following the Filing
Date without regard to any Delayed Filing Date (the “Target Effective Date”),
and (ii) subject to Section 10(e), keep such Registration Statement continuously
effective and usable for the sale of Registrable Securities until the date on
which all shares of Common Stock in respect thereof cease to be Registrable
Securities.  If the Company has an effective Registration Statement on Form S-1
filed pursuant to Section 2(d) and becomes eligible to use Form S-3 or such
other short-form registration statement form under the Securities Act, the
Company shall promptly give notice of such eligibility to the Holders covered
thereby and may, or at the request of such Holders with a majority of such
Registrable Securities shall, promptly convert such Registration Statement on
Form S-1 to a Registration Statement on Form S-3 or such other short-form
registration statement by means of a post-effective amendment or otherwise,
unless any Holder notifies the Company within 10 business days of receipt of the
Company’s notice that such conversion would interfere with its distribution of
Registrable Securities already in progress and provides a reasonable explanation
therefor, in which case the

 

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Company will delay the conversion of the Registration Statement for a reasonable
time after receipt of the first such notice, not to exceed 30 days in the
aggregate (unless the Company, at such time as the conversion from Form S-1 to
Form S-3 or such other short-form registration statement may occur, would
otherwise be required to amend the Registration Statement on Form S-1 and
require that Holders suspend sales).  No such conversion of a Registration
Statement on Form S-1 to a Registration Statement on Form S-3 or such other
short-form registration statement shall reduce the number of available Demand
Registrations pursuant to Section 2(c)(4).

 

(f)            Holders’ Withdrawal.  Holders of a majority of the Registrable
Securities to be included in a Demand Registration may, at any time prior to the
effective date of the Registration Statement relating thereto, revoke such
request by providing a written notice to the Company of such revocation.  A
request made and subsequently revoked pursuant to this Section 2(f) shall not
reduce the number of available Demand Registrations pursuant to
Section 2(c)(4) if the revocation is made within ten (10) business days of the
delivery of the Demand Notice.

 

(g)           Preemption of Demand Registration.  Notwithstanding anything to
the contrary contained herein, after receiving a Demand Notice, the Company may
elect to effect an underwritten primary registration in lieu of the Demand
Registration if the Company’s Board of Directors believes that such primary
registration would be in the best interests of the Company. If the Company so
elects to effect a primary registration, the Company shall give prompt written
notice to all Holders of its intention to effect such a registration and shall
afford the Holders the rights set forth in Section 3 with respect to Piggyback
Registrations, except that Section 2(h) will apply in the event of any
underwriter’s cutback.  The Company shall select the underwriters for such an
offering.  In the event the Company elects to effect a primary registration
after receiving a Demand Notice, the Company shall use its commercially
reasonable efforts to have the Registration Statement relating to the primary
registration declared effective by the Commission as soon as reasonably
practicable. In addition, the request for a Demand Registration shall be deemed
to have been withdrawn and such primary registration shall not be deemed to be a
Demand Registration for the purposes of Section 2(c)(4).

 

(h)           Priority in Demand Registrations.  If a Demand Registration
relates to an underwritten offering and the managing underwriter advises the
Company, in writing, that in its good faith judgment, the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering without materially and adversely affecting the
marketability of the offering, then the Company will include in such
registration the maximum number of shares that the managing underwriter advises
the Company can be sold in such offering, allocated as follows:  (i) first, the
Registrable Securities requested to be included in such registration by the
Holders, with such securities to be included on a pro rata basis based on the
amount of securities requested to be included therein and (ii) second, to the
extent that any other securities may be included without exceeding the
limitation recommended by the managing underwriter, the securities the Company
proposes to sell or to include in the registration for the account of other
Persons; provided, however, that the Company and such other Persons may agree to
a different allocation with respect to securities included pursuant to clause
(ii).

 

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3.             Piggyback Registrations.

 

(a)           Right to Piggyback Registrations.  If the Company or another party
having registration rights (other than a Holder) proposes that the Company
register any of the Company’s equity securities under the Securities Act on a
form that would be suitable for a registration of Registrable Securities, the
Company will give written notice of such proposed registration to all Holders at
least twenty days prior to the anticipated filing date.  Such notice shall offer
the Holders the opportunity to register some or all of their Registrable
Securities in the registration (a “Piggyback Registration”).  Subject to
Section 3(b), the Company shall include in the Piggyback Registration all
Registrable Securities requested by Holders to be included therein to the extent
written requests for inclusion are delivered to the Company within ten days of
the delivery of the Company’s notice.  If the Registration Statement relating to
the Piggyback Registration is for an underwritten offering, such Registrable
Securities shall be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters. 
Subject to the terms of any underwriting agreement entered into in connection
with the offering, each Holder shall be permitted to withdraw all or part of its
Registrable Securities from a Piggyback Registration at any time prior to the
effectiveness of the Registration Statement relating to such Piggyback
Registration.  The amount of time for which the Company shall keep a
Registration Statement relating to a Piggyback Registration effective and usable
shall be determined by the Company; provided, however, the Company shall provide
reasonable notice to Holders participating in such a registration if it intends
to keep the Registration Statement effective and usable for less than 90 days.
The Holders shall have unlimited Piggyback Registration rights.

 

(b)           Priority in Piggyback Registrations.  If a Piggyback Registration
is an underwritten offering and the managing underwriter advises the party or
parties initiating such offering in writing that in their good faith judgment
the number of securities requested to be included in such registration exceeds
the number that can be sold in such offering without materially and adversely
affecting the marketability of the offering, then any such registration shall
include the maximum number of shares that the managing underwriter advises can
be sold in the offering allocated as follows:  (i) first, the securities the
party or parties initiating such offering propose to sell, with such securities
to be included on a pro rata basis based on the amount of securities requested
to be included therein, (ii) second, to the extent that any other securities may
be included without exceeding the limitations recommended by the managing
underwriter, all securities proposed to be included in the offering by the
Company and (iii) third, to the extent that any other securities may be included
without exceeding the limitations recommended by the managing underwriter, all
other securities proposed to be included in the offering (including Registrable
Securities), with such additional securities to be included on a pro rata basis
based on the amount of securities requested to be so included, subject, in each
case, to any agreement to the contrary between or among the relevant parties.

 

4.             Rights and Obligations of the Company.

 

(a)           Delay Period.  Notwithstanding anything to the contrary set forth
herein, the Company shall have the right to delay the filing of any Registration
Statement otherwise required to be filed pursuant to Sections 2 or 3, or to
suspend the use of any Registration Statement, for a period not in excess of 60
consecutive days and no more than 90 days in any

 

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consecutive 12-month period (a “Delay Period”), if (i) the Company is pursuing
an acquisition, merger, reorganization, disposition or other similar transaction
and the Company determines in good faith that the Company’s ability to pursue or
consummate such a transaction would be materially adversely affected by any
required disclosure of such transaction in any Registration Statement, (ii) the
Company has experienced some other material non-public event the disclosure of
which at such time, in the good faith judgment of the Company, would materially
adversely affect the Company or (iii) the Company determines in good faith that
the filing or the inability to suspend the use of the Registration Statement
would otherwise be detrimental to the Company or its stockholders, or would
substantially interfere with the Company’s ability to timely file a Form 10-Q or
10-K.

 

(b)           In the case of an event that causes the Company to suspend the use
of a Registration Statement (a “Suspension Event”), the Company shall give
written notice (a “Suspension Notice”) to the Holders to suspend sales of the
Registrable Securities included in such Registration Statement and such notice
shall continue only for so long as the Suspension Event or its effect is
continuing. No Holder shall effect any sales of the Registrable Securities
pursuant to such Registration Statement (or such filings) at any time after it
has received a Suspension Notice from the Company and prior to receipt of an End
of Suspension Notice (as defined below) with respect to such Registration
Statement.  The Holders may recommence effecting sales of the Registrable
Securities pursuant to such Registration Statement (or such filings) following
further notice to such effect (an “End of Suspension Notice”) from the Company,
which End of Suspension Notice shall be given by the Company to the Holders in
the manner described above promptly following the conclusion of any Suspension
Event and its effect.

 

(c)           Registration Procedures.  Whenever the Company is required to
register Registrable Securities pursuant to Sections 2 or 3 hereof, the Company
will use its commercially reasonable efforts to effect the registration to
permit the sale of such Registrable Securities in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company will,
as promptly as reasonably practicable:

 

(1)           prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities on a form available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and use its commercially reasonable efforts to cause such
Registration Statement to become and remain effective for the applicable time
period specified herein;

 

(2)           prepare and file with the Commission such amendments (including
post-effective amendments) to the Registration Statement and such supplements to
the Prospectus as may be necessary to keep such Registration Statement effective
and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement for the
applicable time period specified herein;

 

(3)           furnish to each selling Holder of Registrable Securities covered
by a Registration Statement and to each underwriter, if any, such number of
copies of the Registration Statement, each amendment and post-effective
amendment thereto, and the Prospectus included in such Registration Statement
(including each preliminary prospectus and

 

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any supplement to such Prospectus and any other prospectus filed pursuant to
Rule 424 under the Securities Act), in each case including all exhibits, and
such other documents as such Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Holder or
to be disposed of by such underwriter;

 

(4)           use its commercially reasonable efforts to register or qualify
and, if applicable, to cooperate with the selling Holders, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of the
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as any selling Holder or underwriters (if any) shall
reasonably request, to keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration Statement is
required to be kept effective and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration Statement;
provided, however, that the Company will not be required to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
or (ii) consent to general service of process or taxation in any such
jurisdiction where it is not otherwise so subject;

 

(5)           cause all such Registrable Securities to be listed or quoted (as
the case may be) on each national securities exchange or other securities market
on which securities of the same class as the Registrable Securities are then
listed or quoted;

 

(6)           provide a transfer agent and registrar for all such Registrable
Securities and a CUSIP number for all such Registrable Securities not later than
the effective date of such Registration Statement;

 

(7)           use its commercially reasonable efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or suspending
the qualification (or exemption from qualification) of any of the Registrable
Securities included therein for sale in any relevant jurisdiction, and, in the
event of the issuance of any stop order suspending the effectiveness of a
Registration Statement, or of any order suspending the qualification of any
Registrable Securities included in such Registration Statement for sale in any
relevant jurisdiction, use its commercially reasonable efforts promptly to
obtain the withdrawal of such order;

 

(8)           promptly notify the selling Holders and the managing underwriters,
if any, and confirm such notice in writing, when a Prospectus or any supplement
or post-effective amendment to such Prospectus has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto, when the
same has become effective, of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Prospectus or the initiation of any
proceedings by any governmental authority for that purpose, of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration Statement or any
of the Registrable Securities for offer or sale under the securities or blue sky
laws of any relevant jurisdiction, and of its obtaining knowledge of the
occurrence of any event or the existence of any facts that make any statement
made in such Registration Statement or Prospectus untrue in any material respect
or that require the

 

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making of any change in such Registration Statement or Prospectus so that it
will not omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (which notice shall be a Suspension
Notice);

 

(9)           as promptly as practicable upon obtaining knowledge of the
occurrence of any event contemplated by Section 4(c)(8) above, use its
commercially reasonable efforts to prepare a supplement or post-effective
amendment to the Registration Statement or the Prospectus, or any document
incorporated therein by reference, or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold, the Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;

 

(10)         if requested by the underwriters, if any, or a Holder of
Registrable Securities being sold, promptly incorporate in a Prospectus,
supplement or post-effective amendment such information as the requesting
Person(s) reasonably request to be included therein relating to the sale of the
Registrable Securities, and make all required filings of such Prospectus,
supplement or post-effective amendment promptly following notification of the
matters to be incorporated in such supplement or post-effective amendment;

 

(11)         if the offering is an underwritten offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other appropriate and
reasonable actions requested by the Holders owning a majority of the Registrable
Securities included in the registration or by the managing underwriters in order
to expedite or facilitate the disposition of such Registrable Securities
(including, in the case of a Demand Registration, by causing senior executives
of the Company to participate in a reasonable number of “roadshow” or similar
meetings with potential investors);

 

(12)         if the offering is an underwritten offering, use its reasonable
best efforts to obtain “comfort” letters and updates thereof, in customary form,
scope and substance, from the independent reserve engineers (if any, to the
extent required by the managing underwriters) and the independent certified
public accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial data are,
or are required to be, included in the Registration Statement); and

 

(13)         use its reasonable best efforts to obtain opinions and updates
thereof, in customary form, scope and substance, from counsel to the Company to
the extent necessary or desirable.

 

Notwithstanding anything in this Agreement to the contrary, it is understood and
agreed that the Company shall not be required to take actions to support an
underwritten offering in the manner contemplated by Sections 4(c)(11), (12) or
(13) or otherwise during the period between the end of a fiscal period and the
filing of the report on Form 10-Q or 10-K with respect to such

 

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period if it reasonably determines that doing so would impair its ability to
complete such report in a timely and accurate manner.

 

5.             Registration Expenses.

 

(a)           Expenses Payable by the Company.  The Company shall bear all
expenses incurred with respect to the registration or attempted registration of
the Registrable Securities pursuant to Sections 2 or 3 of this Agreement as
provided herein.  Such expenses shall include, without limitation, (i) all
registration, qualification and filing fees (including, without limitation,
(A) fees payable to the Commission, (B) fees with respect to filings required to
be made with the national securities exchange or national market system on which
the Common Stock is then traded or quoted and (C) fees and expenses relating to
compliance with state securities or blue sky laws (including, without
limitation, fees and disbursements of counsel for the Company or the
underwriters, or both, in connection with blue sky qualifications of Registrable
Securities)), (ii) messenger and delivery expenses, word processing, duplicating
and printing expenses (including without limitation, expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company, printing preliminary prospectuses, prospectuses,
prospectus supplements, including those delivered to or for the account of the
Holders, and blue sky memoranda), (iii) fees and disbursements of counsel for
the Company, (iv) fees and disbursements of all independent certified public
accountants and reserve engineers, if any, for the Company (including, without
limitation, fees relating to any comfort letters), (v) all out-of-pocket
expenses of the Company (including, without limitation, expenses incurred by the
Company, its officers, directors, and employees performing legal or accounting
duties or preparing or participating in “roadshow” presentations), and
(vi) NASDAQ listing fees.

 

(b)           Expenses Payable by the Holders.  Each Holder shall pay all
underwriting discounts and commissions or placement fees of underwriters or
broker’s commissions incurred in connection with the sale or other disposition
of Registrable Securities for or on behalf of such Holder.

 

6.             Indemnification.

 

(a)           Indemnification by the Company.  The Company agrees to indemnify,
to the fullest extent permitted by law, each Holder, each affiliate of a Holder
and each director, officer, employee, manager, partner, member, counsel, agent
or representative of such Holder and its affiliates and each Person who controls
any such Person (within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act) (collectively, the “Holder Indemnified
Parties”) against, and hold it and them harmless from, all losses, claims,
damages, liabilities, actions, proceedings, costs (including, without
limitation, costs of preparation and reasonable attorneys’ fees and
disbursements) and expenses, including expenses of investigation and amounts
paid in settlement (collectively, “Losses”) arising out of, caused by or based
upon any untrue or alleged untrue statement of material fact contained in any
Registration Statement, or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (a “Misstatement/Omission”), or any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any state securities law,
or any rule or regulation promulgated under the Securities Act, the Exchange Act
or any state securities law; provided, however, that the Company shall not be
liable insofar as such

 

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Misstatement/Omission or violation is made in reliance upon and in conformity
with information furnished in writing to the Company by a Holder expressly for
use therein; provided, further, that the Company shall not be liable for a
Holder’s failure to deliver or cause to be delivered (to the extent such
delivery is required under the Securities Act) the Prospectus contained in the
Registration Statement, furnished to it by the Company on a timely basis at or
prior to the time such action is required by the Securities Act to the person
alleging a Misstatement/Omission if such Misstatement/Omission was corrected in
such Prospectus.  In connection with an underwritten offering, the Company will
agree to indemnify the underwriters participating in the offering, their
officers and directors and each Person who controls such underwriters (within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act) on customary terms set forth in the relevant underwriting
agreement.

 

(b)           Indemnification by the Holders.  In connection with any
Registration Statement in which a Holder is participating, each such Holder
agrees to indemnify, to the fullest extent permitted by law, the Company, each
director and officer of the Company and each Person who controls the Company
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act), and each other Holder participating in the registration,
against, and hold it harmless from, any Losses arising out of or based upon
(i) any Misstatement/Omission contained in the Registration Statement, if and to
the extent that such Misstatement/Omission was made in reliance upon and in
conformity with information furnished in writing by or on behalf of such Holder
for use therein or (ii) the failure by such Holder to deliver or cause to be
delivered (to the extent such delivery is required under the Securities Act) the
Prospectus contained in the Registration Statement furnished to it by the
Company on a timely basis at or prior to the time such action is required by the
Securities Act to the person asserting a Misstatement/Omission if such
Misstatement/Omission was corrected in such Prospectus.  Notwithstanding the
foregoing, each Holder’s obligation to indemnify will be individual (several and
not joint) and will be limited to the net amount of proceeds received by such
Holder from the sale of Registrable Securities pursuant to the Registration
Statement giving rise to the indemnification obligation.

 

(c)           Conduct of Indemnification Proceedings.  In case any action, claim
or proceeding shall be brought against any Person entitled to indemnification
hereunder, such indemnified party shall promptly notify each indemnifying party
in writing, and the indemnifying party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the indemnified
party and payment of all fees and expenses incurred in connection with the
defense thereof.  The failure to so notify the indemnifying party shall relieve
the indemnifying party of its indemnification obligations to the extent that the
failure to notify materially prejudiced the indemnifying party.  Each
indemnified party shall have the right to employ separate counsel in such
action, claim or proceeding and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the indemnifying party has agreed to pay such expenses, (ii) the
indemnifying party has failed promptly to assume the defense of the action,
claim or proceeding or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both the indemnified party
and the indemnifying party or an affiliate or controlling person of the
indemnifying party, and the indemnified party shall have been advised in writing
by counsel that either (x) there may be one or more legal defenses available to
it which are different from or in addition to those available to the
indemnifying party or such affiliate or controlling person or (y) 

 

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a conflict of interest may exist if such counsel represents the indemnified
party and the indemnifying party or its affiliate or controlling person;
provided, however, that the indemnifying party shall not, in connection with any
one such action, claim or proceeding or separate but substantially similar or
related actions, claims or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be responsible hereunder for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel), which counsel shall be designated by the indemnified party
or, in the event that the indemnified party is a Holder Indemnified Party, by
the Holders of a majority of the Registrable Securities included in the relevant
registration.

 

(d)           Right to Contribution.  If the indemnification provided for in
this Section 6 is unavailable to, or insufficient to hold harmless, an
indemnified party under Section 6(a) or Section 6(b) in respect of any Losses
incurred, then each applicable indemnifying party shall have an obligation to
contribute to the amount paid or payable by such indemnified party as a result
of such Losses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party, on the one hand, and of the indemnified party,
on the other, in connection with the Misstatement/Omission or violation which
resulted in such Losses, taking into account any other relevant equitable
considerations.  The amount paid or payable by a party as a result of the Losses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 6(c) above, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation, lawsuit or legal or
administrative action or proceeding.

 

The relative fault of the indemnifying party, on the one hand, and of the
indemnified party, on the other, shall be determined by reference to, among
other things, whether the relevant Misstatement/Omission or violation relates to
information supplied by the indemnifying party or by the indemnified party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such Misstatement/Omission or violation.

 

The parties agree that it would not be just and equitable if contribution
pursuant to this Section 6(d) were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to above.  Notwithstanding the provisions of this
Section 6(d), a Holder shall not be required to contribute any amount in excess
of the amount by which (i) the net amount of proceeds received by such Holder
from the sale of Registrable Securities pursuant to the Registration Statement
giving rise to the contribution obligation exceeds (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of the
relevant Misstatement/Omission or violation.

 

No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.

 

(e)           Limitation on Indemnification and Contribution.  No indemnifying
party shall be liable pursuant to this Section 6 for any settlement effected
without its written consent, which consent may not be unreasonably delayed or
withheld.  Each indemnifying party agrees that it will not, without the
indemnified party’s prior written consent, consent to entry of any judgment or
settle or compromise any pending or threatened claim, action or proceeding in
respect of which indemnification or contribution has been sought hereunder
unless the terms of

 

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such consent, settlement or compromise includes an unconditional release, in
form and substance reasonably satisfactory to the indemnified parties, of the
indemnified parties from all liability and obligation arising therefrom.  The
indemnifying party’s liability to any indemnified party hereunder shall not be
extinguished solely because any other indemnified party is not entitled to
indemnity hereunder.

 

(f)            Effect of Underwriting Agreement.  Notwithstanding anything to
the contrary in this Section 6, in the event an underwriting agreement is
entered into in connection with an underwritten offering that includes
Registrable Securities, the terms of such agreement relating to indemnification
and contribution shall control if in conflict with the terms hereof.

 

7.             Registration Defaults.

 

(a)           Liquidated Damages.  If a Registration Statement required by
Section 2(d) does not become effective on or before the Target Effective Date,
then each Holder shall be entitled to a payment (with respect to the Registrable
Securities of each such Holder), as liquidated damages and not as a penalty, of
0.25% of (i) the Share Purchase Price multiplied by (ii) the number of
Registrable Securities held by such Holder (such product being the “Liquidated
Damages Amount”) per the 30-day period following the Target Effective Date,
increasing by an additional 0.25% per each subsequent non-overlapping 30-day
period following the Target Effective Date, up to a maximum of 1.00% of the
Liquidated Damages Amount per each non-overlapping 30-day period until the
Registration Statement becomes effective (the “Liquidated Damages”) (i.e., 0.25%
for 1-30 days; 0.5% for 31-60 days; 0.75% for 61-90 days; and then 1.0% for all
30 day periods thereafter); provided, that the aggregate amount of Liquidated
Damages shall not exceed 5.0% of the Share Purchase Price multiplied by the
number of Registrable Securities held by such Holder.  The Liquidated Damages to
be paid to each Holder for any period of less than 30 days shall be prorated by
multiplying the Liquidated Damages to be paid to each Holder in a full 30 day
period by a fraction, the numerator of which is the number of days for which
Liquidated Damages have accrued, and the denominator of which is 30. The
Liquidated Damages payable pursuant to this Section 7(a) shall be payable within
ten (10) business days after the end of each such non-overlapping 30-day
period.  Any Liquidated Damages shall be paid to each Holder in cash or
immediately available funds.

 

(b)           Additional Rights to Liquidated Damages.  If the Holders shall be
prohibited from selling their Registrable Securities under a Registration
Statement as a result of a Suspension Event or Suspension Events in excess of
the Delay Period, the Holders shall be entitled to a payment (with respect to
the Registrable Securities of each such Holder) of an amount equal to the
Liquidated Damages, following the date which is the first business day after the
60th consecutive day, or the 90th day in any 12-month period, the Registration
Statement ceased to be effective or failed to be useable for its intended
purposes (the “Default Date”), as liquidated damages and not as a penalty;
provided, however, that if a Director designated by the Purchaser pursuant to
the Purchase Agreement shall have approved an action that resulted in the
Suspension Event or Suspension Events exceeding the Delay Period, then the
Holders shall not be entitled to payment of Liquidated Damages. The Liquidated
Damages with respect to this Section 7(b) shall be calculated in accordance with
Section 7(a) with reference to the Default Date rather than reference to the
Target Effective Date.  The Liquidated Damages payable pursuant to the
immediately preceding sentence shall be payable within ten (10) business days

 

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after the end of each such non-overlapping 30-day period.  Any Liquidated
Damages shall be paid to each Holder in cash or immediately available funds.

 

(c)           Waiver of Liquidated Damages.  If the Company is unable to cause
a Registration Statement to become effective by the Target Effective Date as a
result of an acquisition, merger, reorganization, disposition or other similar
transaction, then the Company may request a waiver of the Liquidated Damages
from each Holder of Registrable Securities, which may be granted by the consent
of the Holders of a majority of the Registrable Securities; provided, that each
Holder may waive, in its sole discretion, the payment of Liquidated Damages with
respect to such Holder’s Registrable Securities.

 

8.             Underwritten Registrations.  Without limiting a Holder’s right to
withdrawal pursuant to Section 2(f) and Section 3(a), no Person may participate
in any registration hereunder which is underwritten unless such Person
(a) agrees to sell such Person’s securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, customary indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements; provided,
however, that no Holder of Registrable Securities included in any underwritten
registration shall be required to make any representations or warranties to the
Company or the underwriters except representations and warranties regarding such
Holder and such Holder’s intended method of distribution and other customary
representations and warranties reasonably requested by the Company or the
underwriters.

 

9.             Covenants of Holders.

 

(a)           Cooperation.  Each Holder hereby agrees (i) to cooperate with the
Company and to furnish to the Company all such information regarding such
Holder, its ownership of Registrable Securities and the disposition of such
securities in connection with the preparation of the Registration Statement and
any filings with any state securities commissions as the Company may reasonably
request, (ii) to the extent required by the Securities Act, to deliver or cause
delivery of the Prospectus contained in the Registration Statement, and any
amendment or supplement thereto, to any purchaser of the Registrable Securities
covered by the Registration Statement from the Holder and (iii) to notify the
Company of any sale of Registrable Securities by such Holder.

 

(b)           Suspension of Use of Registration Statement.  Each Holder agrees
that, upon receipt of a Suspension Notice or written notice from the Company of
the occurrence of any event of the kind described in Section 4(c)(8) or the
commencement of a Delay Period, such Holder will forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement until such Holder’s receipt of an End of Suspension Notice.

 

(c)           Insider Trading Laws.  Each Holder agrees that it will not sell,
transfer or otherwise dispose of Registrable Securities in a manner contrary to
applicable securities laws.  A period in which one or more Holders are
prohibited from selling, transferring or disposing of Registrable Securities
pursuant to such laws shall not be deemed a Delay Period for the purposes of
this Agreement.

 

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10.           Miscellaneous.

 

(a)           No Superior Rights.  The Company shall not, without the prior
written consent of the Holders of a majority of the Registrable Securities,
grant any rights to any Person to register any shares of capital stock or other
securities of the Company if such rights would be superior to the rights of the
Holders granted pursuant to this Agreement with respect to the matters addressed
in Sections 2(h) or 3(b).

 

(b)           Remedies.  Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.  The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and hereby agree to waive the defense in any
action for specific performance or injunctive relief that a remedy at law would
be adequate.  Accordingly, any party may in its sole discretion apply to any
court of law or equity of competent jurisdiction (without posting any bond or
other security) for specific performance and for other injunctive relief in
order to enforce or prevent violation of the provisions of this Agreement.

 

(c)           Amendments and Waivers.  Except as otherwise provided herein, the
provisions of this Agreement, including the provisions of this sentence, may be
amended, modified, supplemented or waived only upon the prior written consent of
the Company and Holders of a majority of the outstanding Registrable Securities.

 

(d)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.  The Holders may assign all or any portion of their rights hereunder
with respect to Registrable Securities to any transferee of such securities;
provided, however, that notice of such assignment must be provided to the
Company together with any other information regarding the assignee that the
Company may reasonably request (it being understood that (i) failure to provide
such notice shall not affect the validity of such assignment and (ii) that the
assignee shall not have any rights hereunder until such notice and information
is provided).

 

(e)           Termination of Registration Rights.  The rights of any Holder to
cause the Company to register Registrable Securities under Sections 2 or 3 of
this Agreement shall terminate with respect to such Holder when such Holder is
legally able to dispose of all of its Registrable Securities in one transaction
pursuant to Rule 144 under the Securities Act.

 

(f)            Severability.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected, it being intended that the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

 

(g)           Counterparts.  This Agreement may be executed in any number of
counterparts, any one of which need not contain the signatures of more than one
party, but each

 

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of which when so executed shall be deemed to be an original and all such
counterparts taken together shall constitute one and the same Agreement.

 

(h)           Descriptive Headings; Interpretation.  The descriptive headings of
this Agreement are inserted for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.  The use of the word “including”
in this Agreement shall be by way of example rather than by limitation.

 

(i)            Notices.  All notices, requests and other communications provided
for or permitted to be given under this Agreement must be in writing and shall
be given by personal delivery, by certified or registered United States mail
(postage prepaid, return receipt requested), by a nationally recognized
overnight delivery service for next day delivery, or by facsimile transmission
to the following addresses (or to such other addresses as the relevant party may
give in a notice given in accordance with the provisions hereof):

 

If to the Company:

 

CREDO Petroleum Corporation
1801 Broadway, Suite 900
Denver, Colorado 80202

Attention: James T. Huffman

 

with a copy (which shall not constitute notice) to:

 

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, CO 80202

Attention:  John Elofson

 

If to the Purchaser:

 

RCH Energy Opportunity Fund II, LP

21 Waterway, Suite 200

The Woodlands, TX 77380

Attn: John Rigas

 

With a copy to:

 

Andrews Kurth LLP

600 Travis, Suite 4200

Houston, Texas 77002

Attention: Gislar Donnenberg

 

(j)            GOVERNING LAW; SUBMISSION TO JURISDICTION.  THIS AGREEMENT SHALL
BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF COLORADO WITHOUT
REGARD TO THE CONFLICT OF

 

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LAW PRINCIPLES THEREOF.  The parties hereby irrevocably submit to the
jurisdiction of any federal court located in the State of Colorado or any
Colorado state court solely in respect of the interpretation and enforcement of
the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a
Colorado state or federal court.  The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in
Section 10(i) or in such other manner as may be permitted by law shall be valid
and sufficient service thereof.

 

EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

(k)           Entire Agreement.  This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

 

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IN WITNESS WHEREOF the parties hereto have or have caused this Registration
Rights Agreement to be duly executed as of the date first above written.

 

 

CREDO Petroleum Corporation

 

 

 

 

 

By:

/s/ James T. Huffman

 

 

Name: James T. Huffman

 

 

Title:   Chief Executive Officer

 

 

 

 

 

 

RCH Energy Opportunity Fund II, LP

 

 

By: RCH Energy Opportunity Fund II GP, LP;

 

 

  its general partner

 

 

By: RR Advisors, LLC; its general partner

 

 

 

By:

/s/ W. Mark Meyer

 

 

Name: W. Mark Meyer

 

 

Title:    President

 

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