Exhibit 10.1


 


CREDO PETROLEUM
CORPORATION


 


KEY EMPLOYEE
RETENTION PLAN


 


AS AMENDED AND
RESTATED


 


EFFECTIVE AS OF
JUNE 12, 2008


 


Originally Effective: July 10, 1996


 

















 


KEY EMPLOYEE
RETENTION PLAN


AS AMENDED AND
RESTATED


EFFECTIVE AS OF
JUNE 12, 2008


 


This Key Employee Retention Plan, originally made and entered into
to be effective as of the 10th day of July, 1996, is hereby amended
and restated effective as of the 12th day of June, 2008 by CREDO Petroleum
Corporation.


 


1.             PURPOSE


 


The purpose of the CREDO Petroleum
Corporation Key Employee Retention Plan (the “Plan”) is to provide a bonus
incentive to certain key employees of CREDO Petroleum Corporation (the “Company”)
to remain in the employ of the Company during periods when the future of the
Company or the location of the Company is uncertain due to a potential Change
of Control of the Company or Relocation of the Company.  In particular, the Plan is designed to keep
employees who are in a position to contribute materially to the successful
Change of Control of the Company or Relocation of the Company and to prevent
the loss of employees in the event such a Change of Control or Relocation of
the Company fails to occur.


 


A “Change of Control” shall be
deemed to have occurred if any one of the events set forth below occurs.


 


a.                                       Any “person” or “group” (within the
meaning of Sections 13(d) and 14(d)(2) of the 1934 Act) is or becomes
the “beneficial owner” (as defined in Rule 13-d-3 under the 1934 Act),
directly or indirectly, of 30% or more of the then outstanding voting stock of
the Company.


 


b.                                      The stockholders of the Company
approve a merger, combination, consolidation of the Company with any other
entity resulting in the voting securities of the Company immediately prior to
the consolidation representing less than 51% of the merged, combined, or
consolidated company’s voting securities.


 


c.                                       Any transaction (or combination of
transactions) is consummated for the sale, disposition, or liquidation of at
least 50% of the Company’s net assets provided, however, that this provision
shall not apply if the sale, disposition, or liquidation results in a transfer
of at least 50% of the net assets to a majority owned subsidiary of the
Company.  Net assets are total assets
less liabilities.


 


d.                                      Election of one-third of the
members of the Company’s Board of Directors proposed by any party or group
nominating directors in opposition to the directors nominated for election by
the Company’s then existing Board of Directors.


 


It is expected that the date of any
Change of Control will be fixed by the occurrence of certain events; however,
in the event of uncertainty, the Board of Directors may clarify the date as of
which a Change of Control shall be deemed to have occurred.


 

















 


A “Relocation” shall be deemed to
have occurred if the offices of the Company where a Participant is located are
moved and relocated to another area at least 30 miles from the current offices
of the Company where a Participant is located.


 


2.             ADMINISTRATION


 


The Plan shall be administered by
the Board of Directors or the Executive Committee thereof (the “Board”) and
both the Board of Directors and the Executive Committee shall have all of the
authority granted herein, except as otherwise specifically reserved to the
Board of Directors.  In the event of a conflict
between the Board of Directors and the Executive Committee, the decision of the
Board of Directors shall control.  The
Board of Directors shall have sole discretion to interpret the terms of the
Plan.


 


3.             PARTICIPATION


 


The Board shall designate those
employees who are to participate in the Plan (hereinafter “Participant(s)”) and
the effective date of their participation, and shall advise each Participant in
writing stating the terms and the conditions of this participation (“Participation
Letter”).  At any time in its sole
discretion, the Board may terminate any Participant’s employment with the
Company or may terminate any employee’s status as a Participant in the Plan,
except that the Board may not terminate a Participant’s status as a Plan Participant
at any time when a Change of Control or Relocation is threatened, under
discussion, in progress, subject to legal consideration, or subject to
applicable approval, or following a Change of Control or Relocation, until the
Participant’s Compensation earned and received after the date of such Change of
Control or Relocation is equal to the Qualified Payments defined in Section 4.


 


4.             PARTICIPANT BENEFITS UPON QUALIFIED
TERMINATION


 


In the event of Change of Control
or Relocation resulting in a Qualified Termination, as described in Section 5,
each Participant shall be entitled to the benefits provided under this Section 4.  The Company shall borrow funds, if necessary,
to pay for the benefits provided hereunder.


 


a.                                       Each Participant shall be entitled
to receive a “Qualified Payment” in cash equal to a minimum of the difference
between: (i) the result of (A) Participant’s Monthly Base Salary (as
indicated in the Company’s payroll records or minutes of Board meetings) plus one-twelfth (1/12) of the greater of
(aa) the Participant’s bonus for the immediately preceding year or (bb) the
Participant’s average bonus for the immediately preceding three years (as
indicated in the Company’s payroll records or minutes of Board meetings)
multiplied by (B) the
number of years (including fractions thereof) which the Participant has been
employed by the Company, or such other greater amount as the Board may deem
appropriate considering the circumstances and documented in writing to the
Participant, and (ii) the salary payments earned and received by the
Participant for his or her employment with the Company after the date of the
Change of Control or 


 


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Relocation.  The Qualified Payment shall be a lump sum
cash payment to be made on the date a Qualified Termination occurs.


 


b.                                      Unless specifically prohibited or
restricted in a Company welfare benefit plan or by law, each Participant shall
be entitled to continue any participation he had immediately prior to the
Change of Control or Relocation in each of the Company’s welfare benefit plans
(as set forth in, or on a schedule to, any Change of Control transaction
agreement or Relocation plan or in the absence of such an agreement, schedule
or plan, any benefit paid by the Company on behalf of the Participant) (herein
after “Benefits”) for a minimum period equal to the difference between” (i) one
month for each year or partial year that the Participant has been employed by
the Company and (ii) one month for each complete month during which the
Participant has been employed after the Change of Control or Relocation, or
such greater period as the Board may deem appropriate (“Coverage Period”).  To the extent that any Company welfare
benefit plan is a group health plan that is subject to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended or similar state law (“COBRA”),
each Participant’s entitlement to participation in such plan during the
Coverage Period shall comply with the following:


 


i.                                          Coverage
during the COBRA period.  Provided that
the Participant timely elects continuation health insurance coverage under
COBRA, COBRA coverage shall be provided on the same basis as Participant’s
health insurance coverage, including eligible dependents (“Dependents”) and coverage
elections, in effect at the Separation Date (“Participant’s Company Heath
Coverage”).  Participant’s share of the
COBRA premiums shall be equal to the proportion of the Participant’s Company
Health Coverage premium that the Participant was required to pay immediately
prior to the Change of Control or Relocation until the first to occur of (A) the
termination of the Participant’s COBRA coverage, or (B) the end of the
Coverage Period.


 


ii.                                       Coverage
after the COBRA period.  If the
Participant is entitled to a Coverage Period that exceeds the Participant’s
COBRA period and the Participant applies for and receives comparable
replacement insurance coverage effective as of the first day of the month after
the Participant ceases to be eligible for COBRA coverage (“COBRA Replacement
Health Insurance”), then, during the period beginning on the date when the
Participant ceases to be eligible for COBRA coverage and ending on the last day
of the Coverage Period, the Participant shall be reimbursed in an amount equal
to the proportion of the Participant’s Company Health Coverage premium that the
Participant was required to pay immediately prior to the Change of Control or
Relocation, as applied to the Participant’s COBRA Replacement Health
Insurance.  Such reimbursement shall be
paid within thirty (30) days of the Participant’s submission of proof of
premium payment.


 


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5.             QUALIFIED TERMINATION


 


“Qualified Termination” shall mean:


 


a.                                       In the event of a Change of
Control, a “Qualified Termination” shall mean (i) a  termination of the Participant’s employment
by the Company or its successor effective on the date of a Change of Control;
or (ii) in the event of a Change of Control, if the Participant remains
employed at the discretion of the new controlling party and the Participant’s
compensation earned and received after the date of such Change of Control has not
equaled the Qualified Payment, a termination for either of the following
reasons:


 


A.            by the Company
or its successor for any reason other than for Cause; or


 


B.            by the
Participant for Good Reason.


 


b.                                      In the event of a Relocation, a “Qualified
Termination” shall mean (i) a termination of the Participant’s employment
by the Company or the Participant if, and only if, the Participant chooses not
to relocate or the Company terminates the Participant’s employment other than
for Cause on the date of such Relocation, 
provided that the Participant is employed by the Company on the date
when such Relocation occurs; or (ii) in the event of a Relocation, if the
Participant remains employed by mutual agreement of the Company and the
Participant at a location that does not qualify as a Relocation for that
Participant, and the Participant’s compensation earned and received after the
date of such Relocation has not equaled the Qualified Payment, a
termination for any of the following reasons:


 


A.            by the Company for any reason other
than for Cause; or


 


B.            by the Participant for any reason.


 


c.                                       “Cause” shall mean (i) serious,
willful dishonesty toward, fraud upon, or deliberate injury or attempted
deliberate injury to the Company; (ii) final conviction for a felony or
crime involving moral turpitude; (iii) willful refusal or willful failure
to follow the lawful directions of the Board; or (iv) gross violation of
the Company’s or its successor’s established policies and procedures.  The effect of this definition shall be
limited to determining the consequences of a termination and shall not restrict
or otherwise interfere with the Company’s or its successor’s discretion with
respect to the termination of any Participant’s employment.


 


d.                                      “Good Reason” shall mean the
occurrence of any of the following conditions within the twenty-four (24) month
period following the Change of Control, provided that the Participant gives the
Company or its successor written notice of such condition within ninety (90)
days of its occurrence, and the Company or its successor fails to remedy the
condition within thirty (30) days of its receipt of notice:


 


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i.              material diminution by the Company
or its successor of the Participant’s authority, duties or responsibilities or
the responsibilities of the supervisor to whom the Participant is required to
report, which change would cause the Participant’s position to become one of
less responsibility, importance or scope, including the requirement that a
Participant report to a corporate officer or employee instead of reporting
directly to the Board of Directors;


 


ii.             material diminution of the budget
making over which the Participant retains authority;


 


iii.            material reduction by the Company
or its successor of the Participant’s base salary in effect immediately
preceding the Change of Control;


 


iv.            the Company or its successor
requiring the Participant to be based anywhere other than within twenty miles
of the Company’s principal office location immediately preceding the Change of
Control, except for required business travel to an extent substantially
consistent with the Participant’s business travel requirements immediately
preceding the Change of Control; or


 


v.             any other action or inaction that
constitutes a material breach by the Company or its successor of the agreement
under which the Participant provides services.


 


6.             LIMITATIONS OF PAYMENTS TO
PARTICIPANTS


 


Notwithstanding any other provision
of this Plan, in the event that any payment (or portion thereof) to be made
hereunder to a Participant would constitute a “parachute payment” for purposes
of Section 280G(b)(2) of the Code, such payment (or portion thereof)
shall be reduced so that the remaining portion of such payment (if any) does
not constitute a parachute payment.  In
the event that more than one payment (or portion thereof) would constitute a
parachute payment, the preceding sentence shall be applied to such payments in
the order designated by the Participant until none of the remaining payments
(or portions thereof) constitute parachute payments.  If the Participant does not designate the
order in which such payments shall be reduced, each payment (or portion
thereof) shall be reduced in the order in which it is payable starting with the
payment payable last in time, and then the payment payable next to last in
time, and so forth until none of the remaining payments (or portions thereof)
constitute parachute payments.


 


7.             SAVINGS PROVISION FOR SECTION 409A
OF THE CODE


 


Notwithstanding any other provision of this Plan, it is the intention
of the Company that the Plan comply with and be administered in accordance with Section 409A
of the Code and the interpretive guidance thereunder, including the exceptions
for short-term deferrals, separation pay arrangements, reimbursements, and
in-kind distributions. The Agreement shall be construed and interpreted in
accordance with such intent.  To
the extent such potential payments or benefits could become subject to such
Section, the Company shall amend this Agreement with the goal of giving the
Participant 


 


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the economic
benefits described herein in a manner that does not result in the imposition of
additional tax under Section 409A of the Code.  Notwithstanding any provision to the
contrary,


 


a.                                       to
the extent the Participant is considered a specified employee under Section 409A
of the Code and would be entitled to a payment during the six month period
beginning on the Participant’s date of the termination that is not otherwise
excluded under Section 409A of the Code under the exceptions for
short-term deferrals, separation pay arrangements, reimbursements, in-kind
distributions, or an otherwise applicable exemption, the payment will not be
made to the Participant until the earlier of the six month anniversary of the
Participant’s date of termination or the Participant’s death; and


 


b.                                      if
on the date of termination of the Participant’s employment with the Company or
its successor, Participant would not have a separation from service within the
meaning of Section 409A of the Code and the Treasury Regulations
thereunder (“Separation From Service”) and, as a result of such termination of
employment, would receive any payment that, absent the application of this Section 7(b),
would be subject to additional tax imposed pursuant to Section 409A of the
Code, then such payment shall instead be payable on the date that is the
earliest of (1) Participant’s Separation From Service, (2) the date
the Participant becomes disabled (within the meaning of Section 409A(a)(2)(C) of
the Code), (3) the Participant’s death, or (4) such other date as
will not result in such payment being subject to such additional tax.


 


8.             ACCELERATION OF VESTING UPON CHANGE
OF CONTROL OR RELOCATION


 


Notwithstanding any provision
contained in a Stock Option Plan or Option Agreement of the Company, and unless
barred by law or because a stockholders vote is required, if a Participant has
been granted options to acquire shares of the Company’s stock, which options
vest or become exercisable over a period of time and which are not fully vested
or exercisable at the date of the Change of Control or Relocation, the rights
of the Participant under such option shall be accelerated so that all of such
options shall be vested and exercisable the day immediately preceding the date
of such Change of Control or Relocation as determined by the Board.


 


9.             ESTABLISHMENT OF ESCROW UPON A
CHANGE OF CONTROL


 


The Board shall require that the
Company, immediately prior to a Change of Control, establish an escrow account,
at a bank selected by the Board, with funds estimated to be sufficient, taking
into consideration reasonable estimates of inflation in Benefit costs, to
provide all Qualified Payments and Benefits in accordance with the Plan’s
terms.  It is the Company’s intention
that this Plan shall be an unfunded plan not subject to the provisions of the
Employee Retirement Income Security Act of 1974 (“ERISA”).  The Company shall enter into an escrow
agreement with the bank which shall provide: (i) the funds shall be held
to meet the obligations of this Plan, (ii) to the extent that Participant
salary payments received from and months of employment with 


 


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the new controlling party after a Change of Control reduce a
Participant’s Qualified Payment and Benefits, as provided in Section 4 above,
the amount of such reduction (dollar reduction in the case of Qualified
Payments and monthly premium payment contributions or reimbursements in the
case of Benefits) shall be paid to the Company, (iii) to the extent that
the actual cost of the Qualified Payments and Benefits exceed the amount placed
in escrow, the new controlling party after the Change of Control shall
contribute the difference to the escrow account on an ongoing basis, and (iv) to
the extent any funds remain in escrow following the payment of all benefits of
this Plan, the escrow shall terminate, and the remaining funds shall be paid to
the Company.  Payments to and
contributions by the Company, as required under clauses (ii) and (iii) above,
may be netted, provided that such payments and contributions are required with
respect to the same six month period.


 


10.           AMENDMENT AND TERMINATION


 


So long as there is no agreement,
letter of intent or action in progress which, if consummated, would result in,
or has caused a Change of Control or Relocation, the Plan may be amended by a
two-thirds majority vote of the entire Board of Directors without the consent
of the Participants.  Otherwise the Plan
may not be amended to affect the rights of any Participant whose rights were
granted hereunder prior to said point in time or the written consent of such
Participant to the amendment has been obtained. 
This Plan may be terminated at any time unless there is a pending threat
of Change of Control or Relocation, a pending discussion or negotiation for Change
of Control or Relocation , or a Change of Control or Relocation in
progress.  No termination may occur upon
or after a Change of Control or Relocation.


 


11.           BENEFIT OF PLAN


 


The Plan shall be binding upon and
shall inure to the benefit of the Participants, the Participants’ heirs and
legal representatives, and the Company and its successors.  The term “successor” shall mean any person,
firm, corporation or other business entity that, at any time whether by merger,
acquisition or otherwise, is a party to a Change of Control as described in Section 1.


 


12.           EMPLOYMENT RELATIONSHIP


 


Nothing contained in this Plan or
in any Participation Letter received by a Participant shall restrict or
otherwise interfere with the discretion of the Company or its successor with
respect to the termination of any Participant’s employment.


 


13.           NON-ASSIGNABILITY


 


Each Participant’s rights under
this Plan shall be non-transferable except by will or by the laws of descent
and distribution and except insofar as applicable law may otherwise
require.  Subject to the foregoing, no
right, benefit or interest hereunder shall be subject to anticipation,
alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or
set­off in respect of any claim, debt or obligation, or to execution,
attachment, levy or similar process, or to assignment by operation of law, and
any 


 


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attempt, voluntary or involuntary, to effect any such action
shall, to the full extent permitted by law, be null, void and of no effect.


 


14.           SEVERABILITY


 


In the event that any provision or
portion of this Plan shall be determined to be invalid or unenforceable for any
reason, the remaining provisions and portions of the Plan shall be unaffected
and shall remain in full force and effect to the fullest extent permitted by
law.


 


15.           EXPENSES


 


Any dispute or controversy arising out of or relating to this Plan,
including without limitation any claim by a Participant under any federal,
state or local law or statute, shall be settled by arbitration by a single
arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association from time to time in force.  The hearing on any such arbitration shall be
held in Denver, Colorado.  If such
Commercial Arbitration Rules and practices shall conflict with the
Colorado Rules of Civil Procedure or any other provisions of Colorado law
then in force, such Colorado rules and provisions shall govern.


 


Within thirty (30) days after the receipt by the Company or a
Participant of a written notice to arbitrate from a Participant or the Company,
respectively, the Company and the Participant shall mutually select the
arbitrator.  If the Company and the
Participant cannot agree on such arbitrator, the selection of the arbitrator
shall be made in accordance with the procedures of the American Arbitration
Association.


 


Awards shall be final and binding on all parties to the extent and in
the manner provided by Colorado law. 
Each award shall expressly entitle the prevailing party to recover such
party’s attorneys’ fees and costs, and the award shall specifically allocate
such fees and costs between the parties. 
All awards may be filed by any party with the Clerk of the District
Court in the City and County of Denver, Colorado, and an appropriate judgment
entered thereon and execution issued therefore. 
At the election of any party, said award may also be filed, and judgment
entered thereon and execution issued therefore, with the clerk of one or more
other courts, state or federal, having jurisdiction over the party against whom
such an award is rendered or its property.


 


16.           COLORADO LAW TO GOVERN AND COLORADO
VENUE INTENDED


 


All questions pertaining to the construction, regulation, validity
and effect of the provisions of the Plan shall be determined in accordance with
the laws of the State of Colorado without regard to the conflict of law
principles thereof.  It is also intended
that each Participant shall submit
to the venue and personal jurisdiction of the Colorado state and federal courts
concerning any dispute arising from or relating to the Plan.


 


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  DATED as of June  12, 2008.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDO PETROLEUM CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James T.
  Huffman

  
	
   

  	
   

  	
  James T. Huffman

  
	
   

  	
   

  	
  Chairman of the Board of Directors

  
				



 


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