UNITED STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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SCHEDULE 14A
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Proxy Statement
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant
x
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Filed by a Party other than the Registrant
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Check the appropriate box:
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x
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Preliminary Proxy
Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy
Statement
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Definitive additional
Materials
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Soliciting Material
Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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CREDO PETROLEUM
CORPORATION
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(Name of Registrant
as Specified in Its Charter)
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(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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x
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No fee required.
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o
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Fee computed on
table below per Exchange Act Rules 14a-6(i)(1) and 0-11
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(1)
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Title of each class
of securities to which transaction applies:
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(2)
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Aggregate number of
securities to which transaction applies:
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(3)
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Per unit price or
other underlying value of transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee is calculated and state
how it was determined):
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(4)
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Proposed maximum
aggregate value of transaction:
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(5)
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Total fee paid:
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o
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Fee paid previously
with preliminary materials.
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Check box if any
part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or
Registration Statement No.
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(3)
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Filing Party:
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(4)
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Date Filed:
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CREDO PETROLEUM CORPORATION
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held March 26, 2009
You are invited to attend or to be represented by proxy at the Annual
Meeting of Shareholders of Credo Petroleum Corporation, a Colorado corporation,
to be held at the Brown Palace Hotel, 321 Seventeenth Street, Denver, Colorado,
80202, on March 26, 2009 at 2:30 p.m., MDT, for the purposes set
forth below.
1.
To
elect three Class II directors to serve until the 2012 Annual Meeting of
Shareholders.
2.
To
ratify the appointment of the Companys independent registered public
accounting firm, Ernst & Young, LLP, for the fiscal year 2009.
3.
To
consider and vote on the reincorporation of the Company from the State of
Colorado to the State of Delaware.
4.
To
transact such other business as may properly come before the meeting and at all
adjournments thereof.
Shareholders of record at the close of business on February 12,
2009 are entitled to vote at the meeting and at all adjournments thereof. You are cordially invited to attend the
meeting in person.
Credo
Petroleum Corporations proxy statement is attached. Financial and other information concerning
the Company is contained in the Annual Report to Stockholders for the year
ended October 31, 2008. Pursuant to
new rules promulgated by the Securities and Exchange Commission (SEC), we
have elected to provide access to the Companys proxy materials both by sending
you this full set of proxy materials, including a proxy card, and by notifying
you of the availability of the proxy material on the Internet. This proxy statement, the accompanying proxy
card and the Companys 2008 Annual Report to Stockholders are available at the
Companys website at www.credopetroleum.com.
In addition, and in accordance with SEC rules, you may access the proxy
statement at www.proxyvote.com, which does not have cookies that identify
visitors to the site.
Your
vote is important. Regardless of whether
you expect to attend the meeting in person, please vote your shares via the
Internet at www.proxyvote.com, in accordance with the instructions provided on
the website, or by completing, dating, signing and returning promptly the
enclosed proxy card in the accompanying envelope (which requires no postage if
mailed in the United States) in accordance with the instruction on the proxy
card. You may revoke your proxy at any
time before it is exercised by delivering written notice of revocation, by
substituting a new proxy executed at a later date, or by requesting, in person
at the stockholders meeting, that the proxy be returned.
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BY
ORDER OF THE BOARD OF DIRECTORS
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Alford
B. Neely
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Secretary
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February 25,
2009
Denver,
Colorado
CREDO PETROLEUM CORPORATION
1801 Broadway, Suite 900
,
Denver, Colorado 80202
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, MARCH 26,
2009
GENERAL INFORMATION
Your proxy in the enclosed form is solicited by the Board of Directors
of Credo Petroleum Corporation for use at the Annual Meeting of Shareholders to
be held on Thursday, March 26, 2009 at 2:30 p.m., MDT, at the Brown
Palace Hotel, 321 Seventeenth Street, Denver, Colorado 80202, and at all
adjournments thereof. You may obtain
directions to the meeting by contacting us at (303) 297-2200. These proxy materials were first mailed to
shareholders on or about February 25, 2009.
Important Notice Regarding the
Availability of Proxy Materials for
the Annual Meeting of Shareholders to
be Held on March 26, 2009.
The
Companys Notice, Proxy Statement and Annual Report to Stockholders are available
at http://www.credopetroleum.com.
In
addition, and in accordance with SEC rules, you may also access the Notice and
Proxy Statement and
vote via the Internet at http://www.proxyvote.com, which does not have
cookies that identify visitors
to the site.
Only shareholders of record at the close of business on February 12,
2009 will be entitled to vote at the meeting.
On that date, there were 10,349,157 shares of common stock outstanding
and entitled to vote, excluding 311,098 shares held in the Companys
treasury.
All shares represented by properly executed, unrevoked proxies timely
received in proper form will be voted in accordance with the directions
specified thereon. Any such proxy on
which no direction is specified will be voted in favor of the election of the
nominees named herein to the Board of Directors, for ratification of the
appointment of Ernst & Young LLP as the Companys independent
registered public accounting firm for fiscal 2009 and for the re-incorporation
of the Company under the laws of the State of Delaware. In addition, all proxies will be voted in
accordance with the judgment of the proxy holder with respect to any other
matter which may properly come before the meeting. Any shareholder giving a proxy may revoke
that proxy at any time before it is voted at the meeting by executing a later
dated proxy, by voting by ballot at the meeting, or by filing an instrument of
revocation with the Secretary of the Company prior to the meeting.
The
Companys Annual Report on Form 10-K (the Annual Report), which includes
audited financial statements, is being mailed to shareholders of the Company
simultaneously with this Proxy Statement.
The Company amended its Annual Report by filing a Form 10-K/A on February 20,
2009. The changes made in the Form 10-K/A
are reflected in the Summary of Changes Made in Form 10-K/A being mailed
with this Proxy Statement. The Annual
Report is not part of the Companys proxy soliciting materials.
VOTING INFORMATION
The $.10 par value common stock of the Company is the only class of
capital stock outstanding. Each
outstanding share of common stock is entitled to one vote with respect to each
matter to be voted on by the shareholders, which vote may be given in person or
by proxy. Cumulative voting is not
permitted. A quorum, being
a majority of shares of outstanding common stock, is necessary in order
for business to be transacted at the meeting.
Abstentions and broker non-votes
1
represented by submitted proxies will be included in the calculation of
the number of the shares present at the meeting for the purposes of determining
a quorum. Broker non-votes means
shares held of record by a broker that are not voted because the broker has not
received voting instructions from the beneficial owner of the shares and either
lacks or declines to exercise the authority to vote the shares in its
discretion.
Proposal One.
Directors are elected by a
plurality and the nominees who receive the most votes will be elected. Proposal One is considered a routine matter
under NASDAQ rules and, accordingly, brokerage firms and nominees have the
authority to vote their customers unvoted shares on Proposal One as well as to
vote the customers shares where the customers have not furnished voting
instructions within a specified period of time prior to the Annual Meeting of
Shareholders. Abstentions and broker
non-votes will not affect the outcome of the vote on Proposal One.
Proposal Two.
To be approved, the ratification
of Ernst & Young, LLP, as the Companys independent public accounting
firm must receive the affirmative vote of the majority of the shares of common
stock present in person or by proxy at the Annual Meeting of Shareholders and
entitled to vote. Proposal Two is
considered a routine matter under NASDAQ rules and, accordingly,
brokerage firms and nominees have the authority to vote their customers
unvoted shares on Proposal Two as well as to vote the customers shares where
the customers have not furnished voting instructions within a specified period
of time prior to the Annual Meeting of Shareholders. Abstentions and broker non-votes will not
affect the outcome of the vote on Proposal Two.
Proposal Three
. To be approved, the re-incorporation of the
Company from the laws of the State of Colorado to the laws of the State of
Delaware must receive the affirmative vote of the majority of the outstanding
shares of common stock. Proposal Three
is considered a non routine matter under NASDAQ rules and, accordingly,
brokerage firms and nominees do not have the authority to vote their customers
unvoted shares on Proposal Three or to vote the customers shares if the
customers have not furnished voting instructions within a specified period of
time prior to the Annual Meeting of Shareholders. Abstentions and broker non-votes will have
the same effect as a vote against Proposal Three.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The only persons known to own of record or beneficially more than 5% of
the Companys common stock as of February 12, 2009 is set forth
below. As of February 12, 2009
there were 10,363,157 shares of common stock outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Title of Class
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Name And
Address
Of Beneficial Owner
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Amount
And Nature Of
Beneficial Ownership
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Percent
Of Class
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Common
Stock
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James
T. Huffman (1)
6919 S. Steele Street
Centennial, Colorado 80122
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748,555
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7.1
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%
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Common
Stock
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Estate
of R.K. OConnell (2)
P.O. Box 2003
Casper, Wyoming 82602
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556,428
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5.3
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%
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Common
Stock
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RCH
Energy Opportunity Fund II, LP (3)
21 Waterway, Suite 200
The Woodlands, TX 77380
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1,150,000
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11.1
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%
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Common
Stock
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RCH
Energy Opportunity Fund III, LP (3)
21 Waterway, Suite 200
The Woodlands, TX 7738
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687,000
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6.6
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%
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(1)
Mr. Huffman is the Companys Chief Executive Officer and Chairman
of the Board of Directors. Includes
404,406 shares owned by members of Mr. Huffmans immediate family and
2
108,563 shares that are related to options currently exercisable,
or exercisable within 60 days of, February 12, 2009.
(2)
Includes 454,445 shares owned by the Estate of Mr. OConnell and a
corporation for which he served on the Board of Directors, and 101,983 shares
owned by other family members.
(3)
Robert J. Raymond and RR Advisors, LLC beneficially own the RCH Energy
Opportunity Fund II, LP and RCH Energy Opportunity Fund III, LP shares.
The
following table, based in part upon information supplied by officers, directors
and principal stockholders, sets forth certain information known to the Company
with respect to beneficial ownership of the Companys common stock as of February 12,
2009, by (i) each Named Executive Officer (see Executive Compensation
Summary Compensation Table), (ii) each director of the Company, and (iii) all
directors and executive officers of the Company as a group. Except as otherwise indicated, each person
has sole voting and investment power with respect to all shares shown as
beneficially owned, subject to community property laws where applicable. Voting power is the power to vote or direct
the voting of securities, and investment power is the power to dispose of or
direct the disposition of securities.
Security Ownership of Management
Title of Class
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Name of Beneficial Owner
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Amount
And Nature Of
Beneficial
Ownership
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Percent
Of Class
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Common Stock
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Clarence H. Brown
(1) (4)
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91,080
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0.9
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%
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Common Stock
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Oakley Hall (1) (2)
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120,000
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1.2
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%
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Common Stock
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James T. Huffman
(1) (3)
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748,555
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7.1
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%
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Common Stock
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Alford B. Neely (1)
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10,000
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0.1
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%
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Common Stock
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H. Leigh Severance (7)
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237,000
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2.3
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%
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Common Stock
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William F. Skewes
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70,301
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0.7
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%
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Common Stock
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Richard B. Stevens (5)
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191,104
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1.8
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%
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Common Stock
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David E. Dennis
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0
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0.0
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%
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Common Stock
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W. Mark Meyer
(6)
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0
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0.0
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%
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Common Stock
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John A. Rigas (6)
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0
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0.0
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%
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Common
Stock
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All
Directors and Officers as a Group (ten persons)
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1,468,040
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14.2
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%
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(1)
Includes the following shares subject to stock options which are
currently exercisable, or exercisable within 60 days of February 12, 2009:
Mr. Brown - 29,250 shares; Mr. Hall 20,000 shares; Mr. Huffman
- 108,563 shares; Mr. Neely - 10,000 shares.
(2)
Mr. Halls shares are held in the name of an entity he controls.
(3)
Includes 404,406 shares owned by members of Mr. Huffmans immediate
family.
(4)
Mr. Browns shares are held in the name of a trust, of which he is
a beneficiary.
(5)
Mr. Stevens shares are held in the name of a trust, of which he is
a beneficiary.
(6)
Mr. Meyer and Mr. Rigas are partners in RCH Energy Opportunity
Fund II, LP and RCH Energy Opportunity Fund III, LP. The two funds, combined, hold 1,837,000
shares or 17.7% of the Companys common stock.
Based on Schedule 13D filed on July 14, 2008. Robert J. Raymond and RR Advisors, LLC are
the beneficial owners of the 1,837,000 RCH Energy Opportunity Fund II, LP and
RCH Energy Opportunity Fund III, LP shares.
(7)
Mr. Severance was appointed to the Board in November, 2008.
3
DIRECTORS
AND OFFICERS
Election
of Directors (Item 1 on Proxy Card)
The Articles of Incorporation, as amended,
classify members of the Board of Directors into three classes having staggered
terms of three years each. The Board of
Directors consists of eight directors, including seven independent directors,
who have particular expertise in areas considered essential to the Companys
businessnamely land, petroleum engineering, legal, accounting and
investments.
The
Board of Directors has affirmatively determined that Clarence H. Brown, Oakley
Hall, William F. Skewes, Richard B. Stevens, W. Mark Meyer, John A. Rigas and
H. Leigh Severance, who comprise a majority of the Board of Directors, are
independent directors in accordance with NASDAQ standards.
The directors to be elected to the Board of Directors in Class II
at the 2009 Annual Meeting of Shareholders will serve until the 2012 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified. Class I and Class III
directors will continue to serve until the 2010 and 2011 Annual Meetings of
Shareholders, respectively, or until their successors are duly elected and
qualified.
The Class II nominees named below are presently members of the
Board of Directors. Unless your proxy
contains contrary instructions, it will be voted FOR the nominees. Should the nominees become unable to serve,
which is not anticipated, the proxy will vote for such substitute nominees as
recommended by the Board of Directors.
Any vacancy occurring in a class following the election of that class
may be filled by the remaining members of the Board of Directors. A director selected to fill a vacancy in a
class will hold office for a term expiring at the Annual Meeting of
Shareholders at which the term of that class expires or until a successor is
duly elected and qualified.
The following table sets forth certain information with respect to each
nominee and each director whose term of office will continue after the meeting.
Information Concerning Director Nominees and Continuing Directors
Name, Age, Position
with Company
and Term as Director
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Business Experience and
Directorships
in Other Public or Investment Companies
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CLASS II - NOMINEES FOR
ELECTION AT THE 2009 ANNUAL MEETING
WHOSE TERMS WILL EXPIRE AT THE 2012 ANNUAL
MEETING
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James T. Huffman
Age: 61; Chairman of the Board,
Chief Executive Officer and Director
since 1980
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Mr. Huffman was a
founder of the Company in 1978 and has been the Chairman of the Board of
Directors and Chief Executive Officer of the Company since 1980.
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Clarence H. Brown
Age: 74; Director
since 2000
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Mr. Brown
has been an independent businessman and oil operator since December of
2000. From 1989 until December of 2000, Mr. Brown was an Executive
Vice President, Chief Operating Officer and member of the Board of Directors
for Columbus Energy, Inc. Prior to 1989, Mr. Brown was the Chairman
of the Board of Directors and Chief Executive Officer of Kimbark Oil and Gas
Company.
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W. Mark Meyer
Age: 46; Director
since July 2008
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Mr. Meyer
has been President, since April of 2007, of RR Advisors, LLC and
Principal of RCH Energy Opportunity Fund II, LP and RCH Energy Opportunity
Fund III, LP, E&P equity investment funds. From August of 2005 until
March of 2007, Mr. Meyer was a Portfolio manager for CastleArk
Management. From January of 2001 until July of 2005, Mr. Meyer
was Director of Simmons & Company, Intl and a Senior Equity
Research Analyst in the E&P sector.
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4
CLASS I - DIRECTORS WHOSE TERMS WILL EXPIRE
AT THE 2010 ANNUAL MEETING
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Oakley Hall
Age: 62; Director
since 2000
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Mr. Hall has been an independent businessman and investor since
July of 2000. Previously, Mr. Hall was an audit partner with the
accounting firm of PricewaterhouseCoopers.
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William F. Skewes
Age: 63; Director
since 1980
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Mr. Skewes
has been an attorney in private practice since April of 1988. From 1977
until April 1988, Mr. Skewes was a partner in the Denver law firm
of Kelly, Stansfield & ODonnell.
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CLASS III DIRECTORS
WHOSE TERMS WILL EXPIRE AT THE 2011 ANNUAL MEETING
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Richard B. Stevens
Age: 79; Director
since 1987
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Mr. Stevens has been
an independent businessman and oil operator since July of 1987. From
1981 to July of 1987, Mr. Stevens was President and a member of the
Board of Directors of SECO Energy Corporation.
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John A. Rigas
Age 45; Director
since July 2008
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Mr. Rigas has been
Vice President, since June of 2007, of RR Advisors, LLC and Partner
of RCH Energy Opportunity Fund II, LP and RCH Energy Opportunity Fund III,
LP, E&P equity investment funds. From January of 2006 until
May of 2007, Mr. Rigas was an independent business development
consultant for various oil and gas companies. From April of 2003 until
December of 2005, Mr. Rigas was a Principal in Odyssey Energy
Capital I, LP, managing a portfolio of oil and gas mezzanine loans.
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Pursuant
to an equity sale transaction entered into in July, 2008, RCH Energy
Opportunity Fund II LP and RCH Energy Opportunity
Fund III LP made an investment in the Company and Mr. John A.
Rigas and Mr. W. Mark Meyer, nominated by RCH, became directors of the
Company. During the period of service of
Messrs. Rigas and Meyer, significant disagreements have arisen between Messrs. Rigas
and Meyer and other board members, in particular Mr. Huffman, about a
number of issues, primarily involving the strategic direction of the Company
and the senior management of the Company.
Mr. Rigas and Mr. Meyer do not believe that Mr. Huffman
should continue as a director of the Company and voted against the nomination
of Mr. Huffman to continue as a director of the Company. The remainder of the Board members voted in
favor of Mr. Huffman being nominated for reelection as a director of the
Company. A significant majority of directors
support Mr. Huffman and the current strategic direction of the Company.
H. Leigh Severance
Age 70; Director
since November 2008
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Mr. Severance has
owned Severance Capital Management, a portfolio management company, since
1984. Prior 1984, Mr. Severance was employed by Cambiar
Investors, Inc., an independent Denver-based investment advisory firm.
Previously, he served as portfolio manager of Founder Growth Fund, portfolio
manager of J.M. Hartwell and Company, and as a securities analyst for the endowment
fund at the University of Rochester. Mr. Severance was appointed by the
Board in November, 2008 to fill an
additional Board position.
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5
Information
Concerning Other Executive Officers and Significant Employees
In addition to the directors
and executive officer listed above, during fiscal year 2008 the following
persons have been or are executive officers or significant employees as defined
by Securities and Exchange Commission regulations.
Name
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Position
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Age
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Work Experience
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Alford
B. Neely
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Chief
Financial Officer and Secretary since July 2008
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63
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Mr. Neely
served as the Companys Manager of Regulatory Compliance from July 2006
until July 2008, and was the Companys Vice President and Chief
Financial Officer from April 1998 through April 2000. From
April 2000 to July 2006, Mr. Neely was a principal in his
familys business, and served as the principal owner and general manager.
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David E. Dennis
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Chief Financial Officer
August 2006 to July 2008 and Secretary January 2007 to
July 2008
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67
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Mr. Dennis has been
the owner of Dennis & Company, PC, CPA, since 1989. Previously, he
was a partner at Holben, Dennis & Company, PC from 1979 to 1989.
Prior to that, he was Director in charge of the Rocky Mountain consulting
practice for Coopers and Lybrand (now PricewaterhouseCoopers). He is a member
of the American Institute of Certified Public Accountants and the Colorado
Society of Certified Public Accountants.
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Kenneth J. DeFehr
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Manager-Petroleum
Engineering since October 1990
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59
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Prior to joining the
Company, from 1982 until 1990, Mr. DeFehr was a Senior Reservoir
Engineer for Axem Resources, Inc. Prior to that, Mr. DeFehr was a
Reservoir Engineer for Phillips Petroleum Company. Mr. DeFehr is a
Registered Professional Engineer.
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Torie A.Vandeven
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Manager-Geology and
Exploration since August 1999
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54
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Prior to joining the
Company, from 1997 to 1998, Ms. Vandeven was a Regional Geologist for
Key Production Company. From 1995 to 1997, Ms. Vandeven was a Senior
Staff Geologist and from 1998 to 1999 a Regional Exploitation Geologist for
Amoco Production Company. Prior to 1995, Ms. Vandeven was a Senior Staff
Geologist for Santa Fe Minerals, Inc. Ms. Vandeven is a Certified
Petroleum Geologist.
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Information Concerning Meetings of the Board of Directors and Board
Committees
The Board of Directors met
sixteen times during fiscal 2008. All
directors attended more than 75% of Board and committee meetings. It is Company policy that Board members
attend the Annual Meeting of Shareholders unless health, family or other
important personal matters prohibit such attendance. All members of the Board of Directors
attended the Companys 2008 Annual Meeting of Shareholders.
The Board of Directors has an Executive
Committee consisting of Messrs. Hall, Huffman and Skewes. Mr. Hall and Mr. Skewes are independent
directors in accordance with NASDAQ standards.
The Executive Committee did not meet during fiscal 2008. There are no Compensation or Nominating
Committees because such matters are considered by the entire Board of Directors
or by the Executive Committee. The
Directors believe that, due to its size and composition, either the full Board
or the Executive Committee is capable and qualified to fulfill the function of
a separate Nominating Committee or Compensation Committee.
The
Audit Committee of the Board of Directors has three members: Mr. Hall, a retired CPA; Mr. Brown,
a former oil company executive and Mr. Skewes, an attorney in private
practice. The Audit Committee met seven
times during fiscal 2008. Mr. Hall
is a retired CPA and is a retired PricewaterhouseCoopers audit partner. He is Chairman of the Audit Committee and is
qualified as an audit committee financial expert under the applicable
Securities and Exchange
6
Commission rules. Mr. Hall,
Mr. Brown and Mr. Skewes are independent directors in accordance
with NASDAQ standards.
Consideration of Director
Nominees
Shareholder Nominees
If a shareholder wishes to
recommend a nominee for the Board of Directors, the shareholder should write to
the Corporate Secretary of the Company at:
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CREDO Petroleum Corporation
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1801 Broadway,
Suite 900
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Denver,
Colorado 80202
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Shareholders
should specify the name and address of the nominee and the qualifications of
such nominee for membership on the Board of Directors. All such recommendations will be brought to
the attention of the Companys Board of Directors.
Evaluating Nominees for
Director
Nominations for open
positions on the Board of Directors may come from a variety of sources
including business contacts of current and former directors or officers, the
use of a professional search firm selected by the Board of Directors and
shareholder nominations. In evaluating
such nominations, the Board of Directors will seek to achieve a balance of
knowledge, skills and experience on the Board.
Each nominee will be considered based on the need or desire to fill
existing vacancies or expand the size of the Board and otherwise to select
nominees that best suit the Companys needs.
Director Qualifications
Director candidates will be
evaluated based on criteria developed by the Board of Directors from time to
time for each individual vacancy.
Qualifications that will be considered for all nominees include, but are
not limited to:
·
the ability of the prospective nominee to
represent the interests of the Companys shareholders;
·
the prospective nominees personal and
professional experience and expertise;
·
the prospective nominees standards of
integrity, commitment and independence of thought and judgment; and
·
the prospective nominees ability to dedicate
sufficient time, energy and attention to the performance of his or her duties.
Certain Relationships and Related Transactions
Transactions with Related Persons
Credo
Petroleum Corporation, a Colorado corporation (the Company), entered into a
Company Stock Purchase Agreement (the Purchase Agreement) with RCH Energy
Opportunity Fund II, LP, a Delaware limited partnership (Purchaser) on June 3,
2008, pursuant to which the Company agreed to sell to Purchaser 1,150,000
shares of newly-issued common stock, par value $0.10 per share (the Stock),
at a price of $14.50 per share in cash.
On July 3, 2008, the Company completed the issuance and sale to
Purchaser of the Stock (the Closing), and contemporaneously therewith, Messrs. Huffman,
Skewes and Stevens, directors of the Company, completed a private sale to
Purchaser of 687,000 shares of Stock, also at a price of $14.50 per share, for
$6,162,500, $2,784,000 and $1,015,000, respectively (The Secondary Stock
Purchase).
The Purchase Agreement
provides that Purchaser is entitled to designate two directors to serve on the
Companys board of directors for so long as it beneficially owns at least 15%
of the outstanding common stock, and one director so long as it beneficially
owns at least 10% of the outstanding common stock. The Purchase Agreement also contains a standstill
provision that will prohibit Purchaser from acquiring any additional shares of
common stock for a period of two years following the closing without the
consent of the Company.
7
Purchaser and the Company
entered into a registration rights agreement pursuant to which Purchaser is
entitled to require the Company to register its shares of common stock for
resale under the Securities Act of 1933 in certain circumstances.
In connection with the
transactions contemplated by the Purchase Agreement and effective June 3,
2008, the Company amended its Rights Agreement, dated as of April 11,
1989, as amended (the Rights Agreement), between the Company and
Computershare Trust Company, N.A., in order to exempt the Purchase Agreement,
the agreement governing the Secondary Stock Purchase and the related
transactions from application of the Rights Agreement.
Review, Approval or Ratification of Transactions with
Related Persons
The
Board of Directors recognizes that transactions between the Company and certain
related persons present a heightened risk of conflicts of interest. In order to ensure that the Company acts in
the best interest of its stockholders, the Board of Directors has delegated the
review and approval of related party transactions to the Audit Committee. Any related party transaction required to be
disclosed in accordance with applicable SEC regulations must be reviewed and
approved by the Audit Committee. In
reviewing a proposed transaction, the audit committee must (i) satisfy
itself that it has been fully informed as to the related partys relationship and
interest and the material facts of the proposed transaction and (ii) consider
all of the relevant facts and circumstances available to the committee. After its review, the Audit Committee will
only approve or ratify transactions that are fair to the Company and not
inconsistent with the best interests of the Company and its stockholders.
Compensation Discussion and
Analysis
Overview
of Compensation Committee
The
Board of Directors (excluding Mr. Huffman with respect to Chief Executive
Officer compensation and benefits) acting as the Compensation Committee (the Compensation
Committee) is responsible for establishing and administering a general
compensation policy and program for the Company. The Compensation Committee possesses powers
of administration under the Companys employee benefit plans, including the
stock option plan, key employee retention plan and other employee benefit
plans. Subject to the provisions of
those plans, the Compensation Committee determines the individuals eligible to
participate in the plans, the extent of such participation and the terms and
conditions under which benefits may be vested, received or exercised.
Executive Compensation
Philosophy and Objectives
The Compensation Committee is
committed to a strong link between business performance and the attainment of
strategic goals with the Companys compensation and benefit programs. The Companys compensation policy is designed
to support the overall objective of maximizing the return to the Companys
shareholders by:
·
Attracting,
developing, rewarding, and retaining highly qualified and productive
individuals.
·
Directly
aligning compensation to both Company and individual performance.
·
Encouraging
executive stock ownership to enhance a mutuality of interest with the Companys
shareholders.
This
policy is intended to provide incentives that promote both the short-term and
long-term financial objectives of the Company.
Base salary and performance bonuses are designed to reward achievement
of short-term objectives while long-term incentive compensation is intended to
encourage executives to focus on the long-term goals of the Company.
Components of Executive
Compensation
Base Salary
The
Compensation Committee periodically reviews the compensation of each executive
officer and certain other significant employees, including salaries, bonuses
and total compensation levels. The
compensation for each of our named executive officers is subjectively
determined primarily on the basis of the following factors: experience, individual
8
performance,
contribution to our corporate performance, level of responsibility, duties and
functions, and breadth of knowledge.
Base salaries are also reviewed to ensure internal consistency among the
various levels of responsibility within the Company. Members of the Compensation Committee are
generally knowledgeable about compensation levels in the oil and gas industry
through associations within the industry and through periodic review of public
disclosure documents such as proxy statements of other companies. These base salaries are reviewed annually and
may be adjusted in the discretion of the Compensation Committee, based upon the
factors discussed above, as well as changes in the duties, responsibilities and
functions of the executive officer, changed economic circumstances affecting
the Company, and the Companys financial performance generally. The relative weight given to each of these
factors differs from individual to individual, as the Compensation Committee
deems appropriate.
Annual Cash Bonuses and Incentives
Cash
bonuses are awarded to executive officers and other significant employees to
recognize and reward Company and individual performance. Performance bonuses to executive officers are
subject to the discretion of the Board of Directors and focus on performance
criteria reviewed at the end of the year, including but not limited to: production volume, reserve replacement,
finding costs, internal and external prospect generation, promoting
acquisitions, dispositions or other transactions that contribute to the Companys
success, and the Companys overall financial performance. The Compensation Committee does not utilize
predetermined targets to establish the payment or level of performance bonuses,
but may establish particular performance goals for certain employees. A performance goal established for the Chief
Financial Officer was to supervise the preparation of financial statements that
did not contain a material internal control weakness, and to provide improved
training for the accounting staff. The
Committee looks primarily at the Companys relative short and long term
operating and financial performance. In
particular in 2008, taking into consideration the volatility in oil and natural
gas prices and upwardly spiraling field costs, significant weight was given to
the Companys record of success as viewed by outside, independent sources. Certain external market data considered by
the Committee included CREDOs long record of consistent performance as the
following citations show: 200 Best
Small Companies 2008, 2006, 2004, 2001 (
Forbes
Magazine); Americas Fastest Growing Small Companies 2006, 2005,
2004, 2003 (
Fortune Small Business
Magazine); Top
Performing 25 Stocks in the Past 25 Years (#17) 2007 (
USA Today
).
Additionally, the Company achieved record operating income, its second
best net earnings, and raised $16.7 million in equity capital near the
2008 market top for the Company. In
anticipation of a market slow-down, the Company was also among the first to
slow down drilling in the face of rising field costs. These factors, in the aggregate, demonstrated
the Companys successful performance.
This information, coupled with the Committee members general knowledge
of compensation levels within the oil and gas industry, provided the basis for
bonus level determinations.
Long-Term Incentive Compensation
At
the discretion of the Board of Directors, stock options may be granted to
employees, including named executive officers.
Grants are made generally on a basis similar to the parameters described
for cash bonuses. No predetermined
targets are utilized to determine the timing or amounts of awards to be
granted. However, the Board of Directors
considers items such as the potential impact on the Companys financial
statements and the desire to align the employees interests with the interests
of shareholders by providing incentive based compensation such as stock
options, and encouraging the Companys personnel to own and hold the Companys
stock. The Companys stock option plan
uses vesting periods to encourage long term affiliation with the Company.
Other Benefits
The
executive officers are entitled to the same benefits coverage as other
employees of the Company, including health insurance, participation in the
Companys 401(K) plan and the reimbursement of ordinary and reasonable
business expenses. The CEO receives
other benefits, as approved by the Board of Directors, as described in the All
Other Compensation Table.
The
Company does not currently offer any deferred compensation program,
supplemental executive retirement plan or any financial planning services for
its executive officers.
Mr. Huffman
and certain other technical employees receive payments from oil and gas
production based on overriding royalty or working interest ownership granted to
them periodically by the Company. In
fiscal 2008, such payments to Mr. Huffman totaled $68,700.
9
Chief Executive Officer
The majority of the
Compensation Committee believes Mr. Huffman has done an outstanding job of
leading and managing the Company. During
the past five years, the Company has achieved significant annual increases in
its production, reserves, revenue and net income. The Compensation Committee believes that Mr. Huffman
has positioned the Company to maintain its growth rate while expanding and
diversifying the volume and breadth of the Companys business in terms of
geography, capital requirements, risk and reserve potential. The Compensation Committee also considered Mr. Huffmans
success in completing the $16.7 million equity transaction, the effective
response to the changing economy and the external market analyses of the
Companys performance, as noted above under the caption Annual Cash Bonuses
and Incentives. Cash compensation for Mr. Huffman
during 2008 consisted of his $200,000 base salary and a cash bonus of
$150,000. Mr. Huffman also received
$68,731 in cash payments in 2008 related to overriding royalty and working
interest ownership granted to him by the Company in prior years. Although the Compensation Committee did not
award Mr. Huffman any equity-based incentives in 2008, it may do so in the
future to provide incentive compensation and to further align his financial
interests with those of the Companys shareholders.
Summary Compensation Table
The following table sets
forth the total compensation received during the Companys last two fiscal
years for services in all capacities by persons acting as the Chief Executive
Officer and Chief Financial Officer (the Named Executive Officers). No other executive officer of the Company had
total compensation in excess of $100,000 for the fiscal years ended October 31, 2008
and 2007.
Name and
Principal Position
|
|
Year
|
|
Salary
$
|
|
Bonus
$
|
|
Stock
Option
Awards(1)
$
|
|
Non-Equity
Incentive
Plan
Compensation
$
|
|
Change
in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
$
|
|
All
Other
Compen-
sation(4)
$
|
|
Total
$
|
|
James T. Huffman
|
|
2008
|
|
$
|
200,000
|
|
$
|
150,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
111,470
|
|
$
|
461,470
|
|
Chief Executive
Officer
|
|
2007
|
|
$
|
135,000
|
|
$
|
100,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
123,255
|
|
$
|
358,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David E. Dennis(2)
|
|
2008
|
|
$
|
41,667
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
41,667
|
|
Chief Financial
Officer
|
|
2007
|
|
$
|
50,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alford B. Neely(3)
|
|
2008
|
|
$
|
54,167
|
|
$
|
20,000
|
|
$
|
19,680
|
|
$
|
|
|
$
|
|
|
$
|
3,017
|
|
$
|
96,864
|
|
Chief Financial
Officer
|
|
2007
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
|
(1)
Dollar
amount of compensation recognized in 2008 for option awards, as defined under
FAS 123R, including costs related to awards granted in previous years. The discussion of assumptions used in calculating
these values can be found in Note 1 of the Notes to Consolidated Financial
Statements included in the Companys Form 10-K for the year ended October 31,
2008.
(2) Mr. Dennis served as the
Companys Chief Financial Officer from August 2006 to July 2008.
(3) Mr. Neely served as the
Companys Chief Financial Officer from July 2008.
(4) For additional information on
All Other Compensation, see table below.
10
The following table provides
a detailed breakdown of the amounts for fiscal years 2008 and 2007 under All
Other Compensation in the Summary Compensation Table:
All Other Compensation
Benefits
|
|
Year
|
|
James T.
Huffman
|
|
David E.
Dennis
|
|
Alford B.
Neely
|
|
Company
Contributions to 401(k) Retirement Plan
|
|
2008
|
|
$
|
12,566
|
|
$
|
|
|
$
|
|
|
|
|
2007
|
|
$
|
8,989
|
|
$
|
|
|
$
|
|
|
Health,
Disability & Long Term Care Insurance
|
|
2008
|
|
$
|
13,535
|
|
$
|
|
|
$
|
3,017
|
|
Premiums
|
|
2007
|
|
$
|
10,800
|
|
$
|
|
|
$
|
|
|
Life Insurance
Premiums
|
|
2008
|
|
$
|
10,609
|
|
$
|
|
|
$
|
|
|
|
|
2007
|
|
$
|
12,800
|
|
$
|
|
|
$
|
|
|
Payments on
Overriding Royalty Interests
|
|
2008
|
|
$
|
68,731
|
|
$
|
|
|
$
|
|
|
|
|
2007
|
|
$
|
84,924
|
|
$
|
|
|
$
|
|
|
Health Club
Membership
|
|
2008
|
|
$
|
2,039
|
|
$
|
|
|
$
|
|
|
|
|
2007
|
|
$
|
1,763
|
|
$
|
|
|
$
|
|
|
Auto and Other
|
|
2008
|
|
$
|
3,990
|
|
$
|
|
|
$
|
|
|
|
|
2007
|
|
$
|
3,979
|
|
$
|
|
|
$
|
|
|
Total All Other
Compensation
|
|
2008
|
|
$
|
111,470
|
|
$
|
|
|
$
|
3,017
|
|
|
|
2007
|
|
$
|
123,255
|
|
$
|
|
|
$
|
|
|
Grants of Plan-Based Awards
There
were no grants of stock options to Named Executive Officers during the fiscal
year ended October 31, 2008.
However, on September 8, 2008 options to purchase 53,706 shares
were granted to a Company executive, who subsequently resigned and the options
were cancelled.
Option
Exercised and Stock Vested
There were no option exercises by the Named Executive Officers during
fiscal year 2008.
Outstanding Equity Awards at Fiscal Year End
(1)
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
James T. Huffman
|
|
108,563
|
(2)
|
|
|
$
|
5.93
|
|
6/13/2013
|
|
David E. Dennis
|
|
|
|
|
|
|
|
|
|
Alford B. Neely
|
|
10,000
|
(3)
|
10,000
|
(3)
|
$
|
12.78
|
|
12/6/2016
|
|
(1)
All option awards were granted under the
Companys Stock Option Plans. The
Company does not grant stock awards.
(2)
This was a single grant on June 13, 2003,
as adjusted for subsequent stock dividends and stock splits. The grant vested one third on the grant
date, one third on each succeeding anniversary of the grant date, and became
fully vested on June 13, 2005.
(3)
This was a single grant of options to purchase
20,000 shares, granted on December 6, 2006. The grant vests 25% on each anniversary
of the grant date and becomes fully vested on December 6, 2010.
11
Compensation
Committee Interlocks and Insider Participation
The entire
Board of Directors served as the Companys Compensation Committee, provided
however, that Mr. Huffman did not participate in any discussions or
decisions regarding the Chief Executive Officers compensation and benefits.
No
interlocking relationship exists between the members of the Companys Board of
Directors or Compensation Committee and the board of directors or compensation
committee of any other company.
Compensation of and Agreements with Non-Employee Directors
Non-employee
directors receive $2,500 per meeting plus reimbursement for out-of-pocket
expenses for each meeting of the Board of Directors (held at the Companys
offices) attended and may be paid $100 per hour for committee meeting
attendance or for consulting services provided at the request of the majority
of the Board of Directors.
Non-employee directors may also receive director compensation in the
form of stock options granted under the Companys Stock Option Plan. The option exercise price is the price of the
Companys common stock on the option grant date. The options typically vest in one-third
increments beginning on the date of grant and then on each anniversary
thereafter until fully vested. Except
for Mr. Hall, who received a stock option grant of 20,000 shares on December 6,
2006, no stock options have been granted to non-employee directors since June 13, 2003.
During
fiscal year 2008, the Directors of the Company received the following
compensation for service as a director:
Director
Compensation
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
(1) (2) (3)
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
Clarence H.
Brown
|
|
$
|
20,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
20,000
|
|
Oakley Hall
|
|
$
|
22,000
|
|
$
|
|
|
$
|
39,384
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
61,384
|
|
W. Mark Meyer(4)
|
|
$
|
7,500
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
7,500
|
|
John A. Rigas(4)
|
|
$
|
7,500
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
7,500
|
|
William F.
Skewes
|
|
$
|
20,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
20,000
|
|
Richard B.
Stevens
|
|
$
|
15,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
92,000
|
|
$
|
|
|
$
|
39,384
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
131,384
|
|
(1)
Stock options granted to non-employee
directors typically vest in one-third increments beginning on the date of grant
and then on each anniversary thereafter until fully vested. The fair value of stock options granted was
measured as of the date of grant using a Black-Scholes option-pricing
model. Additional information regarding
the assumptions used to estimate the fair value of all stock option awards is
contained within the Companys 2008 Annual Report on Form 10-K.
(2)
Reflects the fiscal year 2008 FASB SFAS 123(R) expense
associated with an award of 20,000 stock options granted December 6, 2006.
(3)
As of October 31, 2008, outstanding
option awards to non-employee directors totaled 49,250, all of which are
currently exercisable. The weighted
average grant date fair value of outstanding options held by non-employee
directors at October 31, 2008 was $3.05 per share, as measured
using the Black-Scholes option-pricing model at the date of grant. Additional information regarding the
assumptions used to estimate the fair value of all stock option awards is
contained within the Companys 2008 Annual Report on Form 10-K.
12
(4)
Director fees earned by Messrs. Meyer and
Rigas are paid 63% to RCH Energy Opportunity Fund II, LP and 37% to RCH
Energy Opportunity Fund III, LP. Messrs Meyer and Rigas receive no director
fees directly paid to them.
The Companys By-laws provide for indemnification of its officers and
directors. The By-laws require the
Company to indemnify such officers and directors to the fullest extent
permitted by Colorado Law and to advance expenses in connection with certain
claims against the officers and directors.
Equity
Compensation Plan Information
The
Company has two equity incentive compensation plans that have been approved by
the stockholders under which shares of the Companys common stock have been
authorized for issuance to directors, officers, employees, advisors and
consultants:
·
the
1997 Stock Option Plan, which expired July 29, 2007. No additional options can be granted under
the 1997 Plan. However all outstanding options granted under the 1997 Plan
will continue to be governed by the provisions of the 1997 Plan.
·
the
2007 Stock Option Plan approved by the shareholders at the March 22, 2007
Annual Meeting. 1,000,000 shares
are authorized for issuance under the 2007 Plan, and 1,000,000 shares remain
available for grant.
The
following table sets forth information, as of October 31, 2008, with
respect to the Companys compensation plans under which Common Stock is or was
authorized for issuance and is outstanding.
Plan Category
|
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options
(a)
|
|
Weighted-Average Per
Share Exercise Price of
Outstanding Options
(b)
|
|
Number of Securities
Remaining Available for
Future Issuance Under the
Equity Compensation
Plan(s)
(c)
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
232,769
|
|
$
|
9.04
|
|
1,000,000
|
|
Equity
compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
232,769
|
|
$
|
9.04
|
|
1,000,000
|
|
Potential Payments upon
Termination of Change in Control
Key Employee Retention
Plan
The
Company has established a Key Employee Retention Plan (the Plan) for certain
of its key employees which includes the named chief executive officer. The purpose of the Plan is to provide a bonus
incentive to certain key employees to remain in the employ of the Company
during periods when there is a potential for a change in control of the
Company. Employees who are participants
in the Plan are entitled to receive qualified payments equal to their current
monthly base salary plus the greater of (i) one-twelfth of their prior
year bonus or (ii) one-twelfth of the average of their prior three years
bonus, times their years of service with the Company, or such greater amount as
the Board of Directors may deem appropriate considering the circumstances, in
the event that their employment is terminated within two years after a change
in control of the Company (a) without cause by the new controlling party
or (b) for good reason by the employee (e.g. an adverse change in the
officers status after a change in control), each as defined in the Plan. In addition, all insurance and fringe
benefits will be provided for a period equal to the greater of one month of
coverage for each year of employment with the Company or 24 months of
coverage.
13
A
change in control is defined to include (i) any person or group becomes
the beneficial owner, directly or indirectly of 30% or more of the outstanding
voting stock of the Company, (ii) the stockholders of the Company approve
a merger, combination or consolidation of the Company with any other entity
resulting in the voting securities of the Company immediately prior to the
transaction representing less than 51% of the merged, combined or consolidated
securities, (iii) any transaction (or combination of transactions) is
consummated for the sale, disposition or liquidation of at least 50% of the
Companys net assets, or (iv) election of one-third of the members of the
Companys Board of Directors proposed by any party or group nominating
directors in opposition to the directors nominated for election by the Company.
The following table presents
the amount of compensation payable to Mr. Huffman if the triggering
termination event had occurred on the last day of the Companys most recently
completed fiscal year, October 31, 2008.
Name
|
|
Salary
|
|
Bonus
|
|
All Other
Compensation(1)
|
|
Total
|
|
James T. Huffman
|
|
$
|
200,000
|
|
$
|
150,000
|
|
42,700
|
|
$
|
392,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes payments on overriding royalty
interests.
The
above amounts represent annual totals which would be paid to Mr. Huffman
on a pro-rata monthly basis for a period of 31 months, with the aggregate
amount payable to Mr. Huffman under the plan being $1,014,600. Oil and gas production payments are not
governed by the Key Employee Retention Plan.
Compensation Committee
Report
The independent members of
the Board of Directors, acting as the Compensation Committee, reviewed and
discussed the above Compensation Discussion and Analysis with the Companys
management. Based on the review and
discussions, the Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in this proxy
statement.
MEMBERS OF THE BOARD OF
DIRECTORS ACTING AS THE COMPENSATION COMMITTEE:
Clarence H. Brown
Oakley Hall
W. Mark Meyer
John A. Rigas
William F. Skewes
Richard
B. Stevens
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Item 2
on Proxy Card)
The Board of Directors has appointed Ernst & Young LLP as the
Companys independent registered public accounting firm for fiscal 2009. Representatives of Ernst & Young LLP
will be present at the Annual Meeting of Shareholders to make any statement
they so desire and will be available to answer appropriate shareholder
questions.
In
the event this proposal is defeated, the shareholder vote will not be binding
on the Company but may be considered by the Audit Committee when it considers
selecting other auditors for the next fiscal year. However, because of the difficulty and
expense of making any substitution of auditors after the beginning of the
fiscal year, Ernst & Youngs appointment for the 2009 fiscal year will
be permitted to stand unless the Audit Committee finds other reasons for making
a change.
In the absence of contrary instructions by a shareholder, the shares
represented by the proxy will be voted FOR the ratification of the appointment
of Ernst & Young LLP as the Companys independent registered pubic
accounting firm for fiscal 2009.
14
During
fiscal year 2008, the Company dismissed Hein & Associates LLP (Hein)
as the Companys independent registered public accounting firm and engaged
Ernst & Young LLP (Ernst & Young) as its new independent
registered public accounting firm for the audit of fiscal 2008. The change in independent public accounting
firms was not the result of any disagreement with Hein.
Audit Fees
The aggregate fees billed or expected to be billed for professional
services rendered by Ernst & Young LLP for its audit of the Companys
annual financial statements included in the Companys Annual Report on Form 10-K,
its audit of internal controls, and its reviews of the financial statements
included in the Companys Quarterly Reports on Form 10-Q were $273,000 for
fiscal 2008 including $43,000 related to the hedge accounting restatement.
Aggregate fees billed or expected to be billed for professional services
rendered by Hein & Associates LLP for its review of the financial
statements included in the Companys Quarterly Reports on Form 10-Q and
its review of the Companys Annual Report in Form 10-K were $48,700 in
fiscal year 2008, and $248,000 in fiscal year 2007.
Audit-Related Fees
No audit related services were provided in fiscal 2008 or 2007 by either
Ernst & Young LLP or Hein & Associates LLP
Tax Fees
Neither Ernst & Young LLP nor Hein & Associates LLP
provided tax services to the Company during fiscal 2008 or 2007.
All
Other Fees
Neither Ernst & Young LLP nor Hein & Associates LLP
provided services during fiscal 2008 or 2007 other than the services described
above.
Policies and Procedures for Approval
of Audit and Non-Audit Services
The
Audit Committee pre-approves all audit and non-audit services expected to be
performed by Ernst & Young LLP in any fiscal year. In addition, the Audit Committee has
delegated authority to its Chairman to pre-approve additional non-audit
services by Ernst & Young LLP, and ensures that the independent
registered public accounting firm shall not be engaged to perform the specific
non-audit services that are prohibited by law or regulation. The Audit Committee Chairman must report any
such additional pre-approved services at the next scheduled Audit Committee
meeting. There were no hours expended on
the Ernst & Young LLP audit of the Companys most recent
financial statements by persons other than Ernst & Young LLPs
full-time, permanent employees.
Audit Committee Report
The
responsibilities of the Audit Committee are set forth in the
Audit Committee Charter
which was revised February 12, 2007
and adopted by the Board of Directors, and was included as an Appendix to the
2007 Proxy Statement. In the future, the
Audit Committee Charter will be included in the Proxy Statement at least once
every three years. The Audit Committee
reviews and reassesses the adequacy of its Charter on an annual basis. The Companys
Audit
Committee Charter
is posted on the Companys internet website
(www.credopetroleum.com). In addition, a
copy of the
Audit Committee Charter
can be obtained
from the Company, without charge, by written request to the Chief Financial
Officer at the Companys address.
The
Audit Committee met seven times during fiscal 2008 and has met twice since
fiscal 2008 year-end. The Audit
Committee reviewed and discussed the Companys audited financial statements for
fiscal 2008 with management and the Companys independent registered public
accounting firm, and discussed with the Companys independent registered public
accounting firm the matters required to be discussed by the
Statement on Auditing Standards No. 61
as amended. The
15
Committee
has received from the independent registered public accounting firm appropriate
written disclosures regarding their independence as required by
Independence Standards Board Standard No. 1
as adopted by the Public Company Accounting
Oversight Board in Rule 3600T, and has discussed with them their
independence. Based on these reviews and
discussions, the Audit Committee recommended to the Board of Directors that the
Companys audited financial statements for the year ended October 31, 2008
be included in the Companys Annual Report on Form 10-K.
Submitted by the Audit
Committee of the Board of Directors
Oakley Hall, Chairman
Clarence H. Brown
William
F. Skewes
APPROVE THE COMPANYS
REINCORPORATION UNDER THE LAWS OF
THE STATE OF DELAWARE
(Item 3 on Proxy Card)
REINCORPORATION IN THE STATE OF DELAWARE
General
Credo Petroleum Corporation is a publicly traded independent energy
company headquartered in Denver, Colorado.
The Company is engaged in the exploration for and the acquisition,
development and marketing of natural gas and crude oil in the Mid-Continent and
Rocky Mountain regions. The Companys
Executive Offices are located at 1801 Broadway, Suite 900, Denver,
Colorado 80202; Telephone: 303-297-2200.
The
Board of Directors has unanimously approved and recommends that the
shareholders approve the reincorporation of Credo from the State of Colorado to
the State of Delaware (the Reincorporation Proposal). The reincorporation will be effected pursuant
to an Agreement and Plan of Merger, dated as of February 9, 2009 (the Merger
Agreement), by and between Credo and Credo Petroleum Corporation, a Delaware
corporation (Credo-Delaware) which is a wholly owned subsidiary of
Credo. The Board of Directors, and the
board of directors of Credo-Delaware, have unanimously approved the Merger
Agreement. The Merger Agreement is included
as Appendix A to this Proxy Statement.
No Change in Business, Jobs, Physical Location, Etc.
The
reincorporation merger will effect a change in the legal domicile of Credo and
other changes of a legal nature, the most significant of which are described
below under Comparison of Shareholder Rights Before and After the
Reincorporation. However, the
reincorporation merger will not result in any change in headquarters, business,
jobs, management, location of any of our offices or facilities, number of
employees, taxes payable to the State of Colorado, assets, liabilities or net
worth (other than as a result of the costs incident to the reincorporation
merger). The Company name will remain
the same and our management, including all directors and officers, will remain
the same in connection with the reincorporation merger and will assume
identical positions with Credo-Delaware.
None of our subsidiaries will be changing their respective states of
organization in connection with the reincorporation merger. At the effective time of the reincorporation
merger, your shares of Credo common stock will be converted into an equal
number of shares of Credo-Delaware common stock.
Reasons for the Reincorporation
Delaware
is a nationally recognized leader in adopting and implementing comprehensive
and flexible corporate laws. The General
Corporation Law of the State of Delaware (the DGCL) is frequently revised and
updated to accommodate changing legal and business needs and is more
comprehensive, widely used and interpreted than other state corporate laws,
including the Colorado Business Corporation Act (the CBCA). In addition, Delaware has established a
specialized court, the Court of Chancery, which has exclusive jurisdiction over
matters relating to the DGCL. The
Chancery Court has no jurisdiction over criminal or tort cases, and corporate
cases are heard by judges, without juries, who typically
16
have
many years of experience with corporate issues.
Traditionally, this has meant that the Delaware courts are able in most
cases to process corporate litigation relatively quickly and effectively. By comparison, many states, including
Colorado, do not have a specialized judiciary for matters relating to corporate
issues.
Delaware
courts have developed considerable expertise in dealing with corporate legal
issues and produced a substantial body of case law construing the DGCL, with
multiple cases concerning areas that no Colorado court has considered. Because our judicial system is based largely
on legal precedents, the abundance of Delaware case law should serve to enhance
the relative clarity and predictability of many areas of corporate law, which
should offer added advantages to Credo by allowing our Board of Directors and
management to make corporate decisions and take corporate actions with greater
assurance as to the validity and consequences of those decisions and actions.
Reincorporation
from Colorado to Delaware may also make it easier to attract future candidates
willing to serve on our Board of Directors, because (i) many such
candidates are already familiar with Delaware corporate law from their past
business experience and (ii) the CBCA contains limits on the permissible
indemnification of directors that are not found in the DGCL.
Finally,
the Board of Directors believes that reincorporation from Colorado to Delaware
will better enable it to protect the interests of Credos shareholders in the
event of a hostile takeover attempt. See
Anti-Takeover Considerations.
Credo-Delaware
Credo-Delaware,
a wholly owned subsidiary of Credo, was incorporated under the DGCL on February 9, 2009
exclusively for the purpose of merging with Credo. The address and phone number of
Credo-Delawares principal office are the same as those of Credo. Prior to the reincorporation merger,
Credo-Delaware will have no material assets or liabilities and will not have
carried on any business. Upon completion
of the reincorporation merger, the rights of the shareholders of Credo-Delaware
will be governed by the DGCL and the certificate of incorporation, as amended,
and bylaws of Credo-Delaware (the Delaware Certificate of Incorporation and
the Delaware Bylaws, respectively).
The Delaware Certificate of Incorporation and the Delaware Bylaws are
included as Appendices B and C, respectively, to this Proxy Statement.
The Merger Agreement
The
Merger Agreement provides that Credo will merge with and into Credo-Delaware,
with Credo-Delaware being the surviving corporation. Pursuant to the Merger Agreement,
Credo-Delaware will assume all assets and liabilities of Credo, including
obligations under our existing contracts.
Our existing Board of Directors, including the Directors elected at this
meeting, and officers will become the board of directors and officers of
Credo-Delaware and our existing subsidiaries will become the subsidiaries of
Credo-Delaware.
At
the effective time of the reincorporation merger, each outstanding share of
Credos common stock will automatically be converted into one share of
Credo-Delaware common stock and such shares will trade on the NASDAQ Global
Market under the symbol CRED. You will
not have to exchange your existing stock certificates of Credo for stock
certificates of Credo-Delaware. However,
after consummation of the reincorporation merger, any stockholder desiring a
new form of stock certificate may submit the existing stock certificate to
Credo-Delawares transfer agent for cancellation and obtain a new
certificate. The transfer agent for
Credo and Credo-Delaware is Computershare Trust Company, 350 Indiana Street, Suite 800,
Golden, CO 80401, Telephone:
1-800-962-4284.
Pursuant
to the reincorporation merger, Credo-Delaware will assume all of Credos
obligations under its existing stock incentive plans. Each award of shares of Credos common stock
under such plans will be converted into an award of shares of Credo-Delaware
common stock on the same terms and conditions as in effect immediately prior to
the reincorporation, and each outstanding option to purchase shares of Credo
common stock under such plans will be converted into an option to purchase the
same number of shares of Credo-Delaware common stock on the same terms and
conditions as in effect immediately prior to the reincorporation. Options and rights granted under Credos
incentive plans in the future will be for shares of Credo-Delaware common
stock.
17
The
Merger Agreement has been approved by the Board of Directors of Credo, by the
board of directors of Credo-Delaware and by Credo as the sole shareholder of
Credo-Delaware. Approval of the
Reincorporation Proposal by Credos stockholders requires the affirmative vote
of the holders of a majority of all of the votes entitled to be cast on the
proposal.
A
vote in favor of the Reincorporation Proposal is a vote to approve the Merger
Agreement and the reincorporation merger.
A vote in favor of the Reincorporation Proposal is also a vote in favor
of the Delaware Certificate of Incorporation and the Delaware Bylaws.
Pursuant
to Section 7-113-102(1.3) of the CBCA, Credo shareholders will not have
the right to dissent and demand payment for their shares.
Effective Time
If
the Reincorporation Proposal is approved, it is anticipated that the
reincorporation merger will become effective at the time set forth in the
statement of merger to be filed with the Secretary of State of Colorado and the
certificate of merger to be filed with the Secretary of State of Delaware. However, the Merger Agreement may be
terminated and abandoned by action of the Board of Directors at any time prior
to the effective time of the reincorporation merger, whether before or after
the approval by Credos shareholders, if the Board of Directors determines for
any reason, in its sole judgment and discretion, that the consummation of the
reincorporation merger would be inadvisable or not in the best interests of
Credo and its shareholders.
Effect of Not Obtaining the Required Vote for Approval
Approval
of the Reincorporation Proposal by Credos stockholders requires the
affirmative vote of the holders of a majority of all of the outstanding shares
entitled to be cast on the proposal.
If
the Reincorporation Proposal fails to obtain the requisite vote for approval,
the reincorporation merger will not be consummated and Credo will continue to
be incorporated in Colorado.
Anti-Takeover Considerations
Currently,
Credo has in place certain provisions in its certificate of incorporation and
bylaws that reduce its vulnerability to hostile takeover attempts, including a
staggered Board of Directors, a poison pill, blank check preferred stock and
the requirement that certain provisions of the Articles of Incorporation
relating to the Board of Directors and limitations on certain business
combinations can be amended only with the approval of 80% of the outstanding
shares entitled to vote in an election of directors.
Delaware,
like Colorado, permits a corporation to take certain actions designed to reduce
this vulnerability. Certain provisions
of the Delaware Certificate of Incorporation and Delaware Bylaws have
anti-takeover implications. The
Reincorporation Proposal is not being proposed in order to prevent any current
or threatened hostile takeover attempt.
To the extent that the Reincorporation may provide greater deterrence to
takeover offers and greater defenses against takeovers, the Reincorporation may
have the effect of discouraging or defeating future takeover attempts which a
substantial number or majority of Credos shareholders might wish to accept and
which might provide a substantial premium over market prices. The Board, however, believes that the
potential disadvantages of hostile takeover attempts (including the possibility
of terms which may be less favorable to all of the shareholders than would be
available in a board-approved transaction) are sufficiently great that, on
balance, prudent steps to reduce the likelihood of such takeover attempts and
to help ensure that the Board has adequate opportunity to fully consider and
respond to any takeover attempt and actively negotiate its terms, are in the
best interests of the Company and its shareholders.
Comparison of Shareholder Rights Before and After the
Reincorporation
Because
of differences between the CBCA and the DGCL, as well as differences between
Credos governing documents before and after the reincorporation, the
reincorporation will effect some changes in the rights of Credos
shareholders. Summarized below are the
most significant differences between the rights of the shareholders of Credo
before and after the reincorporation as a result of the differences among the
CBCA and the DGCL, the Articles of Incorporation of Credo (the Colorado
Articles of Incorporation) and the Bylaws of Credo (the Colorado Bylaws) and
the Delaware Certificate of
18
Incorporation
and the Delaware Bylaws. The summary
below is not intended to be relied upon as an exhaustive list of all the
differences or a complete description of the differences, and is qualified in
its entirety by reference to the CBCA, the Colorado Articles of Incorporation,
the Colorado Bylaws, the DGCL, the Delaware Certificate of Incorporation and
the Delaware Bylaws.
|
|
Credo
|
|
Credo-Delaware
|
Number
of Directors
|
|
The
Colorado Articles of Incorporation provide that the Board of Directors shall
have no fewer than six and no more than twelve members, with the exact number
to be determined from time to time by the Board.
|
|
The
Delaware Certificate of Incorporation provides that the Board of Directors
shall have no fewer than five nor more than nine members, and the Delaware
Bylaws provide that the exact number will be determined from time to time by
the Board.
|
|
|
|
|
|
Removal
of Directors
|
|
The
Colorado Articles of Incorporation provide that any director may be removed
by the shareholders without cause, but only with the approval of holders of
80% of the shares entitled to vote in an election of directors.
|
|
Under
the DGCL and the Delaware Certificate of Incorporation, directors can be
removed by shareholders only for cause.
|
|
|
|
|
|
Vacancies
on the Board of
Directors
|
|
Under
the Colorado Articles of Incorporation, a vacancy on the Board of Directors
may be filled by the affirmative vote of a majority of the remaining
directors.
|
|
Under
the Delaware Certificate of Incorporation, a vacancy on the Board of
Directors may be filled only by the remaining directors.
|
|
|
|
|
|
Classified
Board
|
|
The
Colorado Articles of Incorporation and the Colorado Bylaws provide for a
classified Board of Directors, with each director to serve for three-year
terms. The provisions in the Colorado Articles of Incorporation relating to
the classification of the Board can be amended only with the approval of
holders of 80% of the shares entitled to vote in an election of directors. In
addition, under the CBCA, an amendment to a companys articles of
incorporation that is proposed by a holder of 10% or more of the companys
voting shares may be submitted to a shareholder vote without the prior
approval of the companys board of directors.
|
|
The
Delaware Certificate of Incorporation provides for a classified Board of
Directors, with each director to serve for three-year terms. The provisions
in the Delaware Certificate of Incorporation relating to the classification
of the Board can be amended only with the approval of holders of 66-2/3% of
the shares entitled to vote in an election of directors. In addition, under
the DGCL, a companys board of directors must approve a proposed amendment to
the companys certificate of incorporation before it can be submitted to a
shareholder vote.
|
|
|
|
|
|
Shareholders
Power to Call
Special Meetings
|
|
The
CBCA provides that holders of 10% or more of the shares entitled to vote may
call a special meeting of a companys shareholders.
|
|
Under
the DGCL, special meetings of shareholders may be called by a companys board
of directors or by persons authorized to do so in the companys certificate
of incorporation or bylaws. The Delaware Certificate of Incorporation
provides that holders of 10% or more of the shares entitled to vote may call
a special meeting of Credo-Delawares shareholders.
|
|
|
|
|
|
Shareholder
Action by
Written Consent
|
|
Under
the CBCA, shareholders may generally act by written consent only if
(i) all shareholders consent to the action or (ii) the articles of
incorporation expressly allow non-unanimous action by written
|
|
Under
the DGCL, shareholders may act by written consent unless the certificate of
incorporation provides otherwise. The Delaware Certificate of Incorporation
prohibits shareholder action by written
|
19
|
|
consent.
The Colorado Articles of Incorporation do not provide for non-unanimous
action by written consent.
|
|
consent.
|
|
|
|
|
|
Notice
of Shareholder
Nominations for the Board of
Directors and other Business
Proposed to be Considered at
a Shareholders Meeting
|
|
None
of the CBCA, the Colorado Articles of Incorporation or the Colorado Bylaws
currently require shareholders to provide advance notice of director
nominations or other business they propose to bring before annual meetings of
shareholders.
|
|
The
Delaware Bylaws provide that a shareholder may not propose a nominee for the
Board of Directors or present other business for consideration at any meeting
of shareholders unless the shareholder satisfies certain notice requirements.
Advance notice of any such business must be provided not less than ninety
days nor more than one hundred twenty days prior to the date of the meeting,
unless public disclosure of the date of the meeting is first made less than
one hundred days prior to the date of the meeting, in which case notice by
the shareholder must be provided not later than the tenth day following the
date on which such public disclosure of the date of the meeting is made. A
notice must include specified information concerning, among other things, the
business proposed to be conducted, the shareholder making the proposal and,
if applicable, the persons nominated to be elected as directors.
|
|
|
|
|
|
Amendment
of the
Articles/Certificate of
Incorporation
|
|
Under
the CBCA, an amendment to a companys articles of incorporation that is
proposed by a holder of 10% or more of the companys voting shares may be
submitted to a shareholder vote without the prior approval of the companys
board of directors.
|
|
Under
the DGCL, a companys board of directors must approve a proposed amendment to
the companys certificate of incorporation before it can be submitted to a
shareholder vote. Accordingly, a reincorporation from Colorado to Delaware
would give the Board of Directors greater influence over possible changes to
the companys articles/certificate of incorporation, including changes that
would affect the feasibility or likelihood of success of a hostile takeover
attempt.
|
|
|
|
|
|
Amendment
of Bylaws
|
|
Under
the CBCA, a companys bylaws may be amended by the shareholders or, subject
to certain exceptions, the board of directors.
|
|
Under
the DGCL, a companys bylaws may be amended by the shareholders and, if the
certificate of incorporation so provides, by the board of directors. The
Delaware Certificate of Incorporation provides that the Board of Directors
may amend the Delaware Bylaws.
|
|
|
|
|
|
Vote
Required to Amend
Certain Provisions of the
Articles/Certificate of
Incorporation
|
|
The
Colorado Articles of Incorporation provide that provisions of the articles
relating to the number of directors, the classification of the Board, removal
of directors, vacancies on the Board and limitations on certain business
combinations (see Business Combination Limitations) can be
|
|
The
Delaware Certificate of Incorporation provides that provisions of the
certificate relating to the number of directors, the classification of the
Board, removal of directors, vacancies on the Board, the exculpation of
directors and the indemnification of directors and officers can be amended
only with the approval
|
20
|
|
amended
only with the approval of holders of 80% of the shares entitled to vote in an
election of directors.
|
|
of
the holders of two-thirds of the shares entitled to vote in an election of
directors.
|
|
|
|
|
|
Examination
of Books and
Records
|
|
Under
the CBCA, any record or beneficial shareholder of Credo, may, upon 5 days
written demand, inspect certain records, including shareholder actions,
minutes of shareholder meetings, communications with shareholders and recent
financial statements. In addition, upon 5 days written demand, any such
shareholder may inspect the list of shareholders and certain other corporate
records, including minutes of the meetings of Board of Directors of Credo, if
the shareholder either (i) has been a shareholder for at least 3 months
or (ii) is a shareholder of at least 5% of all outstanding shares of any
class of shares when the demand is made, provided that the demand is made in
good faith for a proper purpose reasonably related to such persons interest
as a shareholder.
|
|
Under
the DGCL, the inspection rights of the stockholders of Credo-Delaware are the
same as under the CBCA, except (i) there is no requirement that a
stockholder has been a stockholder for at least 3 months or is a stockholder
of at least 5% of all outstanding shares of any class of shares when the
demand is made, and (ii) if Credo-Delaware refuses to permit inspection
or does not reply to the demand within 5 business days after the demand has
been made, the stockholder may apply to the Court of Chancery for an order to
compel such inspection.
|
|
|
|
|
|
Business
Combination
Limitations
|
|
The
CBCA does not have any provisions limiting business combination transactions
with significant stockholders. However, the Colorado Articles of
Incorporation require a business combination transaction involving an
interested stockholder to be approved by the holders of 80% of Credos
common stock unless certain requirements are satisfied. The Colorado Articles
of Incorporation generally define (i) interested stockholder as a
beneficial owner of 20% or more of Credos outstanding common stock and (ii) business
combination as a merger, sale of assets or other business combination with
or involving an interested stockholder. The 80% vote requirement will not
apply to a business combination if, among other things, the value of the
consideration to be received by Credos shareholders in the business
combination is at least equal to the highest price paid by the interested
stockholder for shares of Credos common stock in the two preceding years.
|
|
Section 203
of the DGCL imposes a three-year moratorium on certain business combination
transactions between a company and an interested stockholder, subject to
certain exceptions. Section 203 generally defines interested
stockholder as the beneficial owner of 15% or more of a companys stock. The
moratorium will not apply if, among other things, the business combination is
approved by the holders of two-thirds of the companys voting stock not owned
by the interested stockholder.
|
|
|
|
|
|
Shareholders
Rights
Agreement
|
|
Credo
is currently party to a Rights Agreement, dated as of April 11, 1989, as
amended (the Existing Rights Agreement), with Computershare Trust Company,
N.A. The rights issued pursuant to the Rights Agreement are designed to
impose a significant penalty
|
|
Effective
simultaneously with the closing of the reincorporation merger, Credo-Delaware
will enter into a rights agreement with Computershare Trust Company, N.A.
that will be substantively similar to the Rights Agreement except that
(i) the rights issued pursuant to the
|
21
|
|
upon
any person or group that acquires beneficial ownership of 15% or more of
Credos outstanding common stock without the prior approval of the Board of
Directors. The Rights Agreement will not interfere with any merger or other
business combination approved by the Board of Directors. Effective
simultaneously with the closing of the reincorporation merger, the Rights
Agreement will be terminated.
|
|
new
agreement will expire 10 years after the closing of the reincorporation
merger and (ii) the Existing Rights Agreement contains a provision
pursuant to which the rights issued pursuant to the agreement will be
automatically redeemed if the holders of a majority of Credos stock approve
an offer by a third party to acquire all of Credos stock (and certain other
requirements are met), and the new rights agreement will not have a similar
provision.
|
|
|
|
|
|
Indemnification
|
|
Under
the CBCA and the Colorado Bylaws, Credo may indemnify current and former
directors and officers against expenses incurred in any action brought
against those persons as a result of their role with Credo if those persons
meet a minimum standard of conduct and certain other requirements are
satisfied. In addition, Credo may advance to a person potentially eligible
for indemnification the expenses incurred in defending such an action if
certain requirements are satisfied.
|
|
Under
the DGCL and the Delaware Certificate of Incorporation, Credo-Delaware is
required to indemnify current and former directors and officers against expenses
incurred in any action brought against those persons as a result of their
role with Credo-Delaware if those persons meet a minimum standard of conduct
and certain other requirements are satisfied. In addition, Credo-Delaware
will advance to a person potentially eligible for indemnification the
expenses incurred in defending such an action if certain requirements are
satisfied. The Delaware Certificate of Incorporation sets forth procedural
rules relating to claims for indemnification that are generally favorable
to a person seeking indemnification from Credo-Delaware.
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Franchise
Tax
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The
state of Colorado does not impose any franchise tax on companies incorporated
under the CBCA.
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The
state of Delaware imposes an annual franchise tax on companies incorporated
under the DGCL. The current maximum tax is $165,000 per year. Based on
Credo-Delawares anticipated capitalization, its expected franchise tax
for 2009 is approximately $45,000.
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Federal
Tax Consequences of the Reincorporation Merger
The
following discussion addresses the material federal income tax consequences of
the reincorporation merger that are applicable to holders of shares of Credos
common stock. The discussion does not
address all federal income tax consequences that may be relevant to a
particular holder of shares of Credos common stock, or any foreign, state or
local tax considerations.
Accordingly, holders of Credos common stock are urged to consult their
own tax advisors as to the specific federal, foreign, state and local tax
consequences to them as a result of the reincorporation merger.
The
following discussion is based upon the Internal Revenue Code of 1986, as
amended (the Code), applicable Treasury Regulations, judicial authority and
administrative rulings and practice, all as of the date hereof. Credo has not and will not request a ruling
from the Internal Revenue Service regarding the tax consequences of the
reincorporation merger.
Credo
believes that the reincorporation merger and the resulting reincorporation of Credo
from Colorado to Delaware will constitute a tax-free reorganization within the
meaning of Section 368(a) of the Code. Accordingly for federal income tax purposes, (i) no
gain or loss will be recognized by the holders of Credos common stock upon consummation
of
22
the
reincorporation merger, (ii) the aggregate tax basis of shares of
Credo-Delaware common stock received in the reincorporation merger will be the
same as the aggregate tax basis of shares of Credo common stock exchanged in
the reincorporation merger and (iii) the holding period of the shares of
Credo-Delaware common stock received in the reincorporation merger will include
the period for which shares of Credos common stock were held.
Accounting
Treatment of the Reincorporation Merger
The
reincorporation merger will be accounted for as a reverse merger whereby, for
accounting purposes, Credo will be considered the accounting acquirer and
Credo-Delaware will be treated as the successor to the historical operations of
Credo. Accordingly, the historical
financial statements of Credo, which previously have been reported to the
Commission on Forms 10-K and 10-Q, among others, as of and for all periods
through the date of this proxy statement, will be treated as the financial
statements of Credo-Delaware.
Regulatory Approval
To Credos knowledge, the
only required regulatory or governmental approval or filing necessary in
connection with the consummation of the reincorporation merger will be the
filing of the Statement of Merger with the Secretary of State of Colorado and
the filing of the Certificate of Merger with the Secretary of State of
Delaware.
CODE OF
ETHICS
The Company has adopted a
Code of Ethics
that applies to, among others, its directors, principal executive, financial
and accounting officers, and other persons, if any, performing similar
functions. The Companys
Code of Ethics
is posted on the Companys Internet website
(www.credopetroleum.com). In addition, a
copy of the
Code of Ethics
can be obtained from the
Company, without charge, by written request to the Chief Financial Officer at
the Companys address.
Any amendment to, or waiver under, the Company
Code of
Ethics
will be posted on the Companys website (www.credopetroleum.com).
MANNER
AND EXPENSES OF SOLICITATION
Solicitation of proxies will be by mail.
The total expenses of such solicitation will be borne by the Company and
will include reimbursement of brokerage firms and others for their expenses in
forwarding solicitation material regarding the meeting to beneficial
owners. Solicitation of proxies may be
made by telephone or oral communication by regular employees of the Company who
will not be directly compensated. In
addition, the Company may choose to employ a proxy solicitor. Costs of a proxy solicitor, if any, will be
paid by the Company and should not exceed $100,000.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
the Companys directors and executive officers to file initial reports of
ownership and reports of changes in ownership of the Companys common stock
with the Securities and Exchange Commission.
Such persons are required to furnish the Company with copies of all Section 16(a) forms
that they file. Based upon a review of
these filings and written representations by such persons, the Company believes
that its directors and executive officers were in compliance with all filing
requirements pursuant to Section 16(a) during fiscal 2008.
SHAREHOLDER PROPOSALS FOR NEXT
ANNUAL MEETING
AND SHAREHOLDER COMMUNICATIONS
WITH THE BOARD OF DIRECTORS
Any proposal which a shareholder intends to present for consideration
and action at the next Annual Meeting of Shareholders must be received in
writing by the Company at 1801 Broadway, Suite 900, Denver, Colorado,
80202 no later than October 16, 2009 and must conform to applicable
Securities and Exchange Commission rules and regulations. If a shareholder does not seek inclusion of a
proposal in the proxy material and submits the proposal outside the process
described in Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended, the proposal must be received by the Companys Secretary on
or before December 31, 2009.
If the proposal is not received by that date, the Board of Directors
will be allowed to use its discretionary voting authority as to the proposal
when it is raised at the Annual Meeting
23
of Shareholders. Nothing in this
paragraph shall be deemed to require the Company to permit presentation of a
shareholder proposal, or to include in the Companys proxy materials relating
to the 2010 Annual Meeting of Shareholders, any shareholder proposal that does
not meet all of the requirements for presentation or inclusion established by
the regulations of the Securities and Exchange Commission in effect at that
date.
The Board of Directors attends each Annual Meeting and the individual
directors are available to answer appropriate questions. Appropriate questions generally relate to the
Boards responsibility to establish overall policy and direction for the
Company, its responsibility to retain and evaluate management, and its
responsibilities related to certain functions related to the Audit
Committee. Shareholders may send
communications to the Board of Directors addressed to the attention of the
Chairman of the Executive Committee of the Board of Directors at the Companys
business address. The Chairman of the
Executive Committee will log and retain all such communications. Those communications that the Chairman, in
his sole judgment, believes are (i) within the scope of the Board of
Directors responsibility, (ii) credible, and (iii) material, or
potentially material, will be presented to the full Board of Directors at its
next succeeding regular quarterly meeting.
The Board of Directors will then determine, in its sole judgment,
whether a response is appropriate.
OTHER
MATTERS
The Company does not know of
any matters other than the election of directors, the ratification of the
Companys independent registered accounting firm, and approval of the Companys
re-incorporation under the laws of the State of Delaware to be brought before
the Annual Meeting of Shareholders. If
any other matters not mentioned in this proxy statement are properly brought
before the Annual Meeting of Shareholders, the individuals named in the
enclosed proxy will use their discretionary voting authority under the proxy to
vote the proxy in accordance with their best judgment on those matters.
HOUSEHOLDING
INFORMATION
The Security and Exchange Commission permits companies
and intermediaries (such as brokers and banks) to satisfy delivery requirements
for proxy statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy statement
and annual report to those stockholders. This process, which is commonly referred to as
householding, is intended to reduce the volume of duplicate information
stockholders receive and also reduce expenses for companies. While the Company does not utilize
householding, some intermediaries may be householding our proxy materials and
annual report. Once you have received
notice from your broker or another intermediary that they will be householding
materials to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If you hold your shares through an
intermediary that sent a single proxy statement and annual report to multiple
stockholders in your household, we will promptly deliver a separate copy of
each of these documents to you if you send a written request to us at our
address appearing on page one of this proxy statement, to the attention of
the Corporate Secretary. If you hold
your shares through an intermediary that is utilizing householding and you want
to receive separate copies of our annual report and proxy statement in the
future, you should contact your bank, broker or other nominee record holder.
24
APPENDIX A
AGREEMENT AND PLAN OF
MERGER
This AGREEMENT AND PLAN OF
MERGER (the Agreement), dated as of February 9, 2009, to be
effective March 27, 2009, is entered into between CREDO Petroleum
Corporation, a Colorado corporation (CREDO or the Company), and CREDO
Petroleum Corporation, a Delaware corporation and a wholly-owned subsidiary of
the Company (CREDO Delaware).
Recitals
WHEREAS, the board of
directors of each of the Company and CREDO Delaware deems it advisable, upon
the terms and subject to the conditions herein stated, that the Company be
merged with and into CREDO Delaware, and that CREDO Delaware be the surviving
corporation (the Reincorporation Merger); and
NOW, THEREFORE, in
consideration of the premises and of the agreements of the parties hereto
contained herein, the parties hereto agree as follows:
ARTICLE I
THE REINCORPORATION MERGER; EFFECTIVE TIME
1.1
The Reincorporation Merger
. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time (as defined in Section 1.2),
the Company shall be merged with and into CREDO Delaware whereupon the separate
existence of the Company shall cease.
CREDO Delaware shall be the surviving corporation (sometimes hereinafter
referred to as the Surviving Corporation) in the Reincorporation Merger and
shall continue to be governed by the laws of the State of Delaware. The Reincorporation Merger shall have the
effects specified in the Delaware General Corporation Law, as amended (the DGCL),
and in the Colorado Business Corporation Act, as amended (the CBCA), and the
Surviving Corporation shall succeed, without other transfer, to all of the
assets and property (whether real, personal or mixed), rights, privileges,
franchises, immunities and powers of the Company, and shall assume and be
subject to all of the duties, liabilities, obligations and restrictions of
every kind and description of the Company.
1.2
Effective Time
. Provided that the condition set forth in Section 5.1
has been fulfilled or waived in accordance with this Agreement and that this
Agreement has not been terminated or abandoned pursuant to Section 6.1, on
the date of the closing of the Reincorporation Merger, the Company and CREDO
Delaware shall cause a Statement of Merger to be executed and filed with the
Secretary of State of Colorado (the Colorado Statement of Merger) and a
Certificate of Merger to be executed and filed with the Secretary of State of
Delaware (the Delaware Certificate of Merger). The Reincorporation Merger shall become
effective upon the date and time specified in the Colorado Statement of Merger
and the Delaware Certificate of Merger (the Effective Time).
ARTICLE II
CHARTER AND BYLAWS OF THE SURVIVING CORPORATION
2.1
The Certificate of Incorporation
. The certificate of incorporation of CREDO
Delaware in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, until amended in accordance with
the provisions provided therein or applicable law.
2.2
The Bylaws
. The bylaws of CREDO Delaware in effect at the
Effective Time shall be the bylaws of the Surviving Corporation, until amended
in accordance with the provisions provided therein or applicable law.
ARTICLE III
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1
Officers
. The officers of the Company at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation, until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal.
25
3.2
Directors
. The directors of the Company at the Effective
Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation, each holding office until the next annual meeting of
stockholders or until his successor shall have been duly elected or appointed
and qualified or until his earlier death, resignation or removal.
ARTICLE IV
EFFECT OF MERGER ON CAPITAL STOCK
4.1
Effect of Merger
on Capital Stock
. At the
Effective Time, as a result of the Reincorporation Merger and without any
action on the part of the Company, CREDO Delaware or the shareholders of the
Company:
(a) Each share of the Companys common
stock issued immediately prior to the Effective Time shall be converted
(without the surrender of stock certificates or any other action) into one
fully paid and non-assessable share of common stock, par value $0.10, of CREDO
Delaware (CREDO Delaware Common Stock) and all shares of the Companys common
stock shall be cancelled and retired and shall cease to exist.
(b) No shares of Preferred Stock of the
Company were issued or outstanding immediately prior to the Effective Time.
(c) Each option, warrant, purchase right
or other security of the Company issued and outstanding immediately prior to
the Effective Time, if any, shall be converted into and shall be an identical
security of the Surviving Corporation.
The same number of shares of CREDO Delaware Common Stock shall be
reserved for purposes of the exercise of such options, warrants, purchase
rights, units or other securities as is equal to the number of shares of the
Companys common stock so reserved, including share reserved under the Companys
Stock Option Plans, as of the Effective Time.
4.2
Certificates
. At and after the Effective Time, all of the
outstanding certificates which immediately prior thereto represented shares of
the Companys common stock or options, warrants, purchase rights or other
securities of the Company, if any, shall be deemed for all purposes to evidence
ownership of and to represent the shares of CREDO Delaware Common Stock, or
options, warrants, purchase rights or other securities of CREDO Delaware, if
any, as the case may be, into which the shares of the Companys common stock,
or options, warrants, purchase rights or other securities of the Company
represented by such certificates have been converted as herein provided and
shall be so registered on the books and records of the Surviving Corporation or
its transfer agent. The registered owner
of any such outstanding certificate shall, until such certificate shall have
been surrendered for transfer or otherwise accounted for to the Surviving
Corporation or its transfer agent, have and be entitled to exercise any voting
and other rights with respect to, and to receive any dividends and other
distributions upon, the shares of CREDO Delaware Common Stock, or options,
warrants, purchase rights or other securities of CREDO Delaware, if any, as the
case may be, evidenced by such outstanding certificate, as above provided.
ARTICLE
V
CONDITION
5.1
Condition to
Each Partys Obligation to Effect the Reincorporation Merger
. The respective obligation of each party
hereto to effect the Reincorporation Merger is subject to receipt prior to the
Effective Time of the requisite approval of this Agreement and the transactions
contemplated hereby by the holders of the Companys common stock pursuant to
the CBCA and the articles of incorporation of the Company.
ARTICLE
VI
TERMINATION
6.1
Termination
. This Agreement may be terminated, and the
Reincorporation Merger may be abandoned, at any time prior to the Effective
Time, whether before or after approval of this Agreement by the shareholders of
the Company, if the board of directors of the Company determines for any
reason, in its sole judgment and discretion, that the consummation of the
Reincorporation Merger would be inadvisable or not in the best interests of the
Company and its shareholders. In the
event of the termination and abandonment of this Agreement, this Agreement
shall become null and void and have no effect, without any liability on the
part of either the Company or CREDO Delaware, or any of their respective
shareholders, directors or officers.
26
ARTICLE
VII
MISCELLANEOUS AND GENERAL
7.1
Modification or
Amendment
. Subject to
the provisions of applicable law, at any time prior to the Effective Time, the
parties hereto may modify or amend this Agreement; provided, however, that an
amendment made subsequent to the approval of this Agreement by the holders of
the Companys common stock shall not (i) alter or change the amount or
kind of shares and/or rights to be received in exchange for or on conversion of
all or any of the shares or any class or series thereof of such corporation, (ii) alter
or change any term of the certificate of incorporation of the Surviving
Corporation to be effected by the merger, or (iii) alter or change any of
the terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of any of
the parties hereto.
7.2
Counterparts
. This Agreement may be executed in any number
of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
7.3
GOVERNING LAW
. 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 DELAWARE WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF.
7.4
Entire Agreement
. This Agreement constitutes the entire
agreement and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
7.5
No Third Party
Beneficiaries
. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
7.6
Severability
. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the
application thereof to any person or any circumstance, is determined by any
court or other authority of competent jurisdiction to be invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefore in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons or circumstances shall not be affected by such invalidity or unenforceability,
nor shall such invalidity or unenforceability affect the validity or
enforceability of such provision, or the application thereof, in any other
jurisdiction.
7.7
Headings
. The headings therein are for convenience of
reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof.
[SIGNATURE PAGE FOLLOWS]
27
IN WITNESS WHEREOF, this
Agreement has been duly executed and delivered by the duly authorized officers
of the parties hereto as of the date first written above.
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CREDO PETROLEUM
CORPORATION,
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a Colorado corporation
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By:
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Name:
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James T. Huffman
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Title:
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Chief Executive Officer
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CREDO PETROLEUM
CORPORATION,
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a Delaware corporation
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By:
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Name:
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James T. Huffman
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Title:
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Chief Executive Officer
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28
APPENDIX B
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
CREDO
PETROLEUM CORPORATION
(a Delaware corporation)
ARTICLE I
NAME
The
name of the Company is CREDO Petroleum Corporation.
ARTICLE
II
REGISTERED AGENT
The address of the registered
office of the Company in the State of Delaware is Corporation Trust Center,
1209 Orange Street, City of Wilmington, County of New Castle. The name of its registered agent at that
address is Corporation Trust Company.
ARTICLE
III
PURPOSE
The purpose of the Company is
to engage in any lawful act or activity for which a Corporation may be
organized under the Delaware General Corporation Law (DGCL).
ARTICLE
IV
CAPITAL STOCK
4.1
Common Stock
.
(a) The total number of
shares of common stock, par value $0.1 per share, that the Company is
authorized to issue is 20,000,000.
(b) Each holder of common
stock shall be entitled to one vote for each share of common stock held on all
matters as to which holders of common stock shall be entitled to vote.
Except for and subject to those preferences, rights, and privileges expressly
granted to the holders of all classes of stock at the time outstanding having
prior rights, and any series of preferred stock which may from time to time
come into existence, and except as may be otherwise provided by the laws of the
State of Delaware, the holders of common stock shall have exclusively all other
rights of stockholders of the Company, including, but not limited to, (i) the
right to receive dividends when, as and if declared by the Board of Directors
out of assets lawfully available therefore, and (ii) in the event of any
distribution of assets upon the dissolution and liquidation of the Company, the
right to receive ratably and equally all of the assets of the Company remaining
after the payment to the holders of preferred stock of the specific amounts, if
any, which they are entitled to receive as may be provided herein or pursuant
hereto.
4.2
Preferred Stock
.
(a) The total number of
shares of preferred stock, par value $0.1 per share, that the Company is
authorized to issue is 5,000,000.
29
(b)
The Board of
Directors is expressly authorized at any time, and from time to time, to
provide for the issuance of shares of preferred stock in one or more series,
with such voting powers, full or limited, or without voting powers and with such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, subject to the limitations
prescribed by law and in accordance with the provisions hereof, including but
not limited to the following:
(1) The designation of
the series and the number of shares to constitute the series.
(2) The dividend rate of
the series, the conditions and dates upon which such dividends shall be
payable, the relation which such dividends shall bear to the dividends payable
on any other class or classes of stock, and whether such dividends shall be
cumulative or noncumulative.
(3) Whether the shares of
the series shall be subject to redemption by the corporation and, if made
subject to such redemption, the times, prices and other terms and conditions of
such redemption.
(4) The terms and amount
of any sinking fund provided for the purchase or redemption of the shares of
the series.
(5) Whether or not the
shares of the series shall be convertible into or exchangeable for shares of
any other class or classes or of any other series of any class or classes of stock
of the corporation, and, if provision be made for conversion or exchange, the
times, prices, rates, adjustments and other terms and conditions of such
conversion or exchange.
(6) The extent, if any,
to which the holders of the shares of the series shall be entitled to vote with
respect to the election of directors or otherwise.
(7) The restrictions, if
any, on the issue or reissue of any additional preferred stock.
(8) The rights of the
holders of the shares of the series upon the dissolution, liquidation, or
winding up of the corporation.
ARTICLE
V
DIRECTORS
5.1
Authority,
Number and Election of Directors
. The affairs of the
Company shall be conducted by the Board of Directors. The number of
directors of the Company shall be fixed from time to time in the manner
provided in the bylaws of the Company and may be increased or decreased from
time to time in the manner provided in the bylaws; provided, however, that,
except as otherwise provided in this Article 5, the number of directors
shall not be less than five or more than nine.
Election of directors need not be by written ballot except and to the extent
provided in the bylaws. The directors shall be divided into three classes
designated as Class I, Class II and Class III. Each class
shall consist, as nearly as may be possible, of one-third of the number of
directors constituting the entire Board of Directors. Initial class assignments shall be determined
by the Board of Directors. At each annual meeting of stockholders,
successors to the directors whose terms expired at that annual meeting shall be
elected for a three-year term. If the number of directors changes, any
increase or decrease shall be apportioned among the classes such that the
number of directors in each class shall remain as nearly equal as possible, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor shall be elected
and qualified, subject, however, to such directors prior death, resignation,
retirement, disqualification or removal from office.
In the event the holders of
any class or series of preferred stock shall be entitled, by a separate class
vote, to elect directors as may be specified pursuant to Article 4, then
the provisions of such class or series of stock with respect to their rights
shall apply. The number of directors that may be elected by the holders
of any such class or series of preferred stock shall be in addition to the
number fixed pursuant to the preceding paragraph of this Article 5.
30
5.2
Removal
. Subject
to any rights of the holders of any series of preferred stock, a director may
be removed from office by the stockholders prior to the expiration of his or
her term of office only for cause.
5.3
Quorum
. A quorum
of the Board of Directors for the transaction of business shall not consist of
less than a majority of the total number of directors, except as otherwise may
be provided in this Certificate of Incorporation or in the bylaws with respect
to filling vacancies.
5.4
Newly Created
Directorships and Vacancies
. Except as otherwise
fixed pursuant to the rights of the holders of any class or series of preferred
stock to elect directors under specified circumstances, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, or by
a sole remaining director, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the new directorship
which was created or in which the vacancy occurred and until such directors
successor shall have been elected and qualified.
ARTICLE
VI
BYLAWS
Except as otherwise provided
in this Certificate of Incorporation, in furtherance and not in limitation of
the powers conferred by statute, the Board of Directors is expressly authorized
to adopt, repeal, alter, amend and rescind any or all of the bylaws of the
Company.
ARTICLE
VII
STOCKHOLDERS
7.1
Meetings
. Meetings
of stockholders may be held within or without the State of Delaware, as
determined by the Board of Directors. Each meeting of stockholders will
be held on the date and at the time and place determined by the Board of
Directors.
7.2
Special Meetings
. Special meetings of stockholders may be
called by the chief executive officer, the Board of Directors or the holders of
ten percent (10%) or more of the shares entitled to vote at such meeting. Any request by a stockholder for a special
meeting shall state the purpose or purposes of the proposed meeting, in
accordance with the requirements of the Bylaws, and shall include all of the
information required by the Bylaws.
Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
7.3
Action by
Written Consent
. Action required or permitted to be taken by
stockholders at any annual or special meeting of stockholders may be taken only
at such a meeting and not by written consent.
ARTICLE
VIII
VOTING REQUIREMENT
Notwithstanding any other
provisions of this Certificate of Incorporation or of the bylaws (and
notwithstanding the fact that a lesser percentage may be otherwise specified by
law, this Certificate of Incorporation or the bylaws), the affirmative vote of
the holders of not less than sixty six and two-thirds percent (66-2/3%) of the
outstanding shares of the capital stock of the Company entitled to vote
generally in the election of directors (considered for this purpose as one
class), shall be required to amend or repeal or adopt any provisions
inconsistent with Articles 5, 8, 9 or 10 of this Certificate of Incorporation.
31
ARTICLE
IX
LIABILITY OF OFFICERS AND DIRECTORS
9.1
General
. A
director of the Company shall not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption from liability or limitation thereof is not permitted
under the DGCL as currently in effect or as the same may hereafter be amended.
9.2
Amendment
. No
amendment, modification or repeal of this Article 9, nor the adoption of
any provision of the Certificate of Incorporation inconsistent with this Article 9,
shall adversely affect any right or protection of a director that exists at the
time of such amendment, modification or repeal.
ARTICLE
X
INDEMNIFICATION
10.1
General
. The
Company shall indemnify to the fullest extent permitted by and in the manner
permissible under the DGCL, as amended from time to time (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law permitted the Company
to provide prior to such amendment), any person made, or threatened to be made,
a party to any threatened, pending or completed action, suit, or proceeding,
whether criminal, civil, administrative, or investigative, by reason of the
fact that such person (a) is or was a director or officer of the Company
or any predecessor of the Company or (b) served any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise as
a director, officer, partner, trustee, employee or agent at the request of the
Company or any predecessor of the Company; provided, however, that except as
provided in Section 10.4, the Company shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized in advance by the Board of Directors.
10.2
Advancement of
Expenses
. The right to indemnification conferred in
this Article 10 shall be a contract right and shall include the right to
be paid by the Company the expenses incurred in defending any such proceeding
in advance of its final disposition, such advances to be paid by the Company
within twenty days after the receipt by the Company of a statement or
statements from the claimant requesting such advance or advances from time to
time; provided, however, that if the DGCL requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Company of an undertaking
by or on behalf of such director or officer to repay all amounts so advanced if
it shall ultimately be determined by a final judicial decision from which there
is no right of appeal that such director or officer is not entitled to be
indemnified under this Article 10 or otherwise.
10.3
Procedure for
Indemnification
. To obtain indemnification under this Article 10,
a claimant shall submit to the Company a written request, including therein or
therewith such documentation and information as is reasonably available to the
claimant and is reasonably necessary to determine whether and to what extent
the claimant is entitled to indemnification.
Upon written request by a claimant for indemnification pursuant to the
first sentence of this Section 10.3, a determination, if required by
applicable law, with respect to the claimants entitlement thereto shall be
made as follows: (a) if requested by the claimant or if there are no
Disinterested Directors (as hereinafter defined), by Independent Counsel (as
hereinafter defined), or (b) by a majority vote of the Disinterested
Directors, even though less than a quorum, or by a majority vote of a committee
of Disinterested Directors designated by a majority vote of Disinterested
Directors, even though less than a quorum. If it is so determined that
the claimant is entitled to indemnification, payment to the claimant shall be
made within 10 days after such determination.
10.4
Certain Remedies
. If a
claim under Section 10.1 is not paid in full by the Company within thirty days
after a written claim pursuant to Section 10.3 has been received by the
Company, the claimant may at any time thereafter bring suit against the Company
to recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the reasonable expense of
prosecuting such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final
32
disposition
where the required undertaking, if any, has been tendered to the Company) that
the claimant has not met the standard of conduct which makes it permissible
under the DGCL for the Company to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Company.
Neither the failure of the Company (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the DGCL, nor an actual determination by the Company (including its
Board of Directors, Independent Counsel or stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that the claimant has not met the applicable standard
of conduct.
10.5
Binding Effect
. If a
determination shall have been made pursuant to Section 10.3 that the
claimant is entitled to indemnification, the Company shall be bound by such
determination in any judicial proceeding commenced pursuant to Section 10.4.
10.6
Validity of this
Article
. The Company shall be precluded from asserting in any judicial
proceeding commenced pursuant to Section 10.4 that the procedures and
presumptions of this Article 10 are not valid, binding and enforceable and
shall stipulate in such proceeding that the Company is bound by all the
provisions of this Article 10.
10.7
Nonexclusivity,
etc
. The right to indemnification and to the advancement of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Article 10 shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaws, agreement, vote of stockholders or
Disinterested Directors or otherwise. No repeal or modification of this Article 10
shall in any way diminish or adversely affect the rights of any present or
former director or officer of the Company or any predecessor thereof hereunder
in respect of any occurrence or matter arising prior to any such repeal or
modification.
10.8
Insurance
. The
Company may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the DGCL.
10.9
Indemnification
of Other Persons
. The Company may grant rights to
indemnification, and rights to the advancement by the Company of expenses
incurred in defending any proceeding in advance of its final disposition, to
any present or former employee or agent of the Company or any predecessor of
the Company to the fullest extent of the provisions of this Article 10
with respect to the indemnification and advancement of expenses of directors
and officers of the Company.
10.10
Severability
. If any
provision or provisions of this Article 10 shall be held to be invalid,
illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Article 10
(including, without limitation, each portion of any paragraph of this Article 10
containing any such provision held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby and (b) to the fullest extent
possible, the provisions of this Article 10 (including, without
limitation, each such portion of any paragraph of this Article 10
containing any such provision held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
10.11
Certain
Definitions
. For purposes of this Article 10:
(a)
Disinterested
Director
means a director of the Company who is not and was not a party to
the matter in respect of which indemnification is sought by the claimant and
otherwise has no material interest in the matter as determined by the Board.
(b)
Independent
Counsel
means a law firm, a member of a law firm, or an independent
practitioner that is experienced in matters of Delaware corporation law and
shall include any such person who, under the applicable standards of
professional conduct then prevailing, would not have a conflict of interest in
representing either the Company or the claimant in an action to determine the
claimants rights under this Article 10. Independent Counsel shall
be selected by the Board of Directors.
33
ARTICLE
XI
AMENDMENTS
Subject to Article 8,
the Company reserves the right to alter, amend, change or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereafter
prescribed by the laws of the State of Delaware, and all rights conferred
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the
undersigned, being a duly authorized officer of the Corporation, has executed
this Certificate of Incorporation the day of 200 .
|
CREDO
PETROLEUM CORPORATION
|
|
|
|
By:
|
|
|
James T. Huffman
|
|
Chief Executive Officer
|
34
APPENDIX
C
BYLAWS
OF
CREDO
PETROLEUM CORPORATION
ARTICLE
I
OFFICES
The registered office of
CREDO Petroleum Corporation (the
Company
) in the State of Delaware
will be as provided for in the Certificate of Incorporation of the Company (the
Certificate of Incorporation
).
The Company will have offices at such other places as the Board of
Directors may from time to time determine.
ARTICLE
II
STOCKHOLDERS
2.1.
Annual Meetings
. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting will be held on the date and at the time and
place, if any, fixed, from time to time, by resolution of the Board of
Directors.
2.2.
Special Meetings
. Special meetings of stockholders may be
called by those persons authorized to do so in the Certificate of
Incorporation. In the case of a special
meeting requested by stockholders, the Board of Directors shall, within 30 days
of the Companys receipt of a duly submitted request for such meeting, set a
place, time and date for the meeting, which date shall be not later than 90
days from the date such request is received.
2.3.
Notice of Meeting
. Written notice stating the place, if any,
date and hour of the meeting, and, in case of a special meeting, the purpose or
purposes for which the meeting is called, will be given not less than ten nor
more than sixty days before the date of the meeting, except as otherwise
required by law or the Certificate of Incorporation, either personally or by
mail, prepaid telegram, telex, facsimile transmission, electronic mail,
cablegram or overnight courier, to each stockholder of record entitled to vote
at such meeting. If mailed, such notice
will be deemed to be given when deposited in the United States mail, postage
prepaid, addressed to the stockholder at the stockholders address as it
appears on the stock records of the Company.
Notice given by electronic transmission pursuant to this Section shall
be deemed given: (1) if by facsimile transmission, when directed to a
facsimile telecommunication number at which the stockholder has consented to
receive notice; (2) if by electronic mail, when directed to the electronic
mail address at which the stockholder has consented to receive notice; (3) if
by posting on an electronic network together with separate notice to the
stockholder of such specific posting, upon the later of (A) such posting,
and (B) the giving of such separate notice; and (4) if by any other
form of electronic transmission, when directed to the stockholder. An affidavit of the secretary or assistant
secretary or of the transfer agent or other agent of the Corporation that the
notice has been given by personal delivery, by mail, or by a form of electronic
transmission shall, in the absence of fraud, be prima facie evidence of the
facts stated therein.
2.4.
Waiver
. Attendance of a stockholder of the Company,
either in person or by proxy, at any meeting, whether annual or special, will
constitute a waiver of notice of such meeting, except where a stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. A written or
electronic transmission of waiver of notice of any such meeting signed by a
stockholder or stockholders entitled to such notice, whether before, at or
after the time for notice or the time of the meeting, will be equivalent to
notice. If such waiver is given by
electronic transmission, the electronic transmission must either set forth or
be submitted with information from which it can be determined that the
electronic transmission was authorized by the stockholder. Neither the business to be transacted at, nor
the purposes of, any meeting need be specified in any written waiver of notice.
2.5.
Record Date for
Meetings
. In order that the Company
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which
35
record
date shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors, and which record date shall not be
more than sixty or fewer than ten days before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof shall be
at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
2.6.
Notice of Business
to be Transacted at Meetings of Stockholders
. No business may be transacted at any meeting
of stockholders, including the nomination or election of persons to the Board
of Directors, other than business that is either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors (or any duly authorized committee thereof) with respect
to an annual meeting or a special meeting, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought
before the meeting by any stockholder of the Corporation (1) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2.6 and on the record date for the determination of
stockholders entitled to vote at such meeting and (2) who complies with
the notice procedures set forth in this Section 2.6. In addition to any other applicable
requirements, for business to be properly brought before a meeting by a
stockholder, such stockholder must have given timely notice thereof in proper
written form to the secretary of the Corporation. The notice procedures set forth in this Section 2.6
shall not be deemed to affect any rights of stockholders to request inclusion
of proposals in the Companys proxy statement pursuant to, and in compliance
with the requirements of, Rule 14a-8 of the Securities Exchange Act of
1934 (the
Exchange Act
).
(a) To be timely, a
stockholders notice to the secretary must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
ninety days nor more than one hundred twenty days prior to the date of the
meeting; provided, however, that in the event that public disclosure of the
date of the meeting is first made less than one hundred days prior to the date
of the meeting, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the
day on which such public disclosure of the date of the meeting was made.
(b) To be in proper
written form, a stockholders notice to the secretary regarding any business
other than nominations of persons for election to the Board of Directors must
set forth as to each matter such stockholder proposes to bring before the
annual meeting, (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv) all
other ownership interests of such stockholder, including derivatives, hedged
positions, synthetic and temporary ownership techniques, swaps, securities,
loans, timed purchases and other economic and voting interests, (v) a
description of all other arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (vi) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to bring such business before the meeting.
(c) To be in proper
written form, a stockholders notice to the secretary regarding nominations of
persons for election to the Board of Directors must set forth (a) as to
each proposed nominee, (i) the name, age, business address and residence
address of the nominee, (ii) the principal occupation or employment of the
nominee, (iii) the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of record by the nominee and
(iv) any other information relating to the nominee that would be required
to be disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to Section 14
of the Exchange Act, and the rules and regulations promulgated thereunder;
and (b) as to the stockholder giving the notice, (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, (iii) all other ownership interests of such
stockholder, including derivatives, hedged positions, synthetic and temporary
ownership techniques, swaps, securities, loans, timed purchases and other
economic and voting interests, (iv) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s) are
to be made by such stockholder, (iv) a representation that such
stockholder intends to appear in person or by proxy at the meeting to nominate
the persons named in its notice and (v) any other information relating to
such stockholder that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act and
the rules and regulations promulgated thereunder.
36
Such
notice must be accompanied by a written consent of each proposed nominee to
being named as a nominee and to serve as a director if elected. Each proposed nominee will be required to
complete a questionnaire, in a form to be provided by the Corporation, to be
submitted with the stockholders notice.
The Corporation may also require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as an independent director of
the Corporation or that could be material to a reasonable stockholders
understanding of the independence, or lack thereof, of such nominee.
(d) No business shall be
conducted at any meeting of stockholders, and no person nominated by a
stockholder shall be eligible for election as a director, unless proper notice
was given with respect to the proposed action in compliance with the procedures
set forth in this Section 2.6.
Determinations of the chairman of the meeting as to whether those
procedures were complied with in a particular case shall be final and binding.
2.7.
Quorum and
Adjournment
. Except as otherwise
required by law, the Certificate of Incorporation or these Bylaws, the holders
of not less than a majority of the shares entitled to vote at any meeting of
the stockholders, present in person or by proxy, will constitute a quorum. If a quorum is not present at any meeting,
the chairman of the meeting, or the stockholders, although less than a quorum,
may adjourn the meeting to another time and place. When a meeting is adjourned to another time
and place, if any, unless otherwise provided by these Bylaws, notice need not
be given of the adjourned meeting if the date, time and place, if any, thereof
by which the stockholders and proxyholders may be deemed to be present in
person and vote at such adjourned meeting, are announced at the meeting at
which the adjournment is taken. At the
adjourned meeting, the stockholders may transact any business that might have
been transacted at the original meeting.
A determination of stockholders of record entitled to notice of or vote
at a meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting. If the
adjournment is for more than 30 days or, if after an adjournment, a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder entitled to vote at the meeting.
2.8.
Procedure
. The order of business and all other matters
of procedure at every meeting of the stockholders may be determined by the
chairman of the meeting. The chairman of
any meeting of the stockholders shall be the chairman of the Board of Directors
or, in his or her absence, the most senior officer of the Company present at
the meeting. The secretary of the
Company shall act as secretary of all meetings of the stockholders, but, in the
absence of the secretary, the presiding officer of the meeting may appoint any
person to act as secretary of the meeting.
2.9.
Vote Required
. Except as otherwise provided by law or by the
Certificate of Incorporation:
(a) Directors shall be
elected by a plurality in voting power of the shares in person or represented
by proxy at a meeting of the stockholders and entitled to vote in the election
of directors; and
(b) Whenever any corporate
action other than the election of directors is to be taken, it shall be
authorized by a majority in voting power of the shares present in person or
represented by proxy at a meeting of stockholders and entitled to vote on the
subject matter.
2.10.
Manner of Voting;
Proxies
.
(a) At each meeting of
stockholders, each stockholder having the right to vote shall be entitled to vote
in person or by proxy. Each stockholder
shall be entitled to vote each share of stock having voting power and
registered in such stockholders name on the books of the Company on the record
date fixed for determination of stockholders entitled to vote at such meeting.
(b) Each person entitled
to vote at a meeting of stockholders may authorize another person or persons to
act for such stockholder by proxy, but no such proxy shall be voted or acted
upon after one year from its date, unless the proxy provides for a longer
period. A proxy shall be irrevocable if
it states that it is irrevocable and if, and only so long as, it is coupled
with an interest sufficient in law to support an irrevocable power. Proxies shall be filed with the secretary of
the Company prior to the meeting being called to order. Without limiting the manner in which a
stockholder may authorize another person or persons to act for such stockholder
as proxy, the following shall constitute valid means by which a stockholder may
grant such authority:
37
(1) A stockholder may
execute a writing authorizing another person or persons to act for such
stockholder as proxy. Execution may be
accomplished by the stockholder or the stockholders authorized officer,
director, employee, or agent signing such writing or causing such persons
signature to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature; and
(2) A stockholder may
authorize another person or persons to act for such stockholder as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or other
means of electronic transmission to the person or persons who will be the
holder of the proxy or to an agent of the proxyholder(s) duly authorized
by such proxyholder(s) to receive such transmission; provided, however,
that any such telegram, cablegram, or other means of electronic transmission
must either set forth or be submitted with information from which it can be
determined that the telegram, cablegram, or other electronic transmission was
authorized by the stockholder. If it is
determined that any such telegram, cablegram, or other electronic transmission
is valid, the inspectors or, if there are no inspectors, such other persons
making that determination, shall specify the information upon which they
relied.
Any copy, facsimile
telecommunication, or other reliable reproduction of a writing or electronic
transmission authorizing a person or persons to act as proxy for a stockholder
may be substituted or used in lieu of the original writing or electronic
transmission for any and all purposes for which the original writing or
electronic transmission could be used; provided, however, that such copy,
facsimile telecommunication, or other reproduction shall be a complete
reproduction of the entire original writing or electronic transmission.
2.11.
Conduct of the
Meeting
. At each meeting of
stockholders, the presiding officer of the meeting shall fix and announce the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at the meeting and shall determine the order
of business and all other matters of procedure.
The Board of Directors may adopt by resolution such rules, regulations,
and procedures for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent
inconsistent with any such rules and regulations adopted by the Board of
Directors, the presiding officer of the meeting shall have the right and
authority to convene and to adjourn the meeting and to establish rules,
regulations, and procedures, which need not be in writing, for the conduct of
the meeting and to maintain order and safety.
Without limiting the foregoing, he or she may:
(a) restrict attendance at
any time to bona fide stockholders of record and their proxies and other
persons in attendance at the invitation of the presiding officer or Board of
Directors;
(b) place restrictions on
entry to the meeting after the time fixed for the commencement thereof;
(c) restrict dissemination
of solicitation materials and use of audio or visual recording devices at the
meeting;
(d) adjourn the meeting
without a vote of the stockholders, whether or not there is a quorum present;
and
(e) make rules governing
speeches and debate, including time limits and access to microphones.
(f) The presiding officer
of the meeting shall act in his or her absolute discretion and his or her
rulings shall not be subject to appeal.
2.12.
Inspectors of
Election
. The Company may, and shall
if required by law, in advance of any meeting of stockholders, appoint one or
more inspectors of election, who may be employees of the Company, to act at the
meeting or any adjournment thereof and to make a written report thereof. The Company may designate one or more persons
as alternate inspectors to replace any inspector who fails to act. In the event that no inspector so appointed
or designated is able to act at a meeting of stockholders, the person presiding
at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to
the best of his or her ability. The
inspector or inspectors so appointed or designated shall (i) ascertain the
number of shares of capital stock of the Company outstanding and the voting
power of each such share, (ii) determine the shares of capital stock of
the Company represented at the meeting and the validity of proxies and ballots,
(iii) count all votes and ballots, (iv) determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their determination of
the
38
number
of shares of capital stock of the Company represented at the meeting and such
inspectors count of all votes and ballots.
Such certification and report shall specify such other information as
may be required by law. In determining
the validity and counting of proxies and ballots cast at any meeting of
stockholders of the Company, the inspectors may consider such information as is
permitted by applicable law. No person
who is a candidate for an office at an election may serve as an inspector at
such election.
ARTICLE
III
DIRECTORS
3.1.
Number
. Subject to the provisions of the Certificate
of Incorporation, the number of directors will be fixed from time to time
exclusively by resolutions adopted by the Board of Directors.
3.2.
Powers
. The Board of Directors shall exercise all of
the powers of the Company except such as are, by applicable law, the
Certificate of Incorporation, or these Bylaws, conferred upon or reserved to
the stockholders of any class or classes or series thereof.
3.3.
Resignations
. Any director may resign at any time by giving
notice in writing or by electronic transmission to the Board of Directors or
the secretary; provided, however, that if such notice is given by electronic
transmission, such electronic transmission must either set forth or be
submitted with information from which it can be determined that the electronic
transmission was authorized by the director.
Such resignation shall take effect at the date of receipt of such notice
or at any later time specified therein.
Acceptance of such resignation shall not be necessary to make it
effective.
3.4.
Regular Meetings
. The Board of Directors shall meet on the same
days as the annual meeting of the stockholders, provided a quorum is present,
and no notice of such meeting will be necessary in order to legally constitute
the meeting. Regular meetings of the Board
of Directors will be held at such times and places as the Board of Directors
may from time to time determine.
3.5.
Special Meetings
. Special meetings of the Board of Directors
may be called at any time, at any place and for any purpose by the chairman of
the board, the chief executive officer, or by a majority of the Board of
Directors.
3.6.
Notice of Meetings
. Notice of every meeting of the Board of
Directors will be given to each director at his usual place of business or at
such other address as will have been furnished by him for such purpose. Such notice will be properly and timely given
if it is (a) deposited in the United States mail not later than the third
calendar day preceding the date of the meeting or (b) personally
delivered, telegraphed, sent by facsimile or electronic transmission or
communicated by telephone at least twenty-four hours before the time of the
meeting. Such notice need not include a
statement of the business to be transacted at, or the purpose of, any such
meeting.
3.7.
Waiver of Notice
. Attendance of a director at a meeting of the
Board of Directors will constitute a waiver of notice of such meeting, except
where a director attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
A written waiver of notice signed by a director or directors entitled to
such notice, whether before, at, or after the time for notice or the time of
the meeting, will be equivalent to the giving of such notice.
3.8.
Required Vote;
Adjournment
. Except as may be
otherwise provided by law, the Certificate of Incorporation or these Bylaws,
the act of a majority of the directors present at a meeting at which a quorum
is present will be deemed the act of the Board of Directors. Less than a quorum may adjourn any meeting of
the Board of Directors from time to time without notice.
3.9.
Participation in
Meetings by Telephone
. Members of
the Board of Directors, or of any committee thereof, may participate in a meeting
of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation will constitute presence in
person at such meeting.
3.10.
Action Without a
Meeting
. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken
39
without
a meeting if written consent thereto is signed by all members of the Board of
Directors or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the board or committee. Any such consent may be in counterparts and
will be effective on the date of the last signature thereon unless otherwise
provided therein.
3.11.
Fees and
Compensation of Directors
. Unless
otherwise provided by the Certificate of Incorporation, or these Bylaws, the
Board of Directors, by resolution or resolutions, may fix the compensation of
directors. The directors may be
reimbursed for their expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a fixed sum for attendance at each meeting
of the Board of Directors or a stated salary as a director. Nothing contained in these Bylaws shall
preclude any director from serving the Company in any other capacity and
receiving compensation therefore.
Members of special or standing committees may be allowed like
compensation for attending committee meetings.
ARTICLE
IV
COMMITTEES
4.1.
Designation of
Committees
. The Board of Directors
may establish one or more committees for the performance of delegated or
designated functions to the extent permitted by law, each committee to consist
of one or more directors of the Company.
In the absence or disqualification of a member of a committee, the
member or members present at any meeting and not disqualified from voting, whether
or not such members constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of such absent or
disqualified member.
4.2.
Committee Powers
and Authority
. Except to the extent
otherwise required by law, the Board of Directors may provide, by resolution or
by amendment to these Bylaws, that a committee may exercise all the power and
authority of the Board of Directors in the management of the business and
affairs of the Company to the extent the Board of Directors deems it reasonable
and appropriate to do so.
ARTICLE
V
OFFICERS
5.1.
Number
. The officers of the Company will be appointed
or elected by the Board of Directors.
The officers will be a chief executive officer, a president, such
number, if any, of executive vice presidents as the Board of Directors may from
time to time determine, such number, if any, of vice presidents as the Board of
Directors may from time to time determine, a secretary, such number, if any, of
assistant secretaries as the Board of Directors may from time to time
determine, and a treasurer. Any person
may hold two or more offices at the same time.
5.2.
Additional
Officers
. The Board of Directors may
appoint such other officers as it may deem appropriate.
5.3.
Term of Office;
Resignation
. All officers, agents
and employees of the Company will hold their respective offices or positions at
the pleasure of the Board of Directors and may be removed at any time by the
Board of Directors with or without cause.
Any officer may resign at any time by giving written notice of his
resignation to the chief executive officer, the president, or to the secretary,
and acceptance of such resignation will not be necessary to make it effective
unless the notice so provides. Any
vacancy occurring in any office will be filled by the Board of Directors.
5.4.
Duties
. The officers of the Company will perform the
duties and exercise the powers as may be assigned to them from time to time by
the Board of Directors or the president and chief executive officer.
5.5.
Salaries
. Subject to any applicable law, regulation or
stock exchange rule to which the Company may be subject, the salaries of
all officers of the Company shall be fixed by the Board of Directors from time
to time, and no officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a director of the Company.
40
ARTICLE
VI
CAPITAL STOCK
6.1.
Certificates
. The shares of capital stock of the Company
may be represented by certificates or may be uncertificated. To the extent required by law, every holder
of capital stock of the Company represented by certificates, and upon request,
every holder of uncertificated shares, shall be entitled to a certificate
representing such shares. Certificates
for shares of stock of the Company shall be issued under the seal of the
Company, or a facsimile thereof, and shall be numbered and shall be entered in
the books of the Company as they are issued.
Each certificate shall bear a serial number, shall exhibit the holders
name and the number of shares evidenced thereby, and shall be signed by the
chairman of the Board or a vice chairman, if any, or the president, if any, or
any vice president, and by the secretary.
Any or all of the signatures on the certificate may be a facsimile. If any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, the certificate may be issued by the Company with the
same effect as if such person or entity were such officer, transfer agent, or
registrar at the date of issue.
6.2.
Registered
Stockholders
. The Company will be
entitled to treat the holder of record of any share or shares of stock of the
Company as the holder in fact thereof and, accordingly, will not be bound to
recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it has actual or other notice
thereof, except as provided by law.
6.3.
Cancellation of
Certificates
. All certificates
surrendered to the Company will be canceled and, except in the case of lost,
stolen or destroyed certificates, no new certificates will be issued until the
former certificate or certificates for the same number of shares of the same
class of stock have been surrendered and canceled.
6.4.
Lost, Stolen, or
Destroyed Certificates
. The Board of
Directors or chief executive officer may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Company alleged to have been lost, stolen, or
destroyed upon the making of an affidavit of that fact in a form acceptable to
the Board of Directors or the chief executive officer by the person claiming
the certificate or certificates to be lost, stolen or destroyed. In its discretion, and as a condition precedent
to the issuance of any such new certificate or certificates, the Board of
Directors or the chief executive officer may require that the owner of such
lost, stolen or destroyed certificate or certificates, or such persons legal
representative, give the Company and its transfer agent or agents, registrar or
registrars a bond in such form and amount as the Board of Directors or the
chief executive officer may direct as indemnity against any claim that may be
made against the Company and its transfer agent or agents, registrar or
registrars on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE
VII
FISCAL YEAR
7.1.
Fiscal Year
. The Companys fiscal year will end on the
31st of October of each year.
ARTICLE
VIII
AMENDMENTS
8.1.
Amendments
. Subject to the provisions of the Certificate
of Incorporation, these Bylaws may be altered, amended, or repealed at any
annual meeting of the stockholders or at any special meeting of the
stockholders duly called for that purpose by a majority vote of the shares
represented and entitled to vote at such meeting. Subject to the laws of the State of Delaware,
the Certificate of Incorporation and these Bylaws, the Board of Directors may
amend these Bylaws or enact such other Bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of the Company.
41
ARTICLE
IX
MISCELLANEOUS
9.1.
Books and Records
.
(a) Any books or records maintained by the
Company in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on, or by means of, or be in
the form of, any information storage device or method; provided, however, that
the books and records so kept can be converted into clearly legible paper form
within a reasonable time. The Company
shall so convert any books or records so kept upon the request of any person
entitled to inspect such records pursuant to the Certificate of Incorporation,
these Bylaws, or the provisions of Delaware law.
(b) It shall be the duty
of the secretary or other officer of the Company who shall have charge of the
stock ledger to prepare, or have prepared, and make, at least ten days before
every meeting of the stockholders, a complete list of the stockholders entitled
to vote thereat, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the stockholders
name. Nothing contained in this
subsection (b) shall require the Company to include electronic mail
addresses or other electronic contact information on such list. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, for a period of at
least 10 days prior to the meeting during ordinary business hours, at the
principal place of business of the Company.
At the meeting, the list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock
ledger shall be the only evidence of the identity of the stockholders entitled
to examine such list.
(c) Except to the extent
otherwise required by law, the Certificate of Incorporation, or these Bylaws,
the Board of Directors shall determine from time to time whether and, if
allowed, when and under what conditions and regulations the stock ledger,
books, records, and accounts of the Company, or any of them, shall be open to
inspection by the stockholders and the stockholders rights, if any, in respect
thereof. Except as otherwise provided by
law, the stock ledger shall be the only evidence of the identity of the
stockholders entitled to examine the stock ledger and the books, records, or
accounts of the Company.
9.2.
Voting Shares in
Other Business Entities
. Any officer
of the Company designated by the Board of Directors may vote any and all shares
of stock or other equity interest held by the Company in any other corporation
or other business entity, and may exercise on behalf of the Company any and all
rights and powers incident to the ownership of such stock or other equity
interest.
9.3.
Record Date for
Distributions and Other Actions
. In
order that the Company may determine the stockholders entitled to receive
payment of any dividend or other distribution, or allotment of any rights, or
the stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of capital stock, or for the purpose of any other
lawful action, except as may otherwise be provided in these Bylaws, the Board
of Directors may fix a record date. Such
record date shall not precede the date upon which the resolution fixing such
record date is adopted, and shall not be more than sixty days prior to such
action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
9.4.
Electronic
Transmission
. For purposes of these
Bylaws, electronic transmission means any form of communication, not directly
involving the physical transmission of paper, that creates a record that may be
retained, retrieved, and reviewed by a recipient thereof, and that may be
directly reproduced in paper form by such a recipient through an automated
process.
9.5.
Certificate of
Incorporation
. Notwithstanding
anything to the contrary contained herein, if any provision contained in these
Bylaws is inconsistent with or conflicts with a provision of the Certificate of
Incorporation, such provision of these Bylaws shall be superseded by the
inconsistent provision in the Certificate of Incorporation to the extent
necessary to give effect to such provision in the Certificate of Incorporation.
42
PROXY
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CREDO
PETROLEUM CORPORATION
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PROXY
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THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS
Important Notice Regarding the
Availability of Proxy Materials for
the Annual Meeting of Shareholders to
be Held on March 26, 2009.
The
Companys Notice, Proxy Statement and Annual Report to Stockholders are
available at http://www.credopetroleum.com.
In
addition, and in accordance with SEC rules, you may also access the Notice and
Proxy Statement and vote via the Internet at http://www.proxyvote.com, which
does not have cookies that identify visitors to the site.
The undersigned
shareholder of Credo Petroleum Corporation (the Company) acknowledges receipt
of the Notice of Annual Meeting of Shareholders to be held March 26, 2009,
at 2:30 p.m., MDT, at the Brown Palace Hotel, 321 Seventeenth Street,
Denver, Colorado 80202, and hereby appoints Oakley Hall or William F. Skewes,
or either of them, as Proxy, with the power of substitution, to vote all the
shares of the undersigned at said Annual Meeting of Shareholders and at all
adjournments thereof, hereby ratifying and confirming all that said Proxy may
do or cause to be done by virtue thereof.
The above named Proxy is instructed to vote all of the undersigneds
shares as follows:
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1.
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Election of Director:
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o
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FOR the Class II
nominees (except as marked to the contrary below)
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o
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WITHHOLD AUTHORITY to
vote for the Class II nominees listed below
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INSTRUCTION:
To withhold authority to vote for any individual nominee, strike a line
through the nominees name in the list below.
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James T. Huffman
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Clarence H.
Brown
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W. Mark Meyer
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2.
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Proposal to ratify
appointment of Ernst & Young, LLP as the Companys independent
registered public accounting firm for fiscal 2009:
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o
FOR
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o
AGAINST
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o
ABSTAIN
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3.
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Proposal to approve
re-incorporation of the Company under the laws of the State of Delaware:
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o
FOR
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o
AGAINST
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o
ABSTAIN
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4.
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In his discretion, the
Proxy is authorized to vote upon such other business as may properly come before
the meeting.
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THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS
1, 2 and 3.
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Dated this
day of ,
2009.
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Signature
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Signature
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Please sign your name
exactly as it appears on your stock certificate. If shares are held jointly,
each holder must sign. Executors, trustees and other fiduciaries should so
indicate when signing.
|
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