Exhibit 10.1

 

AMENDMENT NO. 2 AND AGREEMENT

 

This AMENDMENT NO. 2 AND AGREEMENT (“Amendment”) entered into and made effective
as of March 30, 2010 (“Effective Date”), is among Cano Petroleum, Inc., a
Delaware corporation (“Borrower”), the Guarantors (as defined below), the
Lenders (as defined below), and Union Bank, N.A. (f/k/a Union Bank of
California, N.A.), as administrative agent for such Lenders (in such capacity,
the “Administrative Agent”) and as issuing lender (in such capacity, the
“Issuing Lender”).

 

RECITALS

 

A.            The Borrower is party to that certain Amended and Restated Credit
Agreement dated as of December 17, 2008 (as amended, restated and otherwise
modified from time to time, the “Credit Agreement”) among the Borrower, the
lenders party thereto from time to time (the “Lenders”), the Administrative
Agent and the Issuing Lender.

 

B.            The Lenders, subject to the terms and conditions set forth herein,
wish to amend the Credit Agreement as provided herein.

 

THEREFORE, the Borrower, the Guarantors, the Lenders, the Administrative Agent
and the Issuing Lender hereby agree as follows:

 

Section 1.              Defined Terms; Other Definitional Provisions.  As used
in this Amendment, each of the terms defined in the opening paragraph and the
Recitals above shall have the meanings assigned to such terms therein.  Each
term defined in the Credit Agreement and used herein without definition shall
have the meaning assigned to such term in the Credit Agreement, unless expressly
provided to the contrary.  The words “hereof”, “herein”, and “hereunder” and
words of similar import when used in this Amendment shall refer to this
Amendment as a whole and not to any particular provision of this Amendment. 
Paragraph headings have been inserted in this Amendment as a matter of
convenience for reference only and it is agreed that such paragraph headings are
not a part of this Amendment and shall not be used in the interpretation of any
provision of this Amendment.

 

Section 2.              Amendments to Credit Agreement.

 

(a)           Section 6.18 (Leverage Ratio) of the Credit Agreement is hereby
amended by replacing the last sentence therein in its entirety with the
following:

 

Notwithstanding the foregoing, this Section 6.18 shall not apply for the fiscal
quarters ending December 31, 2009 and March 31, 2010.

 

(b)           Section 6.19 (Interest Coverage Ratio) of the Credit Agreement is
hereby amended by replacing the last sentence therein in its entirety with the
following:

 

Notwithstanding the foregoing, this Section 6.19 shall not apply for the fiscal
quarters ending December 31, 2009 and March 31, 2010.

 

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Section 3.              Agreement.  If the Credit Agreement has not been
replaced, refinanced, or amended and restated on or before May 31, 2010, then
the Borrower hereby agrees to pay on May 31, 2010, in consideration for the
agreements of the Lenders provided herein, an amendment fee in the amount of
$90,000 to the Administrative Agent for the pro rata account of the Lenders.

 

Section 4.              Representations and Warranties.  The Borrower and each
Guarantor represents and warrants that: (a) the representations and warranties
contained in the Credit Agreement and the representations and warranties
contained in the other Loan Documents are true and correct in all material
respects on and as of the Effective Date as if made on as and as of such date
except to the extent that any such representation or warranty expressly relates
solely to an earlier date, in which case such representation or warranty is true
and correct in all material respects as of such earlier date; (b) no Default has
occurred and is continuing; (c) the execution, delivery and performance of this
Amendment are within the corporate, limited liability company, or partnership
power and authority of such Person and have been duly authorized by appropriate
corporate, limited liability company, or partnership actions and proceedings;
(d) this Amendment constitutes the legal, valid, and binding obligation of such
Person enforceable in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the rights of creditors generally and general principles of equity; (e) there
are no governmental or other third party consents, licenses and approvals
required in connection with the execution, delivery, performance, validity and
enforceability of this Amendment; (f) the Liens under the Security Instruments
are valid and subsisting and secure the Borrower’s and such Person’s obligations
under the Loan Documents; and (g) as to each Guarantor, it has no defenses to
the enforcement of the Guaranty.

 

Section 5.              Conditions to Effectiveness.  This Amendment and the
amendments to the Credit Agreement provided herein shall become effective on and
as of the Effective Date and enforceable against the parties hereto upon the
occurrence (whether before or after the Effective Date) of the following
conditions precedent: (a) the Administrative Agent shall have received multiple
original counterparts, as requested by the Administrative Agent, of this
Amendment duly and validly executed and delivered by duly authorized officers of
the Borrower, the Guarantors, the Administrative Agent, and the Lenders, (b) no
Default shall have occurred and be continuing as of the Effective Date, (c) the
representations and warranties in this Amendment shall be true and correct in
all material respects, and (d) the Borrower shall have paid all costs and
expenses that have been invoiced prior to the Effective Date and are payable
pursuant to Section 9.04 of the Credit Agreement.

 

Section 6.              Acknowledgments and Agreements.

 

(a)           The Borrower acknowledges that on the date hereof all Obligations
are payable without defense, offset, counterclaim or recoupment.

 

(b)           The Administrative Agent and the Lenders hereby expressly reserve
all of their rights, remedies, and claims under the Loan Documents.  Nothing in
this Amendment shall constitute a waiver or relinquishment of (i) any Default or
Event of Default under any of the Loan Documents, (ii) any of the agreements,
terms or conditions contained in any of the Loan Documents, (iii) any rights or
remedies of the Administrative Agent or any Lender with respect

 

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to the Loan Documents, or (iv) the rights of the Administrative Agent or any
Lender to collect the full amounts owing to them under the Loan Documents.

 

(c)           Each of the Borrower, the Guarantors, the Lenders, the
Administrative Agent and the Issuing Lender does hereby adopt, ratify, and
confirm the Credit Agreement, as amended hereby, and acknowledges and agrees
that the Credit Agreement, as amended hereby, is and remains in full force and
effect, and the Borrower and the Guarantors acknowledge and agree that their
respective liabilities and obligations under the Credit Agreement, as amended
hereby, and the Guaranty, are not impaired in any respect by this Amendment.

 

(d)           From and after the Effective Date, all references to the Credit
Agreement and the Loan Documents shall mean such Credit Agreement and such Loan
Documents as amended by this Amendment.

 

(e)           This Amendment is a Loan Document for the purposes of the
provisions of the other Loan Documents.  Without limiting the foregoing, any
breach of representations, warranties, and covenants under this Amendment shall
be a Default or Event of Default, as applicable, under the Credit Agreement.

 

Section 7.              Reaffirmation of the Guaranty.  Each Guarantor hereby
ratifies, confirms, acknowledges and agrees that its obligations under the
Guaranty are in full force and effect and that such Guarantor continues to
unconditionally and irrevocably guarantee the full and punctual payment, when
due, whether at stated maturity or earlier by acceleration or otherwise, all of
the Guaranteed Obligations (as defined in the Guaranty), as such Guaranteed
Obligations may have been amended by this Amendment, and its execution and
delivery of this Amendment does not indicate or establish an approval or consent
requirement by such Guarantor under the Guaranty in connection with the
execution and delivery of amendments, consents or waivers to the Credit
Agreement, the Notes or any of the other Loan Documents.

 

Section 8.              Counterparts; Invalidity.  This Amendment may be signed
in any number of counterparts, each of which shall be an original and all of
which, taken together, constitute a single instrument.  This Amendment may be
executed by facsimile signature and all such signatures shall be effective as
originals.  In the event that any one or more of the provisions contained in
this Amendment shall for any reason be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Amendment.

 

Section 9.              Successors and Assigns.  This Amendment shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted pursuant to the Credit Agreement.

 

Section 10.            Governing Law.  This Amendment shall be deemed to be a
contract made under and shall be governed by and construed in accordance with
the laws of the State of Texas.

 

Section 11.            Entire Agreement. THIS AMENDMENT, THE CREDIT AGREEMENT AS
AMENDED BY THIS AMENDMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS CONSTITUTE
THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER

 

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HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

[signature pages follow]

 

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EXECUTED effective as of the date first above written.

 

BORROWER:

CANO PETROLEUM, INC.

 

 

 

 

 

 

 

By:

/s/ Ben Daitch

 

Name:

Ben Daitch

 

Title:

Senior Vice President & CFO

 

 

 

 

 

 

GUARANTORS:

SQUARE ONE ENERGY, INC.

 

LADDER COMPANIES, INC.

 

W.O. ENERGY OF NEVADA, INC.

 

WO ENERGY, INC.

 

CANO PETRO OF NEW MEXICO, INC.

 

 

 

 

 

 

 

Each by:

/s/ Ben Daitch

 

Name:

Ben Daitch

 

Title:

Vice President & Chief Financial Officer

 

 

 

 

W.O. OPERATING COMPANY, LTD.

 

W.O. PRODUCTION COMPANY, LTD.

 

Each by:

WO Energy, Inc., its general partner

 

 

 

 

 

 

 

By:

/s/ Ben Daitch

 

Name:

Ben Daitch

 

Title:

Vice President & Chief Financial Officer

 

Signature Page to Amendment No. 2 and Agreement

 

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UNION BANK, N.A. (f/k/a Union Bank of California, N.A.), as Administrative
Agent, Issuing Lender and a Lender

 

 

 

 

 

By:

/s/ Randall Osterberg

 

Name:

Randall Osterberg

 

Title:

Senior Vice President

 

Signature Page to Amendment No. 2 and Agreement

 

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NATIXIS, as a Lender

 

 

 

 

 

 

 

By:

/s/ Donovan C. Broussard

 

Name:

Donovan C. Broussard

 

Title:

Managing Director

 

 

 

 

 

 

 

By:

/s/ Louis P. Laville, III

 

Name:

Louis P. Laville, III

 

Title:

Managing Director

 

Signature Page to Amendment No. 2 and Agreement

 

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