Exhibit 10.10


 


SUPPLEMENT NO. 1 dated as of April 28, 2006 (the “Supplement”),
to the Guaranty Agreement dated as of November 29, 2005 (as amended,
supplemented or otherwise modified from time to time, the “Guaranty Agreement”), among each
of the subsidiaries party thereto (each such subsidiary individually, a “Guarantor”
and collectively, the “Guarantors”) of CANO PETROLEUM, INC.,
a Delaware corporation (the “Borrower”) in favor of ENERGY
COMPONENTS SPC EEP ENERGY EXPLORATION AND PRODUCTION SEGREGATED PORTFOLIO, as
Administrative Agent (the “Administrative Agent”) for the
benefit of the Beneficiaries (as defined in the Guaranty Agreement).


 


A.            Reference is made to
the Subordinated Credit Agreement dated as of November 29, 2005 (as
amended, supplemented or otherwise modified from time to time, the “Credit Agreement”),
among the Borrower, the lenders from time to time party thereto (the “Lenders”),
and the Administrative Agent.


 


B.            Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Guaranty Agreement and the Credit Agreement.


 


C.            The Guarantors have
entered into the Guaranty Agreement in order to induce the Lenders to make
Advances and the Issuing Lender to issue Letters of Credit. Pursuant to Section 6.15
of the Credit Agreement, the Subsidiaries of the Borrower are required to enter
into the Guaranty Agreement as Guarantors. Section 16 of the Guaranty
Agreement provides that additional Subsidiaries of the Borrower may become
Guarantors under the Guaranty Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary of
the Borrower (the “New Guarantor”) is executing this Supplement in accordance
with the requirements of the Credit Agreement to become a Guarantor under the
Guaranty Agreement in order to induce the Lenders to make additional Advances,
if any, and as consideration for Advances previously made.


 


Accordingly, the Administrative Agent and the New Guarantor agree as
follows:


 


SECTION 1.           In accordance with Section 16
of the Guaranty Agreement, the New Guarantor by its signature below becomes a
Guarantor under the Guaranty Agreement with the same force and effect as if
originally named therein as a Guarantor and the New Guarantor hereby (a) agrees
to all the terms and provisions of the Guaranty Agreement applicable to it as a
Guarantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Guarantor thereunder are true
and correct in all material respects on and as of the date hereof. Each
reference to a “Guarantor” in the Guaranty Agreement shall be deemed to include
the New Guarantor. The Guaranty Agreement is hereby incorporated herein by
reference.


 


SECTION 2.           The New Guarantor
represents and warrants to the Administrative Agent and the other Beneficiaries
that this Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors’ rights generally
and subject, as to enforceability,


 

















 


to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).


 


SECTION 3.           This Supplement may be
executed in counterparts, each of which shall constitute an original, but all
of which when taken together shall constitute a single contract. This
Supplement shall become effective when the Administrative Agent shall have
received counterparts of this Supplement that, when taken together, bear the
signatures of the New Guarantor and the Administrative Agent. Delivery of an
executed signature page to this Supplement by fax transmission shall be as
effective as delivery of a manually executed counterpart of this
Supplement.


 


SECTION 4.           Except as expressly
supplemented hereby, the Guaranty Agreement shall remain in full force and
effect.


 


SECTION 5.           THIS SUPPLEMENT SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF TEXAS. The New Guarantor hereby irrevocably submits to the
jurisdiction of any Texas state or federal court sitting in Dallas, Texas in
any action or proceeding arising out of or relating to this Supplement or the
Guaranty Agreement and the other Loan Documents, and the New Guarantor hereby
irrevocably agrees that all claims in respect of such action or proceeding may be
heard and determined in such court. The New Guarantor hereby irrevocably waives,
to the fullest extent it may effectively do so, any right it may have
to the defense of an inconvenient forum to the maintenance of such action or
proceeding. The New Guarantor hereby agrees that service of copies of the
summons and complaint and any other process which may be served in any
such action or proceeding may be made by mailing or delivering a copy of
such process to such Guarantor at its address set forth on the signature page hereof.
The New Guarantor agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. Nothing in this Section shall
affect the rights of any Beneficiary to serve legal process in any other manner
permitted by the law or affect the right of any Beneficiary to bring any action
or proceeding against the New Guarantor or its Property in the courts of any
other jurisdiction.


 


SECTION 6.           In case any one or more
of the provisions contained in this Supplement should be held invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and in the Guaranty Agreement shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision hereof in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.


 


SECTION 7.           All communications and
notices hereunder shall be in writing and given as provided in Section 10
of the Guaranty Agreement. All communications and notices hereunder to the New
Guarantor shall be given to it at the address set forth under its signature
below.


 


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SECTION 8.           The New Guarantor
agrees to reimburse the Administrative Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including the fees, disbursements
and other charges of counsel for the Administrative Agent.


 


SECTION 9.           PURSUANT
TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, AN AGREEMENT IN
WHICH THE AMOUNT INVOLVED IN AGREEMENT EXCEEDS $50,000 IN VALUE IS NOT
ENFORCEABLE UNLESS THE AGREEMENT IS IN WRITING AND SIGNED BY THE PARTY TO BE
BOUND OR THAT PARTY’S AUTHORIZED REPRESENTATIVE.


 


THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO
AN AGREEMENT SUBJECT TO THE PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM
THE WRITTEN AGREEMENT, AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE
SUPERSEDED BY AND MERGED INTO THIS GURANTY. THIS SUPPLEMENT, THE GUARANTY
AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.


 


THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.


 


IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have
duly executed this Supplement to the Guaranty Agreement as of the day and year
first above written.


 


	
   

  	
  NEW
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  PANTWIST, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ S. Jeffrey Johnson

  	
   

  
	
   

  	
  Name:

  	
   S. Jeffrey Johnson

  	
   

  
	
   

  	
  Title:

  	
   President

  	
   

  
	
   

  	
   

  
	
   

  	
    Address
  of New Guarantor:

  
	
   

  	
  309 West 7th
  Street, Suite 1600

  
	
   

  	
  Fort Worth,
  Texas 76102

  
	
   

  	
   

  
	
   

  	
  ADMINISTRATIVE
  AGENT:

  
	
   

  	
   

  
	
   

  	
  ENERGY COMPONENTS SPC EEP
  ENERGY

  EXPLORATION AND PRODUCTION

  SEGREGATED PORTFOLIO

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Mark Margason

  	
   

  
	
   

  	
  Name:

  	
  Mark Margason

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signer

  	
   

  
								



 


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