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.


 

















 


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 


 


2

















 


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 


 


3

















 


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


 


THERE ARE NO UNWRITTEN
ORAL AGREEMENTS AMONG THE PARTIES.


 


[signature pages follow]


 


4

















 


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


 

















 


	
   

  	
  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


 

















 


	
   

  	
  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