Exhibit 10.2


 


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 UnionBanCal
Equities, Inc., as administrative agent for such Lenders (in such
capacity, the “Administrative Agent”).


 


RECITALS


 


A.                                   The Borrower is
party to that certain Subordinated 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.


 


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 and the Administrative Agent 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
terminated 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 $22,500 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 and the Administrative Agent 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


 

















 


	
   

  	
  UNIONBANCAL EQUITIES, INC.,

  as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ted McNulty

  
	
   

  	
  Name:

  	
  Ted McNulty

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John W. Schmidt

  
	
   

  	
  Name:

  	
  John W. Schmidt

  
	
   

  	
  Title:

  	
  Vice
  President

  



 


Signature Page to
Amendment No. 2 and Agreement