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EXHIBIT 10.97  

 
 

FORM OF RESTRICTED STOCK AWARD    
    
    CANO PETROLEUM, INC.
  2005 LONG-TERM INCENTIVE PLAN    
    

        Pursuant to the Cano Petroleum, Inc. 2005 Long-Term Incentive Plan (the "Plan") for key
employees, key consultants, and outside directors of Cano Petroleum, Inc., a Delaware corporation (the "Company") and its Subsidiaries, 

__________

(the "Participant") 

has
been granted a Restricted Stock Award in accordance with Section 6.4 of the Plan. 

	1.
	Terms of Award. The number of shares of Common Stock awarded under this Award Agreement (this
"Agreement") is            shares (the "Awarded Shares"). The Date of Grant of
this Award is
                , 20    .

	2.
	Subject to Plan. This Agreement is subject to the terms and conditions of the Plan, and the terms of the Plan shall control to the
extent not otherwise inconsistent with the provisions of this Agreement. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan. This
Agreement is subject to any rules promulgated pursuant to the Plan by the Board or the Committee and communicated to the Participant in writing.

	3.
	Vesting. Except as specifically provided in this Agreement and subject to certain restrictions and conditions set forth in the Plan, the
Awarded Shares shall be vested as follows: 

[Vesting
information to be provided in each individual agreement]. 

Notwithstanding
the foregoing, in the event that a Change in Control occurs, then immediately prior to the effective date of such Change in Control, the total restricted stock not previously vested
shall thereupon immediately become vested. 

	4.
	Forfeiture of Awarded Shares. Awarded Shares that are not vested in accordance with  Section 3 shall be forfeited on the
date of the Participant's Termination of Service. Upon forfeiture, all of the Participant's rights with
respect to the forfeited Awarded Shares shall cease and terminate, without any further obligations on the part of the Company.

	5.
	Restrictions on Awarded Shares. Awarded Shares that are not vested in accordance with  Section 3 and
which are subject to forfeiture in accordance with Section 4 shall be
subject to the terms, conditions, provisions, and limitations of this Section 5.

	a.
	Subject
to the provisions of the Plan and the other terms of this Agreement, from the Date of Grant until the date the Awarded Shares are vested in accordance with  Section 3 and no longer subject to
forfeiture in accordance with Section 4 (the
"Restriction Period"), the Participant shall not be permitted to sell, transfer, pledge or assign shares any of the Awarded Shares.

	b.
	Except
as provided in paragraph (a) above, the Participant shall have, with respect to his or her Awarded Shares, all of the rights of a stockholder of the Company, including
the right to vote the shares, and the right to receive any dividends thereon.

	6.
	Legend. The following legend shall be placed on all certificates representing Awarded Shares: 

On
the face of the certificate: 

"Transfer
of this stock is restricted in accordance with conditions printed on the reverse of this certificate." 

 

On
the reverse: 

"The
shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Cano Petroleum, Inc. 2005 Long-Term Incentive Plan, a copy of
which is on file at the principal office of the Company in Fort Worth, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions
of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan." 

The
following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state
securities laws: 

"Shares
of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the
registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel
satisfactory to the Company." 

All
Awarded Shares owned by the Participant shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend. 

	7.
	Delivery of Certificates. Certificates for Awarded Shares free of restriction under this Agreement shall be delivered to the Participant
promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock. Certificates for shares of Common Stock forfeited pursuant to  Section 4 shall be promptly returned to the Company by the Participant. In connection with the issuance of a certificate for Restricted Stock,
the Participant shall endorse such certificate in blank or execute a stock power in a form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.
The parties acknowledge that remedies at law will be inadequate remedies for breach of this Section 7 and consequently agree that this  Section 7
shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies
at law or in equity of the parties under this Section 7.

	8.
	Voting. The Participant, as record holder of the Awarded Shares, has the exclusive right to vote, or consent with respect to, such
Awarded Shares until such time as the Awarded Shares are transferred in accordance with this Agreement; provided,  however, that this Section 8 shall not create any voting right where the holders of such Awarded
Shares otherwise have no such right.

	9.
	Representations, Etc. Each spouse individually is bound by, and such spouse's interest, if any, in any Awarded Shares is subject to, the
terms of this Agreement. Nothing in this Agreement shall create a community property interest where none otherwise exists.

	10.
	Participant's Representations. Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not acquire any
Awarded Shares, and that the Company will not be obligated to issue any Awarded Shares to the Participant hereunder, if the issuance of such shares shall constitute a violation by the Participant or
the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The obligations of the
Company and the rights of the Participant are subject to all applicable laws, rules, and regulations.

	11.
	Participant's Acknowledgments. The Participant acknowledges receipt of a copy of the Plan and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this 

2

 

Award
subject to all the terms and provisions thereof. The Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Board or the Committee upon any
questions arising under the Plan or this Agreement. 

	12.
	Law Governing. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Texas
(excluding any conflict of laws rule or principle of Texas law that might refer the governance, construction, or interpretation of this agreement to the laws of another state).

	13.
	Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement
shall be held by either a court of competent jurisdiction, with respect to claims under Section 7, or by an arbitrator, with respect to all other
claims under the Agreement, to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other
term, provision, or agreement that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had
never been contained herein.

	14.
	Covenants and Agreements as Independent Agreements. Each of the covenants and agreements that is set forth in this Agreement shall be
construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.

	15.
	Entire Agreement. This Agreement together with the Plan supersede any and all other prior understandings and agreements, either oral or
in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior
negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement or the Plan and that any
agreement, statement or promise that is not contained in this Agreement or the Plan shall not be valid or binding or of any force or effect.

	16.
	Parties Bound. The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to
the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set
forth herein. No person or entity shall be permitted to acquire any Awarded Shares without first executing and delivering an agreement in the form satisfactory to the Company making such person or
entity subject to the restrictions on transfer contained in Section 5 hereof.

	17.
	Modification. No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification
is in writing and signed by the parties; provided, however, that the Company may change or modify this Agreement without the Participant's consent or signature if the Company determines, in its sole
discretion, that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Section 409A of the Code or any regulations or other guidance
issued thereunder. Notwithstanding the preceding sentence, the Company may amend the Plan to the extent permitted by the Plan.

	18.
	Headings. The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute
substantive matters to be considered in construing the terms and provisions of this Agreement. 

3

 
	19.
	Gender and Number. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.

	20.
	Notice. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the
Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:

	(a)
	Notice
to the Company shall be addressed and delivered as follows: 

Cano
Petroleum, Inc.

Burnett Plaza

801 Cherry Street

Suite 3200, Unit 25

Fort Worth, Texas 76102

Attn: General Counsel

Facsimile: (817) 698-0796 

	(b)
	Notice
to the Participant shall be addressed and delivered as set forth on the signature page.

	21.
	Tax Requirements. The Participant is hereby advised to consult immediately with his or her own tax advisor regarding the tax
consequences of this Agreement, the method and timing for filing an election to include this Agreement in income under Section 83(b) of the Code, and the tax consequences of such election. By
execution of this Agreement, the Participant agrees that if the Participant makes such an election, the Participant shall provide the Company with written notice of such election in accordance with
the regulations promulgated under Code Section 83(b). The Company or, if applicable, any Subsidiary (for purposes of this Section 21, the
term "Company" shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in
connection with the Plan, any Federal, state, local, or other taxes required by law to be withheld in connection with this Award. The Company may, in its sole discretion, also require the Participant
receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant's income arising with
respect to this Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock.
Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax
withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common
Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or
exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the
Company's withholding of a number of shares to be delivered upon the exercise of this Award, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required
tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the
Company to the Participant. 

[Signature
Page to Follow] 

4

 

        IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent and approval of all the terms
hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof. 

	 	 	COMPANY:
	

 	
 	

CANO PETROLEUM, INC.
	

 	
 	

By:	

    

	 	 	Name:	    

	 	 	Title:	    

	

 	
 	

PARTICIPANT:
	

 	
 	

Signature:	

    

	 	 	Name:	    

	 	 	Address:	    
    
    

5

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EXHIBIT 10.98  

 
 

AMENDMENT NO. 6    
    

        This AMENDMENT NO. 6 ("Agreement") entered into and made effective as of August 13, 2007 ("Effective Date") is among Cano Petroleum, Inc., a
Delaware corporation ("Borrower"), the Guarantors (as defined below), the Lenders (as defined below), and 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 Credit Agreement dated as of November 29, 2005, as amended by the Amendment No. 1 dated as of February 24,
2006, and as amended by the Amendment No. 2, Assignment and Agreement dated as of April 28, 2006, Amendment No. 3 entered into on May 12, 2006 but made effective as of
March 31, 2006, Amendment No. 4 dated as of June 30, 2006, and Amendment No. 5 and Agreement dated as of March 6, 2007 (as so amended, 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
Borrower, the Lenders and the Administrative Agent wish to, subject to the terms and conditions of this Agreement make certain amendments to 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.    As used in this Agreement, 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. 

        Section 2.    Other Definitional Provisions.    Article,
Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. All references to instruments, documents, contracts,
and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified.
The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
The term "including" means "including, without limitation,". Paragraph headings have been inserted in this Agreement as a matter of convenience for reference only and it is agreed that such paragraph
headings are not a part of this Agreement and shall not be used in the interpretation of any provision of this Agreement. 

        Section 3.    Amendments to Credit Agreement.    

        (a)   The
definition of "Secured Parties" in Section 1.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 

"Secured Parties" means the Administrative Agent, the Lenders, the Issuing Lender, and the Swap Counterparties.

        (b)   The
definitions of "Acceptable Security Interest", "Mortgage", "Interest Expense", "Obligations", "Report", "Transactions" and "Working Capital" found in
Section 1.01 of the Credit Agreement are hereby each amended by replacing each reference to "Collateral Trustee" contained therein with the term
"Administrative Agent". 

        (c)   Sections
5.01, 5.02, 5.08, 5.11, and 7.01(l) of the Credit Agreement are hereby amended by replacing each reference to "Collateral
Trustee" contained therein with the term "Administrative Agent". 

 

        (d)   Section 6.02(b)
of the Credit Agreement is hereby deleted in its entirety and replaced with the following:
"(b)            [Reserved]." 

        (e)   Section 6.03
of the Credit Agreement is hereby amended by deleting the parenthetical found therein in its entirety and replacing it with the following:  "(other than this Agreement and the Security Instruments)"

        (f)    Section 7.01(q)
of the Credit Agreement is hereby deleted in its entirety and replaced with the following:
"(q)            [Reserved]." 

        (g)   Section 7.02(c)
of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 

"(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security
Instruments, the Guaranties, and any other Loan Document for the ratable benefit of the Secured Parties by appropriate proceedings."

        (h)   Section 7.03(c)
of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 

"(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security
Instruments, the Guaranties, and any other Loan Document for the ratable benefit of the Secured Parties by appropriate proceedings."

        (i)    Section 7.06
of the Credit Agreement is hereby deleted in its entirety and replaced with the following: 

"7.06 Application of Proceeds. From and during the continuance of any Event of Default, any monies or Property actually received by the Administrative Agent pursuant to this
Agreement or any other Loan Document, the exercise of any rights or remedies under any Security Instrument or any other agreement with the Borrower, any Guarantor or any of their respective
Subsidiaries which secures any of the Obligations, shall be applied in the following order:

(a)    First, to the payment of all amounts, including costs and expenses incurred in connection with the collection of such proceeds and the payment of any part of
the Obligations, due to the Administrative Agent
under any of the expense reimbursement or indemnity provisions of this Agreement or any other Loan Document, any Security Instrument or other collateral documents, and any applicable
law;

(b)    Second, ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the payment of the Obligations then
due and payable, including Obligations with respect to Letters of Credit and any obligations of the Borrower or its Subsidiaries owing to any Swap Counterparty under any Hedge Contract;
and

(c)    Third, the remainder, if any, to the Borrower, its Subsidiaries, their respective successors or assigns, or such other Person as may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct."

        (j)    Schedule 4.07
which is attached to the Credit Agreement is hereby replaced in its entirety with the Schedule 4.07 attached to this Agreement. 

        Section 4.    Borrower Representations and Warranties.    The
Borrower represents and warrants that: (a) after giving effect to this Agreement, the representations and warranties contained in the Credit Agreement and the representations and warranties
contained in the other Loan Documents are true 

2

 

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) after giving effect to this Agreement, no Default has
occurred and is continuing; (c) the execution, delivery and performance of this Agreement are within the corporate power and authority of the Borrower and have been duly authorized by
appropriate corporate and governing action and proceedings; (d) this Agreement constitutes the legal, valid, and binding obligation of the Borrower 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 Agreement; and
(f) the Liens under the Security Instruments are valid and subsisting and secure Borrower's obligations under the Loan Documents. 

        Section 5.    Guarantors Representations and
Warranties.    Each Guarantor represents and warrants that: (a) after giving effect to this Agreement, the representations and warranties contained in the
Guaranty 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) after giving effect to this Agreement, no Default has occurred and is continuing; (c) the execution,
delivery and performance of this Agreement are within the corporate, limited liability company, or partnership power and authority of such Guarantor and have been duly authorized by appropriate
corporate, limited liability company, or partnership action and proceedings; (d) this Agreement constitutes the legal, valid, and binding obligation of such Guarantor 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
Agreement; (f) it has no defenses to the enforcement of the Guaranty; and (g) the Liens under the Security Instruments are valid and subsisting and secure such Guarantor's and the
Borrower's obligations under the Loan Documents. 

        Section 6.    Conditions to Effectiveness.    This Agreement
and the amendments to the Credit Agreement provided herein shall become effective on the Effective Date and enforceable against the parties hereto upon the receipt by the Administrative Agent of
multiple original counterparts of this Agreement executed and delivered by officers of the Borrower, the Guarantors, the Administrative Agent, and the Lenders. 

        Section 7.    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 Agreement 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 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, Administrative Agent, and Lenders does hereby adopt, ratify, and confirm the Credit Agreement, as amended hereby, and acknowledges
and 

3

 

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 Agreement. 

        (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 Agreement. 

        (e)   This
Agreement 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 Agreement shall be a Default or Event of Default, as applicable, under the Credit Agreement. 

        Section 8.    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 Agreement, and its execution and delivery of this Agreement 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 9.    Counterparts.    This Agreement 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 Agreement may be executed by facsimile signature and all such
signatures shall be effective as originals. 

        Section 10.    Successors and Assigns.    This Agreement 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 11.    Invalidity.    In the event that any one or more
of the provisions contained in this Agreement 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 Agreement. 

        Section 12.    Governing Law.    This Agreement 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 13.    Entire
Agreement.    THIS AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.  

[SIGNATURES BEGIN ON NEXT PAGE]  

4

        EXECUTED effective as of the date first above written. 

	BORROWER:	 	CANO PETROLEUM, INC.
	

 	
 	

By:	

/s/ S. Jeffrey Johnson
 S. Jeffrey Johnson

Chairman and Chief Executive Officer

	    	 	 	 
	
GUARANTORS:	
 	
SQUARE ONE ENERGY, INC.

LADDER COMPANIES, INC.

W.O. ENERGY OF NEVADA, INC.

WO ENERGY, INC.

PANTWIST, LLC

CANO PETRO OF NEW MEXICO, INC.
	

 	
 	

Each by:	

/s/ S. Jeffrey Johnson
 S. Jeffrey Johnson

President

	    	 	 	 	 
	

 	
 	
W.O. OPERATING COMPANY, LTD.
	 	 	By:	WO Energy, Inc., its general partner
	

 	
 	

 	

By:	

/s/ S. Jeffrey Johnson
 S. Jeffrey Johnson

President

	    	 	 	 	 
	

 	
 	
W.O. PRODUCTION COMPANY, LTD.
	 	 	By:	WO Energy, Inc., its general partner
	

 	
 	

 	

By:	

/s/ S. Jeffrey Johnson
 S. Jeffrey Johnson

President

	    	 	 	 
	
ADMINISTRATIVE AGENT/ISSUING LENDER/LENDER:	
 	
UNION BANK OF CALIFORNIA, N.A.,
	

 	
 	

By:	

/s/ Randall Osterberg
 Randall Osterberg

Senior Vice President

   

   

Signature
Page to Amendment No. 6 

	 	 	NATIXIS, as a Lender
	

 	
 	

By:	

/s/ Donovan C. Broussard
 Donovan C. Broussard

Managing Director
	

 	
 	

By:	

/s/ Daniel Payer
 Daniel Payer

Director

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

  

  

  

  

Signature
Page to Amendment No. 6 

  

 
 

Schedule 4.07    
    
    Litigation    
    

        On March 23, 2006, the following lawsuit was filed in the 100th Judicial District Court in Carson County, Texas; Cause No. 9840, The
Tom L. and Anne Burnett Trust, by Anne Burnett Windfohr, Windi Phillips, Ben Fortson, Jr., George Beggs, III and Ed Hudson, Jr. as Co-Trustees; Anne Burnett Windfohr; and Burnett
Ranches, Ltd. v. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc.; W. O. Operating Company, Ltd, and W.O. Energy, Inc. The owner of the remainder of the mineral
estate, Texas Christian University, has intervened in the suit joining the plaintiffs' request to terminate certain oil and natural gas leases and on January 26, 2007, Southwestern Public
Service Company d/b/a XCEL Energy, intervened in the suit as a party adverse to all defendants, claiming that the fire that is the subject of this lawsuit destroyed transmission and distribution
equipment, including utility poles, lines and other equipment with an estimated loss of $1,876,000. By order dated March 7, 2007, the court granted defendants' motion to strike the intervention
of Southwestern Public Service Company d/b/a XCEL Energy. 

        On
April 28, 2006, the following lawsuit was filed in the 31st Judicial District Court of Roberts County, Texas, Case No. 1922, Robert and Glenda Adcock, et
al. v. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc.; W. O. Operating Company, Ltd, and W.O. Energy, Inc. There are 45 plaintiffs and four groups of interveners in this
suit. 

        On
April 10, 2006, the following lawsuit was filed in the 31st Judicial District Court of Roberts County, Texas, Case No. 1920, Joseph Craig Hutchison and
Judy Hutchison v. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc.; W. O. Operating Company, Ltd, and W.O. Energy, Inc. 

        On
May 1, 2006, the following lawsuit was filed in the 31st Judicial District Court of Roberts County, Texas, Case No. 1923, Chisum Family
Partnership, Ltd. v. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc.; W. O. Operating Company, Ltd, and W.O. Energy, Inc. 

        The
plaintiffs in the above actions claim that the electrical wiring and equipment of Cano Petroleum, Inc. or certain of its subsidiaries relating to its oil and gas operations
started a wildfire that began on March 12, 2006 in Carson County, Texas. The plaintiffs (i) allege negligence and gross
negligence, trespass or nusiance and (ii) seek undisclosed damages, including, but not limited to, damages for damage to their land and livestock, certain expenses related to fighting the fire
and certain remedial expenses. In addition, certain plaintiffs seek (i) termination of certain oil and gas leases, (ii) reimbursement for their attorney's fees and (iii) exemplary
damages. Certain plaintiffs also allege res ipsa loquitur, single business enterprise and general partnership/de facto general partnership. 

        On
July 3, 2006, the following lawsuit was filed in the 31st Judicial District Court of Roberts County, Texas, Case No. 1928, Rebecca Lee Martinez, et al v. Cano
Petroleum, Inc., W.O. Energy of Nevada, Inc.; W. O. Operating Company, Ltd., and W.O. Energy, Inc. The plaintiffs claim that the electrical wiring and equipment of Cano or
certain of its subsidiaries relating to oil and natural gas operations started a wildfire that began on March 12, 2006 in Carson County, Texas. The plaintiffs (i) allege negligence and
gross negligence and (ii) seek undisclosed damages for the wrongful death of two individuals who they claim died as a result of the fire. Additional heirs and relatives of one of the decedents
have intervened in this case seeking similar claims. 

        On
August 9, 2006, the following lawsuit was filed in the 233rd Judicial District Court of Gray County, Texas, Yolanda Villareal, Individually and on behalf of the Estate of
Gerardo Villareal v. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc., W. O. Operating Company, Ltd., and W.O. Energy, Inc. The plaintiffs claim that the electrical wiring
and equipment of Cano or certain of its subsidiaries relating to oil and natural gas operations started a wildfire that began on March 12, 2006 in Carson County, Texas. The plaintiffs
(i) allege negligence and gross negligence and (ii) seek undisclosed damages for the wrongful death of Gerardo Villareal who they claim died as a result of the fire. 

1

 

Relatives
of Roberto Chavira have intervened in the case alleging similar claims regarding the death of Roberto Chavira. 

        On
June 20, 2006, the following lawsuit was filed in the United States District Court for the Northern District of Texas, Fort Worth Division, C.A.
No. 4-06cv-434-A, Mid-Continent Casualty Company, Plaintiff, vs. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc., W.O. Operating
Company, Ltd. and W.O. Energy, Inc. seeking a declaration that the plaintiff is not responsible for pre-tender defense costs and that the plaintiff has the sole and exclusive
right to select defense counsel and to defend, investigate, negotiate and settle the litigation described above and on September 18, 2006, the First Amended Complaint for Declaratory Judgment
was filed with regard to the cases described above. On February 9, 2007, Cano and its subsidiaries entered into a Settlement Agreement and Release with the plaintiff pursuant to which in
exchange for mutual releases, in addition to the approximately $923,000 that had been reimbursed by plaintiff, the plaintiff agreed to pay to Cano within 20 business days of February 9, 2007
the amount of $6,699,827 comprised of the following: (a) the $1,000,000 policy limits of the primary policy; (b) the $5,000,000 policy limits of the excess policy; (c) $500,000
for future defense costs; (d) $144,000 as partial payment for certain unpaid invoices for litigation related expenses; (e) all approved reasonable and necessary litigation related
expenses through December 21, 2006 that are not part of the above referenced $144,000; and (f) certain specified attorneys fees. 

        On
March 14, 2007, the following lawsuit was filed in 100th Judicial District Court in Carson County, Texas; Cause No. 9994, Southwestern Public Service Company d/b/a Xcel
Energy v. Cano Petroleum, Inc., W.O. Energy of Nevada, Inc.; W. O. Operating Company, Ltd, and WO Energy, Inc. The plaintiffs claim that the electrical wiring and equipment
of Cano or certain of its subsidiaries relating to oil and natural gas operations started a wildfire that began on March 12, 2006 in Carson County. This case is a refiling of the intervention
which was struck by the court as described above. The plaintiff alleges negligence and seeks $1,876,000 in damages for loss and damage to transmission and distribution equipment, utility poles, lines
and other equipment. Three additional plaintiffs have intervened in the case alleging negligence, gross negligence, res ipsa loquitur, nuisance, trespass, single business enterprise and general
partnership/de facto general partnership relating to the March 2006 Carson County, Texas wildfire and seeking recovery for damages to their land, improvements and livestock, seeking exemplary
damages and seeking attorneys' fees. 

        On
May 2, 2007, the following lawsuit was filed in the 84th District Court of Hutchinson County, Texas, Cause No. 37,619, Gary and Benia Burgess, et al. vs.
Cano Petroleum, Inc., W.O. Energy of Nevada, Inc., W.O. Operating Company, Ltd., and W.O. Energy, Inc. alleging negligence, gross negligence, res ipsa loquitur, nuisance,
trespass, single business enterprise, and general partnership/de facto general partnership and seeking damages for their land, equipment and live stock, seeking exemplary damages and seeking
attorneys' fees. 

2

QuickLinks

AMENDMENT NO. 6

RECITALS

Schedule 4.07 Litigation

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