Document:

Exhibit 10.1

 

THE SECURITIES OFFERED HEREIN HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”)
AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS
THAT TERMS IS DEFINED IN THE 1933 ACT) UNLESS THE SECURITIES ARE REGISTERED
UNDER THE 1933 ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
1933 ACT IS AVAILABLE. THIS SUBSCRIPTION IS EXECUTED IN RELIANCE UPON THE
EXEMPTIONS PROVIDED BY RULE 506 OF REGULATION D UNDER THE 1933 ACT.

 

SUBSCRIPTION

 

THIS SUBSCRIPTION (the “Subscription”) has been
executed by the undersigned in connection with the offering of 2,100,000 shares
of common stock, par value $0.001 (hereinafter referred to as the “Stock”), of
Cano Petroleum, Inc., a corporation organized under the laws of the State
of Delaware (hereinafter referred to as the “Issuer”).  There is no minimum offering.  The Stock being subscribed for pursuant to
this Subscription has not been registered under the 1933 Act.  The offer of the Stock and, if this
Subscription is accepted by the Issuer, the sale of Stock, is being made in
reliance upon Rule 506 of Regulation D promulgated under the 1933 Act.
(All dollar amounts in this Subscription are expressed in U.S. Dollars).

 

ARTICLE 1

SUBSCRIPTION

 

Subscription

 

1.1                                 The undersigned
(the “Subscriber”), as principal, hereby subscribe to purchase, in the
aggregate, a minimum of 266,500 shares of
Common Stock (the “Shares”), having a purchase price of $4.14 per Share for an
aggregate purchase price of $1,103,310.00
(the “Subscription Price”).

 

Minimum
Subscription

 

1.2                                 A minimum number of 266,500 Shares must be purchased by the Subscriber.

 

Method of Payment

 

1.3                                 Upon receipt of
physical certificates on Closing Date (defined below), the Subscriber shall pay
the Subscription Price by delivering good funds in United States Dollars by way
of wire transfer of funds to the Issuer. 
The wire transfer instructions are:

 

Wires from
Correspondent Banks Worldwide:

 

	
  Beneficiary Bank:

  	
   

  	
  Worth National Bank

  
	
   

  	
   

  	
  801
  Cherry Street, unit 27

  
	
   

  	
   

  	
  Fort
  Worth, TX 76102

  
	
   

  	
   

  	
  Tel:
  817-877-2018

  
	
  Beneficiary:

  	
   

  	
  Cano Petroleum, Inc.

  
	
  ABA Routing#:

  	
   

  	
  111907568

  
	
  Account Number:

  	
   

  	
  31013406

  

 

 

The Company shall issue and
cause to be delivered on or before September 30, 2005 (the “Closing Date”)
to the Subscriber a certificate or certificates representing the Shares (the “Certificates”) pursuant
to Article 6 hereof.  Upon receipt
of the Certificates, the Subscriber shall deliver the full
Subscription Funds to
the wire instructions provided above. 
The Subscriber acknowledges that the subscription for Shares hereunder
may be rejected in whole or in part by the Issuer in its sole discretion.

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER

 

Representations and Warranties

 

2.1                                 The Subscriber
represents and warrants in all material respects to the Issuer, with the intent
that the Issuer will rely thereon in accepting this Subscription, that:

 

(a)                                  Experience.  The Subscriber is sufficiently experienced in
financial and business matters to be capable of evaluating the merits and risks
of its investments, and to make an informed decision relating thereto, and to
protect its own interests in connection with the purchase of the Shares;

 

(b)                                 Own Account.  The Subscriber is purchasing the Shares as principal
for its own account.  The Subscriber is
purchasing the Stock for investment purposes only and not with an intent or
view towards further sale thereof, and has not pre-arranged any sale with any
other subscriber;

 

(c)                                  Not Underwriter.  The Subscriber is not an underwriter, or
dealer in, the Stock, and the Subscriber is not participating, pursuant to a
contractual agreement, in a distribution of the Stock;

 

(d)                                 Importance of
Representations.  The
Subscriber understands that the Stock are being offered and sold to it in
reliance on an exemption from the registration requirements of the 1933 Act,
and that the Issuer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Subscriber set forth herein in order to determine the applicability of such
exemptions and the suitability of the Subscriber to acquire the Stock;

 

(e)                                  Registration.  The Issuer shall use its best efforts to file
a registration statement to be filed with and declared effective by the
Securities and Exchange Commission (the “SEC”) at the earliest practicable date
after the Closing Date.  The Subscriber
represents and warrants and hereby agrees that all offers and sales of the
Securities shall be made only pursuant to such registration or to such
exemption from registration;

 

(f)                                    Risk.  The Subscriber acknowledges that the purchase
of the Stock involves a high degree of risk, is aware of the risks and further
acknowledges that it can bear the economic risk of the Stock, including the
total loss of its investment;

 

(g)                                 Current
Information.  The
Subscriber has been furnished with or has acquired copies of all requested
information concerning the Issuer, including a copies of reports filed by the
Issuer pursuant to the United States Securities Exchange Act of 1934, as
amended (the “1934 Act”) and copies of press releases issued by the Issuer;

 

2

 

(h)                                 Independent
Investigation.  The Subscriber, in making the decision to
subscribe for the Shares, has relied upon independent investigations made by it
and its purchaser representatives, if any, and the Subscriber and such
representatives, if any, have, prior to making this Subscription, been given
access and the opportunity to examine all material contracts and documents
relating to this offering and an opportunity to ask questions of, and to
receive answers from, the Issuer or any person acting on its behalf concerning
the terms and conditions of this offering. 
The Subscriber and its advisors, if any, have been furnished with access
to all materials relating to the business, finances and operation of the Issuer
and materials relating to the offer and sale of the Shares which have been
requested.  The Subscriber and its
advisors, if any, have received complete and satisfactory answers to any such
inquiries;

 

(i)                                     No Written or
Oral Representations.  No person
has made to the Subscriber any written or oral representations

 

(i)                                                             that any person will resell or
repurchase the Stock,

 

(ii)                                                          that any person will refund the
purchase price of the Stock, or

 

(iii)                                                       as to the future price or value of
the Stock;

 

(j)                                     No
Recommendation or Endorsement.  The Subscriber understands that no federal or
state agency has passed on or made any recommendation or endorsement of the
Stock;

 

(k)                                  Partnership,
Corporation or Trust.  If
the Subscriber is a partnership, corporation or trust, the person executing
this Subscription on its behalf represents and warrants that

 

(i)            he or she has
made due inquiry to determine the truthfulness of the representations and
warranties made pursuant to this Subscription, and

 

(ii)           he or she is
duly authorized (and if the undersigned is a trust, by the trust agreement) to
make this investment and to enter into and execute this Subscription on behalf
of such entity;

 

(l)                                     Affiliate
Status.  Upon purchase of the Stock,
the Subscriber will be an affiliate of the Issuer and the Subscriber
acknowledges that the Stock held by it will be subject to certain resale
restrictions under the 1933 Act;

 

(m)                               Other
Subscribers.  The Subscriber acknowledges that Shares
may be issued to other purchasers under this offering concurrently with the
Closing;

 

(n)                                 No
Advertisement or General Solicitation.  The sale of the Shares has not been
advertised through any article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio; or
through any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;

 

(o)                                 Accredited Investor. 
The Subscriber is (i) an “accredited investor” as that term is
defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3), (ii) experienced in making
investments of the kind described in this Agreement 

 

3

 

and the related documents, (iii) able, by reason
of the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Subscription,
and to evaluate the merits and risks of an investment in the Stock, and (iv) able
to afford the entire loss of its investment in the Stock.;

 

(p)                                 Hedging Transactions. 
The Subscriber acknowledges and agrees that all offers and sales of the
Stock, as applicable, by the Subscriber shall be made only pursuant to
registration of the Stock under the 1933 Act, or pursuant to an available
exemption from the registration requirements of the 1933 Act.;

 

(q)                                 Beneficial Ownership. 
Upon consummation of the transactions contemplated by this Subscription,
the Subscriber will be the beneficial owner of the Stock issued to it pursuant
to this Subscription.  The Subscriber
will share beneficial ownership of the Stock with Wellington Management
Company, llp as its investment adviser. The Subscriber has not pre-arranged any
sale of the Stock with any person or persons in the United States;

 

(r)                                    No Short Position. 
The Subscriber will not, directly or indirectly, or through one or more
intermediaries, maintain any short position in the common shares of the Company
during the applicable distribution compliance period;

 

(s)                                  Restriction on Transfer. 
The Subscriber understands and acknowledges that the Issuer will not
allow any transfer or other disposition of the Stock until the Stock has been
registered under the 1933 Act.  The
Certificate(s) shall bear the following legend in addition to any other legend
required under this Subscription:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

 

Non-Merger and Survival

 

2.2                                 The
representations and warranties of the Subscribers contained herein will be true
at the date of execution of this Subscription by the Subscribers and as of the
Closing Date in all material respects as though such representations and
warranties were made as of such times and shall survive the Closing Date and
the delivery of the Certificates.

 

Indemnity

 

2.3                                 The Subscriber
agrees to indemnify and hold harmless the Issuer from and against any and all
claims, demands, actions, suits, proceedings, assessments, judgments, damages,
costs, losses and expenses, including attorney’s fees incurred in contesting
any such claim and any payment made in good faith in settlement of any claim
(subject to the right of the Subscriber to defend any such claim), resulting
from the breach of any representation or warranty of such party under this
Subscription.

 

4

 

ARTICLE 3

REPRESENTATIONS
AND WARRANTIES OF THE ISSUER

 

3.1                                 The Issuer,
upon taking up and accepting this Subscription, represents and warrants in all
material respects to the Subscriber, with the intent that the Subscriber will
rely thereon in making this Subscription, that:

 

(a)                                  Legality.  The Issuer has the requisite corporate power
and authority to accept this Subscription and to issue, sell and deliver the
Shares; this Subscription and the issuance, sale and delivery of the Shares
hereunder and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action by the Issuer; this Subscription
and the Shares have been duly and validly executed and delivered by and on
behalf of the Issuer, and are valid and binding agreements of the Issuer,
enforceable in accordance with their respective terms, except as enforceability
may be limited by general equitable principles, bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other laws affecting
creditors’ rights generally;

 

(b)                                 Transfer.  Provided that
a registration statement in respect of the Shares is in effect as required
under all applicable securities laws, such Shares shall be freely transferable
on the books and records of the Issuer, provided that the sale is made to a
bona-fide purchaser and that the prospectus delivery requirements are met;

 

(c)                                  Listed Company Status. 
The Issuer is required to make current filings with the SEC pursuant to Section 13
or 15(d) of the 1934 Act,
the Stock is presently listed on the American Stock Exchange and the Issuer has
received no notice, either oral or written, with respect to its continued
eligibility for such listing;

 

(d)                                 Listing of Shares. 
Subject to notification to the American Stock Exchange of actual
issuance, as of the Closing Date the Shares will be listed on the American
Stock Exchange.

 

(e)                                  Proper
Organization.  The Issuer
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and is duly qualified as a
foreign corporation in all jurisdictions where the failure to be so qualified
would have a materially adverse effect on its business, taken as whole;

 

(f)                                    No Legal
Proceedings.  There is no
action, suit or proceeding before or by any court or any governmental agency or
body, domestic or foreign, now pending or to the knowledge of the Issuer,
threatened, against or affecting the Issuer, or any of its properties or
assets, which might result in any material adverse change in the condition
(financial or otherwise) or in the earnings, business affairs or business
prospects of the Issuer, or which might materially and adversely affect the properties
or assets thereof;

 

(g)                                 Non-Default.  The Issuer is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property
may be bound; and

 

(h)                                 Non-Contravention.  The execution and delivery of this
Subscription and the consummation of the issuance of the Shares and the
transactions contemplated by this Agreement do not and will not conflict with
or result in a breach by the Issuer of any of 

 

5

 

the
terms or provisions of, or constitute a default under, the Certificate
of Incorporation or Bylaws of the Issuer, or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Issuer is a party
or by which it or any of its properties or assets are bound, or any existing
applicable decree, judgment or order of any court, Federal or state regulatory
body, administrative agency or other domestic governmental body having
jurisdiction over the Issuer or any of its properties or assets.

 

Non-Merger and Survival

 

3.2                                 The
representations and warranties of the Issuer contained herein will be true at
the date of execution of this Subscription by the Issuer and as of the Closing
Date in all material respects as though such representations and warranties
were made as of such times and shall survive the Closing Date and the delivery
of the Certificates.

 

Indemnity

 

3.3                                 The Issuer
agrees to indemnify and hold harmless the Subscriber from and against any and
all claims, demands, actions, suits, proceedings, assessments, judgments,
damages, costs, losses and expenses, including attorney’s fees incurred in contesting
any such claim and any payment made in good faith in settlement of any claim
(subject to the right of the Issuer to defend any such claim), resulting from
the breach of any representation, warranty or covenant of such party under this
Subscription.

 

ARTICLE 4

COVENANTS OF THE ISSUER

 

Covenants
of the Issuer

 

4.1                                 The Issuer
covenants and agrees with the Subscriber that:

 

(a)                                  Filings.  The Issuer will make all necessary filings in
connection with the sale of the Shares as required by the laws and regulations
of all appropriate jurisdictions;

 

(b)                                 Section 13
Compliance.  The Issuer
shall, from and after the Closing Date, use its best efforts to comply with the
requirements of Section 13 of the 1934 Act and maintain the listing of the
Common Stock on the American Stock Exchange or other quotation medium;

 

(c)                                  Rule 144
Opinion.  The Issuer will, upon written
request by the Subscriber, take such steps as are necessary to cause its
counsel to issue an opinion to the Issuer’s transfer agent allowing the Subscriber
to offer and sell any Shares issued in reliance on the applicable provisions of
Rule 144 provided that the holding period and other requirements of such Rule 144
are met.  The costs of obtaining such an
opinion shall be borne by the Issuer; and

 

(d)                                 Use of Proceeds.  The Issuer will apply the Subscription Price,
together with all other subscription funds received from other subscribers
under this offering, for general corporate and working capital purposes.

 

6

 

Survival

 

4.2                                 The covenants
set forth in this Article 4 shall survive the Closing for the benefit of
the Subscriber.

 

ARTICLE 5

DEMAND REGISTRATION RIGHTS

 

Registration Statement

 

4.1                                 Upon the Closing, the Issuer shall
use its best efforts to file a registration statement under the 1933 Act and
under any applicable Blue Sky laws registering the resale of Shares and shall
use its best efforts to cause such registration statement to be declared
effective by the Commission at the earliest practicable date, all at the Issuer’s
sole cost and expense.  Such best efforts shall include promptly
responding to all comments received by the staff of the SEC, and promptly
preparing and filing amendments to such registration statement which are
responsive to the comments received from the staff of the SEC, and in no event
later than twenty-one (21) days from receipt by the Issuer of the comments of
the staff of the SEC.  Such registration statement shall name the
Subscriber as a selling shareholder and shall provide for the sale of the
Shares by the Subscriber from time to time directly to purchasers or in the
over-the-counter market or through or to securities brokers or dealers that may
receive compensation in the form of discounts, concessions, or commissions. 
The Issuer shall provide the Subscriber with such number of copies of the
prospectus as shall be reasonably requested to facilitate the sale of the
Shares.  None of the foregoing shall in any way limit the Subscriber’s
rights to sell the Shares in reliance on an exemption from the registration
requirements under the 1933 Act in connection with a particular transaction.

 

Currency of Registration Statement

 

4.2                                 The Issuer shall use its best
efforts to maintain the currency of the registration statement filed with the
SEC and under all applicable Blue Sky laws in respect of the Shares for 12
months from the Closing Date.

 

Indemnification of Subscriber by Issuer

 

4.3                                 To the extent permitted by law,
the Issuer will indemnify the Subscriber and any underwriter and each person
who controls either of them within the meaning of Section 15 of the 1933
Act, against all expenses, claims, losses, damages or liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or treated, to the extent such expenses, claims,
losses, damages or liabilities arise out of or are based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Issuer of the 1933 Act or any rule or
regulation promulgated under the 1933 Act applicable to the Issuer in
connection with any such registration, qualification or compliance, and the
Issuer will reimburse the Subscriber, each of its officers and directors and
partners, and each person controlling the Subscriber, each such underwriter and
each person who controls either of them, for any legal and any other expense
reasonably incurred in connection with investigation, preparing or defending
any such claim, loss, damage, liability or action, provided, however, that the
indemnity contained herein shall not apply to amounts paid in settlement of any
claim, loss, damage, liability or expense if settlement is effected without the
consent of the Issuer (which consent 

 

7

 

shall not unreasonably be withheld); provided, further, that the Issuer
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Issuer by the
Subscriber specifically for inclusion in the registration statement.  Notwithstanding the foregoing, insofar as the
foregoing indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at
the time the registration statement becomes effective or in the final
prospectus filed with the SEC pursuant to Rule 424(b) of the SEC, the
indemnity agreement herein shall not inure to the benefit of the Subscriber if
a copy of the final prospectus filed pursuant to Rule 424(b) was not
furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the 1933 Act.

 

Indemnification of Issuer by Subscriber

 

4.4                                 To the extent permitted by law,
the Subscriber will indemnify the Issuer, each of its directors and officers,
affiliates, counsel, advisors, employees and each underwriter, if any, of the
Issuer’s securities covered by such a registration statement, each person who
controls the Issuer or such underwriter within the meaning of Section 15
of the 1933 Act, and each other person selling the Issuer’s securities covered
by such registration statement, each of such person’s officers and directors
and each person controlling such persons within the meaning of Section 15
of the 1933 Act, against all claims, losses, damages and liabilities (or
actions in respect thereof), including attorneys fees and costs, arising out of
or based on any statement made in reliance upon and in conformity with written
information furnished to the Issuer or such underwriter by the Subscriber
specifically for inclusion in the registration statement,or any other violation
by the Subscriber of any rule or regulation promulgated under the 1933 Act
applicable to the Subscriber and relating to action or inaction required of the
Subscriber in connection with any such registration, qualification or
compliance, and will reimburse the Issuer, such other person, such directors,
officers, persons, underwriters or control persons for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided, however, that the
indemnity contained herein shall not apply to amounts paid in settlement of any
claim, loss, damage, liability or expense if settlement is effected without the
consent of the Subscriber (which consent shall not be unreasonably withheld).
Notwithstanding the foregoing, the liability of the Subscriber under this subsection (b) shall
be limited in an amount equal to the net proceeds actually received by the
Subscriber from the sale of the shares under the registration statement.

 

Removal of Legend

 

4.5                                 After the registration statement
referenced in Section 4.1 is declared effective by the SEC, the
Subscribers may deliver to the Issuer the Certificate representing the Shares
issued to such Subscriber and the Issuer will, within three days after receipt
by the Issuer of the foregoing, issue a new certificate representing and in
exchange for the aforementioned certificate, which new certificate shall be
legended as follows:

 

THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES MAY BE SOLD PURSUANT TO THE REGISTRATION STATEMENT PROVIDED
THAT (I) THE REGISTRATION STATEMENT IS CURRENT AND EFFECTIVE, (II) THE HOLDER
COMPLIES WITH THE PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND 

 

8

 

(III) THE SALE IS IN COMPLIANCE WITH THE PLAN
OF DISTRIBUTION SET FORTH IN THE PROSPECTUS. THE TRANSFER OF SUCH SECURITIES IS
RESTRICTED AS SET FORTH IN A SUBSCRIPTION AGREEMENT BETWEEN THE ISSUER AND THE
HOLDER, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.

 

ARTICLE 6

ISSUANCE OF CERTIFICATES

 

On or before the Closing Date, the Issuer
will prepare and issue one or more Certificates for the Shares registered in
such name or names as specified by the Subscriber and cause the same to be
delivered to the Subscriber pursuant to the delivery instructions provided by
the Subscriber.

 

ARTICLE 7

CLOSING

 

Closing shall be effected through
the acceptance of this Subscription by the Issuer, the delivery of the share
certificates to the Subscriber and the taking up of the Subscription Funds by
the Issuer.

 

ARTICLE 8

GENERAL PROVISIONS

 

Governing Law

 

8.1                                 This Subscription shall be governed
by and construed under the law of the State of Delaware without regard to its
choice of law provision.  Any disputes
arising out of, in connection with, or with respect to this Subscription, the
subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby shall be adjudicated
in a Court of competent civil jurisdiction sitting in the City of Wilmington,
Delaware and nowhere else.

 

Successors and Assigns

 

8.2                                 This
Subscription shall inure to the benefit of and be binding on the respective
successors and assigns of the parties hereto.

 

Execution by Counterparts and Facsimile

 

8.3                                 This
Subscription may be executed in counterparts and by facsimile, each of which
when executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Subscription.

 

[Remainder of page intentionally
left blank.]

 

9

 

SIGNATURE PAGE FOR
ENTITIES

 

IN WITNESS WHEREOF, the undersigned represents that
the foregoing statements are true and that it caused this Subscription to be
duly executed on its behalf on this 16th day of September, 2005.

 

 

	
  Howard Hughes Medical Institute

  By:
  Wellington Management Company, LLP

  	
   

  
	
  As investment adviser

  	
   

  	
   

  
	
  Printed Name

  	
    /s/ Julie A. Jenkins

  	
   

  
	
   

  	
  Signature

  
	
  Julie A. Jenkins

  	
   

  
	
  Vice President and Counsel

  	
   

  	
   

  
	
  Printed Title

  	
   

  
					

 

 

Agreed to this 16th day of September, 2005:

 

CANO PETROLEUM, INC.

 

 

	
  Per:

  	
    /s/
  Michael J. Ricketts

  	
   

  

 

Print Name: Michael J. Ricketts

 

 

This is page 11 to the Subscription by the above subscriber to
Cano Petroleum, Inc. dated as stated above.

 

 

Full Name and Address of
Subscriber for Registration Purposes:

 

	
  NAME:

  	
   

  	
  Mac &
  Co.

  	
   

  	
   

  
	
   

  	
   

  	
  c/o Wellington Management
  Company, llp

  	
   

  	
   

  
	
   

  	
   

  	
  75 State Street

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  	
  Boston, MA 02109

  	
  Attn: Gina Di Mento

  
						

 

 

	
  TEL.NO.:

  	
   

  	
  617-790-7535

  
	
   

  	
   

  	
   

  
	
  FAX NO.:

  	
   

  	
  617-204-7535

  
	
   

  	
   

  	
   

  
	
  EMAIL ADDRESS:

  	
   

  	
  gmdimento@wellington.com

  
	
   

  	
   

  	
   

  
	
  CONTACT NAME:

  	
   

  	
  Gina Di Mento

  
					

 

Delivery Instructions (if
different from Registration Name):

 

	
  NAME:

  	
   

  	
  Mellon
  Securities Trust

  

 

	
  ADDRESS:

  	
   

  	
  120
  Broadway, 13th Floor

  
	
   

  	
   

  	
  New York,
  NY 10271

  
	
   

  	
   

  	
  Howard
  Hughes Medical Inst.

  
	
   

  	
   

  	
  Acct #
  HHMF5022232

  
	
   

  	
   

  	
   

  
	
  TEL.NO.:

  	
   

  	
  412-236-5792

  
	
   

  	
   

  	
   

  
	
  FAX NO.:

  	
   

  	
   

  

 

	
  CONTACT NAME:

  	
   

  	
  Patrick
  Ravas (Mellon/Pittsburgh)

  

 

	
  SPECIAL INSTRUCTIONS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

This is page 12 to the
Subscription by the above subscriber to Cano Petroleum, Inc.

 

2Exhibit
10.2

 

THE SECURITIES OFFERED HEREIN HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) AND MAY NOT BE OFFERED
OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS THAT TERMS IS DEFINED IN
THE 1933 ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE 1933 ACT, OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT IS AVAILABLE. THIS
SUBSCRIPTION IS EXECUTED IN RELIANCE UPON THE EXEMPTIONS PROVIDED BY RULE 506
OF REGULATION D UNDER THE 1933 ACT.

 

SUBSCRIPTION

 

THIS SUBSCRIPTION (the “Subscription”) has been executed by the
undersigned in connection with the offering of 2,100,000 shares of common
stock, par value $0.001 (hereinafter referred to as the “Stock”), of Cano
Petroleum, Inc., a corporation organized under the laws of the State of
Delaware (hereinafter referred to as the “Issuer”).  There is no minimum offering.  The Stock being subscribed for pursuant to
this Subscription has not been registered under the 1933 Act.  The offer of the Stock and, if this
Subscription is accepted by the Issuer, the sale of Stock, is being made in
reliance upon Rule 506 of Regulation D promulgated under the 1933 Act.
(All dollar amounts in this Subscription are expressed in U.S. Dollars).

 

ARTICLE 1

SUBSCRIPTION

 

Subscription

 

1.1                                 The undersigned
(the “Subscriber”), as principal, hereby subscribe to purchase, in the
aggregate, a minimum of 305,700 shares of
Common Stock (the “Shares”), having a purchase price of $4.14 per Share for an
aggregate purchase price of $1,265,598.00
(the “Subscription Price”).

 

Minimum
Subscription

 

1.2                                 A minimum number of 305,700 Shares must be purchased by the Subscriber.

 

Method of Payment

 

1.3                                 Upon receipt of
physical certificates on Closing Date (defined below), the Subscriber shall pay
the Subscription Price by delivering good funds in United States Dollars by way
of wire transfer of funds to the Issuer. 
The wire transfer instructions are:

 

Wires from Correspondent Banks
Worldwide:

 

	
  Beneficiary Bank:

  	
   

  	
  Worth National Bank

  
	
   

  	
   

  	
  801 Cherry Street, unit 27

  
	
   

  	
   

  	
  Fort Worth, TX 76102

  
	
   

  	
   

  	
  Tel: 817-877-2018

  
	
  Beneficiary:

  	
   

  	
  Cano Petroleum, Inc.

  
	
  ABA Routing#:

  	
   

  	
  111907568

  
	
  Account Number:

  	
   

  	
  31013406

  

 

 

The Company shall issue and
cause to be delivered on or before September 30, 2005 (the “Closing Date”)
to the Subscriber a certificate or certificates representing the Shares (the “Certificates”) pursuant
to Article 6 hereof.  Upon receipt
of the Certificates, the Subscriber shall deliver the full
Subscription Funds to
the wire instructions provided above. 
The Subscriber acknowledges that the subscription for Shares hereunder
may be rejected in whole or in part by the Issuer in its sole discretion.

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER

 

Representations and Warranties

 

2.1                                 The Subscriber
represents and warrants in all material respects to the Issuer, with the intent
that the Issuer will rely thereon in accepting this Subscription, that:

 

(a)                                  Experience.  The Subscriber is sufficiently experienced in
financial and business matters to be capable of evaluating the merits and risks
of its investments, and to make an informed decision relating thereto, and to
protect its own interests in connection with the purchase of the Shares;

 

(b)                                 Own Account.  The Subscriber is purchasing the Shares as principal
for its own account.  The Subscriber is
purchasing the Stock for investment purposes only and not with an intent or
view towards further sale thereof, and has not pre-arranged any sale with any
other subscriber;

 

(c)                                  Not Underwriter.  The Subscriber is not an underwriter, or
dealer in, the Stock, and the Subscriber is not participating, pursuant to a
contractual agreement, in a distribution of the Stock;

 

(d)                                 Importance of
Representations.  The
Subscriber understands that the Stock are being offered and sold to it in
reliance on an exemption from the registration requirements of the 1933 Act,
and that the Issuer is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Subscriber set forth herein in order to determine the applicability of such
exemptions and the suitability of the Subscriber to acquire the Stock;

 

(e)                                  Registration.  The Issuer shall use its best efforts to file
a registration statement to be filed with and declared effective by the
Securities and Exchange Commission (the “SEC”) at the earliest practicable date
after the Closing Date.  The Subscriber
represents and warrants and hereby agrees that all offers and sales of the
Securities shall be made only pursuant to such registration or to such
exemption from registration;

 

(f)                                    Risk.  The Subscriber acknowledges that the purchase
of the Stock involves a high degree of risk, is aware of the risks and further
acknowledges that it can bear the economic risk of the Stock, including the
total loss of its investment;

 

(g)                                 Current
Information.  The
Subscriber has been furnished with or has acquired copies of all requested
information concerning the Issuer, including a copies of reports filed by the
Issuer pursuant to the United States Securities Exchange Act of 1934, as
amended (the “1934 Act”) and copies of press releases issued by the Issuer;

 

2

 

(h)                                 Independent
Investigation.  The Subscriber, in making the decision to
subscribe for the Shares, has relied upon independent investigations made by it
and its purchaser representatives, if any, and the Subscriber and such
representatives, if any, have, prior to making this Subscription, been given
access and the opportunity to examine all material contracts and documents
relating to this offering and an opportunity to ask questions of, and to
receive answers from, the Issuer or any person acting on its behalf concerning
the terms and conditions of this offering. 
The Subscriber and its advisors, if any, have been furnished with access
to all materials relating to the business, finances and operation of the Issuer
and materials relating to the offer and sale of the Shares which have been
requested.  The Subscriber and its
advisors, if any, have received complete and satisfactory answers to any such
inquiries;

 

(i)                                     No Written or
Oral Representations.  No person
has made to the Subscriber any written or oral representations

 

(i)                                                             that any person will resell or repurchase the
Stock,

 

(ii)                                                          that any person will refund the purchase
price of the Stock, or

 

(iii)                                                       as to the future price or value of the Stock;

 

(j)                                     No
Recommendation or Endorsement.  The Subscriber understands that no federal or
state agency has passed on or made any recommendation or endorsement of the
Stock;

 

(k)                                  Partnership,
Corporation or Trust.  If
the Subscriber is a partnership, corporation or trust, the person executing
this Subscription on its behalf represents and warrants that

 

(i)            he or she has
made due inquiry to determine the truthfulness of the representations and
warranties made pursuant to this Subscription, and

 

(ii)           he or she is
duly authorized (and if the undersigned is a trust, by the trust agreement) to
make this investment and to enter into and execute this Subscription on behalf
of such entity;

 

(l)                                     Affiliate
Status.  Upon purchase of the Stock,
the Subscriber will be an affiliate of the Issuer and the Subscriber
acknowledges that the Stock held by it will be subject to certain resale
restrictions under the 1933 Act;

 

(m)                               Other
Subscribers.  The Subscriber acknowledges that Shares
may be issued to other purchasers under this offering concurrently with the
Closing;

 

(n)                                 No
Advertisement or General Solicitation.  The sale of the Shares has not been
advertised through any article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio; or
through any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising;

 

(o)                                 Accredited Investor. 
The Subscriber is (i) an “accredited investor” as that term is
defined in Rule 501 of the General Rules and Regulations under the
1933 Act by reason of Rule 501(a)(3), (ii) experienced in making
investments of the kind described in this Agreement

 

3

 

and the related documents, (iii) able, by reason
of the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Subscription,
and to evaluate the merits and risks of an investment in the Stock, and (iv) able
to afford the entire loss of its investment in the Stock.;

 

(p)                                 Hedging Transactions. 
The Subscriber acknowledges and agrees that all offers and sales of the
Stock, as applicable, by the Subscriber shall be made only pursuant to
registration of the Stock under the 1933 Act, or pursuant to an available
exemption from the registration requirements of the 1933 Act.;

 

(q)                                 Beneficial Ownership. 
Upon consummation of the transactions contemplated by this Subscription,
the Subscriber will be the beneficial owner of the Stock issued to it pursuant
to this Subscription.  The Subscriber
will share beneficial ownership of the Stock with Wellington Management
Company, llp as its investment adviser. The Subscriber has not pre-arranged any
sale of the Stock with any person or persons in the United States;

 

(r)                                    No Short Position. 
The Subscriber will not, directly or indirectly, or through one or more
intermediaries, maintain any short position in the common shares of the Company
during the applicable distribution compliance period;

 

(s)                                  Restriction on Transfer. 
The Subscriber understands and acknowledges that the Issuer will not
allow any transfer or other disposition of the Stock until the Stock has been
registered under the 1933 Act.  The
Certificate(s) shall bear the following legend in addition to any other legend
required under this Subscription:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

 

Non-Merger
and Survival

 

2.2                                 The
representations and warranties of the Subscribers contained herein will be true
at the date of execution of this Subscription by the Subscribers and as of the
Closing Date in all material respects as though such representations and
warranties were made as of such times and shall survive the Closing Date and
the delivery of the Certificates.

 

Indemnity

 

2.3                                 The Subscriber
agrees to indemnify and hold harmless the Issuer from and against any and all
claims, demands, actions, suits, proceedings, assessments, judgments, damages,
costs, losses and expenses, including attorney’s fees incurred in contesting
any such claim and any payment made in good faith in settlement of any claim
(subject to the right of the Subscriber to defend any such claim), resulting
from the breach of any representation or warranty of such party under this
Subscription.

 

4

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE ISSUER

 

3.1                                 The Issuer,
upon taking up and accepting this Subscription, represents and warrants in all
material respects to the Subscriber, with the intent that the Subscriber will
rely thereon in making this Subscription, that:

 

(a)                                  Legality.  The Issuer has the requisite corporate power
and authority to accept this Subscription and to issue, sell and deliver the
Shares; this Subscription and the issuance, sale and delivery of the Shares
hereunder and the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action by the Issuer; this Subscription
and the Shares have been duly and validly executed and delivered by and on
behalf of the Issuer, and are valid and binding agreements of the Issuer,
enforceable in accordance with their respective terms, except as enforceability
may be limited by general equitable principles, bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other laws affecting
creditors’ rights generally;

 

(b)                                 Transfer.  Provided that
a registration statement in respect of the Shares is in effect as required
under all applicable securities laws, such Shares shall be freely transferable
on the books and records of the Issuer, provided that the sale is made to a
bona-fide purchaser and that the prospectus delivery requirements are met;

 

(c)                                  Listed Company Status. 
The Issuer is required to make current filings with the SEC pursuant to Section 13
or 15(d) of the 1934 Act,
the Stock is presently listed on the American Stock Exchange and the Issuer has
received no notice, either oral or written, with respect to its continued
eligibility for such listing;

 

(d)                                 Listing of Shares. 
Subject to notification to the American Stock Exchange of actual
issuance, as of the Closing Date the Shares will be listed on the American
Stock Exchange.

 

(e)                                  Proper
Organization.  The Issuer
is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and is duly qualified as a
foreign corporation in all jurisdictions where the failure to be so qualified
would have a materially adverse effect on its business, taken as whole;

 

(f)                                    No Legal
Proceedings.  There is no
action, suit or proceeding before or by any court or any governmental agency or
body, domestic or foreign, now pending or to the knowledge of the Issuer,
threatened, against or affecting the Issuer, or any of its properties or
assets, which might result in any material adverse change in the condition
(financial or otherwise) or in the earnings, business affairs or business
prospects of the Issuer, or which might materially and adversely affect the properties
or assets thereof;

 

(g)                                 Non-Default.  The Issuer is not in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property
may be bound; and

 

(h)                                 Non-Contravention.  The execution and delivery of this
Subscription and the consummation of the issuance of the Shares and the
transactions contemplated by this Agreement do not and will not conflict with
or result in a breach by the Issuer of any of

 

5

 

the
terms or provisions of, or constitute a default under, the Certificate
of Incorporation or Bylaws of the Issuer, or any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Issuer is a party
or by which it or any of its properties or assets are bound, or any existing
applicable decree, judgment or order of any court, Federal or state regulatory
body, administrative agency or other domestic governmental body having
jurisdiction over the Issuer or any of its properties or assets.

 

Non-Merger
and Survival

 

3.2                                 The
representations and warranties of the Issuer contained herein will be true at the
date of execution of this Subscription by the Issuer and as of the Closing Date
in all material respects as though such representations and warranties were
made as of such times and shall survive the Closing Date and the delivery of
the Certificates.

 

Indemnity

 

3.3                                 The Issuer
agrees to indemnify and hold harmless the Subscriber from and against any and
all claims, demands, actions, suits, proceedings, assessments, judgments,
damages, costs, losses and expenses, including attorney’s fees incurred in contesting
any such claim and any payment made in good faith in settlement of any claim
(subject to the right of the Issuer to defend any such claim), resulting from
the breach of any representation, warranty or covenant of such party under this
Subscription.

 

ARTICLE 4

COVENANTS OF THE ISSUER

 

Covenants
of the Issuer

 

4.1                                 The Issuer
covenants and agrees with the Subscriber that:

 

(a)                                  Filings.  The Issuer will make all necessary filings in
connection with the sale of the Shares as required by the laws and regulations
of all appropriate jurisdictions;

 

(b)                                 Section 13
Compliance.  The Issuer
shall, from and after the Closing Date, use its best efforts to comply with the
requirements of Section 13 of the 1934 Act and maintain the listing of the
Common Stock on the American Stock Exchange or other quotation medium;

 

(c)                                  Rule 144
Opinion.  The Issuer will, upon written
request by the Subscriber, take such steps as are necessary to cause its
counsel to issue an opinion to the Issuer’s transfer agent allowing the Subscriber
to offer and sell any Shares issued in reliance on the applicable provisions of
Rule 144 provided that the holding period and other requirements of such Rule 144
are met.  The costs of obtaining such an
opinion shall be borne by the Issuer; and

 

(d)                                 Use of Proceeds.  The Issuer will apply the Subscription Price,
together with all other subscription funds received from other subscribers
under this offering, for general corporate and working capital purposes.

 

6

 

Survival

 

4.2                                 The covenants
set forth in this Article 4 shall survive the Closing for the benefit of
the Subscriber.

 

ARTICLE 5

DEMAND REGISTRATION RIGHTS

 

Registration Statement

 

4.1                                 Upon the Closing, the Issuer shall use its
best efforts to file a registration statement under the 1933 Act and under any
applicable Blue Sky laws registering the resale of Shares and shall use its
best efforts to cause such registration statement to be declared effective by
the Commission at the earliest practicable date, all at the Issuer’s sole cost
and expense.  Such best efforts shall include promptly responding to all
comments received by the staff of the SEC, and promptly preparing and filing
amendments to such registration statement which are responsive to the comments
received from the staff of the SEC, and in no event later than twenty-one (21)
days from receipt by the Issuer of the comments of the staff of the SEC. 
Such registration statement shall name the Subscriber as a selling shareholder
and shall provide for the sale of the Shares by the Subscriber from time to
time directly to purchasers or in the over-the-counter market or through or to
securities brokers or dealers that may receive compensation in the form of
discounts, concessions, or commissions.  The Issuer shall provide the
Subscriber with such number of copies of the prospectus as shall be reasonably
requested to facilitate the sale of the Shares.  None of the foregoing
shall in any way limit the Subscriber’s rights to sell the Shares in reliance on
an exemption from the registration requirements under the 1933 Act in
connection with a particular transaction.

 

Currency of Registration Statement

 

4.2                                 The Issuer shall use its best efforts to
maintain the currency of the registration statement filed with the SEC and
under all applicable Blue Sky laws in respect of the Shares for 12 months from
the Closing Date.

 

Indemnification of Subscriber by Issuer

 

4.3                                 To the extent permitted by law, the Issuer
will indemnify the Subscriber and any underwriter and each person who controls
either of them within the meaning of Section 15 of the 1933 Act, against
all expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or treated, to the extent such expenses, claims, losses,
damages or liabilities arise out of or are based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Issuer of the 1933 Act or any rule or regulation
promulgated under the 1933 Act applicable to the Issuer in connection with any
such registration, qualification or compliance, and the Issuer will reimburse
the Subscriber, each of its officers and directors and partners, and each
person controlling the Subscriber, each such underwriter and each person who
controls either of them, for any legal and any other expense reasonably
incurred in connection with investigation, preparing or defending any such
claim, loss, damage, liability or action, provided, however, that the indemnity
contained herein shall not apply to amounts paid in settlement of any claim,
loss, damage, liability or expense if settlement is effected without the
consent of the Issuer (which consent

 

7

 

shall
not unreasonably be withheld); provided, further, that the Issuer will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Issuer by the Subscriber
specifically for inclusion in the registration statement.  Notwithstanding the foregoing, insofar as the
foregoing indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at
the time the registration statement becomes effective or in the final
prospectus filed with the SEC pursuant to Rule 424(b) of the SEC, the
indemnity agreement herein shall not inure to the benefit of the Subscriber if
a copy of the final prospectus filed pursuant to Rule 424(b) was not
furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the 1933 Act.

 

Indemnification of Issuer by Subscriber

 

4.4                                 To the extent permitted by law, the
Subscriber will indemnify the Issuer, each of its directors and officers,
affiliates, counsel, advisors, employees and each underwriter, if any, of the
Issuer’s securities covered by such a registration statement, each person who
controls the Issuer or such underwriter within the meaning of Section 15
of the 1933 Act, and each other person selling the Issuer’s securities covered
by such registration statement, each of such person’s officers and directors
and each person controlling such persons within the meaning of Section 15
of the 1933 Act, against all claims, losses, damages and liabilities (or
actions in respect thereof), including attorneys fees and costs, arising out of
or based on any statement made in reliance upon and in conformity with written
information furnished to the Issuer or such underwriter by the Subscriber
specifically for inclusion in the registration statement,or any other violation
by the Subscriber of any rule or regulation promulgated under the 1933 Act
applicable to the Subscriber and relating to action or inaction required of the
Subscriber in connection with any such registration, qualification or
compliance, and will reimburse the Issuer, such other person, such directors,
officers, persons, underwriters or control persons for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided, however, that the
indemnity contained herein shall not apply to amounts paid in settlement of any
claim, loss, damage, liability or expense if settlement is effected without the
consent of the Subscriber (which consent shall not be unreasonably withheld).
Notwithstanding the foregoing, the liability of the Subscriber under this subsection (b) shall
be limited in an amount equal to the net proceeds actually received by the
Subscriber from the sale of the shares under the registration statement.

 

Removal of Legend

 

4.5                                 After the registration statement referenced
in Section 4.1 is declared effective by the SEC, the Subscribers may
deliver to the Issuer the Certificate representing the Shares issued to such
Subscriber and the Issuer will, within three days after receipt by the Issuer
of the foregoing, issue a new certificate representing and in exchange for the
aforementioned certificate, which new certificate shall be legended as follows:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY BE
SOLD PURSUANT TO THE REGISTRATION STATEMENT PROVIDED THAT (I) THE REGISTRATION
STATEMENT IS CURRENT AND EFFECTIVE, (II) THE HOLDER COMPLIES WITH THE PROSPECTUS
DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND

 

8

 

(III) THE SALE IS IN COMPLIANCE WITH THE PLAN OF
DISTRIBUTION SET FORTH IN THE PROSPECTUS. THE TRANSFER OF SUCH SECURITIES IS RESTRICTED
AS SET FORTH IN A SUBSCRIPTION AGREEMENT BETWEEN THE ISSUER AND THE HOLDER, A
COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.

 

ARTICLE 6

ISSUANCE OF CERTIFICATES

 

On or before the Closing Date, the Issuer will
prepare and issue one or more Certificates for the Shares registered in such
name or names as specified by the Subscriber and cause the same to be delivered
to the Subscriber pursuant to the delivery instructions provided by the
Subscriber.

 

ARTICLE 7

CLOSING

 

Closing shall be effected
through the acceptance of this Subscription by the Issuer, the delivery of the
share certificates to the Subscriber and the taking up of the Subscription
Funds by the Issuer.

 

ARTICLE 8

GENERAL PROVISIONS

 

Governing Law

 

8.1                                 This Subscription shall be governed by and
construed under the law of the State of Delaware without regard to its choice
of law provision.  Any disputes arising
out of, in connection with, or with respect to this Subscription, the subject
matter hereof, the performance or non-performance of any obligation hereunder,
or any of the transactions contemplated hereby shall be adjudicated in a Court
of competent civil jurisdiction sitting in the City of Wilmington, Delaware and
nowhere else.

 

Successors and Assigns

 

8.2                                 This
Subscription shall inure to the benefit of and be binding on the respective
successors and assigns of the parties hereto.

 

Execution
by Counterparts and Facsimile

 

8.3                                 This
Subscription may be executed in counterparts and by facsimile, each of which
when executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Subscription.

 

[Remainder of page intentionally
left blank.]

 

9

 

SIGNATURE PAGE FOR ENTITIES

 

IN WITNESS WHEREOF, the undersigned represents that the
foregoing statements are true and that it caused this Subscription to be duly
executed on its behalf on this 16th day of September, 2005.

 

 

	
  The Robert Wood Johnson Foundation

  By: Wellington Management Company, LLP

  	
   

  
	
  As investment adviser

  	
   

  	
   

  
	
  Printed Name

  	
    /s/ Julie A. Jenkins

  	
   

  
	
   

  	
  Signature

  
	
  Julie A. Jenkins

  	
   

  
	
  Vice President and Counsel

  	
   

  	
   

  
	
  Printed Title

  	
   

  
					

 

 

Agreed
to this 16th day of September, 2005:

 

CANO PETROLEUM, INC.

 

 

	
  Per:

  	
    /s/ Michael J. Ricketts

  	
   

  

 

Print
Name: Michael J. Ricketts

 

 

This
is page 11 to the Subscription by the above subscriber to Cano Petroleum, Inc.
dated as stated above.

 

 

Full Name and Address of
Subscriber for Registration Purposes:

 

	
  NAME:

  	
   

  	
  BENCHWORTHY &
  CO

  	
   

  	
   

  
	
   

  	
   

  	
  c/o Wellington Management Company,
  llp

  	
   

  	
   

  
	
   

  	
   

  	
  75 State Street

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  	
  Boston, MA 02109

  	
  Attn: Gina Di Mento

  
						

 

 

	
  TEL.NO.:

  	
   

  	
  617-790-7535

  
	
   

  	
   

  	
   

  
	
  FAX NO.:

  	
   

  	
  617-204-7535

  
	
   

  	
   

  	
   

  
	
  EMAIL ADDRESS:

  	
   

  	
  gmdimento@wellington.com

  
	
   

  	
   

  	
   

  
	
  CONTACT NAME:

  	
   

  	
  Gina Di Mento

  
					

 

Delivery Instructions (if
different from Registration Name):

 

	
  NAME:

  	
   

  	
  State
  Street Bank & Trust Co

  
	
   

  	
   

  	
   

  
	
  ADDRESS:

  	
   

  	
  Acct:
  State Street

  
	
   

  	
   

  	
  55 Water
  Street Plaza Level- 3rd fl

  
	
   

  	
   

  	
  Acct:
  Robert Wood Johnson Foundation, A/C # JF1G

  
	
   

  	
   

  	
   

  
	
  TEL.NO.:

  	
   

  	
  (212) 855
  2441

  
	
   

  	
   

  	
   

  
	
  FAX NO.:

  	
   

  	
   

  

 

	
  CONTACT NAME:

  	
   

  	
  Robert
  Mendez

  
	
   

  
	
  SPECIAL INSTRUCTIONS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

 

This is page 12 to the Subscription by
the above subscriber to Cano Petroleum, Inc.

 

2

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