Document:

EXHIBIT 10.2

 

LIBERTY MEDIA CORPORATION

2002 NONEMPLOYEE DIRECTOR INCENTIVE PLAN

 

(As Amended and Restated Effective May 9, 2006)

 

ARTICLE I

 

PURPOSE AND ASSUMPTION OF PLAN

 

1.1           Purpose.  The purpose
of the Plan is to provide a method whereby eligible Nonemployee Directors of
the Company may be awarded additional remuneration for services rendered and
encouraged to invest in capital stock of the Company, thereby increasing their
proprietary interest in the Company’s businesses and increasing their personal interest
in the continued success and progress of the Company.  The Plan is also intended to aid in
attracting Persons of exceptional ability to become Nonemployee Directors of
the Company.

 

1.2           Assumption of Plan; Amendment and Restatement of Plan.  The Plan
was previously adopted as the Liberty Media Corporation 2002 Nonemployee
Director Incentive Plan, by the board of directors of Liberty Media LLC (“Old
Liberty”), which prior to the Merger (as defined below) was a Delaware
corporation named Liberty Media Corporation and was the parent corporation of
the Company. The Plan has been amended and restated as set forth herein by the
Board of the Company in connection with the merger of a wholly owned subsidiary
of the Company with and into Old Liberty (“Merger”). Effective May 9,
2006, the Company has become the parent corporation of Old Liberty and has
assumed and adopted the Plan.

 

ARTICLE II

 

DEFINITIONS

 

2.1           Certain Defined Terms. 
Capitalized terms not defined elsewhere in the Plan shall have the
following meanings (whether used in the singular or plural):

 

“Affiliate” of the
Company means any corporation, partnership, or other business association that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the Company.

 

“Agreement” means a stock
option agreement, stock appreciation rights agreement, restricted shares
agreement, stock units agreement, or an agreement evidencing more than one type
of Award, specified in Section 11.5, as any such Agreement may be
supplemented or amended from time to time.

 

 

“Approved Transaction”
means any transaction in which the Board (or, if approval of the Board is not
required as a matter of law, the stockholders of the Company) shall approve (i) any
consolidation or merger of the Company, or binding share exchange, pursuant to
which shares of Common Stock of the Company would be changed or converted into
or exchanged for cash, securities, or other property, other than any such
transaction in which the common stockholders of the Company immediately prior
to such transaction have the same proportionate ownership of the Common Stock
of, and voting power with respect to, the surviving corporation immediately
after such transaction, (ii) any merger, consolidation, or binding share
exchange to which the Company is a party as a result of which the Persons who
are common stockholders of the Company immediately prior thereto have less than
a majority of the combined voting power of the outstanding capital stock of the
Company ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors
immediately following such merger, consolidation, or binding share exchange, (iii) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company, or (iv) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company.

 

“Award” means a grant of
Options, SARs, Restricted Shares, Stock Units and/or cash under this Plan.

 

“Board” means the Board
of Directors of the Company.

 

“Board Change” means,
during any period of two consecutive years, individuals who at the beginning of
such period constituted the entire Board cease for any reason to constitute a
majority thereof unless the election, or the nomination for election, of each
new director was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of the period.

 

“Code” means the Internal
Revenue Code of 1986, as amended from time to time, or any successor statute or
statutes thereto.  Reference to any
specific Code section shall include any successor section.

 

“Common Stock” means each
or any (as the context may require) series of the Company’s
common stock.

 

“Company” means Liberty
Media Corporation, a Delaware corporation (which was originally incorporated
under the name Liberty Media Holding Corporation).

 

“Control Purchase” means
any transaction (or series of related transactions) in which (i) any
person (as such term is defined in Sections 13(d)(3) and 14(d)(2) of
the Exchange Act), corporation, or other entity (other than the Company, any
Subsidiary of the Company, or any employee benefit plan sponsored by the
Company or any Subsidiary of the Company) shall purchase any Common Stock of
the Company (or securities convertible into Common Stock of the Company) for
cash, securities, or any other consideration pursuant to a tender offer or exchange
offer, without the prior consent of 

 

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the Board, or (ii) any person (as such term is so
defined), corporation, or other entity (other than the Company, any Subsidiary
of the Company, any employee benefit plan sponsored by the Company, or any
Subsidiary of the Company or any Exempt Person (as defined below)) shall become
the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the then outstanding
securities of the Company ordinarily (and apart from the rights accruing under
special circumstances) having the right to vote in the election of directors
(calculated as provided in Rule 13d-3(d) under the Exchange Act in
the case of rights to acquire the Company’s securities), other than in a
transaction (or series of related transactions) approved by the Board.  For purposes of this definition, “Exempt
Person” means each of (a) the Chairman of the Board, the President and
each of the directors of the Company as of August 10, 2001, and (b) the
respective family members, estates, and heirs of each of the Persons referred
to in clause (a) above and any trust or other investment vehicle for the
primary benefit of any of such Persons or their respective family members or
heirs.  As used with respect to any
Person, the term “family member” means the spouse, siblings and lineal
descendants of such Person.

 

“Director Compensation”
means the annual retainer and meeting fees, and any other regular cash
compensation payable by the Company to a Nonemployee Director for service on
the Board.

 

“Disability” means the
inability to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a continuous
period of not less than 12 months.

 

“Dividend Equivalents”
means, with respect to Restricted Shares to be issued at the end of the
Restriction Period, to the extent specified by the Board only, an amount equal
to all dividends and other distributions (or the economic equivalent thereof)
which are payable to stockholders of record during the Restriction Period on a
like number and kind of shares of Common Stock.

 

“Domestic Relations Order”
means a domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.

 

“Effective Date” means December 17,
2002.

 

“Equity Security” shall
have the meaning ascribed to such term in Section 3(a)(11) of the Exchange
Act, and an equity security of an issuer shall have the meaning ascribed
thereto in Rule 16a-1 promulgated under the Exchange Act, or any successor
Rule.

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended from time to time, or any successor
statute or statutes thereto. Reference to any specific Exchange Act section shall
include any successor section.

 

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“Fair Market Value” of a
share of any series of Common Stock on any day means the last sale price (or,
if no last sale price is reported, the average of the high bid and low asked
prices) for a share of such series of Common Stock on such day (or, if such day
is not a trading day, on the next preceding trading day) as reported on the
consolidated transaction reporting system for the principal national securities
exchange on which shares of such series of Common Stock are listed on such day
or if such shares are not then listed on a national securities exchange, then
as reported on Nasdaq or, if such shares are not then listed or quoted on
Nasdaq, then as quoted by the National Quotation Bureau Incorporated.  If for any day the Fair Market Value of a
share of the applicable  series of Common
Stock is not determinable by any of the foregoing means, then the Fair Market
Value for such day shall be determined in good faith by the Board on the basis
of such quotations and other considerations as the Board deems appropriate.

 

“Free Standing SAR” has
the meaning ascribed thereto in Section 7.1.

 

“Holder” means a Person
who has received an Award under this Plan.

 

“Nasdaq” means The Nasdaq
Stock Market.

 

“Nonemployee Director”
means an individual who is a member of the Board and who is not an employee of
the Company or any Subsidiary.

 

“Nonqualified Stock
Option” means a stock option granted under Article VI.

 

“Option” means a
Nonqualified Stock Option.

 

“Person” means an
individual, corporation, limited liability company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of
any kind.

 

“Plan” means this Liberty
Media Corporation 2002 Nonemployee Director Incentive Plan (As Amended and
Restated Effective May 9, 2006).

 

“Restricted Shares” means
shares of any series of Common Stock or the right to receive shares of any
specified series of Common Stock, as the case may be, awarded pursuant to Article VIII.

 

“Restriction Period”
means a period of time beginning on the date of each Award of Restricted Shares
and ending on the Vesting Date with respect to such Award.

 

“Retained Distribution”
has the meaning ascribed thereto in Section 8.3.

 

“SARs” means stock
appreciation rights, awarded pursuant to Article VII, with respect to
shares of any specified series of Common Stock.

 

“Stock Unit Awards” has
the meaning ascribed thereto in Section 9.1.

 

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“Subsidiary” of a Person
means any present or future subsidiary (as defined in Section 424(f) of
the Code) of such Person or any business entity in which such Person owns,
directly or indirectly, 50% or more of the voting, capital, or profits
interests.  An entity shall be deemed a
subsidiary of a Person for purposes of this definition only for such periods as
the requisite ownership or control relationship is maintained.

 

“Tandem SARs” has the
meaning ascribed thereto in Section 7.1.

 

“Vesting Date,” with
respect to any Restricted Shares awarded hereunder, means the date on which
such Restricted Shares cease to be subject to a risk of forfeiture, as
designated in or determined in accordance with the Agreement with respect to
such award of Restricted Shares pursuant to Article VIII.  If more than one Vesting Date is designated
for an award of Restricted Shares, reference in the Plan to a Vesting Date in
respect of such Award shall be deemed to refer to each part of such Award and
the Vesting Date for such part.

 

ARTICLE III

 

ADMINISTRATION

 

3.1           Administration.  The
Plan shall be administered by the Board, provided that it may delegate to
employees of the Company certain administrative or ministerial duties in
carrying out the purposes of the Plan.

 

3.2           Powers.  The Board
shall have full power and authority to grant to eligible Persons Options under Article VI
of the Plan, SARs under Article VII of the Plan, Restricted Shares under Article VIII
of the Plan, and/or Stock Units under Article IX of the Plan, to determine
the terms and conditions (which need not be identical) of all Awards so
granted, to interpret the provisions of the Plan and any Agreements relating to
Awards granted under the Plan, and to supervise the administration of the
Plan.  The Board in making an Award may
provide for the granting or issuance of additional, replacement, or alternative
Awards upon the occurrence of specified events, including the exercise of the
original Award.  The Board shall have
sole authority in the selection of Persons to whom Awards may be granted under
the Plan and in the determination of the timing, pricing, and amount of any
such Award, subject only to the express provisions of the Plan.  In making determinations hereunder, the Board
may take into account such factors as the Board in its discretion deems
relevant.

 

3.3           Interpretation.  The
Board is authorized, subject to the provisions of the Plan, to establish,
amend, and rescind such rules and regulations as it deems necessary or
advisable for the proper administration of the Plan and to take such other
action in connection with or in relation to the Plan as it deems necessary or
advisable.  Each action and determination
made or taken pursuant to the Plan by the Board, including any interpretation
or construction of the Plan, shall be final and conclusive for all purposes and
upon all Persons.  No member of the Board
shall be liable for any action or determination made or taken by him or the
Board in good faith with respect to the Plan.

 

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ARTICLE IV

 

SHARES SUBJECT TO THE PLAN

 

4.1           Number of Shares. 
Subject to the provisions of this Article IV, the maximum number of
shares of Common Stock (i) which may be issued in lieu of Director
Compensation pursuant to Section 10.1 and (ii) with respect to which
Awards may be granted during the term of the Plan shall be 1.5 million
shares.  Shares of Common Stock will be
made available from the authorized but unissued shares of the Company or from
shares reacquired by the Company, including shares purchased in the open
market.  The shares of Common Stock
subject to (i) any Award granted under the Plan that shall expire,
terminate or be annulled for any reason without having been exercised (or
considered to have been exercised as provided in Section 7.2), (ii) any
Award of any SARs granted under the Plan that shall be exercised for cash, and (iii) any
Award of Restricted Shares or Stock Units that shall be forfeited prior to
becoming vested (provided that the Holder received no benefits of ownership of
such Restricted Shares or Stock Units other than voting rights and the
accumulation of Retained Distributions and unpaid Dividend Equivalents that are
likewise forfeited) shall again be available for purposes of the Plan.

 

4.2           Adjustments.  If the
Company subdivides its outstanding shares of any series of Common Stock into a
greater number of shares of such series of Common Stock (by stock dividend,
stock split, reclassification, or otherwise) or combines its outstanding shares
of any series of Common Stock into a smaller number of shares of such series of
Common Stock (by reverse stock split, reclassification, or otherwise) or if the
Board determines that any stock dividend, extraordinary cash dividend,
reclassification, recapitalization, reorganization, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase such
series of Common Stock, or other similar corporate event (including mergers or
consolidations other than those which constitute Approved Transactions,
adjustments with respect to which shall be governed by Section 11.1(b))
affects any series of Common Stock so that an adjustment is required  to preserve the benefits or potential
benefits intended to be made available under this Plan, then the Board, in its
sole discretion and in such manner as the Board may deem equitable and
appropriate, may make such adjustments to any or all of (i) the number and
kind of shares of stock which thereafter may be awarded, optioned, or otherwise
made subject to the benefits contemplated by the Plan, (ii) the number and
kind of shares of stock subject to outstanding Awards, and (iii) the
purchase or exercise price and the relevant appreciation base with respect to
any of the foregoing, provided,  however, that the number of shares subject to any Award
shall always be a whole number. 
Notwithstanding the foregoing, if all shares of any series of Common
Stock are redeemed, then each outstanding Award shall be adjusted to substitute
for the shares of such series of Common Stock subject thereto the kind and
amount of cash, securities or other assets issued or paid in the redemption of
the equivalent number of shares of such 
series of Common Stock and otherwise the terms of such Award, including,
in the case of Options or similar rights, the aggregate exercise price, and, in
the case of Free Standing SARs, the aggregate base price, shall remain constant
before and after the substitution (unless otherwise determined by the Board and
provided in the applicable Agreement). 
The Board may, if deemed appropriate, provide for a cash payment to any
Holder of an Award in connection with any adjustment made pursuant to this Section 4.2.

 

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ARTICLE V

 

ELIGIBILITY

 

5.1           General.  The Persons
who shall be eligible to participate in the Plan and to receive Awards under
the Plan shall, subject to Section 5.2, be such Persons who are
Nonemployee Directors as the Board shall select.  Awards may be made to Nonemployee Directors
who hold or have held Awards under the Plan or any similar or other awards
under any other plan of the Company or any of its Affiliates.

 

5.2           Ineligibility.  No
Person who is not a Nonemployee Director shall be eligible to receive an Award.

 

ARTICLE VI

 

STOCK OPTIONS

 

6.1           Grant of Options. 
Subject to the limitations of the Plan, the Board shall designate from
time to time those eligible Persons to be granted Options, the time when each
Option shall be granted to such eligible Persons, the series and number of
shares of Common Stock subject to such Option, and, subject to Section 6.2,
the purchase price of the shares of Common Stock subject to such Option.

 

6.2           Option Price.  The
price at which shares may be purchased upon exercise of an Option shall be
fixed by the Board and may be no less than the Fair Market Value of the shares
of the applicable series of Common Stock subject to the Option as of the date
the Option is granted.

 

6.3           Term of Options.  Subject to the provisions of the Plan with
respect to death, retirement and termination of service, the term of each
Option shall be for such period as the Board shall determine as set forth in
the applicable Agreement.

 

6.4           Exercise of Options. 
An Option granted under the Plan shall become (and remain) exercisable
during the term of the Option to the extent provided in the applicable Agreement
and the Plan and, unless the Agreement otherwise provides, may be exercised to
the extent exercisable, in whole or in part, at any time and from time to time
during such term; provided, however, that
subsequent to the grant of an Option, the Board, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part (without reducing the term of such
Option).

 

6.5           Manner of Exercise.

 

(a)           Form of Payment.  An
Option shall be exercised by written notice to the Company upon such terms and
conditions as the Agreement may provide and in accordance with such other
procedures for the exercise of Options as the Board may 

 

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establish from time to time.  The method or methods of payment of the
purchase price for the shares to be purchased upon exercise of an Option and of
any amounts required by Section 11.9 shall be determined by the Board and
may consist of (i) cash, (ii) check, (iii) whole shares of any
series of Common Stock, (iv) the withholding of shares of the applicable
series of Common Stock issuable upon such exercise of the Option, (v) the
delivery, together with a properly executed exercise notice, of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds required to pay the purchase price, or (vi) any
combination of the foregoing methods of payment, or such other consideration
and method of payment as may be permitted for the issuance of shares under the
Delaware General Corporation Law.  The
permitted method or methods of payment of the amounts payable upon exercise of
an Option, if other than in cash, shall be set forth in the applicable
Agreement and may be subject to such conditions as the Board deems appropriate.

 

(b)           Value of Shares. 
Unless otherwise determined by the Board and provided in the applicable
Agreement, shares of any series of Common Stock delivered in payment of all or
any part of the amounts payable in connection with the exercise of an Option,
and shares of any series of Common Stock withheld for such payment, shall be
valued for such purpose at their Fair Market Value as of the exercise date.

 

(c)           Issuance of Shares. 
The Company shall effect the transfer of the shares of Common Stock
purchased under the Option as soon as practicable after the exercise thereof
and payment in full of the purchase price therefor and of any amounts required
by Section 11.9, and within a reasonable time thereafter, such transfer
shall be evidenced on the books of the Company. 
Unless otherwise determined by the Board and provided in the applicable
Agreement, (i) no Holder or other Person exercising an Option shall have
any of the rights of a stockholder of the Company with respect to shares of
Common Stock subject to an Option granted under the Plan until due exercise and
full payment has been made, and (ii) no adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of
such due exercise and full payment.

 

6.6           Nontransferability. 
Unless otherwise determined by the Board and provided in the applicable
Agreement, Options shall not be transferable other than by will or the laws of
descent and distribution or pursuant to a Domestic Relations Order, and, except
as otherwise required pursuant to a Domestic Relations Order, Options may be
exercised during the lifetime of the Holder thereof only by such Holder (or his
or her court-appointed legal representative).

 

8

 

ARTICLE VII

 

SARS

 

7.1           Grant of SARs. 
Subject to the limitations of the Plan, SARs may be granted by the Board
to such eligible Persons in such numbers, with respect to any specified series
of Common Stock, and at such times during the term of the Plan as the Board
shall determine.  A SAR may be granted to
a Holder of an Option (hereinafter called a “related Option”) with respect to
all or a portion of the shares of Common Stock subject to the related Option (a
“Tandem SAR”) or may be granted separately to an eligible Nonemployee Director
(a “Free Standing SAR”).  Subject to the
limitations of the Plan, SARs shall be exercisable in whole or in part upon
notice to the Company upon such terms and conditions as are provided in the Agreement.

 

7.2           Tandem SARs.  A Tandem
SAR may be granted either concurrently with the grant of the related Option or
at any time thereafter prior to the complete exercise, termination, expiration,
or cancellation of such related Option. 
Tandem SARs shall be exercisable only at the time and to the extent that
the related Option is exercisable (and may be subject to such additional
limitations on exercisability as the Agreement may provide) and in no event
after the complete termination or full exercise of the related Option.  Upon the exercise or termination of the
related Option, the Tandem SARs with respect thereto shall be canceled
automatically to the extent of the number of shares of Common Stock with
respect to which the related Option was so exercised or terminated. Subject to
the limitations of the Plan, upon the exercise of a Tandem SAR and unless
otherwise determined by the Board and provided in the applicable Agreement, (i) the
Holder thereof shall be entitled to receive from the Company, for each share of
the applicable series of Common Stock with respect to which the Tandem SAR is
being exercised, consideration (in the form determined as provided in Section 7.4)
equal in value to the excess of the Fair Market Value of a share of the
applicable series of Common Stock with respect to which the Tandem SAR was
granted on the date of exercise over the related Option purchase price per
share, and (ii) the related Option with respect thereto shall be canceled
automatically to the extent of the number of shares of Common Stock with
respect to which the Tandem SAR was so exercised.

 

7.3           Free Standing SARs. 
Free Standing SARs shall be exercisable at the time, to the extent and
upon the terms and conditions set forth in the applicable Agreement.  The base price of a Free Standing SAR may be no
less than the Fair Market Value of the applicable series of Common Stock with
respect to which the Free Standing SAR was granted as of the date the Free
Standing SAR is granted.  Subject to the
limitations of the Plan, upon the exercise of a Free Standing SAR and unless
otherwise determined by the Board and provided in the applicable
Agreement,  the Holder thereof shall be
entitled to receive from the Company, for each share of the applicable series
of Common Stock with respect to which the Free Standing SAR is being exercised,
consideration (in the form determined as provided in Section 7.4) equal in
value to the excess of the Fair Market Value of a share of the applicable
series of Common Stock with respect to which the Free Standing SAR was granted
on the date of exercise over the base price per share of such Free Standing
SAR.

 

9

 

7.4           Consideration.  The
consideration to be received upon the exercise of a SAR by the Holder shall be
paid in cash, shares of the applicable series of Common Stock with respect to
which the SAR was granted (valued at Fair Market Value on the date of exercise
of such SAR), a combination of cash and such shares of the applicable series of
Common Stock or such other consideration, in each case, as provided in the
Agreement.  No fractional shares of
Common Stock shall be issuable upon exercise of a SAR, and unless otherwise
provided in the applicable Agreement, the Holder will receive cash in lieu of
fractional shares.  Unless the Board
shall otherwise determine, to the extent a Free Standing SAR is exercisable, it
will be exercised automatically for cash on its expiration date.

 

7.5           Limitations.  The
applicable Agreement may provide for a limit on the amount payable to a Holder
upon exercise of SARs at any time or in the aggregate, for a limit on the
number of SARs that may be exercised by the Holder in whole or in part for cash
during any specified period, for a limit on the time periods during which a
Holder may exercise SARs, and for such other limits on the rights of the Holder
and such other terms and conditions of the SAR, including, without limitation,
a condition that the SAR may be exercised only in accordance with rules and
regulations adopted from time to time, as the Board may determine.  Unless otherwise so provided in the
applicable Agreement, any such limit relating to a Tandem SAR shall not
restrict the exercisability of the related Option.  Such rules and regulations may govern
the right to exercise SARs granted prior to the adoption or amendment of such rules and
regulations as well as SARs granted thereafter.

 

7.6           Exercise.  For
purposes of this Article VII, the date of exercise of a SAR shall mean the
date on which the Company shall have received notice from the Holder of the SAR
of the exercise of such SAR (unless otherwise determined by the Board and
provided in the applicable Agreement).

 

7.7           Nontransferability. 
Unless otherwise determined by the Board and provided in the applicable
Agreement, (i) SARs shall not be transferable other than by will or the
laws of descent and distribution or pursuant to a Domestic Relations Order, and
(ii) except as otherwise required pursuant to a Domestic Relations Order,
SARs may be exercised during the lifetime of the Holder thereof only by such
Holder (or his or her court-appointed legal representative).

 

10

 

ARTICLE VIII

 

RESTRICTED SHARES

 

8.1           Grant.  Subject to the
limitations of the Plan, the Board shall designate those eligible Persons to be
granted Awards of Restricted Shares, shall determine the time when each such
Award shall be granted, shall determine whether shares of Common Stock covered
by Awards of Restricted Shares will be issued at the beginning or the end of
the Restriction Period and whether Dividend Equivalents will be paid during the
Restriction Period in the event shares of the applicable series of Common Stock
are to be issued at the end of the Restriction Period, and shall designate (or
set forth the basis for determining) the Vesting Date or Vesting Dates for each
Award of Restricted Shares, and may prescribe other restrictions, terms, and
conditions applicable to the vesting of such Restricted Shares in addition to
those provided in the Plan.  The Board
shall determine the price, if any, to be paid by the Holder for the Restricted
Shares; provided, however, that the issuance of
Restricted Shares shall be made for at least the minimum consideration
necessary to permit such Restricted Shares to be deemed fully paid and
nonassessable.  All determinations made
by the Board pursuant to this Section 8.1 shall be specified in the
Agreement.

 

8.2           Issuance of Restricted Shares at Beginning of the Restriction Period.  If shares of the applicable series of Common
Stock are issued at the beginning of the Restriction Period, the stock
certificate or certificates representing such Restricted Shares shall be
registered in the name of the Holder to whom such Restricted Shares shall have
been awarded.  During the Restriction
Period, certificates representing the Restricted Shares and any securities
constituting Retained Distributions shall bear a restrictive legend to the
effect that ownership of the Restricted Shares (and such Retained Distributions),
and the enjoyment of all rights appurtenant thereto, are subject to the
restrictions, terms, and conditions provided in the Plan and the applicable
Agreement.  Such certificates shall
remain in the custody of the Company or its designee, and the Holder shall
deposit with the custodian stock powers or other instruments of assignment,
each endorsed in blank, so as to permit retransfer to the Company of all or any
portion of the Restricted Shares and any securities constituting Retained
Distributions that shall be forfeited or otherwise not become vested in
accordance with the Plan and the applicable Agreement.

 

8.3           Restrictions. 
Restricted Shares issued at the beginning of the Restriction Period
shall constitute issued and outstanding shares of the applicable series of
Common Stock for all corporate purposes. 
The Holder will have the right to vote such Restricted Shares, to
receive and retain such dividends and distributions, as the Board may
designate, paid or distributed on such Restricted Shares, and to exercise all
other rights, powers, and privileges of a Holder of shares of the applicable
series of Common Stock with respect to such Restricted Shares; except, that, unless otherwise determined by the Board and
provided in the applicable Agreement,  (a) the
Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled or waived; (b) the Company or its
designee will retain custody of the stock certificate or certificates
representing the Restricted Shares during the Restriction Period as provided in
Section 8.2; (c) other than such dividends and 

 

11

 

distributions as the
Board may designate, the Company or its designee will retain custody of all
distributions (“Retained Distributions”) made or declared with respect to the
Restricted Shares (and such Retained Distributions will be subject to the same
restrictions, terms and vesting, and other conditions as are applicable to the
Restricted Shares) until such time, if ever, as the Restricted Shares with
respect to which such Retained Distributions shall have been made, paid, or
declared shall have become vested, and such Retained Distributions shall not
bear interest or be segregated in a separate account; (d) the Holder may
not sell, assign, transfer, pledge, exchange, encumber, or dispose of the
Restricted Shares or any Retained Distributions or his interest in any of them
during the Restriction Period; and (e) a breach of any restrictions,
terms, or conditions provided in the Plan or established by the Board with
respect to any Restricted Shares or Retained Distributions will cause a
forfeiture of such Restricted Shares and any Retained Distributions with
respect thereto.

 

8.4           Issuance of Stock at End of the Restriction Period.  Restricted Shares issued at the end of the
Restriction Period shall not constitute issued and outstanding shares of the
applicable series of Common Stock, and the Holder shall not have any of the
rights of a stockholder with respect to the shares of Common Stock covered by
such an Award of Restricted Shares, in each case until such shares shall have
been transferred to the Holder at the end of the Restriction Period.  If and to the extent that shares of Common
Stock are to be issued at the end of the Restriction Period, the Holder shall
be entitled to receive Dividend Equivalents with respect to the shares of
Common Stock covered thereby either (i) during the Restriction Period or (ii) in
accordance with the rules applicable to Retained Distributions, as the
Board may specify in the Agreement.

 

8.5           Cash Payments.  In
connection with any Award of Restricted Shares, an Agreement may provide for
the payment of a cash amount to the Holder of such Restricted Shares after such
Restricted Shares shall have become vested. 
Such cash amounts shall be payable in accordance with such additional
restrictions, terms, and conditions as shall be prescribed by the Board in the
Agreement and shall be in addition to any other compensation payments which
such Holder shall be otherwise entitled or eligible to receive from the
Company.

 

8.6           Completion of Restriction Period.  On the Vesting Date with respect to each Award
of Restricted Shares and the satisfaction of any other applicable restrictions,
terms, and conditions, (a) all or the applicable portion of such
Restricted Shares shall become vested, (b) any Retained Distributions and
any unpaid Dividend Equivalents with respect to such Restricted Shares shall
become vested to the extent that the Restricted Shares related thereto shall
have become vested, and (c) any cash amount to be received by the Holder
with respect to such Restricted Shares shall become payable, all in accordance
with the terms of the applicable Agreement. 
Any such Restricted Shares, Retained Distributions and any unpaid
Dividend Equivalents that shall not become vested shall be forfeited to the
Company, and the Holder shall not thereafter have any rights (including
dividend and voting rights) with respect to such Restricted Shares, Retained
Distributions, and any unpaid Dividend Equivalents that shall have been so
forfeited.  The Board may, in its
discretion, provide that the delivery of any Restricted Shares, Retained
Distributions, and unpaid Dividend Equivalents that shall have become vested,
and payment of any cash amounts that shall have become payable, shall be
deferred until such date or dates as the recipient may elect.  Any election of a recipient pursuant to the
preceding 

 

12

 

sentence shall be filed
in writing with the Board in accordance with such rules and regulations,
including any deadline for the making of such an election, as the Board may
provide, and shall be made in compliance with Section 409A of the Code.

 

ARTICLE IX

 

STOCK UNITS

 

9.1           Grant.  In addition to
granting Awards of Options, SARs, and Restricted Shares, the Board shall,
subject to the limitations of the Plan, have authority to grant to eligible
Persons Awards of Stock Units which may be in the form of shares of any
specified series of Common Stock or units, the value of which is based, in
whole or in part, on the Fair Market Value of the shares of any specified
series of Common Stock.  Subject to the
provisions of the Plan, including any rules established pursuant to Section 9.2,
Awards of Stock Units shall be subject to such terms, restrictions, conditions,
vesting requirements, and payment rules as the Board may determine in its
discretion, which need not be identical for each Award.  The determinations made by the Board pursuant
to this Section 9.1 shall be specified in the applicable Agreement.

 

9.2           Rules.  The Board may,
in its discretion, establish any or all of the following rules for
application to an Award of Stock Units:

 

(a)           Any
shares of Common Stock which are part of an Award of Stock Units may not be
assigned, sold, transferred, pledged, or otherwise encumbered prior to the date
on which the shares are issued or, if later, the date provided by the Board at
the time of the Award.

 

(b)           Such
Awards may provide for the payment of cash consideration by the Person to whom
such Award is granted or provide that the Award, and any shares of Common Stock
to be issued in connection therewith, if applicable, shall be delivered without
the payment of cash consideration; provided, however, that
the issuance of any shares of Common Stock in connection with an Award of Stock
Units shall be for at least the minimum consideration necessary to permit such
shares to be deemed fully paid and nonassessable.

 

(c)           Awards
of Stock Units may relate in whole or in part to performance or other criteria
established by the Board at the time of grant.

 

(d)           Awards
of Stock Units may provide for deferred payment schedules, vesting over a
specified period of service, the payment (on a current or deferred basis) of
dividend equivalent amounts with respect to the number of shares of Common
Stock covered by the Award, and elections by the Holder to defer payment of the
Award or the lifting of restrictions on the Award, if any, provided that any
such deferrals shall comply with the requirements of Section 409A of the
Code.

 

13

 

(e)           In
such circumstances as the Board may deem advisable, the Board may waive or
otherwise remove, in whole or in part, any restrictions or limitations to which
a Stock Unit Award was made subject at the time of grant.

 

ARTICLE X

 

STOCK AWARDS IN LIEU OF CASH DIRECTOR FEES

 

10.1         General.  Each
Nonemployee Director shall have the option to elect to receive shares of one or
more series of Common Stock, as prescribed by the Board, in lieu of all or part
of the Director Compensation otherwise payable by the Company during each
calendar quarter.  Subject to any
applicable Purchase Restriction as described in Section 10.3, to the
extent a Nonemployee Director has elected in writing to receive stock in lieu
of Director Compensation, such Nonemployee Director will receive shares of
Common Stock on the last day of the calendar quarter for which the Director
Compensation was earned.  The Director
Compensation shall be converted to a number of shares of Common Stock equal in
value to such Director Compensation based on the Fair Market Value of such
shares on the last day of the calendar quarter for which the Director
Compensation would otherwise be payable to the Nonemployee Director, with any
fractional shares paid in cash.  For this
purpose, if the last day of the calendar quarter is not a trading day, then
Fair Market Value shall be determined as of the next succeeding trading
day.  Any shares issued in lieu of
Director Compensation shall be issued free of all restrictions except as
required by law.

 

10.2         Timing of Election.  A
Nonemployee Director’s election pursuant to Section 10.1 must be made no
later than the 30th calendar day (or such other day as the Board may prescribe)
prior to the end of the calendar quarter to which the election applies in accordance
with the procedures established by the Board. 
Once an election is made with respect to a particular calendar quarter,
it may not be withdrawn or substituted unless the Board determines, in its sole
discretion, that the withdrawal or substitution is occasioned by an
extraordinary or unanticipated event.

 

10.3         Election Void During Restricted Period.  If, on the date shares would be purchased
pursuant to an election under Section 10.1, there is in place any
restriction under applicable law (including, without limitation, a blackout
period under the Sarbanes-Oxley Act of 2002) or the rules of the principal
national securities exchange on which shares of the applicable series of Common
Stock are traded (a “Purchase Restriction”) which would prohibit the Nonemployee
Director from making such a purchase, then such shares shall be purchased on
the first trading day following the lapse or removal of the Purchase
Restriction based on the Fair Market Value of the shares on such trading day.

 

10.4         Conditions.  Nothing
contained herein shall preclude the Board, in its sole discretion, from
imposing conditions on any election made under Section 10.1, including,
without limitation, the conditions described in Section 10.3.

 

14

 

ARTICLE XI

 

GENERAL PROVISIONS

 

11.1         Acceleration of Awards.

 

(a)           Death or Disability. 
If a Holder’s service shall terminate by reason of death or Disability,
notwithstanding any contrary waiting period, installment period, vesting
schedule, or Restriction Period in any Agreement or in the Plan, unless the
applicable Agreement provides otherwise: 
(i) in the case of an Option or SAR, each outstanding Option or SAR
granted under the Plan shall immediately become exercisable in full in respect
of the aggregate number of shares covered thereby; (ii) in the case of
Restricted Shares, the Restriction Period applicable to each such Award of
Restricted Shares shall be deemed to have expired and all such Restricted
Shares, any related Retained Distributions and any unpaid Dividend Equivalents
shall become vested and any related cash amounts payable pursuant to the
applicable Agreement shall be adjusted in such manner as may be provided in the
Agreement; and (iii) in the case of Stock Units, each such Award of Stock
Units shall become vested in full.

 

(b)           Approved Transactions; Board Change; Control Purchase.  In the event of any Approved Transaction,
Board Change or Control Purchase, notwithstanding any contrary waiting period,
installment period, vesting schedule, or Restriction Period in any Agreement or
in the Plan, unless the applicable Agreement provides otherwise:  (i) in the case of an Option or SAR,
each such outstanding Option or SAR granted under the Plan shall become
exercisable in full in respect of the aggregate number of shares covered
thereby; (ii) in the case of Restricted Shares, the Restriction Period
applicable to each such Award of Restricted Shares shall be deemed to have
expired and all such Restricted Shares, any related Retained Distributions, and
any unpaid Dividend Equivalents shall become vested and any related cash
amounts payable pursuant to the applicable Agreement shall be adjusted in such
manner as may be provided in the Agreement; and (iii) in the case of Stock
Units, each such Award of Stock Units shall become vested in full, in each case
effective upon the Board Change or Control Purchase or immediately prior to
consummation of the Approved Transaction. 
Notwithstanding the foregoing, unless otherwise provided in the
applicable Agreement, the Board may, in its discretion, determine that any or
all outstanding Awards of any or all types granted pursuant to the Plan will
not vest or become exercisable on an accelerated basis in connection with an
Approved Transaction if effective provision has been made for the taking of
such action which, in the opinion of the Board, is equitable and appropriate to
substitute a new Award for such Award or to assume such Award and to make such
new or assumed Award, as nearly as may be practicable, equivalent to the old
Award (before giving effect to any acceleration of the vesting or
exercisability thereof), taking into account, to the extent applicable, the
kind and amount of securities, cash, or other assets into or for which the
applicable series of Common Stock may be changed, converted, or exchanged in
connection with the Approved Transaction.

 

15

 

11.2         Termination of Service.

 

(a)           General.  If a Holder’s
service shall terminate prior to an Option or SAR becoming exercisable or being
exercised (or deemed exercised, as provided in Section 7.2) in full, or
during the Restriction Period with respect to any Restricted Shares or prior to
the vesting or complete exercise of any Stock Units, then such Option or SAR
shall thereafter become or be exercisable, such Stock Units to the extent
vested shall thereafter be exercisable, and the Holder’s rights to any unvested
Restricted Shares, Retained Distributions, unpaid Dividend Equivalents, and related
cash amounts, and any such unvested Stock Units shall thereafter vest, in each
case solely to the extent provided in the applicable Agreement; provided, however, that, unless otherwise determined by the
Board and provided in the applicable Agreement, (i) no Option or SAR may
be exercised after the scheduled expiration date thereof; (ii) if the
Holder’s service terminates by reason of death or Disability, the Option or SAR
shall remain exercisable for a period of at least one year following such
termination (but not later than the scheduled expiration of such Option or
SAR); and (iii) any termination of the Holder’s
service for cause will be treated in accordance with the provisions of Section 11.2(b).

 

(b)           Termination for Cause. 
If a Holder’s service on the Board shall be terminated by the Company for
“cause” during the Restriction Period with respect to any Restricted Shares, or
prior to any Option or SAR becoming exercisable or being exercised in full or
prior to the vesting or complete exercise of any Stock Unit (for these
purposes, “cause” shall include dishonesty, incompetence, moral turpitude,
other misconduct of any kind, and the refusal to perform his duties and
responsibilities for any reason other than illness or incapacity; provided, however, that if such termination occurs within 12
months after an Approved Transaction or Control Purchase or Board Change,
termination for “cause” shall mean only a felony conviction for fraud,
misappropriation, or embezzlement), then, unless otherwise determined by the
Board and provided in the applicable Agreement, 
(i) all Options and SARs and all unvested or unexercised Stock
Units held by such Holder shall immediately terminate, and (ii) such
Holder’s rights to all Restricted Shares, Retained Distributions, any unpaid
Dividend Equivalents and any related cash amounts shall be forfeited
immediately.

 

11.3         Nonalienation of Benefits. 
Except as set forth herein, no right or benefit under the Plan shall be
subject to anticipation, alienation, sale, assignment, hypothecation, pledge,
exchange, transfer, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or
charge the same shall be void.  No right
or benefit hereunder shall in any manner be liable for or subject to the debts,
contracts, liabilities, or torts of the Person entitled to such benefits.

 

11.4         Written Agreement. 
Each Award of Options shall be evidenced by a stock option agreement;
each Award of SARs shall be evidenced by a stock appreciation rights agreement;
each Award of Restricted Shares shall be evidenced by a restricted shares
agreement; and each Award of Stock Units shall be evidenced by a stock units
agreement, each in such form and containing such terms and provisions not
inconsistent with the provisions of the Plan as the Board from time to time
shall approve; provided, however,
that if more than one type of Award 

 

16

 

is made to the same
Holder, such Awards may be evidenced by a single Agreement with such
Holder.  Each grantee of an Option, SAR,
Restricted Shares, or Stock Units shall be notified promptly of such grant, and
a written Agreement shall be promptly executed and delivered by the Company.  Any such Agreement may be supplemented or
amended from time to time as approved by the Board as contemplated by Section 11.6(b).

 

11.5         Designation of Beneficiaries.  Each Person who shall be granted an Award
under the Plan may designate a beneficiary or beneficiaries and may change such
designation from time to time by filing a written designation of beneficiary or
beneficiaries with the Board on a form to be prescribed by it, provided that no
such designation shall be effective unless so filed prior to the death of such
Person.

 

11.6         Termination and Amendment.

 

(a)           General.  Unless the
Plan shall theretofore have been terminated as hereinafter provided, no Awards
may be made under the Plan on or after the tenth anniversary of the Effective
Date.  The Plan may be terminated at any
time prior to the tenth anniversary of the Effective Date and may, from time to
time, be suspended or discontinued or modified or amended if such action is
deemed advisable by the Board.

 

(b)           Modification.  No
termination, modification or amendment of the Plan may, without the consent of
the Person to whom any Award shall theretofore have been granted, adversely
affect the rights of such Person with respect to such Award.  No modification, extension, renewal, or other
change in any Award granted under the Plan shall be made after the grant of
such Award, unless the same is consistent with the provisions of the Plan.  With the consent of the Holder and subject to
the terms and conditions of the Plan (including Section 11.6(a)), the
Board may amend outstanding Agreements with any Holder, including, without
limitation, any amendment which would (i) accelerate the time or times at
which the Award may be exercised and/or (ii) extend the scheduled
expiration date of the Award.  Without
limiting the generality of the foregoing, the Board may, but solely with the
Holder’s consent unless otherwise provided in the Agreement, agree to cancel
any Award under the Plan and grant a new Award in substitution therefor,
provided that the Award so substituted shall satisfy all of the requirements of
the Plan as of the date such new Award is made. 
Nothing contained in the foregoing provisions of this Section 11.6(b) shall
be construed to prevent the Board from providing in any Agreement that the
rights of the Holder with respect to the Award evidenced thereby shall be
subject to such rules and regulations as the Board may, subject to the
express provisions of the Plan, adopt from time to time or impair the
enforceability of any such provision.

 

11.7         Government and Other Regulations.  The obligation of the Company with respect to
Awards shall be subject to all applicable laws, rules, and regulations and such
approvals by any governmental agencies as may be required, including, without
limitation, the effectiveness of any registration statement required under the
Securities Act of 1933, and the rules and regulations of any securities
exchange or association on which the Common Stock may be listed or quoted.  For so long as any series of Common Stock are
registered under the Exchange Act, 

 

17

 

the Company shall use its
reasonable efforts to comply with any legal requirements (i) to maintain a
registration statement in effect under the Securities Act of 1933 with respect
to all shares of the applicable series of Common Stock that may be issued to
Holders under the Plan and (ii) to file in a timely manner all reports
required to be filed by it under the Exchange Act.

 

11.8         Withholding.  The
Company’s obligation to deliver shares of Common Stock or pay cash in respect
of any Award under the Plan shall be subject to applicable federal, state, and
local tax withholding requirements. 
Federal, state, and local withholding tax due at the time of an Award,
upon the exercise of any Option or SAR or upon the vesting of, or expiration of
restrictions with respect to, Restricted Shares or Stock Units, as appropriate,
may, in the discretion of the Board, be paid in shares of the applicable series
of Common Stock already owned by the Holder or through the withholding of
shares otherwise issuable to such Holder, upon such terms and conditions
(including, without limitation, the conditions referenced in Section 6.5)
as the Board shall determine.  If the
Holder shall fail to pay, or make arrangements satisfactory to the Board for
the payment to the Company of, all such federal, state and local taxes required
to be withheld by the Company, then the Company shall, to the extent permitted
by law, have the right to deduct from any payment of any kind otherwise due to
such Holder an amount equal to any federal, state, or local taxes of any kind
required to be withheld by the Company with respect to such Award.

 

11.9         Nonexclusivity of the Plan. 
The adoption of the Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.

 

11.10       Exclusion from Other Plans. 
By acceptance of an Award, unless otherwise provided in the applicable
Agreement, each Holder shall be deemed to have agreed that such Award is
special incentive compensation that will not be taken into account, in any
manner, as compensation or bonus in determining the amount of any payment under
any pension, retirement or other benefit plan, program, or policy of the
Company or any Subsidiary of the Company. 
In addition, each beneficiary of a deceased Holder shall be deemed to
have agreed that such Award will not affect the amount of any life insurance
coverage, if any, provided by the Company on the life of the Holder which is
payable to such beneficiary under any life insurance plan of the Company or any
Subsidiary of the Company. Director Compensation elected to be received in the
form of stock in lieu of cash shall be treated as regular compensation for
purposes of any Director retirement or life insurance plan.

 

11.11       Unfunded Plan. 
Neither the Company nor any Subsidiary of the Company shall be required
to segregate any cash or any shares of Common Stock which may at any time be
represented by Awards, and the Plan shall constitute an “unfunded” plan of the
Company.  Except as provided in Article VIII
with respect to Awards of Restricted Shares and except as expressly set forth
in an Agreement, no Holder shall have voting or other rights with respect to
the shares of Common Stock covered by an Award prior to the delivery of such
shares.  Neither the Company nor any
Subsidiary of the Company shall, by any provisions of the Plan, be deemed to be
a trustee of any shares of Common Stock or any other property, and the liabilities
of the 

 

18

 

Company to any Holder
pursuant to the Plan shall be those of a debtor pursuant to such contract
obligations as are created by or pursuant to the Plan, and shall be limited to
those of a general creditor of the Company. 
In its sole discretion, the Board may authorize the creation of trusts
or other arrangements to meet the obligations of the Company under the Plan, provided, however, that the existence of such trusts or
other arrangements is consistent with the unfunded status of the Plan.

 

11.12       Governing Law.  The
Plan shall be governed by, and construed in accordance with, the laws of the
State of Delaware.

 

11.13       Accounts.  The
delivery of any shares of Common Stock and the payment of any amount in respect
of an Award shall be for the account of the Company or the applicable
Subsidiary of the Company, as the case may be, and any such delivery or payment
shall not be made until the recipient shall have paid or made satisfactory
arrangements for the payment of any applicable withholding taxes as provided in
Section 11.8.

 

11.14       Legends.  Each
certificate evidencing shares of Common Stock subject to an Award shall bear
such legends as the Board deems necessary or appropriate to reflect or refer to
any terms, conditions, or restrictions of the Award applicable to such shares,
including, without limitation, any to the effect that the shares represented
thereby may not be disposed of unless the Company has received an opinion of
counsel, acceptable to the Company, that such disposition will not violate any
federal or state securities laws.

 

11.15       Company’s Rights.  The
grant of Awards pursuant to the Plan shall not affect in any way the right or
power of the Company to make reclassifications, reorganizations, or other
changes of or to its capital or business structure or to merge, consolidate,
liquidate, sell, or otherwise dispose of all or any part of its business or
assets.

 

11.16       Section 409A. 
Notwithstanding anything in this Plan to the contrary, if any Plan
provision or Award under the Plan would result in the imposition of an
additional tax under Code Section 409A and related regulations and United
States Department of the Treasury pronouncements (“Section 409A”), that
Plan provision or Award will be reformed to avoid imposition of the applicable
tax and no action taken to comply with Section 409A shall be deemed to
adversely affect the Holder’s rights to an Award.

 

19Exhibit 4.1

 

AMENDMENT NO. ONE

TO THE

REGISTRATION RIGHTS AGREEMENT

 

THIS AMENDMENT NO. ONE, effective November 29, 2005, to the
Registration Rights Agreement (the “Rights Agreement”) dated November
29, 2005, is by and among Cano Petroleum, Inc., a Delaware corporation (the “Company”)
and the Estate of Miles O’Loughlin (“Purchaser”).

 

W I T N E S S
E T H:

 

WHEREAS, the Company and Purchaser previously entered into the Rights
Agreement, pursuant to which the Company agreed to provide Purchaser with
certain registration rights under the Securities Act of 1933, as amended, and
under applicable state securities laws for 895,660 shares of the Company’s
common stock; and

 

WHEREAS, the Company and Purchaser desire to amend the Rights Agreement
to modify the terms regarding certain registration rights and the Purchase
Option, as defined in the Rights Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and all other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Company and Purchaser agree as follows:

 

1.             Paragraphs 2(a) and
(b) are hereby amended by striking said paragraphs and substituting in lieu
thereof the following:

 

If at any time before the Registrable Securities are eligible for
resale pursuant to the provisions of Rule 144(k) (the “Registration Period”),
the Company shall determine to register any of its equity securities, either
for its own account or for the account of a security holder or holders, other
than a registration statement relating solely to employee benefit plans or a
registration statement relating solely to a Rule 145 transaction or other
merger transaction or a registration on any registration form which does not
permit secondary sales of common stock or does not include substantially the
same information as would be required to be included in a registration
statement covering the resale of Registrable Securities, the Company will
include in such registration statement, and in any underwriting involved
therein, all of the Registrable Securities.

 

2.             The parties hereby
confirm that, except to the extent specifically amended hereby, the provisions
of the Rights Agreement shall remain unmodified and the Rights Agreement as so
amended is hereby confirmed as being in full force and effect.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
One to the Registration Rights Agreement to be executed by the undersigned as
of this 13th day of May, 2006.

 

 

	
   

  	
  ESTATE OF MILES

  O’LOUGHLIN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott B. White Independent Executor

  
	
   

  	
  Name: Scott B. White

  
	
   

  	
  Title: Independent Executor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CANO PETROLEUM, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
  Name: S. Jeffrey Johnson

  
	
   

  	
  Title: Chairman and CEO

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