Document:

Exhibit
10.54

September 7, 2007

To the employees of
International Wholesale Tile, Inc.:

The housing
industry has experienced a significant downturn over the past year, which is
expected to continue for some time. This downturn resulted in International Wholesale
Tile’s (IWT) management, and its parent company, IWT Tesoro Corporation
(Tesoro), taking preemptive action in order to maintain its operations.

Tesoro’s and IWT’s
Boards of Directors have decided to seek protection by filing a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code.  The Boards believe this
reorganization is in the best interest of the Tesoro and IWT, and their
employees, customers, creditors, and shareholders.  Tesoro’s CEO, Henry J. Boucher, Jr. has said,
“After considering a wide range of alternatives, it became clear that this
course of action was a necessary and responsible step to preserve Tesoro’s
viability and longevity as we address our financial challenges and work to
secure our future.”

As part of the
reorganization, Tesoro’s and IWT’s primary lender, Bank of America, has agreed
to continue to provide financing to Tesoro and IWT.  The financing will include post-petition
funds to acquire inventory, pay operating expenses and the costs of the Chapter
11 activities.   We want to stress;
Tesoro and IWT are NOT ceasing operations and expect to continue business as
usual.  In particular, IWT expects to:

·                  Continue
normal business operations today and throughout the reorganization process

·                  Honor
its customer service policies; ship and deliver orders as usual

·                  Pay
its employees’ wages and salaries, offering the same medical, life insurance
and other benefits and to accrue vacation and discretionary time without
interruption.

Please be assured
that all funds in your 401(k) account are not affected in any way by this
filing.

During the
reorganization process, Tesoro will be assisted in part by KMA Capital
Partners.  Tesoro, IWT and KMA Capital
expect to co-sponsor a reorganization and refinancing plan so that we will
continue to operate, assuming the Court certifies the plan.  KMA Capital is an experienced merchant
banking company with the same objectives of Tesoro’s management - to focus on
restructuring IWT as a renewed leader in the industry, which you have come to
expect from IWT.  KMA Capital will be
aiding us in the financial restructuring of the Company.  During the interim period, KMA will also
assist the company in its effort to increase the flow of product.  Additionally, Tesoro and IWT are exploring
other plans, as alternative possibilities.

We appreciate your
support as we work our way through this reorganization process.

Sincerely,

Paul Boucher

International Wholesale Tile, Inc.

3500 SW 42nd Avenue

Palm City, FL 34990

772-223-5151

772-223-9744

www.internationalwholesaletile.com

www.tesorothecollection.com

www.iwttesoro.comExhibit
10.55

September 7, 2007

To Our Valued Suppliers:

The housing
industry has experienced a significant downturn over the past year, which is
expected to continue for some time. This downturn resulted in International
Wholesale Tile’s (IWT) management, and its parent company, IWT Tesoro
Corporation (Tesoro), taking preemptive action in order to maintain its
operations.

Tesoro’s and IWT’s
Boards of Directors have decided to seek protection by filing a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code.  The Boards believe this
reorganization is in the best interest of the Tesoro and IWT, and their
employees, customers, creditors, and shareholders.  Tesoro’s CEO, Henry J. Boucher, Jr. has said,
“After considering a wide range of alternatives, it became clear that this
course of action was a necessary and responsible step to preserve Tesoro and
IWT’s viability and longevity as we address our financial challenges and work
to secure our future.”

As part of the
reorganization, Tesoro’s and IWT’s primary lender, Bank of America, has agreed
to continue to provide financing to Tesoro and IWT.  The financing will include post-petition
funds to acquire inventory, pay operating expenses and the costs of the Chapter
11 activities.   We want to stress;
Tesoro and IWT are NOT ceasing operations and expect to continue business as
usual.

During the
reorganization process, Tesoro will be assisted in part by KMA Capital
Partners.  Tesoro, IWT and KMA Capital
expect to co-sponsor a reorganization and refinancing plan so that we will
continue to operate assuming the Court certifies the plan.  KMA Capital is an experienced merchant
banking company with the same objectives of Tesoro’s management – to focus on
restructuring IWT as a renewed leader in the industry, which you have come to
expect from IWT.  KMA Capital will be
aiding us in the financial restructuring of the Company.  During the interim period, KMA will also
assist the company in its effort to increase the flow of product.  Additionally, Tesoro and IWT are exploring
other plans, as alternative possibilities.

By order of the
Bankruptcy Court, we are not permitted to pay past due amounts at this
time.  However, KMA Capital thru the
Bankruptcy Court will be contacting you with a proposed plan for resolving past
amounts owed.

Going forward, we
anticipate continuing our relationship on product orders.  As stated above, Bank of America has agreed
in principal to provide post-petition financing for the acquisition of
inventory.  New orders will have to be
coordinated with your IWT representative under new payment terms.  Collectively, we have spent considerable time
and effort developing and marketing your products, and would like to continue
to supply them to IWT customers.

We will be contacting
you in the near future to discuss our future business relationship.

This decision was
extremely difficult, but a necessary and responsible one that we firmly believe
will provide you and IWT with the time and opportunity to strengthen our
performance and achieve a new vibrant relationship.

We appreciate your
support as we work our way through this reorganization process.

Sincerely,

Paul Boucher

International Wholesale Tile, Inc.

3500 SW 42nd Avenue

Palm City, FL 34990

772-223-5151

772-223-9744

www.internationalwholesaletile.com

www.tesorothecollection.com

www.iwttesoro.comEXHIBIT 10.1

AMENDMENT NO. 7 AND AGREEMENT

This AMENDMENT NO. 7 AND AGREEMENT (“Agreement”) entered into and made
effective as of September 7, 2007 (“Effective Date”) is among Cano Petroleum,
Inc., a Delaware corporation (“Borrower”), the Guarantors (as defined below),
the Lenders (as defined below), and Union Bank of California, N.A., as
administrative agent for such Lenders (in such capacity, the “Administrative
Agent”) and as issuing lender (in such capacity, the “Issuing Lender”).

RECITALS

A.            The Borrower is party to that
certain Credit Agreement dated as of November 29, 2005, as amended by the
Amendment No. 1 dated as of February 24, 2006, and as amended by the Amendment
No. 2, Assignment and Agreement dated as of April 28, 2006, Amendment No. 3
entered into on May 12, 2006 but made effective as of March 31, 2006, Amendment
No. 4 dated as of June 30, 2006, Amendment No. 5 and Agreement dated as of
March 6, 2007, and Amendment No. 6 dated as of August 13, 2007 (as so amended,
the “Credit Agreement”) among the Borrower, the lenders party thereto from time
to time (the “Lenders”), the Administrative Agent, and the Issuing Lender.

B.            The
Borrower, the Lenders and the Administrative Agent wish to, subject to the
terms and conditions of this Agreement (i) increase the Borrowing Base and (ii)
make certain amendments to the Credit Agreement as provided herein.

THEREFORE, the Borrower, the Guarantors, the
Lenders, and the Administrative Agent hereby agree as follows:

Section 1.              Defined
Terms.  As used in
this Agreement, each of the terms defined in the opening paragraph and the
Recitals above shall have the meanings assigned to such terms therein.  Each term defined in the Credit Agreement and
used herein without definition shall have the meaning assigned to such term in
the Credit Agreement, unless expressly provided to the contrary.

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

Section 3.              Amendments to Credit Agreement.

(a)           The last sentence of
Section 5.02(b) of the Credit Agreement is hereby replaced in its entirety with
the following:

“Notwithstanding the foregoing,
the Borrower is not required to turn over to the Collateral Trustee the
casualty insurance proceeds received by the Borrower and its Subsidiaries in
connection with the fires beginning on March 12, 2006 in the Texas Panhandle;
provided that (i) the aggregate amount of insurance proceeds the Borrower is
permitted to retain pursuant to the preceding provision shall not exceed
$6,000,000, (ii) the Borrower shall deposit all such insurance proceeds into a
deposit account with the Administrative Agent in which the Administrative Agent
shall have a first priority security interest , and (iii) the Borrower shall
use such proceeds to pay the attorneys’ fees, settlement amounts and other
litigation expenses incurred by the Borrower and its Subsidiaries in defending
or settling the Fire Litigation and for general corporate purposes”

(b)           Section 6.18 of the
Credit Agreement is hereby replaced in its entirety with the following:

Section 6.18.        Leverage Ratio.  The Borrower (a) shall not permit the
Leverage Ratio at the end of each fiscal quarter ending prior to June 30, 2008
to be greater than 5.00 to 1.00; (b) shall not permit the Leverage Ratio at the
end of each fiscal quarter ending on or after June 30, 2008 but prior to
December 31, 2008 to be greater than 4.50 to 1.00; and (c) shall not permit the
Leverage Ratio at the end of each fiscal quarter ending on or after December
31, 2008 to be greater than 4.00 to 1.00; provided that, solely for purposes of
calculating Leverage Ratio under this clause, “consolidated Debt” shall not
include Debt outstanding under preferred Equity Interests issued in compliance
with Section 6.22.

Section 4.              Increases in the Borrowing
Base.  Subject to the terms of this Agreement, the
Lenders and the Borrower hereby agree that as of the Effective Date the
Borrowing Base shall be $60,000,000 and such Borrowing Base shall remain in
effect at that level until the Borrowing Base is redetermined or reduced in
accordance with the Credit Agreement, as amended hereby.

Section 5.              Borrower Representations and Warranties.  The Borrower represents and warrants that:
(a) after giving effect to this Agreement, the representations and warranties
contained in the Credit Agreement and the representations and warranties
contained in the other Loan Documents are true and correct in all material respects
on and as of the Effective Date as if made on as and as of such date except to
the extent that any such representation or warranty expressly relates solely to
an earlier date, in which case such representation or warranty is true and
correct in all material respects as of such earlier date; (b) after giving
effect to this Agreement, no Default has occurred and is continuing; (c) the execution,
delivery and

 2
 

performance of this
Agreement are within the corporate power and authority of the Borrower and have
been duly authorized by appropriate corporate and governing action and
proceedings; (d) this Agreement constitutes the legal, valid, and binding
obligation of the Borrower enforceable in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the rights of creditors generally and general principles
of equity; (e) there are no governmental or other third party consents,
licenses and approvals required in connection with the execution, delivery,
performance, validity and enforceability of this Agreement; and (f) the Liens
under the Security Instruments are valid and subsisting and secure Borrower’s
obligations under the Loan Documents.

Section 6.              Guarantors Representations and Warranties.  Each Guarantor represents and warrants that:
(a) after giving effect to this Agreement, the representations and warranties
contained in the Guaranty and the representations and warranties contained in
the other Loan Documents are true and correct in all material respects on and
as of the Effective Date as if made on as and as of such date except to the
extent that any such representation or warranty expressly relates solely to an
earlier date, in which case such representation or warranty is true and correct
in all material respects as of such earlier date; (b) after giving effect to
this Agreement, no Default has occurred and is continuing; (c) the execution,
delivery and performance of this Agreement are within the corporate, limited
liability company, or partnership power and authority of such Guarantor and
have been duly authorized by appropriate corporate, limited liability company,
or partnership action and proceedings; (d) this Agreement constitutes the
legal, valid, and binding obligation of such Guarantor enforceable in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the rights of
creditors generally and general principles of equity; (e) there are no governmental
or other third party consents, licenses and approvals required in connection
with the execution, delivery, performance, validity and enforceability of this
Agreement; (f) it has no defenses to the enforcement of the Guaranty; and (g)
the Liens under the Security Instruments are valid and subsisting and secure
such Guarantor’s and the Borrower’s obligations under the Loan Documents.

Section 7.              Conditions to Effectiveness.  This Agreement, the increase
in the Borrowing Base, and the amendments to the Credit Agreement provided
herein shall become effective on the Effective Date and enforceable against the
parties hereto upon the occurrence of the following conditions precedent:

(a)           The Administrative Agent shall have
received multiple original counterparts, as requested by the Administrative
Agent, of this Agreement duly and validly executed and delivered by duly
authorized officers of the Borrower, the Guarantors, the Administrative Agent,
and the Lenders.

(b)           No Default shall
have occurred and be continuing as of the Effective Date.

(c)           The representations
and warranties in this Agreement shall be true and correct in all material
respects.

(d)           The Borrower shall have paid (i) a fee in the amount of $80,000 for the pro rata
account of the Lenders (after giving effect to the assignment provided herein) in

 3
 

consideration of the Borrowing Base increase as
required under Section 2.08(d) of the Credit Agreement, and (ii) all fees and
expenses of the Administrative Agent’s outside legal counsel and other consultants
pursuant to all invoices presented for payment on or prior to the Effective
Date.

Section 8.              Acknowledgments and Agreements.

(a)           The Borrower
acknowledges that on the date hereof all Obligations are payable without
defense, offset, counterclaim or recoupment.

(b)           The Administrative
Agent and the Lenders hereby expressly reserve all of their rights, remedies,
and claims under the Loan Documents. 
Nothing in this Agreement shall constitute a waiver or relinquishment of
(i) any Default or Event of Default under any of the Loan Documents, (ii) any
of the agreements, terms or conditions contained in any of the Loan Documents,
(iii) any rights or remedies of the Administrative Agent or any Lender with
respect to the Loan Documents, or (iv) the rights of the Administrative Agent
or any Lender to collect the full amounts owing to them under the Loan
Documents.

(c)           Each of the
Borrower, the Guarantors, Administrative Agent, and Lenders does hereby adopt,
ratify, and confirm the Credit Agreement, as amended hereby, and acknowledges
and agrees that the Credit Agreement, as amended hereby, is and remains in full
force and effect, and the Borrower and the Guarantors acknowledge and agree
that their respective liabilities and obligations under the Credit Agreement,
as amended hereby, and the Guaranty, are not impaired in any respect by this
Agreement.

(d)           From and after the
Effective Date, all references to the Credit Agreement and the Loan Documents
shall mean such Credit Agreement and such Loan Documents as amended by this
Agreement.

(e)           This Agreement is a
Loan Document for the purposes of the provisions of the other Loan
Documents.  Without limiting the
foregoing, any breach of representations, warranties, and covenants under this
Agreement shall be a Default or Event of Default, as applicable, under the
Credit Agreement.

Section 9.              Reaffirmation of the Guaranty.  Each Guarantor hereby ratifies, confirms,
acknowledges and agrees that its obligations under the Guaranty are in full
force and effect and that such Guarantor continues to unconditionally and
irrevocably guarantee the full and punctual payment, when due, whether at
stated maturity or earlier by acceleration or otherwise, all of the Guaranteed
Obligations (as defined in the Guaranty), as such Guaranteed Obligations may
have been amended by this Agreement, and its execution and delivery of this
Agreement does not indicate or establish an approval or consent requirement by
such Guarantor under the Guaranty in connection with the execution and delivery
of amendments, consents or waivers to the Credit Agreement, the Notes or any of
the other Loan Documents.

Section 10.            Counterparts.  This Agreement may be signed in any number of
counterparts, each of which shall be an original and all of which, taken
together, constitute a single instrument. 
This Agreement may be executed by facsimile signature and all such
signatures shall be effective as originals.

 4
 

Section 11.            Successors
and Assigns.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted pursuant to the Credit
Agreement.

Section 12.            Invalidity.  In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement.

Section 13.            Governing
Law.  This
Agreement shall be deemed to be a contract made under and shall be governed by
and construed in accordance with the laws of the State of Texas.

Section 14.            Entire
Agreement.  THIS AGREEMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AGREEMENT, THE
NOTES, AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG
THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.

THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[SIGNATURES BEGIN ON NEXT PAGE]

 5

EXECUTED effective as of the date first above written.

	
  BORROWER:

  	
  CANO PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
   

  	
  S. Jeffrey Johnson

  
	
   

  	
   

  	
  Chairman and Chief
  Executive Officer

  
	
   

  	
   

  
	
  GUARANTORS:

  	
  SQUARE ONE ENERGY, INC.

  
	
   

  	
  LADDER COMPANIES, INC.

  
	
   

  	
  W.O. ENERGY OF NEVADA, INC.

  
	
   

  	
  WO ENERGY, INC.

  
	
   

  	
  PANTWIST, LLC

  
	
   

  	
  CANO PETRO OF NEW MEXICO, INC.

  
	
   

  	
   

  
	
   

  	
  Each by:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
   

  	
  S. Jeffrey Johnson

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
  W.O. OPERATING COMPANY, LTD.

  
	
   

  	
  By: WO Energy, Inc., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
  S. Jeffrey Johnson

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
  W.O. PRODUCTION COMPANY, LTD.

  	 

	
   

  	
  By: WO Energy, Inc., its general partner

  	 

	
   

  	
   

  	 

	
   

  	
   

  	
  By:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
  S. Jeffrey Johnson

  
	
   

  	
  President

  
						

 

Signature Page to
Amendment No. 7 and Agreement

 

 

	
  ADMINISTRATIVE AGENT/

  	
   

  
	
  ISSUING LENDER/LENDER:

  	
  UNION BANK OF CALIFORNIA, N.A.,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randall Osterberg

  
	
   

  	
   

  	
   

  	
  Randall Osterberg

  
	
   

  	
   

  	
   

  	
  Senior Vice President

  

 

Signature Page to
Amendment No. 7 and Agreement

 

 

	
  

  	
  NATIXIS, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donovan C. Broussard

  
	
   

  	
  Name:

  	
  Donovan C. Brousard

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Louis P. Laville, III

  
	
   

  	
  Name:

  	
  Louis P. Laville, III

  
	
   

  	
  Title:

  	
  Managing Director

  
					

 

Signature Page to Amendment
No. 7 and Agreement

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