Document:

Exhibit 10.14

 

	
  Cano
  Petroleum, Inc.

  The Oil & Gas Commerce Building

  309 West Seventh Street,
  Suite 1600

  Fort Worth, TX 76102

  	
   

  	
   

  	
  

  
	
  Phone (US) 817-698-0900

  	
   

  	
   

  	
  producing oil & gas

  
	
  Toll Free 1-877-698-0900

  	
   

  	
   

  	
  in the USA

  
	
  Fax 817-698-0796

  	
   

  	
   

  	
  for the USA

  

 

February 14, 2006

 

Energy Components SPC EEP
Energy

Exploration and Production
Segregated Portfolio

Grand Pavilion Commercial
Centre

802 West Bay Road, Suite 14

George Town, Grand Cayman,
B.W.I., Cayman Islands

Attention: Michael Proctor

 

Mitchell Energy Partners

7515 Greenville Avenue,
Suite 905

Dallas, Texas 75231

Attention: Mynan C. Feldman

Facsimile: (469) 916-7489

 

UnionBanCal Equities, Inc.

445 S. Figueroa Street, 13th Floor

Los Angeles, CA 90071

Attention: Michael Ross

Facsimile: (213) 236-7619

 

Gentlemen:

 

Reference is made to that
certain Subordinated Credit Agreement (the “Agreement”)
dated as of November 29, 2005, by and among Cano Petroleum, Inc. (the “Borrower”), the lenders named
therein, and Energy Components SPC EEP Energy Exploration and Production
Segregated Portfolio (“Energy Components”),
as Administrative Agent and Lender. Capitalized terms used herein shall, unless
otherwise indicated, have the respective meanings set forth in the Agreement.

 

Borrower hereby notifies
Energy Components, as Administrative Agent and Lender, and UnionBanCal Equities,
Inc. (“UnionBanCal”), as Lender,
that Borrower may not be able to comply with the covenant set forth in Section 5.01 of the Agreement, which
requires that Borrower comply in all material respects with all material Legal
Requirements. In connection with Borrower’s acquisition of W.O. Energy of
Nevada, Inc. (“W.O.”), Borrower is required
to file the financial statements of W.O. and the pro forma financial information
required by Item 9.01(a-b) of Form 8-K by amendment (the “Amendment”)
to the 8-K previously filed with the Securities and Exchange Commission on
December 5, 2005 (the “8-K”). The
required financial statements and pro forma financial information involve all
of W.O.’s prior activities, including non-oil & gas activities that were specifically excluded from Borrower’s
acquisition of W.O. (e.g. an airplane company and a hotel company).
Additionally, Borrower and Borrower’s independent auditor have received no
cooperation or support from W.O.’s external accountant in this matter. Such
Amendment is required to be filed within 71 days after the date the initial 8-K
was required to be filed (December 5, 2005), but Borrower will be unable to file
the Amendment in a timely manner. Borrower intends to file the Amendment as soon as possible, but no later than 10 calendar days from the date
hereof. As a result, Borrower is requesting that Energy Components, as Majority
Lender, waive, for a period not to exceed ten (10) calendar days from the date hereof,
the requirements of Section 5.01 of the Agreement, insofar and only insofar as such requirements

 

WWW.CANOPETRO.COM

 

 

pertain to the timely filing
of the Amendment (the “Covenant”).
By execution of this letter in the space provided below, Energy Components, as
Majority Lender, hereby waives the Covenant according to the terms set forth
herein.

 

	
  Warmest regards,

  
	
   

  
	
  /s/ Mike Ricketts

  	
   

  
	
  Mike Ricketts

  
	
  Chief Financial Officer

  
	
  Telephone Number: (817) 412-1349

  
	
  Fax Number: (817) 334-0222

  

 

 

	
   

  	
  Accepted and Agreed to:

  
	
   

  	
   

  
	
   

  	
  ENERGY
  COMPONENTS SPC EEP ENERGY

  
	
   

  	
  EXPLORATION
  AND PRODUCTION SEGREGATED

  
	
   

  	
  PORTFOLIO

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark A. Margason

  	
   

  
	
   

  	
  Name:

  	
  Mark A. Margason

  	
   

  
	
   

  	
  Title:

  	
  Duly Authorized Signer

  	
   

  
						

 

2Exhibit 10.2

 

March 20, 2003

 

Kevin
Kelley

4455
Paradise Road

Las Vegas, Nevada 89109

 

Re:
Performance Awards Plan/Award Agreement

 

Dear Kevin:

 

Pursuant
to the Hard Rock Hotel, Inc. Performance Awards Plan (as presently in effect,
and as it may be amended from time to time hereafter, the “Plan”)
and this Award Agreement (this “Agreement”), Hard Rock Hotel, Inc.,
a Nevada corporation (the “Corporation”), hereby awards to
Kevin Kelley (“Participant”) the number of Plan
performance units (“Units”) specified in Section 1
below. Units are granted to Participant subject to the restrictions, terms,
conditions and vesting schedule set forth herein and in the Plan and are in all
respects qualified, limited and conditioned by the Plan. In the event of any
conflict or inconsistency between this Agreement and the Plan, the terms of the
Plan shall govern. Capitalized terms which are not defined herein have the
meaning specified in the Plan. A copy of the Plan will be provided to
Participant upon request or may be reviewed by Participant at the Corporation’s
executive offices during regular business hours. All references herein to “Sections”
shall mean the numbered Sections of this Agreement, unless otherwise
specified.

 

1.             Grant of Units; Types of
Awards. The Corporation hereby
grants to you 2,000 Units, each of which has an index value of $1,000 (“Index
Value”) for purposes of this Agreement. All Awards under this
Agreement, whether they are payable as Cash-Based Awards or as Share-Based
Awards, are designated as Performance-Based Awards and shall be subject to the
provisions of the Plan relating to Performance-Based Awards. All Awards payable
hereunder are Cash-Based Awards, except (i) Awards payable under Section 11(b)
which are Share-Based Awards to the extent provided therein and (ii) Awards which, in connection with a
Change in Control, the Committee decides to designate as Share-Based Awards (as
authorized under Section 10).

 

2.             Award Payment Date; Payment
Deferrals. Except as provided in
Sections 5(a), 6, 9, 10 or 11, all Awards payable pursuant to this Agreement
shall be paid 90 days after the end of the four-year Vesting Period (as defined
in Section 3). Participant, however, may request deferral of the payment of
Awards by submitting to the Committee, not later than 30 days prior to the end
of the Vesting Period, a written request stating the

 

1

 

requested
deferred payment date and the amount of the requested deferral. The Committee
shall have absolute discretion to approve or deny such request. An Award
payment deferral, if approved by the Committee, shall be for a term of one year
(a “Deferral
Year”) from the date on which the Award payment would
otherwise have been due. A Participant, however, may request subsequent Deferral
Years in accordance with the above provisions of this Section. Each such
request for a subsequent deferral must be submitted to the Committee not later
than 120 days prior to the then-scheduled Award payment date.

 

3.             Vesting; Contingent Units.

 

(a)           Except as provided in Sections 5(a), 10 or
11, Units awarded under this Agreement shall become vested at the rate of 25%
per year during the four-year period (the “Vesting Period”) commencing
on April 1, 2003. Vesting shall occur on March 31 of each year of the Vesting
Period, provided that Participant is still employed by the Corporation or any
of its Subsidiaries on each date fixed for vesting.

 

(b)           Each of the four years commencing on April 1
which comprise the Vesting Period, as provided in paragraph (a) of this
Section, is referred to herein as a “Vesting Year.” Units which have not
yet become vested as of a specified date are sometimes referred to herein as “Contingent
Units.”

 

4.             Calculations of Awards.

 

(a)           The value assigned to an Award (the “Assigned
Value”) shall be calculated annually prior to the earlier of
(i) the 90th day after the end of each Vesting Year or (ii) any such
earlier date after the end of a Vesting Year by which payment of an Award based
on that calculation is due under this Agreement. If payment of an Award is
deferred pursuant to Section 2, then the Assigned Value also shall be
calculated not earlier than 90 days and not later than one day prior to the end
of each Deferral Year. The Assigned Value shall equal the sum of (x) the
Initial EBITDA Award Value, which shall be calculated in accordance with
paragraph (b) of this Section 4, only for Units that became vested either in
the most recently completed Vesting Year prior to the calculation date or subsequent
to such most recently completed Vesting Year as a result of accelerated vesting
(collectively, “Newly Vested Units”), plus (y) the
most recent Carryover EBITDA Award Value, which shall be calculated in
accordance with paragraph (c) of this Section 4, for Units that became vested
in any Vesting Year prior to either the most recently completed Vesting Year or
the most recently completed Deferral Year (collectively, “Previously
Vested Units”). The Committee shall certify all such
calculations prior to payment of the Award. If, as a result of accelerated
vesting, Units become vested prior to completion of the first Vesting Year,
then for purposes of the above calculations specified in this paragraph (a)
such Units shall be deemed to have become vested in the first Vesting Year.

 

(b)           Initial EBITDA Award Value shall be
calculated as follows:

 

	
  Index

  Value

  	
  x

  	
  number
  of Newly Vested Units

  	
  =

  	
  Initial
  EBITDA Award Value

  

 

2

 

(c)           For each completed Vesting Year after the
first one and for each Deferral Year (if any), Carryover EBITDA Award Value
shall be calculated as follows:

 

	
  EBITDA Performance Factor
  (calculated pursuant to paragraph (d) of this Section 4)  

  	
  x

  	
  the sum of Initial EBITDA
  Award Value calculated during the immediately preceding Vesting Year plus Carryover EBITDA Award Value
  calculated during the immediately preceding Vesting Year (if any)  

  	
  =

  	
  Carryover EBITDA Award
  Value

  

 

(d)           “EBITDA Performance Factor” shall be calculated as a ratio, the numerator
of which is EBITDA for the most recently completed Vesting Year or Deferral Year,
as the case may be (or $1 if such EBITDA was a negative amount), and the denominator
of which is EBITDA for the Vesting Year or Deferral Year immediately preceding
the most recently completed Vesting Year or Deferral Year, as the case may be (or
$1 if such EBITDA was a negative amount).

 

(e)           If an Award is paid without deferral under
Section 2, then the amount of the Award payment shall be the greater of (i) the
most recently calculated Assigned Value as of the Award payment date or (ii)
the product of the Index Value multiplied by the number of Units in respect of
which the Award is payable. If an Award payment is deferred pursuant to Section
2, then the amount of the Award payment shall be the most recently calculated
Assigned Value as of the Award payment date.

 

5.             Death, Disability or
Retirement of Participant.

 

(a)           If Participant dies or ceases to be an
employee of the Corporation or any of its Subsidiaries by reason of Disability
(as defined in paragraph (b) of this Section) or Retirement (as defined in
paragraph (c) of this Section) while any Units awarded hereunder are still
Contingent Units, then the Committee shall have the authority, in its absolute
discretion, to approve and implement any or all of the following:

 

(i)            accelerated vesting of some or all Contingent
Units;

 

(ii)           cancellation of some or all Contingent Units
(with no payment or replacement Units in respect thereof); or

 

(iii)          payment of Awards to Participant (or to
Participant’s estate in the event of death) prior to the payment date provided
for in Section 2.

 

(b)           “Disability” means

 

(i)            disability, disabled or permanently disabled,
as defined in Participant’s employment agreement; or

 

3

 

(ii)           if clause (i) of this paragraph (b) is not
applicable, a physical or mental illness or incapacity of Participant which has
resulted in a determination that Participant is entitled to receive benefits
(A) under a long-term disability insurance policy maintained by the Corporation
or any of its Subsidiaries for Participant or (B) if no such insurance policy
is then in existence, under the federal social security disability insurance
program.

 

(c)           “Retirement” means

 

(i)            permanent termination of regular full-time
employment at a time when (A) Participant’s age is at least 65 or (B)
Participant’s age is at least 55 and the sum of his or her age plus years of
regular full-time employment with the Corporation or any of its Subsidiaries is
at least 65; and

 

(ii)           Participant certifies in writing to the
Committee that he or she no longer intends to engage in a full-time vocation.

 

(d)           Except to the extent the Committee takes any
of the actions specified in paragraph (a) of this Section, the payment of
Awards and the status of Contingent Units in the event of Participant’s death,
Disability or Retirement shall be governed by Section 8.

 

6.             Termination of Employment
By Corporation Or Subsidiaries Other Than For Cause. If the Corporation or any of its Subsidiaries
terminate Participant’s employment for
any reason other than Cause (as provided in Section 7), then (i) all Contingent
Units as of the date of such termination shall be canceled, (ii) Participant
shall not be entitled to any payment or replacement Units in respect of such
Contingent Units, and (iii) all Awards payable pursuant to this Agreement shall
be paid 90 days after the date of such termination.

 

7.             Termination of Employment
For Cause.

 

(a)           If the Corporation or any of its Subsidiaries
terminate Participant’s employment for Cause as provided in paragraph (b) of
this Section, then all Contingent Units shall be canceled and all vested Units
for which Awards have not yet been paid shall be forfeited. Participant shall
not be entitled to any payment or replacement Units in respect of Units that
are canceled or forfeited pursuant to this Section.

 

(b)           Termination of Participant’s employment for
any of the following reasons shall constitute termination for Cause:

 

(i)            any event or condition occurs which is specified
in Participant’s employment agreement as grounds for termination for cause;

 

(ii)           Participant engages in the operation or
management of a business, whether as owner, partner, officer, director,
employee or otherwise, which is in competition with the Corporation or any of
its Subsidiaries, or Participant otherwise violates the terms of any covenant
restricting such competition contained in any agreement

 

4

 

to
which Participant is a party and the Corporation or any of its Subsidiaries are
a party or a third party beneficiary;

 

(iii)          Participant is convicted of, or pleads nolo contendere to, any felony or other
crime which would, in the reasonable judgment of the Committee, make
Participant unsuitable for employment with a licensed gaming enterprise; or

 

(iv)          Participant commits any act or omission
constituting gross negligence or willful misconduct in the performance of his
or her duties.

 

In
addition, Participant’s employment shall be deemed terminated for Cause if
Participant resigns or otherwise terminates his or her employment at a time
when the Corporation or any of its Subsidiaries had grounds to terminate
Participant’s employment under any of clauses (i) through (iv) of this
paragraph (b).

 

8.             Termination Of Employment
By Participant Or Under Certain Other Circumstances. If Participant resigns or otherwise
terminates his or her employment with the Corporation or its Subsidiaries or if
Participant’s employment terminates due to death or Disability and Section 5(d)
provides that this Section 8 shall govern, then (i) all Contingent Units shall
be canceled, (ii) Participant shall not be entitled to any payment or
replacement Units in respect of such Contingent Units and (iii) the Corporation
shall pay Awards with respect to vested Units 90 days after the end of the
Vesting Period.

 

9.             Special Events.

 

(a)           If Participant issues written certification
to the Committee that an event specified in paragraph (c) of this Section has
occurred (the “Certification”) and at the time of
the Certification Participant has been employed by the Corporation or any of
its Subsidiaries for at least two years, then subject to the approval of the
Committee, which shall not be unreasonably withheld and shall be deemed granted
unless the Committee issues written disapproval to Participant within ten days
after receiving the Certification, Participant shall be entitled to accelerated
payment of Awards in accordance with paragraph (b) of this Section.

 

(b)           Awards of which the Committee has approved
accelerated payment under paragraph (a) of this Section shall be paid within 30
days after such approval.

 

(c)           An event covered by paragraph (a) of this
Section is any of the following:

 

(i)            a purchase by Participant of his or her
principal residence;

 

(ii)           a medical emergency requiring payment by
Participant (after giving effect to amounts covered by insurance) of more than
$5,000; or

 

(iii)          payment by Participant of college tuition and
related expenses of a dependent in an aggregate amount exceeding $5,000.

 

5

 

10.           Change in Control. In the event of a Change in Control, the
Committee shall have absolute discretion to accelerate the vesting of
Contingents Units or the payment of Awards, to designate Awards as Share-Based
Awards, or to make any other decisions or take any other actions described in
Section 7(b) of the Plan.

 

11.           Initial Public Offering.

 

(a)           Upon a sale by the Corporation of Stock or
other equity securities convertible into Stock in an initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the “IPO”), the Committee shall have
absolute discretion to accelerate the vesting of Contingent Units and payment
of Awards so that the Contingent Units become vested upon completion of the IPO
and all Awards are paid within 30 days after the date on which the IPO is
completed.

 

(b)           Awards in respect of Contingent Units which
become vested pursuant to the acceleration provisions of paragraph (a) of this
Section shall be paid in the form of the equity securities that were sold in,
and at the price per security offered in, the IPO (exclusive of underwriters’
discounts), subject to the aggregate limit on Share-Based Awards specified in
Section 5(a) of the Plan. Awards in excess of such limit shall be Cash-Based
Awards.

 

12.           Payment Dates Falling on
Holidays. If the date on which
any payment due hereunder falls on a Saturday, Sunday or day on which federal
government offices and banks are generally closed (a “Holiday”), such
payment shall instead be due on the next subsequent day that is not a Holiday.

 

13.           Governing Law. This Agreement shall be governed by the laws
of the State of Nevada from time to time in effect, without regard to conflicts
of law principles.

 

14.           Notices. Any notice, request, certification or other
communication pertaining to this Agreement or the Plan (collectively, “Notices”)
shall be given in writing and delivered in person or mailed by certified
or registered mail, addressed to the respective party at the address as set out
below, or at such other address as either party may elect to designate in
advance in writing, to the other party:

 

PARTICIPANT:

 

Kevin
Kelley

4455
Paradise Road

Las
Vegas, Nevada 89109

 

The
CORPORATION or the COMMITTEE:

 

Hard
Rock Hotel, Inc.

510
North Robertson Boulevard

Los
Angeles, California 90048

Attn:
Peter A. Morton, Chairman/CEO

 

6

 

Notices
given in the aforesaid manner shall be deemed given and received at the time of
delivery if delivered in person or three days after mailing if sent by
certified or registered mail.

 

15.           Severability. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable by
reason of any rule of law or public policy, all other provisions of this
Agreement shall nevertheless remain in effect. No provision of this Agreement
shall be deemed dependent on any other provision unless so expressed herein.

 

16.           Gaming Authorities Approval. Nothing in this Agreement shall be construed
to require the performance of any act contrary to law, and if there is any
conflict between any provision of this Agreement and any statute, law,
ordinance, or regulation, contrary to which the parties have no legal right to
contract, then the latter shall prevail; but in such an event, the provisions
of this Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within the legal requirements. Notwithstanding anything
herein to the contrary, the effectiveness of this Agreement, the terms and
conditions contained herein and the payment of any Awards hereunder shall be contingent
upon all requisite approvals of the Gaming Authorities.

 

17.           No Assurance of Employment. Nothing in this Agreement or in any other documents
related to this Agreement or the Plan shall confer upon Participant any right
to continue in the employ or other service of the Corporation or any of its
Subsidiaries or constitute any contract (of employment or otherwise) or other
limitation on the right of the Corporation or any of its Subsidiaries to change
Participant’s compensation or other benefits or to terminate the employment of
Participant with or without cause.

 

18.           Merger. This Agreement and the Plan supersede any and
all other agreements and understandings, either oral or in writing, between the
parties hereto with respect to the Units awarded to Participant under this
Agreement, the vesting of such Units and the payment of Awards in respect of
such Units.

 

19.           Effectiveness. This Agreement shall be effective upon the
parties’ execution of it in the spaces provided below,
Participant’s initialing Section 21 in the space
provided at the end of that Section, and Participant’s delivery of
an executed copy to the Corporation’s Chairman/CEO.

 

20.           Construction. The section headings in this Agreement are
for convenience only and are not to be given any legal effect and shall not
affect the meaning or interpretation of this Agreement

 

21.           Participant’s
Waiver of Certain Legal Rights to Earlier Payments. Participant acknowledges that in
the event of voluntary or involuntary termination of Participant’s employment
with the Corporation or any of its Subsidiaries, the Nevada Revised Statutes
(Nevada law) might call for the Corporation to pay Participant any amounts due
hereunder earlier than the payment date called for under this Agreement and the
Plan. Participant hereby waives entitlement to such payment by

 

7

 

	
  the date called for under the
  Nevada Revised Statutes in the event of termination of Participant’s
  employment and, in lieu 

  
	
  thereof, accepts the later
  payment date called for under this Agreement.

  	
   

  	
   

  

Participant’s Initials

 

	
   

  	
  Hard Rock Hotel, Inc., a
  Nevada

  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Morton

  
	
   

  	
   

  	
  Name:

  	
  Peter Morton

  
	
   

  	
   

  	
  Title:

  	
  Chairman/CEO

  
	
   

  	
   

  
	
  Accepted and agreed:

  	
   

  
	
   

  	
   

  
	
  PARTICIPANT:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Kevin Kelley

  	
   

  	
   

  
	
  Signature

  	
   

  
	
  Name: Kevin Kelley

  	
   

  
					

 

8

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