Exhibit 10.1


 


EMPLOYMENT AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
by and between Cano Petroleum Inc.,
a Delaware corporation with its principal executive offices in Fort Worth,
Texas (the “Company”), and Ben
Daitch, an individual currently residing in Dallas County, Texas (“Employee”),
as of the 23rd day of June, 2008 (the “Effective Date”).  The Company and Employee may sometimes be
referred to herein individually as “Party” and collectively as “Parties.”


 


Background


 


A.            The Company desires to employ Employee in
such a manner as will reinforce and encourage the highest attention and
dedication to the Company and in the best interest of the Company and its
shareholders; and


 


B.            Employee is willing to serve the Company on
the terms and conditions herein provided.


 


Terms and
Conditions


 


In consideration of the covenants and agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree as follows:


 


1.             Employment.  The Company hereby employs Employee in the capacity of Sr. Vice
President and Chief Financial Officer, and Employee hereby agrees to accept
such employment by the Company, upon the terms and conditions stated in this Agreement.


 


2.             Term.  The employment of Employee by the Company as provided in this Section will
be for a term of three (3) years (the ‘“Term”
or “Employment Period”) commencing on the Effective Date and expiring at the
close of business on June 23, 2011.


 


3.             Duties.  Employee shall perform such services and duties as may be
assigned to him from time to time by the Chief Executive Officer and the Board
of Directors of the Company.  Employee
shall devote his full working time, efforts and energies to the performance of
his duties hereunder, which shall include managing the financial affairs of the
Company.


 


4.             Compensation.


 


(a)           Salary:  The Company shall pay Employee for his
services, a base salary, on an annualized basis, of $250,000.00 (Two Hundred
Fifty Thousand Dollars) per annum for the period from the Effective Date, which
salary shall be payable by the Company in substantially equal installments on
the Company’s normal payroll dates.  All applicable taxes on the base
salary will be withheld in accordance with applicable federal, state and local
taxation guidelines.


 


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(b)           Bonus: In
addition to the base salary described in paragraph 4(a) above, Employee
shall be eligible for periodic cash bonuses in an amount up to 100% of the then
base salary and/or stock bonuses at the discretion of the Board of Directors of
the Company.


 


(b)           Stock Award:  In addition to the base salary described in
paragraph 4(a) above, Employee shall receive 100,000 shares of restricted
common stock in the Company.  The
restrictions on the shares shall lapse in 33,333 share increments on each of June 23,
2009, June 23, 2010 and June 23, 2011, provided Employee is still
employed by the Company at that time. 
The terms and conditions of this restricted stock award shall be
contained in an agreement to be executed by the Company and Employee and which
will be awarded pursuant to the 2005 Cano Petroleum, Inc. Long Term
Incentive Plan.


 


(c)           Raises:  Employee may receive increases in the base
salary at the discretion of the Board of Directors of the Company, which
increased base salary shall become the base salary for purposes of this
Agreement.


 


5.             Vacations and Days Off.  Employee shall be entitled to a
reasonable paid vacation of not less than twenty (20) days each calendar year
during the Term (prorated for the first calendar year), exclusive of holidays
and weekends, which vacation shall be taken by Employee in accordance with the
business requirements of the Company at the time and its vacation plans,
policies and practices as applied to other officers of the Company then in
effect relative to this subject.  Employee shall also be entitled to up to
five (5) paid days off each calendar year for paternity leave and up to
three (3) paid days off to attend the funeral of any member of Employee’s
immediate family.


 


6.             Employment Facilities.  During the Employment Period, the
Company shall provide, at its expense, appropriate and adequate office space,
furniture, communications, stenographic and word-processing equipment, supplies
and such other facilities and services as shall be suitable to Employee’s
position or necessary for Employee to perform his assigned tasks, duties and
responsibilities under this Agreement.


 


7.             Expenses and Services.  During the term of Employee’s
employment hereunder, Employee shall be entitled to receive prompt
reimbursement for all pre-approved, reasonable expenses incurred by Employee by
reason of his employment, including travel and living expenses while away from
home at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company and in effect when the expenses are
incurred.


 


8.             Rights under Certain Plans.  During the term of Employee’s
employment hereunder, Employee shall be entitled to participate in any employee
stock ownership plans, 401K plans, health and dental insurance and other
employee benefit plans and programs maintained by the Company applicable to
other executive officers on the same basis as other executive officers of the
Company.


 


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9.             Confidential Information.  Employee and the Company agree that,
upon executing this Agreement, the Company will provide Employee with its
confidential information, including, without limitation, customer information,
trade secrets, lists of suppliers and costs, information concerning the
business and operations of the Company and its Affiliates and other proprietary
data or information, that is valuable, special and a unique asset of the
Company and its Affiliates.  Employee agrees not to disclose such
confidential information, except as may be necessary in the performance of his
duties, to any Person, nor use such confidential information, except as may be
necessary in the performance of his duties, either (i) while employed; or (ii) within
the later of three years immediately following his termination of employment or
the three years immediately following expiration of this Agreement without
renewal or replacement unless Employee has received the prior written consent
of the Company.  Upon termination of Employee’s employment for any reason
or upon a request, at any time, by the Company, Employee shall promptly deliver
to the Company all drawings, manuals, letters, notebooks, customer lists,
documents, records, equipment, files, computer disks or tapes, reports or any
other materials relating to the Company’s business (and all copies) which are
in Employee’s possession or under Employee’s control.


 


10.           Early Termination. Employee’s employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:


 


(a)           Employee’s employment hereunder will
terminate upon his death;


 


(b)           If, as a result of Employee’s incapacity due
to physical or mental illness, Employee shall have been absent from his duties
or unable to perform his full duties hereunder for a total of 90 days during
any 12 month period (“Disability Period”), and within 15 days after written
notice of termination is given (which may occur before or after the end of such
90 day period), shall not have returned to the performance of his full duties
hereunder on a full-time basis, the Company may terminate Employee’s employment
hereunder.


 


(c)           The Company may terminate Employee’s
employment hereunder for Cause.  For purposes of this Agreement, the
Company shall have “Cause” to terminate Employee’s employment hereunder upon (i) the
willful and continued failure by Employee to substantially perform his duties
hereunder (other than any such failure resulting from Employee’s incapacity due
to physical or mental illness); (ii) the willful engaging by Employee in
misconduct which is injurious or disparaging to the Company; or (iii) the
conviction of Employee of any felony or crime of moral turpitude.  For
purposes of this subsection (c), no act, or failure to act, on Employee’s
part shall be considered “willful” unless done, or omitted to be done, by him
not in good faith and without reasonable belief that his action or omission was
in the best interest of the Company.


 


(d)           Any termination of Employee’s employment by
the Company or by Employee (other than termination pursuant to subsection (a) above)
shall be communicated by written Notice of Termination to the other Party
hereto.  For purposes of this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in 


 


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reasonable
detail the facts and circumstances claimed to provide a basis for termination
of Employee’s employment under the provision so indicated.


 


(e)           “Date of Termination” shall mean (i) if
Employee’s employment is terminated by his death, the date of his death; (ii) if
Employee’s employment is terminated pursuant to subsection (b) above,
15 days after Notice of Termination is given (provided that Employee shall not
have returned to the performance of his duties on a full-time basis during such
15 days period); (iii) if Employee’s employment is terminated at the
expiration of the Term or any extension thereof, the last day of the Term or,
if applicable, the last day of any extension; and (iv) if Employee’s
employment is terminated for any other reason, the date the Notice of
Termination is given.


 


11.           Compensation upon Termination or During
Disability.  Upon
termination of Employee’s employment hereunder or during any period of Employee’s
physical or mental disability, Employee shall be paid as follows:


 


(a)           Employee shall continue to receive his annual
base salary at the rate then in effect during any Disability Period provided,
however, that such payments shall not continue beyond the earlier of (i) the
end of the Term, or (ii) the Date of Termination of this Agreement by the
Company pursuant to Section 10(e)(ii), provided that payments so made to
Employee shall be reduced by the sum of the amounts, if any, payable to
Employee under any disability benefit plans of the Company and which were not
previously applied to reduce any such payment.  In addition the Company
shall reimburse Employee for any theretofore unreimbursed expenses which were
incurred prior to the commencement of the Disability Period.


 


(b)           If Employee’s employment is
terminated by his death, the Company shall pay to Employee’s designated
beneficiaries, or if he leaves no designated beneficiaries, to his estate, his
annual base salary through the date of Employee’s death at the rate then in
effect and any theretofore unreimbursed expenses and the Company shall have no
further obligations to Employee under this Agreement.


 


(c)           If Employee’s employment shall be terminated
for Cause, the Company shall pay Employee his annual base salary (but not the
compensation described in Sections 4(b)) through the Date of Termination
at the rate in effect at the time Notice of Termination is given and the
Company shall have no further obligations to Employee under this Agreement.


 


(d)           If the Company shall (i) terminate
Employee’s employment other than pursuant to Section 10(b) or 10(c) hereof;
(ii) assign to Employee any duties materially inconsistent with Employee’s
position in the Company; or (iii) assign to Employee a title, office or
status which is inconsistent than that established herein (unless in the nature
of a promotion) then, in addition to reimbursement of  Employee for any theretofore unreimbursed
expenses, the Company shall pay Employee, with no offset, an amount equal to
the greater of (a) Employee’s annual base salary at the rate in effect at
the time Notice of Termination is given, for the unexpired term of this
Agreement and payment for 


 


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any accrued, but unused
vacation days hereunder; or (b) six (6) months of Employee’s annual
base salary at the rate in effect at the time Notice of Termination is given
and payment for any accrued, but untaken vacation days hereunder.  Such payments to be made in a single lump sum
within ten (10) days of the termination of this Agreement.


 


During the term of this
Agreement Employee shall give the Company immediate notice of any change of
address.


 


If Employee shall terminate
his employment pursuant to Section 10(d), the Company shall pay Employee,
in addition to reimbursement of any theretofore unreimbursed expenses, his full
salary through the Date of Termination at the rate in effect on the date that
Notice of Termination is received by the Company, plus payment for any accrued,
but untaken vacation days hereunder and the Company shall have no further
obligation to Employee under this Agreement.


 


12.           Change in
Control Severance Benefit.  If within
twelve (12) months after the occurrence of a Change in Control (as defined
below) (i) the Company terminates Employee’s employment for any reason; or
(ii) Employee resigns at any time after any diminution in Employee’s job
title, duties or compensation or the relocation of Employee, without Employee’s
consent, to an office in a county that does not abut Tarrant County, Texas, the
Company shall pay to Employee, in a lump sum, three times Employee’s annual
salary in effect as of the date of Employee’s termination or resignation and
three times the sum of prior year bonuses paid to Employee and shall continue
to provide to Employee, Employee’s spouse and dependents, for a period of three
years after such termination or resignation, the right to participate in any
health and dental plans that the Company may maintain for its employees, on the
same basis as participation by such employees.


 


A “Change in Control” shall mean:


 


(a) any consolidation, merger or share exchange of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of the Company’s common stock would be converted into cash,
securities or other property, other than a consolidation, merger or share
exchange of the Company in which the holders of the Company’s common stock
immediately prior to such transaction have the same proportionate ownership of
common stock of the surviving corporation immediately after such transaction; (b) any
sale, lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all
or substantially all of the assets of the Company; (c) the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company; (d) the cessation of control (by virtue of their not
constituting a majority of directors) of the Board by the individuals (the “Continuing Directors”)
who (x) at the Effective Date were directors or (y) become directors
after the Effective Date and whose election or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the
directors then in office who were directors at the Effective Date or whose
election or nomination for election was previously so approved; (e) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of an aggregate of 50% or more of the voting power of the
Company’s outstanding voting securities by any person 


 


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or group (as such term is used
in Rule 13d-5 under the Securities Exchange Act of 1934) who beneficially
owned less than 50% of the
voting power of the Company’s outstanding voting securities on the Effective
Date of this Plan; provided, however, that notwithstanding the
foregoing, an acquisition shall not constitute a Change in Control hereunder if
the acquirer is (x) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company and acting in such capacity, (y) a
subsidiary of the Company or a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of voting securities of the Company or (z) any other person
whose acquisition of shares of voting securities is approved in advance by a
majority of the Continuing Directors; or (f) in a Title 11 bankruptcy
proceeding, the appointment of a trustee or the conversion of a case involving
the Company to a case under Chapter 7.


 


Anything in this Section 12 to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution made, or
benefit provided, by the Company to or for the benefit of Employee (whether
paid or payable or distributed or distributable or provided pursuant to the
terms hereof or otherwise) would constitute a “parachute payment” as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
then the lump sum payment payable pursuant to this Section 12 shall be
reduced so that the aggregate present value of all payments in the nature of
compensation to (or for the benefit of) Employee which are contingent on a
change of control (as defined in Code Section 280G(b)(2)(A)) is One Dollar
($1.00) less than the amount which Employee could receive without being
considered to have received any parachute payment (the amount of this reduction
in the lump sum severance payment is referred to herein as the “Excess Amount”).  The determination of the amount of any
reduction required by this Section 12 shall be made by an independent
accounting firm (other than the Company’s independent accounting firm) selected
by the Company and acceptable to Employee, and such determination shall be
conclusive and binding on the parties hereto.


 


13.           Defined Terms.  For purposes of this Agreement, the
terms set forth in this Agreement shall have the following meanings:


 


(a)           “Affiliate”
shall mean any individual, corporation, unincorporated organization, trust or
other form of entity controlling, controlled by or under common control with
the Company.  For purposes of this definition, “control” (including “controlled
by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such individual, corporation, unincorporated organization, trust or
other form of entity, whether through the ownership of voting securities or
otherwise.


 


(b)           “Person” shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an incorporated
organization or a government or political subdivision thereof.


 


14.           Waiver. No waiver of any provision of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a waiver of any continuing or succeeding breach of
such provision, a waiver of the provision 


 


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itself, or a waiver of any
right under this Agreement.  No waiver shall be binding unless executed in
writing by the Party making the waiver.


 


15.           Limitation of Rights.  Nothing in this Agreement, except as
specifically stated herein, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the Parties and their
respective permitted successors and assigns and other legal representatives,
nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any Party to this Agreement,
nor shall any provision give any third persons any right of subrogation or
action over against any Party to this Agreement.


 


16.           Notices.  All notices given in connection with this Agreement shall be in
writing and shall be delivered either by personal delivery, by telecopy or
similar facsimile means, by certified or registered mail (postage prepaid and
return receipt requested), or by express courier or delivery service, addressed
to the applicable Party hereto at the following address:


 


If to the Company:


 


Cano Petroleum, Inc.


Burnett Plaza


801 Cherry Street


Suite 3200, Unit 25


Fort
Worth, Texas 76102


Attention: S. Jeffery Johnson


Telecopy
No.: 817.698.0761


 


If to Employee:


 


Ben Daitch


8600 Thackery St., #2307


Dallas, Texas 
75225


Telephone: 
917.324.4271


 


or
such other address and number as either Party shall have previously designated
by written notice given to the other Party in the manner hereinabove set
forth.  Notices shall be deemed given when received, if sent by telecopy
or similar facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telecopy or other
facsimile means); and when delivered and receipted for (or upon the date of
attempted delivery where delivery is refused), if hand-delivered, sent by
express courier or delivery service, or sent by certified or registered mail.


 


17.           Inconsistent Obligations. 
Employee represents and warrants that he is not subject to any
undisclosed obligations inconsistent with those of this Agreement.


 


18.           Code Section 409A; Delay of Payments.  The
terms of this Agreement have been designed to comply with the requirements of
Code Section 409A, as amended, where applicable, and shall be interpreted
and administered in a manner consistent with such intent.  


 


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Notwithstanding anything to the
contrary in this Agreement, (i) if upon the date of Employee’s termination
of employment with the Company, Employee is a “specified employee” within the
meaning of Code Section 409A, and the deferral of any amounts otherwise
payable under this Agreement as a result of Employee’s termination of
employment is necessary in order to prevent any accelerated or additional tax
to Employee under Code Section 409A, then the Company will defer the
payment of any such amounts hereunder until the date that is six (6) months
and one day following the date of Employee’s termination of employment with the
Company at which time any such delayed amounts will be paid to Employee in a
single lump sum, with interest from the date otherwise payable at the prime
rate as published in The Wall Street Journal on the date of Employee’s
termination of employment with the Company, and (ii) if any other payments
of money or other benefits due to Employee hereunder could cause the
application of an accelerated or additional tax under Code Section 409A,
such payments or other benefits shall be deferred if deferral will make such
payment or other benefits compliant under Code Section 409A.


 


19.           Entirety and Amendments.  This instrument and the instruments
referred to herein embody the entire agreement between the Parties, supersede
all prior agreements and understandings, if any, relating to the subject matter
hereof, and may be amended only by an instrument in writing executed by all
Parties, and supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.


 


20.           Successors and Assigns.  This Agreement will be binding upon
and inure to the benefit of the Parties hereto and any successors in interest
to the Company, but neither this Agreement nor any rights hereunder may be
assigned by Employee or by the Company, except that the Company may assign this
Agreement to an Affiliate.


 


21.           Governing Law and Venue.  This Agreement shall be governed by
and construed and enforced in accordance with the laws of the State of Texas
applicable to agreements made and to be performed entirely in Texas, exclusive
of any provisions of Texas law which would apply the law of another
jurisdiction.  The obligations and undertakings of each of the Parties to
this Agreement shall be performable in Tarrant County, Texas, and each Party
agrees that if any action at law or in equity is necessary by the Company or
Employee to enforce or interpret the terms of this Agreement, venue shall be in
Tarrant County, Texas.


 


22.           Cumulative Remedies.  No remedy herein conferred upon any
Party is intended to be exclusive of any other benefits or remedy, and each and
every such remedy shall be cumulative and shall be in addition to every other
benefits or remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.  No single or partial exercise by any
Party of any right, power or remedy hereunder shall preclude any other or
further exercise thereof.


 


23.           Multiple Counterparts.  This
Agreement may be executed and delivered by facsimile and in a number of
identical counterparts, each of which constitute collectively, one agreement;
but in making proof of this Agreement, it shall not be necessary to produce or
account for more than one counterpart. 
This Agreement may be executed and delivered via facsimile.


 


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24.           Descriptive Headings.  The headings, captions and
arrangements used in this Agreement are for convenience only and shall not be
deemed to limit, amplify or modify the terms of this Agreement, nor affect the
meanings hereof.


 


25.           Severability. 
The parties intend all provisions of this Agreement to be enforced to
the fullest extent permitted by law. 
Accordingly, if any provision of this Agreement is held illegal,
invalid, or unenforceable under present or future law, such provision shall be
fully severable, this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision were never a part hereof, and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable provision
or by its severance.


 


Signatures


 


To evidence the binding effect of the covenants and agreements
described above, the Parties hereto have executed this Agreement effective as
of the Effective Date.


 


	
   

  	
  THE
  COMPANY:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CANO PETROLEUM, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
   

  	
  S.
  Jeffrey Johnson

  	
   

  
	
   

  	
   

  	
  CEO
  and Chairman

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Ben Daitch

  
	
   

  	
  Ben
  Daitch

  	
   

  



 


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