Exhibit 10.1


 


HADDOCK
INVESTMENTS


210 West Sixth Street
Suite 1206 Fort Worth, TX 76102 817.885.8390 FAX 817.885.8391


 


March 29, 2005


 


Mr. Jeff Johnson, President


Cano Petroleum, Inc.


309 W. 7th Street


Suite 1600 (16th Floor)


Fort Worth, TX 76102


 


Mr. Kenneth Carlile


2615 East End Blvd. South


Marshall, TX 75672


 


Re: Sabine
Royalty Trust (“SBR”)


 


Dear Gentlemen:


 


As you arc
both aware, Haddock Enterprises, LLC (“Haddock Enterprises”) is in the process
of pursuing the possibility of an entity change for SBR of which the
undersigned is a Unit Holder (the “Proposed Transaction”), in order to
transform SBR into a new company (“Newco”). Cano Petroleum, Inc. (“Cano”) and
Kenneth Carlile (“Carlile”) desire to join Haddock Enterprises in pursuing the
Proposed Transaction. This letter serves as an agreement of Haddock
Enterprises, Cano, and Carlile (each a “Party” and together the “Parties”)
according to the terms contained herein.


 


First of all, funds are needed in order to continue with the execution
of the Proposed Transaction. Therefore, each Party shall contribute Forty
Thousand Dollars (340,000.00) to Haddock Enterprises (the “Contribution”) for
its continued pursuit of the Proposed Transaction. Each Party will own its same
percentage of its “deal” subject to an estimated ten percent (10%) dilution
that may be granted by Haddock Enterprises to other persons who may contribute
to the Proposed Transaction. As it has done thus far, Haddock Enterprises will
continue to coordinate execution of the Proposed Transaction. Proceeds of the
Contribution shall be used in the following order of priority: (1)
reimbursement of Haddock Enterprises for its expenditures to date in connection
with the
Proposed Transaction. (2) preparation by Haddock Enterprises of the additional
documents described below, and (3) additional expenses as Haddock Enterprises’
reasonably determines necessary to carry out the Proposed Transaction.


 


Secondly. Haddock Enterprises has prepared a letter to he distributed
to Unit Holders of SBR. a copy of which you have already received. If the
Parties determine that further analysis warrants continued pursuit of the
Proposed Transaction then Haddock


 





















 


for the preparation and distribution of a
proxy to request the calling of a special meeting of Unit Holders. In addition,
Haddock Enterprises Will
initiate the preparation of a detailed partnership agreement to govern
the relationship among the Parties.


 


Thirdly, if a special meeting
of Unit Holders is called, then Haddock Enterprises will develop an exchange
offer for Unit Holders and additional capital commitments will be made subject
to agreement of all Parties in connection with preparation and execution of
such exchange offer.


 


Enclosed please find SBR’s Form
10-K for 2004. Please wire funds to Haddock Investment’s account number
46l-08l23366 at Chase Bank of Texas (ABA: 113-000-609).


 


This letter contains the entire
agreement among the Parties relative to the matters contained in this letter
and supersedes all prior oral and written agreements and understandings, if
any.


 


If the foregoing accurately
sets forth the understanding and agreement of the Parties, please confirm by
signing this letter on the line provided and returning to the undersigned’s
office.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  HADDOCK ENTERPRISES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald W. Haddock

  	
   

  
	
   

  	
   

  	
  Gerald W. Haddock, its President

  
					



 


EncLosures (1)


 


ACKNOWLEDGED, CONFIRMED. AND
AGREED


 


Cano Petroleum, Inc.


 


	
   

  	
  By:

  	
   /s/
  Jeff Johnson

  	
   

  
	
   

  	
  Jeff
  Johnson, its President

  
	
   

  
	
   

  	
   

  
	
  Kenneth Carlile