Document:

EXHIBIT
10.75

 

EMPLOYEE RESTRICTED STOCK AWARD

 

CANO PETROLEUM, INC.

2005 LONG-TERM INCENTIVE PLAN

 

Pursuant to the Cano
Petroleum, Inc. 2005 Long-Term Incentive Plan (the “Plan”) for key
employees, key consultants, and outside directors of Cano Petroleum, Inc.,
a Delaware corporation (the “Company”) and its Subsidiaries,

 

Patrick M. McKinney

(the “Participant”)

 

has been granted a
Restricted Stock Award in accordance with Section 6.4 of the Plan.

 

1.               Terms of Award.  The number of shares of Common Stock awarded
under this Award Agreement (this “Agreement”) 
is 30,000 shares (the “Awarded Shares”). 
The Date of Grant of this Award is June 1, 2006.

 

2.               Subject to Plan.  This Agreement is subject to the terms and
conditions of the Plan, and the terms of the Plan shall control to the extent
not otherwise inconsistent with the provisions of this Agreement.  The capitalized terms used herein that are
defined in the Plan shall have the same meanings assigned to them in the Plan.  This Agreement is subject to any rules promulgated
pursuant to the Plan by the Board or the Committee and communicated to the
Participant in writing.

 

3.               Vesting.  Except as specifically provided in this
Agreement and subject to certain restrictions and conditions set forth in the
Plan, all the Awarded Shares shall be vested on the third anniversary of the
Date of Grant, provided the Participant is employed by (or, if the Participant
is a Consultant, is providing services to) the Company or a Subsidiary on that
date.

 

4.               Forfeiture of
Awarded Shares. Awarded Shares that are not vested in accordance
with Section 3 shall be forfeited on the date of the Participant’s
Termination of Service. Upon forfeiture, all of the Participant’s rights with
respect to the forfeited Awarded Shares shall cease and terminate, without any
further obligations on the part of the Company.

 

5.               Restrictions on
Awarded Shares. Awarded Shares that are not vested in accordance
with Section 3 and which are subject to forfeiture in accordance
with Section 4 shall be subject to the terms, conditions,
provisions, and limitations of this Section 5.

 

a.               Subject to the
provisions of the Plan and the other terms of this Agreement, from the Date of
Grant until the date the Awarded Shares are vested in accordance with Section 3
and no longer subject to forfeiture in accordance with Section 4
(the “Restriction
Period”), the Participant shall not be permitted to sell, transfer,
pledge or assign shares any of the Awarded Shares.

 

 

b.              Except as
provided in paragraph (a) above, the Participant shall have, with respect
to his or her Awarded Shares, all of the rights of a stockholder of the
Company, including the right to vote the shares, and the right to receive any
dividends thereon.

 

6.               Legend.  The following legend shall be placed on all
certificates representing Awarded Shares:

 

On
the face of the certificate:

 

“Transfer
of this stock is restricted in accordance with conditions printed on the
reverse of this certificate.”

 

On
the reverse:

 

“The
shares of stock evidenced by this certificate are subject to and transferable
only in accordance with that certain Cano Petroleum, Inc. 2005 Long-Term
Incentive Plan, a copy of which is on file at the principal office of the
Company in Dallas, Texas.  No transfer or
pledge of the shares evidenced hereby may be made except in accordance with and
subject to the provisions of said Plan. 
By acceptance of this certificate, any holder, transferee or pledgee
hereof agrees to be bound by all of the provisions of said Plan.”

 

The
following legend shall be inserted on a certificate evidencing Common Stock
issued under the Plan if the shares were not issued in a transaction registered
under the applicable federal and state securities laws:

 

“Shares
of stock represented by this certificate have been acquired by the holder for
investment and not for resale, transfer or distribution, have been issued
pursuant to exemptions from the registration requirements of applicable state
and federal securities laws, and may not be offered for sale, sold or
transferred other than pursuant to effective registration under such laws, or
in transactions otherwise in compliance with such laws, and upon evidence
satisfactory to the Company of compliance with such laws, as to which the
Company may rely upon an opinion of counsel satisfactory to the Company.”

 

All
Awarded Shares owned by the Participant shall be subject to the terms of this
Agreement and shall be represented by a certificate or certificates bearing the
foregoing legend.

 

7.               Delivery of
Certificates. 
Certificates for Awarded Shares free of restriction under this Agreement
shall be delivered to the Participant promptly after, and only after, the
Restriction Period shall expire without forfeiture in respect of such shares of
Common Stock.  Certificates for shares of
Common Stock forfeited pursuant to Section 4 shall be promptly
returned to the Company by the Participant. 
In connection with the issuance of a certificate

 

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for
Restricted Stock, the Participant shall endorse such certificate in blank or
execute a stock power in a form satisfactory to the Company in blank and
deliver such certificate and executed stock power to the Company.  The parties acknowledge that remedies at law
will be inadequate remedies for breach of this Section 7 and
consequently agree that this Section 7 shall be enforceable by
specific performance.  The remedy of
specific performance shall be cumulative of all of the rights and remedies at
law or in equity of the parties under this Section 7.

 

8.               Voting.  The Participant, as record holder of the
Awarded Shares, has the exclusive right to vote, or consent with respect to,
such Awarded Shares until such time as the Awarded Shares are transferred in
accordance with this Agreement or a proxy is granted pursuant to Section 9
below; provided, however, that this Section 8 shall
not create any voting right where the holders of such Awarded Shares otherwise
have no such right.

 

9.               Proxies.  Participant may not grant a proxy to any
person, other than a revocable proxy not to exceed 30 days in duration granted
to another stockholder for the sole purpose of voting for directors of the
Company.

 

10.         Representations, Etc.  Each spouse individually is bound by, and
such spouse’s interest, if any, in any Awarded Shares is subject to, the terms
of this Agreement.  Nothing in this
Agreement shall create a community property interest where none otherwise
exists.

 

11.         Simultaneous Death.  If Participant and his or her spouse both
suffer a common accident or casualty which results in their respective deaths
within 60 days of each other, it shall be conclusively presumed, for the
purpose of this Agreement, that the Participant died first and the spouse died
thereafter.

 

12.         Participant’s Representations.  Notwithstanding any of the provisions hereof,
the Participant hereby agrees that he will not acquire any Awarded Shares, and
that the Company will not be obligated to issue any Awarded Shares to the
Participant hereunder, if the issuance of such shares shall constitute a
violation by the Participant or the Company of any provision of any law or
regulation of any governmental authority. 
Any determination in this connection by the Company shall be final,
binding, and conclusive.  The obligations
of the Company and the rights of the Participant are subject to all applicable
laws, rules, and regulations.

 

13.         Participant’s Acknowledgments.  The Participant acknowledges receipt of a
copy of the Plan and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Award subject to all the terms and
provisions thereof. The Participant hereby agrees to accept as binding,
conclusive, and final all decisions or interpretations of the Board or the
Committee upon any questions arising under the Plan or this Agreement.

 

14.         Law Governing.  This Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of Texas (excluding any conflict of laws rule or
principle of Texas law that
might refer the governance, construction, or interpretation of this agreement
to the laws of another state).

 

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15.         Legal Construction.  In the event that any one or
more of the terms, provisions, or agreements that are contained in this Agreement
shall be held by either a court of competent jurisdiction, with respect to
claims under Section 7, or by an arbitrator, with respect to all
other claims under the Agreement, to be invalid, illegal, or unenforceable in
any respect for any reason, the invalid, illegal, or unenforceable term,
provision, or agreement shall not affect any other term, provision, or
agreement that is contained in this Agreement and this Agreement shall be
construed in all respects as if the invalid, illegal, or unenforceable term,
provision, or agreement had never been contained herein.

 

16.         Covenants and Agreements as Independent Agreements. Each of the
covenants and agreements that is set forth in this Agreement shall be construed
as a covenant and agreement independent of any other provision of this
Agreement.  The existence of any claim or
cause of action of the Participant against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of the covenants and agreements that are set forth in this
Agreement.

 

17.         Entire Agreement.  This Agreement together with the Plan
supersede any and all other prior understandings and agreements, either oral or
in writing, between the parties with respect to the subject matter hereof and
constitute the sole and only agreements between the parties with respect to the
said subject matter.  All prior
negotiations and agreements between the parties with respect to the subject
matter hereof are merged into this Agreement. 
Each party to this Agreement acknowledges that no representations,
inducements, promises, or agreements, orally or otherwise, have been made by
any party or by anyone acting on behalf of any party, which are not embodied in
this Agreement or the Plan and that any agreement, statement or promise that is
not contained in this Agreement or the Plan shall not be valid or binding or of
any force or effect.

 

18.         Parties Bound.  The terms, provisions, and agreements that
are contained in this Agreement shall apply to, be binding upon, and inure to
the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, and permitted successors and assigns,
subject to the limitation on assignment expressly set forth herein.  No person or entity shall be permitted to
acquire any Awarded Shares without first executing and delivering an agreement
in the form satisfactory to the Company making such person or entity subject to
the restrictions on transfer contained in Section 5 hereof.

 

19.         Modification.  No change or modification of this Agreement
shall be valid or binding upon the parties unless the change or modification is
in writing and signed by the parties; provided, however, that the Company may
change or modify this Agreement without the Participant’s consent or signature
if the Company determines, in its sole discretion, that such change or
modification is necessary for purposes of compliance with or exemption from the
requirements of Section 409A of the Code or any regulations or other
guidance issued thereunder. 
Notwithstanding the preceding sentence, the Company may amend the Plan
to the extent permitted by the Plan.

 

4

 

20.         Headings.  The headings that are used in this Agreement
are used for reference and convenience purposes only and do not constitute
substantive matters to be considered in construing the terms and provisions of
this Agreement.

 

21.         Gender and Number.  Words of any gender used in this Agreement
shall be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, and vice versa, unless the
context requires otherwise.

 

22.         Notice.  Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered only when actually received
by the Company or by the Participant, as the case may be, at the addresses set
forth below, or at such other addresses as they have theretofore specified by
written notice delivered in accordance herewith:

 

(a)          Notice to the Company shall be addressed and
delivered as follows:

 

Cano
Petroleum, Inc.

309 West Seventh Street, Suite 1600

Fort Worth, Texas  76102

Attn:  General Counsel

Facsimile:  (817) 698-0796

 

(b)         Notice to the Participant shall be addressed and
delivered as set forth on the signature page.

 

23.         Tax Requirements.  The Participant is hereby advised to consult
immediately with his or her own tax advisor regarding the tax consequences of
this Agreement, the method and timing for filing an election to
include this Agreement in income under Section 83(b) of the
Code, and the tax consequences of such election.  By execution of this
Agreement, the Participant agrees that if the Participant makes such an
election, the Participant shall provide the Company with written notice of such
election in accordance with the regulations promulgated under Code Section 83(b).  The Company or, if
applicable, any Subsidiary (for purposes of this Section 23, the
term “Company”
shall be deemed to include any applicable Subsidiary), shall have the right to
deduct from all amounts paid in cash or other form in connection with the Plan,
any Federal, state, local, or other taxes required by law to be withheld in
connection with this Award.  The Company
may, in its sole discretion, also require the Participant receiving shares of
Common Stock issued under the Plan to pay the Company the amount of any taxes
that the Company is required to withhold in connection with the Participant’s
income arising with respect to this Award. 
Such payments shall be required to be made when requested by Company and
may be required to be made prior to the delivery of any certificate
representing shares of Common Stock. 
Such payment may be made (i) by the delivery of cash to the Company
in an amount that equals or exceeds (to avoid the issuance of fractional shares
under (iii) below) the required tax withholding obligations of the
Company; (ii) if the Company, in its sole discretion, so consents in
writing, the actual delivery by the exercising Participant to the Company of
shares of Common Stock that the Participant has not acquired from the Company
within six (6) months prior to the date of exercise, which shares so
delivered have an aggregate Fair Market Value that equals

 

5

 

or
exceeds (to avoid the issuance of fractional shares under (iii) below) the
required tax withholding payment; (iii) if the Company, in its sole
discretion, so consents in writing, the Company’s withholding of a number of
shares to be delivered upon the exercise of this Award, which shares so
withheld have an aggregate fair market value that equals (but does not exceed)
the required tax withholding payment; or (iv) any combination of (i),
(ii), or (iii).  The Company may, in its
sole discretion, withhold any such taxes from any other cash remuneration
otherwise paid by the Company to the Participant.

 

[Signature Page to Follow]

 

6

 

 

IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Participant, to evidence his consent and
approval of all the terms hereof, has duly executed this Agreement, as of the
date specified in Section 1 hereof.

 

	
  

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  CANO PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ S. Jeffrey Johnson

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  S. Jeffrey Johnson

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman and CEO

  

 

	
  

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature: 

  	
  /s/ Patrick M. McKinney

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  PATRICK M. MCKINNEY

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  722 Ashleigh Lane

  
	
   

  	
   

  	
  Southlake, Texas 76072

  

 

7Exhibit 10.76

 

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 Michael J. Ricketts, an individual
currently residing in Tarrant County, Texas (“Vice President”), as of the 1st
day of July, 2006 (the “Effective Date”). 
The Company and Vice President may sometimes be referred to herein
individually as “Party” and collectively as “Parties.”

 

Background

 

A.            The Company desires to employ Vice President 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.            Vice President 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 Vice President in
the capacity of Vice President and Principal Accounting Officer, and Vice
President hereby agrees to accept such employment by the Company, upon the
terms and conditions stated in this Agreement.

 

2.             Term.  The employment of Vice President by the
Company as provided in this Section will be for a term of three (3) years
(the “Term”) commencing on the
Effective Date and expiring at the close of business on June 30,
2009.  After the employment Term,
this Agreement shall be automatically renewed for an indefinite number of
successive one-year periods (a “Renewal Term”), unless either party gives
written notice of its intent not to renew the Agreement no less than 30 days
before the conclusion of the Term or Renewal Term, as applicable.  For the purposes of this Agreement, the Term
and Renewal Term(s) shall be collectively called the “Employment Period.” 
In the event, however, that Vice President remains in the employ of the
Company after the term of this Agreement without the parties having entered
into a new employment agreement or extending this Agreement, then (i) the
terms of this Agreement shall not be applicable, (ii) Vice President shall
be an employee-at-will subject to the benefits, programs, and policies of the
Company then in effect, and (iii) either party may terminate the
employment relationship at any time with or without cause.

 

3.             Duties.  Vice President shall perform such services and
duties as may be assigned to him from time to time by the Senior Vice President
and Chief Financial Officer of the Company. 
Vice President shall devote his full working time, efforts and energies
to the

 

 

performance of his duties
hereunder, which shall include managing the business development affairs of the
Company.

 

4.             Compensation.

 

(a)           Salary:  The Company
shall pay Vice President for his services, a base salary, on an annualized
basis, of $175,000.00 (One Hundred Seventy-Five 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.

 

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

 

(c)           Raises:  Vice President
may receive periodic increases in the base salary at the recommendation of the
Chief Executive Officer and the approval 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.  Vice President shall be entitled to a
reasonable paid vacation of not less than twenty (20) days each calendar year
during the Employment Period (prorated for the first calendar year), exclusive
of holidays and weekends, which vacation shall be taken by Vice President 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.  Vice President 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 Vice President’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 Vice President’s
position or necessary for Vice President to perform his assigned tasks, duties
and responsibilities under this Agreement.

 

7.             Expenses and Services.  During the Employment Period, Vice President
shall be entitled to receive prompt reimbursement for all pre-approved,
reasonable expenses incurred by Vice President 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 Employment Period,
Vice President 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 employees on the same basis as other employees of the Company.

 

9.             Confidential Information and Non-Competition Agreement.

 

(a)           Vice President and the Company agree that, upon
executing this Agreement, the Company promises to provide, and will provide,
Vice President 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 (hereafter “Confidential
Information”).  Vice President agrees not to disclose 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) during his employment by the
Company; (ii) following Vice President’s termination from employment, and;
(iii) following expiration of this Agreement without renewal or
replacement, unless Vice President has received the prior written consent of
the Company to disclose or use Confidential Information.  Upon termination of Vice President’s
employment for any reason or upon a request, at any time, by the Company, Vice
President shall promptly deliver to the Company all Confidential Information,
including 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 Vice
President’s possession or under Vice President’s control.

 

(b)           To protect the Company’s Confidential Information, and
in the event of Vice President’s termination of employment for any reason
whatsoever, whether by Vice President or the Company, it is necessary to enter
into the following restrictive covenant, which is ancillary to the enforceable
promises and agreements between the Company and Vice President in Paragraph 9(a) of
this Agreement.  Without the prior written
consent of the Company, signed by Chairman and CEO of the Company, Vice
President shall not, directly or indirectly, during his employment with the
Company and for a period of one (1) year following the termination of
employment:

 

(i)           Engage in or perform services for a Competing
Business.  For purposes of this
Agreement, a “Competing Business” is one that provides the same or
substantially similar products and services as those provided by the Company
during Vice President’s employment, including, without limitation, primary,
secondary and enhanced oil recovery techniques. 
Vice President agrees and understands that the Company’s business is
international in scope and its products are marketed throughout the United
States.  The geographic area for purposes
of this restriction is the area within the entire State of Texas.

 

 

(ii)          Solicit business from, attempt to do business with, or
do business with any client or prospective client of the Company with whom the
Company transacted business or solicited within the preceding 12 months, and
which either: (1) Vice President contacted, called on, serviced, did
business with or had significant contact with during Vice President’s
employment at the Company or that Vice President attempted to contact, call on,
service, or do business with during the his employment with the Company; or (2) Vice
President became acquainted with as a result of his employment at the
Company.  This restriction applies only
to business that is in the scope of services or products provided by the
Company.

 

(iii)         Solicit, induce or attempt to solicit or induce, on
behalf of himself or any other person or entity, any employee or independent
contractor of the Company to terminate their employment or relationship with
the Company and/or accept employment elsewhere.

 

(iv)        Solicit, induce or attempt to solicit or induce, any
client or prospective client of the Company to cease or curtail their business
relationship with the Company.

 

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

 

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

 

(b)           If, as a result of Vice President’s incapacity due to
physical or mental illness, Vice President 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 Vice President’s
employment hereunder. The determination of Vice President’s incapacity  due to physical or mental illness shall be
made by Vice President’s attending physician unless the Company disagrees with
such determination, in which case Vice President’s incapacity shall be
determined by a majority of three physicians qualified to practice medicine in
the State of the Texas, one to be selected by each of Vice President (or his
authorized representative) and the Company and the third to be selected by such
two designated physicians

 

(c)           The Company may terminate Vice President’s employment
hereunder for Cause.  For purposes of this Agreement, the Company shall
have “Cause” to terminate Vice President’s employment hereunder upon (i) Vice
President’s financial dishonesty, including, without limitation,
misappropriation of funds or property, or any attempt by Vice President to
secure any personal profit related to the business or business opportunities of
the Company without the informed, written approval of the Company; (ii) Vice
President’s willful refusal for at least ten (10) days to comply with
reasonable directives of the Company after receipt by Vice President of prior
written notice from the Company specifying such noncompliance; (iii) gross
negligence or reckless or willful misconduct in the performance of Vice
President’s duties; (iv) the failure to perform, or

 

 

continuing neglect in the performance of, duties
assigned to Vice President for at least ten (10) days after receipt by
Vice President from the Company of prior written notice of such failure or
neglect; (v) misconduct which has a materially adverse effect upon the
Company’s business or reputation; (vi) Vice President’s use of illicit or
illegal drugs; (vii) Vice President’s abuse of alcohol or prescription
medication; (viii) the conviction of, or plea of nolo contendre to, any
felony or a misdemeanor involving moral turpitude or fraud; (ix) continuing
the material breach of any provision of this Agreement for at least ten (10) days
after receipt by Vice President from the Company of prior written notice of
such breach; (x) the violation of the Company’s policies including,
without limitation, the Company’s policies on equal employment opportunity and
prohibition of unlawful harassment, discrimination or retaliation; or (xi) a
violation of Paragraph 9 of this Agreement.

 

(d)           Any termination of Vice President’s employment by the
Company or by Vice President (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 reasonable
detail the facts and circumstances claimed to provide a basis for termination
of Vice President’s employment under the provision so indicated.

 

(e)           “Date of Termination” shall mean (i) if Vice
President’s employment is terminated by his death, the date of his death; (ii) if
Vice President’s employment is terminated pursuant to subsection (b) above,
15 days after Notice of Termination is given (provided that Vice President
shall not have returned to the performance of his duties on a full-time basis
during such 15 days period); (iii) if Vice President’s employment is
terminated at the expiration of the Term, Renewal Term, or any extension
thereof, the last day of the Term or, if applicable, the last day of the
Renewal Term or any extension; and (iv) if Vice President’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 Vice
President’s employment pursuant to the terms of this Agreement or during any
period of Vice President’s physical or mental disability, Vice President shall
be paid as follows:

 

(a)           The Vice President 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, if applicable, the Renewal 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 Vice President shall be reduced by the sum of
the amounts, if any, payable to Vice President 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 Vice President for any
theretofore unreimbursed expenses which were incurred prior to the commencement
of the Disability Period.

 

 

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

 

(c)           If Vice President’s employment shall be terminated for
Cause, the Company shall pay Vice President his annual base salary (but not the
compensation described in Section 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 Vice President under this Agreement.

 

(d)           If the Company shall (i) terminate Vice President’s
employment other than pursuant to Section 10(a), 10(b) or 10(c) hereof;
(ii) assign to Vice President any duties materially inconsistent with Vice
President’s position in the Company; or (iii) assign to Vice President 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  Vice President for any theretofore
unreimbursed expenses, the Company shall pay Vice President, with no offset, an
amount equal to the greater of (a) Vice President’s annual base salary at
the rate in effect at the time Notice of Termination is given for the unexpired
Term or, if applicable, Renewal Term of this Agreement and payment for any
accrued, but unused vacation days hereunder; or (b) six (6) months of
Vice President’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.

 

(e)           If Vice President shall terminate his employment
pursuant to Section 10(d) of this Agreement, the Company shall pay
Vice President, 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 Vice President 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 Vice President’s employment
for any reason; or (ii) Vice President resigns at any time after any
diminution in Vice President’s job title, duties or compensation or the
relocation of Vice President, without Vice President’s consent, to an office in
a county that does not abut Tarrant County, Texas, the Company shall pay to
Vice President, in a lump sum, three times Vice President’s annual salary in
effect as of the date of Vice President’s termination or resignation and three
times the sum of prior year bonuses paid to Vice President and shall continue
to provide to Vice President, Vice President’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 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 Vice President (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) Vice President 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 Vice President 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 Vice President, 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 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.  During the Employment Period of this Agreement
Vice President shall give the Company immediate notice of any change of
address.  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 St., Suite 3200, Unit 25

Fort Worth, Texas 76102
 Attention: S. Jeffery Johnson
 Telecopy No.: 817-698-0761:

 

 

If to Vice
President:

 

Michael J. Ricketts

554 Bear Ridge

Keller, Texas 76248

Telephone:  817-431-9763

 

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.  Vice President represents and
warrants that he is not subject to any undisclosed obligations inconsistent
with those of this Agreement and expressly warrants that he is not subject to a
non-competition agreement with any third-party that is inconsistent with the
obligations set forth herein.

 

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. 
Notwithstanding anything to the contrary in this Agreement, (i) if
upon the date of Vice President’s termination of employment with the Company,
Vice President 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 Vice President’s termination of employment is necessary in order to
prevent any accelerated or additional tax to Vice President 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 Vice
President’s termination of employment with the Company at which time any such
delayed amounts will be paid to Vice President 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 Vice President’s termination of employment
with the Company, and (ii) if any other payments of money or other
benefits due to Vice President 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
Vice President or by the Company, except that the Company may assign this
Agreement to an Affiliate or successor in interest.

 

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
Vice President 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.

 

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  VICE PRESIDENT:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Michael J. Ricketts

  
	
   

  	
   

  	
  Michael J. Ricketts

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