<PAGE>
                                                                   EXHIBIT 10.34

                        SEPARATION AGREEMENT AND RELEASE
                                     BETWEEN
                                MCRAE B. JOHNSTON
                                       AND
                 GAINSCO, INC., NATIONAL SPECIALTY LINES, INC.,
        LALANDE FINANCIAL GROUP, INC., DLT INSURANCE ADJUSTORS, INC. AND
                       MIDWEST CASUALTY INSURANCE COMPANY

     This Separation Agreement and Release ("the Agreement") is made and entered
into on December 17, 2002, by and between McRae B. Johnston (hereafter
"Johnston" or "You") and GAINSCO, INC., a Texas corporation ("GAINSCO"),
National Specialty Lines, Inc., a Florida corporation ("NSL"), Lalande Financial
Group, Inc., a Florida corporation ("Lalande"), DLT Insurance Adjustors, Inc., a
Florida corporation ("DLT"), and Midwest Casualty Insurance Company, a North
Dakota corporation ("MCIC"). GAINSCO, NSL, Lalande, DLT and MCIC are sometimes
referred to collectively as the "Company Parties." The Company Parties and
Johnston are sometimes referred to collectively as the "Parties".

                                   WITNESSETH:

     WHEREAS, Johnston and the Company Parties understand that this Agreement
does not effect a waiver or release of rights or claims that may arise from
events occurring after the Effective Date of this Agreement (as that term is
described in paragraph 4 below); and

     WHEREAS, Johnston and the Company Parties expressly agree and understand
that the consideration for Johnston's waiver of rights or claims is included in
the amount of money referred to in paragraph 6 below, which amount represents
the sum of (i) the amount of money to which Johnston is otherwise entitled plus
(ii) the amount of money paid in consideration for Johnston's waiver of rights
or claims; and

     WHEREAS, Johnston hereby resigns from any and all positions as an officer
or director of any of the Released Parties (as defined in paragraph 10 below);
and

     WHEREAS, the Company Parties desire to settle fully and finally any and all
differences that Johnston may have with them; and

     NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, it is agreed as follows:

1. DENIAL OF LIABILITY. The Parties understand and agree that neither the making
of this Agreement nor the fulfillment of any condition or obligation of this
Agreement constitutes an admission of any liability or wrongdoing on the part of
the other or any of the Released Parties. All liability by either party to the
others has been and is expressly denied.



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2. OTHER AGREEMENTS. This Agreement supersedes any and all other agreements,
written or verbal, which may exist between any of the Company Parties and
Johnston, including, but not limited to:

     a. The Employment Agreement between GAINSCO, NSL and Johnston, dated
     October 23, 1998, as such agreement may have been amended or supplemented
     (hereinafter referred to as the "Employment Agreement"). Accordingly,
     Johnston hereby acknowledges and agrees that he has no claims or rights
     under the Employment Agreement.

     b. The Stock Purchase Agreement between Johnston, GAINSCO, NSL and Lalande
     dated August 17, 1998, as such agreement may have been amended or
     supplemented (hereinafter referred to as the "Stock Purchase Agreement").
     Accordingly, Johnston hereby acknowledges and agrees that he has no claims
     or rights under the Stock Purchase Agreement.

3. JOHNSTON'S ACKNOWLEDGMENTS.

     a. You have been advised by the Company Parties to consult with the
     attorney of Your choice prior to signing this Agreement.

     b. You have been given a period of at least twenty-one (21) days within
     which to consider this Agreement, but have elected to execute this
     Agreement in a shorter period of time.

     c. You would not be entitled to receive the consideration (as described in
     paragraph 6) being offered to You but for Your signing this Agreement.

     d. You may revoke this Agreement within seven (7) days after the date You
     sign it by providing written notice of the revocation to the Company
     Parties no later than the seventh day after You sign it. (This seven (7)
     day period of time given to you to revoke this Agreement is referred to
     hereafter as the "Revocation Period".) The Company Parties must receive
     written notice of revocation no later than 5:00 p.m. on the seventh day
     after you sign this Agreement. You may mail written notice of revocation
     to:

                          GAINSCO, INC.
                          ATTN:  PRESIDENT
                          1445 ROSS AVENUE, SUITE 5300
                          DALLAS, TEXAS 75202

     Alternatively, You may fax the written notice of revocation to GAINSCO,
INC., Attention: President, at (214) 647-0430.

4. THE EFFECTIVE DATE. It is further expressly agreed by the Parties that this
Agreement shall become effective and enforceable on the expiration of the
Revocation Period on the seventh day after it is executed (the "Effective
Date"), provided that Johnston has not revoked this Agreement in accordance with
paragraph 3(d).



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5. VOLUNTARY AGREEMENT. Johnston represents that he has carefully read and fully
understands all the provisions of this Agreement, that he is competent to
execute this Agreement, and that he is voluntarily entering into this Agreement
of his own free will and accord, without reliance upon any statement or
representation of any person or parties released, or their representatives or
their attorneys.

6. PAYMENT TO JOHNSTON. Provided that this Agreement has not been revoked in
accordance with Paragraph 3(d), the Company Parties will pay to Johnston in one
lump sum payment $310,000.00 (THREE HUNDRED TEN THOUSAND DOLLARS AND ZERO CENTS)
no later than 3 business days after the Effective Date of this Agreement.

7. INDEMNIFICATION FOR UNPAID TAXES. Because the Company Parties will not
withhold or pay any federal or state payroll taxes, Johnston does hereby agree
to indemnify and save harmless the Company Parties of and from all claims for
any unpaid federal income taxes, state and federal payroll taxes, applicable
state and federal withholding tax obligations, penalties or interest arising out
of this Agreement. The Company Parties shall issue a 2002 Form 1099-MISC to
Johnston characterizing the payment to Johnston as "Other Income".

8. HEALTH INSURANCE. Johnston's health insurance and all other benefits of his
employment will terminate according to the terms of the plans. This provision is
not, however, intended to waive Johnston's rights under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended. ("COBRA"). Johnston will receive
the COBRA notice under which he may exercise his option in connection with
continuation of coverage.

9. VESTED RIGHTS IN CERTAIN EMPLOYEE BENEFIT PLANS. The Parties to this
Agreement understand that to the extent Johnston may have vested rights pursuant
to group health insurance plans, group life insurance plans, and 401(k) plans of
the Company Parties, such rights are excluded from the scope of this Agreement
and are not terminated or released by it.

10. RELEASE OF CLAIMS. Subject to the terms of this paragraph, Johnston hereby
irrevocably and unconditionally releases, acquits and forever discharges the
Company Parties and each of their current and former parents, owners,
stockholders, predecessors, successors, assigns, agents, consultants, directors,
officers, employees, representatives, attorneys, divisions, subsidiaries,
affiliates and all persons acting by, through, under or in concert with any of
them, (collectively the "Released Parties"), from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs actually
incurred), of any nature whatsoever, known or unknown ("Claim" or "Claims")
which Johnston now has, owns, holds, or which Johnston at any time heretofore
had, owned, or held against any of the Released Parties, including, but not
limited to: (a) all Claims under the AGE DISCRIMINATION IN EMPLOYMENT ACT OF
1967, as amended; (b) all Claims under Title VII of the Civil Rights Act of
1964, as amended; (c) all Claims under the Employee Retirement Income Security
Act of 1974, as amended; (d) all Claims arising under the Americans With
Disabilities Act of 1990, as amended; (e) all Claims arising under the Family
and Medical Leave Act of 1993, as amended; (f) all Claims related to Johnston's
alleged employment with any of the Company Parties; (g) all Claims of unlawful
discrimination based on age, sex, race, religion, national origin, handicap,
disability, equal pay, sexual orientation or otherwise; (h) all


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Claims of wrongful discharge, breach of an implied or express employment
contract, negligent or intentional infliction of emotional distress, libel,
defamation, breach of privacy, fraud, breach of any implied covenant of good
faith and fair dealing and any other federal, state, or local common law or
statutory claims, whether in tort or in contract; (i) all Claims related to
unpaid wages, salary, overtime compensation, bonuses, severance pay, vacation
pay, paid time off or other compensation or benefits arising out of Johnston's
alleged employment with any and all Company Parties; (j) all claims arising
under any federal, state or local regulation, law, code or statute; and (k) all
claims arising under any of the agreements enumerated in paragraph 2, including
without limitation all claims for change in control, earnout payments, and other
amounts under the Stock Purchase Agreement and the Employment Agreement;
provided however, that nothing contained in this Agreement is intended to
release the Company Parties from any Claims that may arise following the
Effective Date related to the Company Parties' breach of the provisions of this
Agreement. IN SHORT, IN EXCHANGE FOR THE CONSIDERATION DESCRIBED IN PARAGRAPH 6
OF THIS AGREEMENT, JOHNSTON IS VOLUNTARILY GIVING UP HIS RIGHT TO SUE THE
COMPANY PARTIES FOR ANY ALLEGED WRONGDOING WHICH PRECEDED THE DATE THAT JOHNSTON
SIGNED THIS AGREEMENT, EXCEPT THAT JOHNSTON DOES NOT RELINQUISH HIS RIGHT TO
CHALLENGE THIS AGREEMENT ON THE BASIS THAT IT WAS NOT KNOWING AND VOLUNTARY.
HOWEVER, JOHNSTON HEREBY RE-AFFIRMS THAT THIS AGREEMENT IS KNOWING AND
VOLUNTARY.

     Subject to the terms of this paragraph, the Company Parties hereby
irrevocably and unconditionally release, acquit and forever discharge Johnston
from any and all Claims which the Company Parties now have, own, hold, or which
the Company Parties at any time heretofore had, owned, or held against Johnston;
provided however, that nothing contained in this Agreement is intended to
release Johnston from any Claims that may arise following the Effective Date
related to Johnston's breach of the provisions of this Agreement.

11. REPRESENTATIONS OF NO LAWSUITS. Johnston represents that he has filed no
lawsuits against any of the Released Parties or, if he has filed any lawsuits
against any of the Released Parties, he will notify the Company Parties of such
lawsuits immediately and cause them to be dismissed with prejudice prior to the
Effective Date of this Agreement. The Company Parties represent that they have
filed no lawsuits against Johnston or, if they have filed any lawsuits against
Johnston, they will notify Johnston of such lawsuits immediately and cause them
to be dismissed with prejudice prior to the Effective Date of this Agreement.

12. INDEMNIFICATION FOR SUITS AGAINST THE COMPANY PARTIES. Johnston covenants
and promises not to sue or otherwise pursue legal action against the Company
Parties or any of the Released Parties, other than for breach of this Agreement,
and further covenants and promises to indemnify and defend the Company Parties
and any of the Released Parties from any and all such claims, demands and causes
of action, including the payment of reasonable costs and attorneys' fees
relating to any claim, demand, or cause of action brought by him. Johnston
agrees that should any legal action be pursued on his behalf by any person or
entity against the Company Parties or any of the Released Parties regarding the
claims released in this Agreement, Johnston will not accept recovery from such
action, but will assign such recovery to the Company Parties and agrees to
indemnify the Company Parties and any of the Released Parties against such
claims and assessment of damages. Reciprocally, the Company Parties covenant and
promise not to sue or otherwise pursue legal action against Johnston, other than
for breach of this Agreement, and further covenant


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and promise to indemnify and defend Johnston from any and all such claims,
demands and causes of action, including the payment of reasonable costs and
attorneys' fees relating to any claim, demand, or cause of action brought by
them. The Company Parties agree that should any legal action be pursued on their
behalf by any person or entity against Johnston regarding the claims released in
this Agreement, the Company Parties will not accept recovery from such action,
but will assign such recovery to Johnston and agree to indemnify Johnston
against such claims and assessment of damages.

13. NON-SOLICITATION. It is recognized and understood by the Parties hereto that
the employees, agents, independent contractors and sub-contractors of the
Company Parties are an integral part of the Company Parties' business and that
it is extremely important for the Company Parties to retain their services. It
is therefore understood and agreed by the Parties that, because of the nature of
the business of the Company Parties, it is necessary to afford fair protection
to the Company Parties from the loss of any such employees, agents, independent
contractors and sub-contractors. Consequently, Johnston covenants and agrees
that until December 1, 2007, Johnston shall not, directly or indirectly, or
through any other person, firm, or corporation, or in any capacity as described
in this paragraph, whether for or on behalf of Johnston or for any entity in
which Johnston shall have a direct or indirect interest (or any subsidiary or
affiliate of any such entity), whether as a proprietor, partner, co-venturer,
financier, investor, stockholder, director, officer, employer, employee,
servant, agent, representative or otherwise, hire or engage or attempt to hire
or engage any individual who is or has been an employee of any of the Company
Parties at any time during the period commencing on July 1, 2002 and ending on
December 1, 2007, other than Carlos De la Torre. Further, Johnston covenants and
agrees that for a period commencing on the Effective Date of this Agreement and
ending on December 1, 2007, Johnston shall not, directly or indirectly, or
through any other person, firm, or corporation, or in any capacity as described
in this paragraph above, induce, or attempt to induce or influence any employee,
agent, independent contractor or sub-contractor of the Company Parties, or any
of their parents, subsidiaries or affiliates to terminate their employment or
relationship with the Company Parties, or any of their parents, subsidiaries or
affiliates when the Company Parties, or any of their parents, subsidiaries or
affiliates desire to retain the services of that employee, agent, independent
contractor, or sub-contractor.

14. NON-COMPETITION.

     a. Until after December 31, 2004, Johnston shall not do any of the
     following:

          (i) engage directly or indirectly, alone or as a shareholder, partner,
     director, officer, employee of or consultant to any other business
     organization, in any business activities that are in the business of
     writing, claims adjusting, premium financing, selling, underwriting, or
     acting as an agent with respect to private passenger automotive insurance
     in the State of Florida (the "Designated Industry"); or

          (ii) approach any customer of the Company Parties in an attempt to
     divert it to any competitor of the Company Parties in the Designated
     Industry.

     b. Johnston's noncompetition obligations hereunder shall not preclude
     Johnston from owning less than five percent of the common stock of any
     publicly traded corporation


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     conducting business activities in the Designated Industry. If at any time
     the provisions of this paragraph 14 are determined to be invalid or
     unenforceable by reason of being vague or unreasonable as to area, duration
     or scope of activity, this paragraph 14 shall be considered divisible and
     shall be immediately amended to only such area, duration and scope of
     activity as shall be determined to be reasonable and enforceable by the
     court or other body having jurisdiction over the matter, and Johnston
     agrees that this paragraph 14 as so amended shall be valid and binding as
     though any invalid or unenforceable provision had not been included herein.
     After two (2) years from the Effective Date of this Agreement, Johnston may
     engage in any activity in the Designated Industry subject to paragraphs 13
     and 15.

15. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Johnston acknowledges and agrees
that he had access to certain Confidential Information, trade secrets and
proprietary data of the Company Parties, their parents, subsidiaries or
affiliates by virtue of Johnston's relationship with the Company Parties and his
participation in the Company Parties' activities and businesses. Johnston agrees
to maintain (except with the specific prior written consent of the applicable
Company Party) the secrecy of all Confidential Information (as hereinafter
defined) and agrees not to disclose such Confidential Information to any
person(s), employer(s), partnership(s), corporation(s) or other entity of any
nature whatsoever, and agrees to maintain such confidential information in the
strictest confidence and trust. "Confidential Information" means, in whatever
form (tangible or intangible, including electronic data recorded or retrieved by
any means), any and all trade secrets, confidential knowledge, proprietary data,
and information owned by the Company Parties or their parents, affiliates, or
subsidiaries, furnished by the Company Parties or any of their parents,
affiliates or subsidiaries to Johnston, or developed by the Company Parties,
their parents or any affiliates, subsidiaries, agents, contractors, or employees
of the Company Parties and which relates to the business or activities of the
Company Parties, or any of their parents, subsidiaries or affiliates including
technical specifications, diagrams, flow charts, methods, processes, procedures,
discoveries, concepts, calculations, techniques, formulae, systems, production
plans, designs, research and development plans, marketing plans, business plans,
business opportunities, cost and pricing data, customer records and lists,
general chemical, engineering, manufacturing, financial and marketing know-how,
copyrightable works and applications for registrations thereof, pending
applications for letters patent of the United States and foreign countries, and
any such that are issued, granted or published, in common law, state and federal
rights relating to and under any trademarks, trade names or service marks (and
also including any of the foregoing provided to Johnston by or on behalf of the
Company Parties, or any of their parents, subsidiaries or affiliates prior to
the Effective Date of this Agreement), but expressly excluding information which
(1) was available to the public prior to the time of disclosure to Johnston; (2)
becomes available to the public through no act or omission of Johnston; or (3)
becomes available to Johnston through or from a third party who is not under any
obligation of confidentiality to the Company Parties, their parents,
subsidiaries, or affiliates. Johnston hereby expressly acknowledges and agrees
that if Johnston shall seek to disclose, divulge, reveal, report, publish,
transfer or use, for any purpose whatsoever, any Confidential Information,
Johnston shall bear the burden of proving that any such information has become
publicly available other than through the act or omission of Johnston and that
the actions of Johnston do not constitute a breach of any obligation of Johnston
hereunder. Johnston may disclose Confidential Information if required to
disclose such information by law or court order, but


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before doing so Johnston must provide notice to the Company Parties with regard
to such potential disclosure.

16. SCOPE OF RESTRICTIONS ON JOHNSTON. JOHNSTON HAS CAREFULLY READ AND
CONSIDERED THE PROVISIONS OF THIS AGREEMENT AND, HAVING DONE SO, AGREES THAT THE
RESTRICTIONS SET FORTH HEREIN ARE REASONABLE AND ARE REASONABLY REQUIRED FOR THE
PROTECTION OF THE BUSINESS INTERESTS AND GOODWILL OF THE COMPANY PARTIES AND
THEIR BUSINESSES, OFFICERS, DIRECTORS AND EMPLOYEES. JOHNSTON FURTHER AGREES
THAT THE RESTRICTIONS SET FORTH IN THIS AGREEMENT ARE NOT INCLUDED IN THIS
AGREEMENT TO IMPAIR JOHNSTON'S ABILITY TO SECURE EMPLOYMENT WITHIN THE FIELD OR
FIELDS OF JOHNSTON'S CHOICE, INCLUDING THOSE AREAS IN WHICH JOHNSTON IS, IS TO
BE, OR HAS BEEN EMPLOYED BY ANY OF THE COMPANY PARTIES (EXCEPT AS OTHERWISE
SPECIFICALLY SET FORTH IN SECTION 14) BUT INSTEAD TO PROTECT THE CONFIDENTIALITY
OF THEIR CONFIDENTIAL INFORMATION AND TRADE SECRETS AND LEGITIMATE BUSINESS
INTERESTS.

17. SEVERABILITY. The invalidity, illegality or unenforceability of any
provision herein shall not in any way affect, impair, invalidate or render
unenforceable this Agreement or any other provision hereof. In the event that
any provision herein is determined to be invalid, illegal or unenforceable, any
court having jurisdiction thereof shall have the power to reform such provision
to the extent necessary for such provision to be enforceable under applicable
law.

18. DAMAGE TO GOODWILL. Johnston and the Company Parties promise and agree that
they will not damage, or attempt to damage, the business reputation or goodwill
of the other or make disparaging comments about the other.

19. COOPERATION WITH LITIGATION. Johnston agrees that in all future litigation
involving the Company Parties for which the Company Parties request Johnston's
cooperation that he will fully cooperate with the Company Parties. In return for
his cooperation, Johnston shall be paid compensation at the rate of $125 per
hour for any hours in excess of four (4) that he devotes to any particular
litigation matter. The Company Parties also agree to reimburse Johnston for all
the reasonable out-of-pocket costs incurred by Johnston due to his cooperation.
The Parties agree that if Johnston is required to testify or provide
information, he shall do so truthfully.

20. CURE PERIOD. If Johnston or the Company Parties determine that the other has
breached this Agreement, the non-breaching party will notify the party in breach
of that fact in writing and the party in breach will be afforded ten (10) days
to cure the breach.

21. RETURN OF THE COMPANY PARTIES' PROPERTY. Johnston acknowledges that by the
date Johnston executes this Agreement, he will return to the Company Parties any
and all property and Confidential Information of the Company Parties, such as
(but not limited to) marketing plans and related information, product
development plans and related information, trade secret information, pricing
information, vendor information, financial information, telephone lists,
computer software and hardware, keys, credit cards, vehicles, telephones, and
office equipment.



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22. CHOICE OF VENUE. Any action, claim, or other legal proceedings brought to
enforce the Agreement or otherwise concerning this Agreement SHALL be brought in
a court of competent jurisdiction in Dallas County, Texas.

23. CHOICE OF LAW. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Florida without regard to its conflicts
of law principles. In the event any term or condition or provision of this
Agreement shall be determined to be invalid, illegal or unenforceable by a court
of competent jurisdiction, the remaining terms, conditions and provisions of
this Agreement shall remain in full force and effect to the extent permitted by
law.

24. WAIVERS. No waiver of any of the terms of this Agreement shall be valid
unless in writing and signed by all Parties to this Agreement. No waiver or
default of any term of this Agreement shall be deemed a waiver of any subsequent
breach or default of the same or similar nature. This Agreement may not be
changed except by writing signed by the Parties.

25. PARAGRAPH NUMBERING AND ORDERING. The paragraph numbering and ordering in
this Agreement is provided for convenience only and will not affect its
construction or interpretation. Unless a clear contrary intention appears, the
word "including" does not limit the preceding or following words or terms and
the word "or" is used in the inclusive sense of "and/or".

26. BINDING EFFECT OF THIS AGREEMENT. This Agreement shall be binding upon
Johnston and upon Johnston's heirs, administrators, representatives, executors,
trustees, successors and assigns, and shall inure to the benefit of the Released
Parties and each of them, and to their heirs, administrators, representatives,
executors, trustees, successors, and assigns. This Agreement shall be binding
upon the Company Parties and their administrators, representatives, successors,
and assigns.

27. CONSTRUCTION. This Agreement is the product of arms-length settlement
negotiations between the Parties through their respective counsel, and no party
shall be deemed to be the drafter of any provision or the entire agreement. Each
of the provisions of this Agreement, including without limitation the provisions
of Sections 2, 7, 10, 11, 12, 13, 14 and 15, was included as a material
inducement to each of the parties to this Agreement to enter into this
Agreement. The wording in this Agreement was reviewed and accepted by all
Parties after reasonable time to review with legal counsel, and no party shall
be entitled to have any wording of this Agreement construed against the other
party as the drafter of the Agreement in the event of any dispute in connection
with this Agreement.

28. EXECUTION OF DOCUMENTS. For the same aforesaid consideration, it is further
expressly agreed and understood that the Parties will promptly execute any and
all documents that are necessary and appropriate to effectuate the terms of this
Agreement.

29. RESIGNATION. As evidenced by his signature below, Johnston hereby resigns
from any and all positions as an officer or director of any of the Released
Parties.


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     EXECUTED on the date first above written.

                                        /s/ McRae B. Johnston
                                        --------------------------------------
                                        McRae B. Johnston

                                        GAINSCO, INC.


                                        By:   /s/ Glenn W. Anderson
                                              --------------------------------

                                        Its:      President
                                             ---------------------------------


                                        NATIONAL SPECIALTY LINES, INC.


                                        By:   /s/ Glenn W. Anderson
                                              --------------------------------

                                        Its:      Secretary
                                             ---------------------------------


                                        LALANDE FINANCIAL GROUP, INC.

                                        By:   /s/ Glenn W. Anderson
                                              --------------------------------

                                        Its:      Secretary
                                             ---------------------------------


                                        DLT INSURANCE ADJUSTORS, INC.

                                        By:   /s/ Glenn W. Anderson
                                              --------------------------------

                                        Its:      Secretary
                                             ---------------------------------


                                        MIDWEST CASUALTY INSURANCE COMPANY

                                        By:   /s/ Glenn W. Anderson
                                              --------------------------------

                                        Its:      President
                                             ---------------------------------


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