Document:

Exhibit
10.2

 

SEPARATION AGREEMENT AND RELEASE

 

This
Separation Agreement and Release (this “Agreement”) is entered into by Cano
Petroleum, Inc., a Delaware corporation (the “Company”),
Resaca Exploitation, Inc., a Texas corporation (“Resaca”),
and  Benjamin L. Daitch (“Executive”) as of September 29,
2009.  The Company and Executive
are collectively referred to herein as the “Parties” and
Resaca joins in this Agreement solely for the purposes set forth in Section 3(b),
Section 7, and Section 27 and shall not be considered a
“Party”
for any other purpose.  This
Agreement cancels and supersedes all prior agreements relating to Executive’s
employment with the Company, except as provided in this Agreement.

 

RECITALS

 

WHEREAS, Executive is employed as the Senior Vice
President and Chief Financial Officer of the Company under an Employment
Agreement, dated June 23, 2008, as amended by the First Amendment to the
Employment Agreement between the Company and Executive, dated December 31,
2008 (as
amended, the “Employment
Agreement”), under which Executive and the Company agreed
to certain terms and conditions of Executive’s employment with the Company;

 

WHEREAS, because of
his employment as a Company employee, Executive has obtained intimate and
unique knowledge of all Company business operations, current and future plans,
financial plans and other confidential and proprietary information;

 

WHEREAS, the Company
and Resaca anticipate entering into the Agreement and Plan of Merger by and
among the Company, Resaca and Resaca Acquisition Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Resaca (the “Merger
Sub”), dated of even date herewith
(the “Merger Agreement”), under
which the Company will merge with and into the Merger Sub (the “Merger”) and the Company will be the
surviving corporation and subsidiary of Resaca (the “Surviving
Corporation”) effective as of the Closing Date (as defined in
the Merger Agreement);

 

WHEREAS, in connection
with the Merger, the Parties have agreed that Executive’s employment with the
Company and all other officer and representative positions, if any, held by
Executive in the Company or any of its subsidiaries or affiliates will
terminate effective as of the Closing Date (which date shall be referred to herein as the
“Separation Date”);
and

 

WHEREAS, the Parties
desire to finally, fully and completely resolve all disputes that now or may
exist between them, including, without limitation, those concerning Executive’s
job performance and activities while employed with the Company and his hiring,
employment, and termination from employment with the Company, and all disputes
over benefits and compensation concerning his Company employment, and without
limitation, any disputes arising from the terms of Executive’s employment as
set forth in the Employment Agreement.

 

AGREEMENT
TERMS

 

NOW,
THEREFORE, in consideration of the premises and mutual
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which the Parties
acknowledge, the Parties agree as follows:

 

1.                                      Termination of Executive’s Employment.  Executive’s employment with the Company is
terminated as of the Separation Date. 
Executive agrees that this Agreement supersedes any and all prior
agreements with the Company and its subsidiaries and affiliates (including,
without limitation, the Employment 

 

 

Agreement),
which terminate upon the Separation Date. 
Effective as of the Separation Date. Executive shall and hereby does
resign from all corporate, board and other offices and positions he then holds
with the Company and all of its affiliates. 
As of the Separation Date, Executive shall incur a separation from
service from the Company and its affiliates within the meaning of Section 409A
of the Internal Revenue Code of 1986, as amended (“Section 409A”).  The Parties agree that, as of the Separation
Date, Executive, the Company and its subsidiaries and affiliates shall have no
further liabilities, obligations, or duties under such prior agreements,
including the Employment Agreement, except as provided in this Agreement.  Notwithstanding any other provision of this
Agreement, until the Separation Date, Executive’s employment with the Company
shall continue to be governed by the terms, conditions and provisions of the
Employment Agreement, which shall continue in full force and effect until the
Separation Date, including without limitation, the provisions relating to
Executive’s terms and conditions of employment, salary, benefits, insurance
(e.g., directors and officers insurance), authority and responsibilities.

 

2.                                      Termination of this Agreement.  Notwithstanding any other provision of this
Agreement, if the Closing Date does not occur and the Merger Agreement is
terminated, this Agreement shall immediately terminate in full and become null
and void, with no Party having any rights or obligations under this Agreement,
and Executive shall retain any and all claims, rights, legal obligations,
authority, or power he possessed under any prior agreement, including without
limitation the Employment Agreement, bylaw, article of incorporation, statute,
or law prior to the date of this Agreement, or accruing thereafter under the
terms of such agreement, bylaw, article of incorporation, statute, or law.

 

3.                                      Certain
Payments and Benefits.

 

(a)                                  Accrued
Obligations.  On or
within six (6) days following the Closing, the Company shall pay Executive
for all (i) unpaid salary through the Separation Date, and (ii) any
accrued but unused vacation through the Separation Date.  In the next regular payroll date of the
Company immediately following the Separation Date, the Company shall reimburse
Executive for reasonable and necessary business expenses incurred by Executive
in accordance with his duties and responsibilities through the Separation Date,
if any, provided Executive provides substantiating documentation for such
expenses and such expenses are reimbursable in accordance with the Company’s
policies and procedures.  Except as
stated in this Agreement or as required by law, all other compensation and
benefits that relate to Executive’s employment with the Company, including any
benefits set forth in any policy or program, will cease as of the Separation
Date.

 

(b)                                 Separation Payment. 
Subject to Executive’s consent to and fulfillment of
Executive’s obligations in this Agreement, and provided that Executive does not
revoke this Agreement under Section 24, the Company shall pay, or cause to
be paid, Executive severance pay equal to: (i) $500,000 in cash if the
Separation Date occurs on or before December 31, 2009 or $578,666 in cash
if the Separation Date occurs on or after January 1, 2010; and (ii) the
number of whole shares of common stock, par value $0.01 per share, of Resaca (“Resaca Common Stock”) with a Fair
Market Value on the Separation Date equal to $249,999 if the Separation Date
occurs on or before December 31, 2009 or $289,332 if the Separation Date
occurs on or after January 1, 2010  (collectively,
subsections (i), and (ii), the “Separation Payment”).  The Separation Payment shall be made in one
lump sum on the first Business Day immediately following the date that is six (6) months
and one (1) day following the Separation Date. The Separation Payment
shall not be treated as compensation under the Company’s 401(k) Plan or any
other retirement plan.  Executive
recognizes and 

 

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agrees that he is not otherwise entitled to
the Separation Payment, that the Separation Payment is in addition to anything
Executive is otherwise entitled to based on his employment relationship with
the Company, and that he will receive the Separation Payment only as a
condition of signing this Agreement and executing the additional waiver in
accordance with Sections 5 and 6. For purposes of this Section 3(b), “Fair Market Value” means, as of a
particular date, the closing sales price per share of Resaca Common Stock on
the AIM Market of the London Stock Exchange, or, if there was no such sale
reported on that date, on the last preceding date on which such a sale was
reported.  In addition, Executive’s
options to purchase the Company’s common stock and restricted shares of the
Company’s common stock shall vest and become nonforfeitable on the Separation
Date in accordance with the terms and conditions of the applicable award
agreement for the same.

 

(c)                                  Indemnification
Coverage.  To the
fullest extent permitted by applicable law, Executive shall be entitled to
indemnification following the Separation Date on the same terms as
indemnification is provided by the Company to other employees, officers, and
directors through the Company’s Directors and Officers insurance coverage
and/or bylaws.  Such indemnification
shall remain effective after the Separation Date with respect to the actions or
omissions of Executive on or before the Separation Date.

 

(d)                                 Waiver
of Additional Compensation or Benefits.  Executive’s participation in and eligibility
for any compensation, bonus, or benefits plans or practices of the Company
shall terminate on the Separation Date.  Notwithstanding
any other provision in this Agreement, nothing in this Agreement shall affect (i) Executive’s
vested right, if any, under the terms of such plans or any other employee
benefit plans maintained by the Company or Administaff Companies II, L.P. or
its affiliates (together “Administaff”)
for the benefit of the Company’s employees; or (ii) Executive’s right to
continue or convert coverage under such employee benefit plans, in accordance
with the terms of those plans and applicable law, including without limitation,
Executive’s right to elect continued insurance coverage in accordance with the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”).  Except as otherwise provided in this
Agreement, Executive shall not be entitled to any additional compensation,
nor shall Executive be entitled to any benefits, payments or grants under
any benefit plan, severance plan or bonus or incentive program the Company or
any of its affiliates has established. 
Executive agrees that the release in Section 5 covers any claims
that arise before the date he signs this Agreement regarding his compensation,
bonuses, stock options or grants and any other benefits Executive may or may
not have received during the course of his employment relationship with the
Company and its subsidiaries and affiliates.

 

(e)                                  280G
Limitation.  If, at the Closing Date, all or any portion
of the Separation Payment would constitute a “parachute payment” as defined in Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”), then the Separation Payment shall be
reduced so that it is one dollar ($1.00) less than the amount which Executive
could receive without being considered to have received a parachute
payment.  The determination of the amount
of any reduction shall be made by an independent accounting firm selected by
the Company, and such determination shall be conclusive and binding on the
Parties.

 

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(f)                                    Medical
Insurance Premiums.  In
the event Executive timely exercises his right to elect medical benefit
continuation under COBRA, the Company shall reimburse Executive for the
difference between the cost of the COBRA premiums paid by Executive during the
first 12 months following the Separation Date and the cost of premium payments
that the Executive otherwise would have been required to pay during the
12-month period in the event his employment had not terminated.  The Company’s reimbursement of the COBRA
premiums for the first six months of COBRA coverage shall be paid on a monthly
basis unless such monthly reimbursement may not be made without adverse tax
consequences to Executive under Section 409A, in which case such
reimbursement shall be made in a lump sum  on the first Business Day
immediately following the date that is six (6) months and one (1) day
following the Separation Date. Thereafter, the Company shall reimburse
Executive on a monthly basis for the remaining six months during which
Executive maintains coverage under COBRA.

 

4.                                      Intentionally
Omitted.

 

5.                                      General Release and Waiver by Executive.  In consideration for the
Company’s payments in Section 3 and other valuable consideration specified
in this Agreement, Executive, on behalf of himself, his heirs, executors,
successors and assigns, and all persons or entities acting by, through, under
or in concert with any of them, irrevocably and unconditionally releases,
waives, and forever discharges the Company, Resaca, and the Surviving
Corporation and all of their parents, divisions, partnerships, joint ventures, subsidiaries,
affiliates, and related companies, and their present and former agents,
employees, officers, directors, partners, members, attorneys, stockholders,
plan fiduciaries, employee benefit committees, successors and assigns
(collectively, “Company  Released Parties”), from any and all claims,
demands, actions, causes of action, costs, attorney fees, and all liability
whatsoever, whether known or unknown, fixed or contingent, which Executive has,
had, or may ever have against the Company Released Parties relating to or
arising out of Executive’s employment or separation from employment with the
Company, from the beginning of time and up to and including the date Executive
executes this Agreement.  This Agreement
includes, without limitation, (i) law or equity claims; (ii) contract
(express or implied) or tort claims; (iii) claims for wrongful discharge,
retaliatory discharge, whistle blowing, libel, slander, defamation, unpaid
compensation, intentional infliction of emotional distress, fraud, public policy
contract or tort, and implied covenant of good faith and fair dealing; (iv) claims
arising under any federal, state, or local laws of any jurisdiction that
prohibit age, sex, race, national origin, color, disability, religion, veteran,
military status, sexual orientation, or any other form of discrimination,
harassment, or retaliation (including, without limitation, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the ADA
Amendments Act of 2008, Title VII of the 1964 Civil Rights Act, the Civil
Rights Act of 1991, the Civil Rights Acts of 1866 and/or 1871, 42 U.S.C. Section 1981,
the Rehabilitation Act, the Family and Medical Leave Act, the Sarbanes-Oxley Act, the Employee Polygraph
Protection Act, the Uniformed Services Employment and Reemployment Rights Act
of 1994, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act,  the Texas
Commission on Human Rights Act (and any similarly named statute in the Texas
Labor Code), the Texas Labor Code, or any other federal, state,
or local laws of any jurisdiction), (v) claims arising under the Employee
Retirement Income Security Act, and (vi) any other statutory or common law
claims related to Executive’s employment with the Company or the separation of
Executive’s employment with the Company. 
This Agreement does not affect, waive or release (a) any claim for
breach or enforcement of this Agreement; (b) any claim that may arise
after the date this Agreement is signed by Executive; (c) any claim for
worker’s compensation benefits, or (d) Executive’s vested rights, if any,
under the terms of any employee benefit plans maintained by the Company or
Administaff for the benefit of Company employees, including without limitation
Executive’s entitlement to the funds contained in Executive’s 401(k) Plan
account with the Company.

 

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6.                                      Additional
Waiver and Release of Claims.  Executive
agrees to execute a Waiver and Release of Claims, in the form attached hereto
as  Exhibit A (the “Closing Date Waiver and Release”),
on the Separation Date, to irrevocably and unconditionally release, waive, and
forever discharge the Company Released Parties from any and all claims,
demands, actions, causes of action, costs, attorney fees, and all liability
whatsoever against the Company Released Parties relating to or arising out of
Executive’s employment or separation from employment with the Company, from the
date of the execution of this Agreement and up to and including the Separation
Date.

 

7.                                      General
Release and Waiver by the Company and Resaca. 
In consideration for Executive’s release and waiver, as set forth in
the preceding Sections 5 and 6, and other good and valuable consideration
provided for in this Agreement, the Company, Resaca and the Surviving
Corporation (as defined in the Merger Agreement), on behalf of itself and
themselves and its and their affiliated, related, subsidiary, predecessor or
successor corporation or businesses 
(collectively “Company Releasing Parties”)
hereby release, waive and fully discharge Executive and his agents, attorneys,
heirs, successors and assigns (collectively “Executive
Released Parties”) from any and all claims, rights, demands,
actions, obligations, liabilities, and causes of action of any and every kind,
nature, and character whatsoever, known or unknown, that the Company Releasing
Parties or any of them, may now have, may ever have had, or may ever believe it
has against the Executive Released Parties or any of them, based upon any act
or omission by the Executive Released Parties, or any of them, prior to the
date of execution of this Agreement by Executive, including, but not limited
to, any and all claims arising from or in any way related to Executive’s
employment by Company, the termination thereof, or any claims that were raised,
or could have been raised, prior to the execution of the Agreement, whether
based on tort, contract (express or implied), or any federal, state or local
law, statute or regulation.  This
Agreement does not affect, waive or release (a) any claim for breach or
enforcement of this Agreement; (b) any claim that may arise after the date
this Agreement is signed by the Company and Resaca; and (c) any claim for
fraud, gross negligence, or intentional misconduct by the Executive.

 

8.                                      No
Admission of Liability.  This Agreement shall not in
any way be construed as an admission by the Company or any of its subsidiaries
or affiliates or Executive of any acts of wrongdoing or violation of any
statute, law, or legal right.

 

9.                                      Non-Disclosure and Confidentiality.  Executive agrees to abide by the Company’s
confidentiality policies and any agreement regarding confidentiality that
Executive has with the Company as of the date hereof and through the Separation
Date, including without limitation Section 9 (Confidential Information) of
the Employment Agreement.  Executive
further acknowledges and agrees that during his Company employment, the Company
and its subsidiaries and affiliates (the “Company Group”)
disclosed to Executive the Company Group’s unique concepts, sales
presentations, marketing programs, marketing strategies, business practices,
methods of operation, pricing information, cost information, trademarks,
licenses, technical information, proprietary information, computer software
programs, tapes and disks concerning its operations systems, customer lists,
customer names, account information, customer leads, documents identifying
past, present and future customers, customer profile and preference data,
electronically stored information, hiring and training methods, investment
policies, financial and other confidential, proprietary and/or trade secret
information concerning its operations and expansion plans (“Confidential Information”).  The Confidential Information includes,
without limitation, information about the Company Group’s business,
proprietary, and technical information not known to others that could have
economic value to others if improperly disclosed.  Confidential Information also means any
information the Company Group discloses to Executive, either directly or
indirectly, in writing, orally or by inspection of tangible objects, including,
without limitation, information and technical data contained in the Company
Group’s manuals, booklets, publications and materials, equipment of every kind and
character, as well as documents, prototypes, samples, prospects, inventions,
product ideas, know-how, processes, plans (including, without limitation,
market plans and 

 

5

 

strategies),
specifications, designs, techniques, technology formulas, software,
improvements, forecasts, and research.

 

Confidential
Information shall not include any information (a) in the public domain,
through no disclosure or wrongful act of Executive, to such an extent as to be
readily available to competitors; or (b) required to be
disclosed by Executive pursuant to applicable law or valid legal process (in
which case, Executive agrees to provide notice to the Company of such required
disclosure, if possible, before such disclosure, or if notice before such
disclosure is not possible, immediately following such disclosure).

 

Executive
agrees that he will not at any time disclose to anyone, including, without
limitation, any person, firm, corporation, or other entity, or publish, or use
for any purpose, any Confidential Information, except as the Company directs
and authorizes.  Executive agrees that he
shall take all reasonable measures to protect the secrecy of and avoid
disclosure and unauthorized use of the Confidential Information and agrees to
immediately notify the Company in the event of any unauthorized use or
disclosure of the Confidential Information. 
Additionally, if Executive is required to disclose any Confidential
Information by a court order, subpoena, or government directive, Executive
shall immediately notify the Company no later than two (2) days after
Executive receives notice of the court order, subpoena or government directive
to allow the Company to seek a protective order.

 

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10.                               Non-Disparagement.

 

(a)                                  Executive
agrees that he will not, and he will use reasonable efforts to cause his family
members not to, directly or indirectly, disclose, communicate, or publish any
disparaging or defamatory information, written communications, oral
communications, electronic or magnetic communications, writings, oral or
written statements, comments, opinions, facts, or remarks, of any kind or
nature whatsoever (collectively, “Disparaging Information”),
concerning or regarding the Company Group, Resaca or any subsidiary of Resaca
(or any of their respective current or former officers, directors, or
employees).  Executive understands and
acknowledges that this non-disparagement clause prevents him from disclosing,
communicating, or publishing, directly or indirectly, any Disparaging
Information concerning or related to the Company Group, Resaca or any
subsidiary of Resaca (or any of their respective current or former officers,
directors, or employees), including, without limitation, information regarding
businesses, customers or clients, proprietary or technical information,
documents, operations, inventions, trade secrets, product ideas, technical
information, know how, processes, plans (including, without limitation,
marketing plans and strategies), specifications, designs, methods of operation,
techniques, technology, formulas, software, improvements, internal or external
audits, internal controls, or any financial, marketing or accounting
information of any nature whatsoever. 
Further, Executive acknowledges that in executing this Agreement, he has
knowingly, voluntarily, and intelligently waived any free speech, free
association, free press or First Amendment to the United States Constitution
(including, without limitation, any counterpart or similar provision or right
under the Texas Constitution) rights to disclose, communicate, or publish
Disparaging Information concerning or related to the Company Group, Resaca or
any subsidiary of Resaca (or any of their respective current or former
officers, directors, or employees). 
Executive also understands and agrees that he has had a reasonable
period of time to consider this non-disparagement clause, to review the
non-disparagement clause with his attorney, and to consent to this clause and
its terms knowingly and voluntarily. Executive’s obligations under this
section  shall not (i) apply to
private statements by Executive to his immediate family members or tax,
financial, or legal advisors or (ii) prohibit truthful statements by
Executive that are required by law or valid legal process (in which case,
Executive agrees to provide notice to the Company of such law or legal process,
if possible, before making such statements, or if notice before making such
statements is not possible, promptly following such statements).

 

(b)                                 The Company and
Resaca agree that they will not, directly or indirectly, disclose, communicate,
or publish any Disparaging Information concerning or regarding Executive.  The Company and Resaca understand and acknowledge
that this non-disparagement clause prevents them from disclosing,
communicating, or publishing, directly or indirectly, any Disparaging
Information concerning or related to the Executive.  The Parties agree that for purposes of this
Section, the Company’s and Resaca’s obligation shall be limited to their
respective members of the Board of Directors and officers of the Company.  The Company’s obligations under this Section shall
not (i) apply to statements to Company officers, directors, employees, tax
advisors, financial advisors, or legal advisors or (ii) prohibit truthful
statements required by law or valid legal process.

 

(c)                                  Statements that
“the Company and I mutually agreed to separate in connection with the merger
transaction” or similar words to that effect shall not violate this Section.

 

11.                               Non-Recruitment.  Executive agrees that for a period of one (1) year
following the Separation Date, he will not, without the Company’s or Resaca’s
prior written consent, directly or indirectly, either as a principal, manager,
agent, employee, consultant, officer, director, stockholder, partner, investor
or lender, or in any other capacity, and whether personally or through other
persons: solicit, call on, induce or attempt to solicit 

 

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or
induce, on behalf of himself or any other person or entity, any employee of the
Company Group, Resaca or any subsidiary of Resaca to terminate his or her
employment relationship with any such company.

 

12.                               Announcements.  Executive
agrees that he will not discuss, and he will use all reasonable efforts to
cause his family members not to discuss, the terms of this Agreement, the
Merger Agreement or the circumstances of Executive’ s termination of employment
with the Company with any third party, including, without limitation, the press
or the employees of the Company, except to the extent (i) as agreed to, in
writing, by the Company and Resaca, or (ii) as required by law (in which
case, Executive agrees to provide notice to the Company of such required
discussion, if possible, before the such discussion, or if notice before the
discussion is not possible, immediately following such discussion).  Executive’s obligations under this Section shall
not (a) apply to private statements by Executive to his family members or
tax, financial or legal advisors or (b) prohibit truthful statements by
Executive that are required by law or valid legal process.  Furthermore, statements by Executive to third
parties that “the Company and I mutually agreed to separate in connection with
a merger transaction” or similar words to that effect shall not violate this
Section.

 

13.                               Cooperation.  As a further
material inducement to the Company to make the Separation Payment described in
this Agreement and for Executive to accept same, Executive agrees to (a) provide
his full cooperation, at the Company’s request and at reasonable times and
without unreasonable interference with his personal or business activities,
with any of the Company Released Parties in any and all investigations or other
legal, equitable or business matters or proceedings which involve any matters
for which Executive worked on or had responsibility during his employment with
the Company; and (b) to be reasonably available to the Company, Resaca, or
their representatives to provide general advice or assistance as requested by
the Company or Resaca.  This includes,
without limitation, to testifying (and preparing to testify) as a witness in
any proceeding or otherwise providing information or reasonable assistance to
the Company and Resaca in connection with any investigation, claim or suit, and
cooperating with the Company and Resaca regarding any investigation,
litigation, claims or other disputed matters involving the Company or Resaca or
their subsidiaries and affiliates that relate to matters within the knowledge
or responsibility of Executive. 
Specifically, Executive agrees (i) to meet with the Company’s and
Resaca’s representatives, their counsel or other designees at reasonable times
and places with respect to any items within the scope of this provision; (ii) to
provide truthful testimony regarding same to any court, agency or other
adjudicatory body; (iii) to provide the Company with immediate notice of
contact or subpoena by any non-governmental adverse party, and (iv) not to
voluntarily assist any non-governmental adverse party or non-governmental
adverse party’s representatives. 
Executive acknowledges and understands that his cooperation obligations
under this Section 13 are not limited in time and may include, but shall
not be limited to, the need for or availability for testimony.  In addition to the consideration identified
in Section 3, Executive shall receive compensation for his time spent
assisting the Company or Resaca under this Section 13 at the rate of $250
per hour plus reasonable and necessary expenses incurred by Executive;
provided, however, that the Company shall reimburse Executive, upon submission
of substantiating documentation, for necessary and reasonable expenses incurred
by him as a result of such assistance, and the Company shall not be obligated
to reimburse Executive for any time spent actually testifying, as opposed to
preparing to testify, in any judicial or administrative proceeding.  Such hourly rate and expenses will be paid on
a monthly basis within 15 days following receipt of an invoice from
Executive.  Executive shall invoice the
Company or Resaca on a monthly basis. 
Executive’s cooperation under this Section shall be limited by the
Company so that such cooperation shall not result in him failing to incur a
separation from service from the Company and its affiliates within the meaning
of Section 409A.

 

14.                               No Re-Employment with the Company.  Executive waives and relinquishes all rights
to employment, reemployment or reinstatement (collectively “employment”) with the Company and
Resaca and their respective affiliates and subsidiaries.  Executive agrees that he will not work for
the Company, Resaca and their respective affiliates and subsidiaries, or apply
for employment with them, or accept employment with them in any capacity.  Executive further acknowledges that if he
applies for or seeks employment with any of 

 

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the
Company, Resaca and their respective affiliates and subsidiaries, their refusal
to hire Executive based on this provision will provide a complete defense to
any claims arising from his attempt to apply for employment.  In addition, for a period of five (5) years
beginning on the Closing Date, Executive agrees that he will not serve as a
member of the board of directors or officer of any of the Company, Resaca and
their respective affiliates and subsidiaries.

 

15.                               Return
of Company Property.  On or prior to the Separation Date, Executive
shall, to the extent not previously returned or delivered: (a) return all
equipment, records, files, programs or other materials and property in his
possession which belongs to any member of the Company Group or any one or more
of its subsidiaries or affiliates, including, without limitation, all, computer
access codes, Blackberries, credit cards, keys and access cards; and (b) deliver
all original and copies of notes, materials, records, plans, technical data or
other documents, files or programs (whether stored in paper form, computer
form, digital form, electronically or otherwise) that relate or refer to (1) the
Company or any one or more of its subsidiaries or affiliates, or (2) the
Company or any one or more of the Company’s subsidiaries’ or affiliates’ financial
statements, business contacts, and sales. 
Executive further agrees that he will not improperly copy, alter,
destroy, or delete any Company (including other Company Group members) files,
documents or other materials currently in his possession and he will not
improperly use or disclose such materials in any way, or in any format,
including written information in any form, information stored by electronic
means, and any and all copies of these materials.  By signing this Agreement, Executive
represents and warrants that he has not retained and has or will timely return
and deliver all the items described or referenced in subsections (a) or (b) above;
and, that should he later discover additional items described or referenced in
subsections (a) or (b) above, he will promptly notify the Company and
return/deliver such items to the Company. 
This Section does not apply to, and Executive may retain a copy of,
personnel, benefit or payroll documents of the Company concerning him, or any
contacts, personal non-work related e-mails, calendars or any items that
Executive owned and brought to the Company himself.

 

16.                               Return
of Company Credit Card and Club Membership.

 

(a)                                  Executive
agrees that he shall return any Company credit cards in his possession to the
Company on the Separation Date.  During
the period beginning on the date hereof, and ending on the Closing Date,
Executive agrees that (i) he shall use the Company credit cards to pay for
only reasonable and necessary business expenses incurred in the ordinary course
of business and consistent with the Company’s expense policies and procedures;
and (ii) the Company may deduct from the Separation Payment any expenses
that, in the Company’s sole discretion, are not reasonable and necessary
expenses incurred in the ordinary course of business or are in violation of the
Company’s expense reimbursement policies and procedures.

 

(b)                                 For all periods
on and after the Separation Date, Executive, and not the Company or Resaca,
shall be solely responsible for all fees, costs, and expenses associated with
his membership at  the Fort Worth Club.

 

17.                               Breach of Agreement.  In the event Executive fails to materially fulfill any of his
obligations in this Agreement, or Executive or anyone acting on his behalf
brings suit against the Company or Resaca seeking to declare any term of this
Agreement void or unenforceable, and if in such suit one or more material terms
of this Agreement are ruled by a court to be void or unenforceable or subject
to reduction or modification, then the Company shall be entitled to (a) terminate
this Agreement, (b) terminate any remaining Separation Payments set forth
in Section 3, and Executive shall not be entitled to receive any remaining
Separation Payments, (c) recover Separation Payments and all other
benefits set forth in Section 3 already paid to Executive upon court
order, (d) recover attorneys’ fees, expenses and costs the Company incurs
in any court 

 

9

 

action
the Company or Resaca lodges to pursue any remedies for breach of this
Agreement, and/or (e) recover any and all other damages to which the
Company may be entitled at law or in equity as a result of a breach of this
Agreement.  The Company and Executive
agree that at the time Executive and the Company enter into this Agreement, the
damages remedies for Executive’s breach of this Agreement cannot be easily
ascertained and the damages remedies specified in this Section 17 are a
reasonable forecast of just compensation to the Company for any breach.  The Company and Executive understand and
willingly agree that the damages remedies for any breach of the Agreement are
not disproportionate to any actual damages amount and are not a penalty.  If Executive breaches this Agreement, the
Company may seek all other equitable and legal relief including, without
limitation, a temporary restraining order, temporary injunctive relief, and a
permanent injunction against Executive and any other persons, individuals,
corporations, businesses, groups, partnerships or other entities acting by,
through, under, or in concert with Executive. 
At the Company’s sole option, the remaining terms of this Agreement
shall continue in full force and effect.

 

18.                               No
Assignment of Claims. 
Executive represents that he has not transferred or assigned, to any
person or entity, any claim released by this Agreement, or any portion thereof
or interest therein.

 

19.                               Binding
Effect of Agreement.  This
Agreement shall be binding upon Executive and his heirs, spouse,
representatives, successors and assigns.  This Agreement shall be binding upon
the Company, Resaca and their respective representatives, successors and
assigns.

 

20.                               Controlling
Law.  This Agreement shall in all
respects be interpreted, enforced, and governed under the laws of the State of
Texas.  The Company and Executive agree
that the language on this Agreement shall, in all cases, be construed as a
whole, according to its fair meaning, and not strictly for, or against, any of
the Parties.

 

21.                               Severability.  Should any provision of this Agreement be
declared or determined to be illegal or invalid by any government agency or
court of competent jurisdiction, the validity of the remaining parts, terms or
provisions of this Agreement shall not be affected and such provisions shall
remain in full force and effect.  In
addition, any illegal, invalid or unenforceable provisions shall be, and are,
automatically reformed to the maximum limitation permitted by applicable law.

 

22.                               Entire
Agreement.  This
Agreement sets forth the entire agreement between the Parties, and fully
supersedes any and all prior agreements, understandings, or representations
between the Parties pertaining to Executive’s employment with the Company, the
subject matter of this Agreement or any other term or condition of the
relationship between the Company and Executive, including, without limitation,
the Employment Agreement.  Executive
represents and acknowledges that in executing this Agreement, he does not rely,
and has not relied, upon any representation(s) by the Company or Resaca or
their agents except as expressly contained in this Agreement.  No oral statements or prior written material
purporting to be part of this Agreement not specifically incorporated in this
Agreement shall be of any force and effect, and no changes in or additions to
this Agreement shall be recognized, unless incorporated in this Agreement by
written amendment, such amendment to become effective on the date stipulated in
it.  Any amendment to this Agreement must
be signed by all Parties to this Agreement, and consented to in writing by
Resaca.

 

22.                               Notices.  All notices and other
communications hereunder will be in writing. Any notice or other communication
hereunder shall be deemed duly given if it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth:

 

If to the Company:

 

Cano Petroleum, Inc.

 

10

 

Burnett Plaza

801 Cherry Street, Suite 3200

Fort Worth, Texas 76102

Telephone: 817-698-0900

Facsimile: 817-334-0222

Attention: Phillip B. Feiner, Esq.,
General Counsel

 

With a copy (which shall not
constitute notice) to:

 

Resaca
Exploitation, Inc.

1331 Lamar, Suite 1450

Houston, Texas 77010

Telephone: 713-753-1406

Facsimile: 713-753-1537

Attention: Chris Work, Chief
Financial Officer

 

Thompson & Knight
LLP

1722 Routh Street, Suite 1500

Dallas, Texas 75201-2533

Telephone: 214-969-1303

Facsimile: 214-999-1695

Attention: Arthur J. Wright, Esq.

 

Haynes and Boone, LLP

One Houston Center

1221 McKinney Street, Suite 2100

Houston, TX 77010

Telephone: 713-547-2007

Facsimile: 713-236-5540

Attention: Bryce D.
Linsenmayer, Esq. and Amy Moss, Esq.

 

If to Executive:

 

Benjamin Daitch

6419 Riverview Ln.

Dallas, TX 75248

Telephone: (917) 324-4271

 

With a copy (which shall not
constitute notice) to:

 

Shannon Gracey, Ratliff &
Miller, LLP

777 Main Street, Ste. 3800

Fort Worth, TX 76102

Telephone: 817-336-9333

Facsimile: 817-336-3735

Attention: Patrick J. Maher, Esq.

 

Any
Party may send any notice or other communication hereunder to the intended
recipient at the address set forth using any other means (including personal
delivery, expedited courier, messenger services, fax, ordinary mail or
electronic mail), but no such notice or other communication shall be deemed to
have been 

 

11

 

duly given unless and until
it is actually received by the intended recipient.  Any Party may change the address to which
notices and other communications are to be delivered by giving the other Party
notice.

 

23.                               Independent
Representation.  Executive
acknowledges and agrees that he is not relying on any Released Party and any of
their advisors, including, without limitation, Haynes and Boone, LLP and
Thompson & Knight LLP, for advice, including with respect to tax or
legal matters, that he has been advised by the Company to consult advisors of
his choice prior to executing this Agreement, and that he shall be solely
responsible for all taxes due with respect to any payments made to Executive
pursuant to this Agreement, including, without limitation, taxes due under Code
Section 280G and/or Code Section 409A, if any.

 

24.                               Knowing
and Voluntary Waiver.  Executive, by his free and voluntary act of
signing below, acknowledges that (i) he has been given a period of
forty-five (45) days to consider whether to agree to the terms contained in
this Agreement, (ii) the Company advises him to consult with an attorney
before executing this Agreement, (iii) he understands that this Agreement
specifically releases and waives all rights and claims he may have under the
ADEA before the date on which he signs this Agreement, (iv) he agrees to
all of the Agreement terms and intends to be legally bound by them, and (v) he
has received, contemporaneous with this Agreement, a Supplemental Age
Distribution Information Memorandum and a Supplemental Age Distribution
Information Chart (together, the “OWBPA Memorandum”),
which identify the job titles and ages of all employees of the Company who have
been offered a Separation Agreement and Release Agreement in connection with
Transactions (as defined in the Merger Agreement).  Further, Executive acknowledges that the
payments and benefits provided for in Section 3 of this Agreement will be
delayed until both this Agreement and the Closing Date Waiver and Release
become effective, enforceable and irrevocable. 
The Parties acknowledge and agree that each Party has reviewed and
negotiated the terms and provisions of this Agreement and has contributed to
its preparation (with advice of counsel). 
Accordingly, the rule of construction that ambiguities are resolved
against the drafting party shall not be employed in interpreting this Agreement.
Rather, this Agreement’s terms shall be construed fairly as to the Parties and
not in favor of or against either Party, regardless of which Party generally
was responsible for the Agreement’s preparation.

 

The
Company’s offer of this Agreement shall expire after a period of forty-five
(45) days after the date on which Executive first received this Agreement and
the OWBPA Memorandum for consideration (the “Expiration
Date”).  During the
seven-day period after Executive signs this Agreement, Executive may revoke his
agreement to accept the Agreement’s terms by representing in writing to the
Company his intention to revoke.  If
Executive exercises his right to revoke this Agreement, he shall forfeit his
right to receive any of the payments, stock or benefits provided for herein,
and to the extent such payments or benefits have already been made, Executive
agrees that he will immediately reimburse the Company for the amounts of such
payments and benefits.

 

25.                               Defined
Terms.  Any capitalized terms not otherwise
defined in this Agreement shall have the meanings assigned to such terms in the
Merger Agreement.

 

26.                               Company
Authorization.  The Company
acknowledges and agrees that this Agreement and the Separation Payment in Section 3(b) have
been reviewed, approved, and authorized by the Board of Directors of the
Company.

 

27.                               Resaca
Obligations.  In the
event that the Company does not perform its obligations with respect paying the
Separation Payment and other payments under Section 3, Resaca agrees to
pay the Separation Payment and such other payments to Executive.  Furthermore, to the extent the Company does
not fulfill its obligations under this Agreement, Resaca agrees to cause the
Surviving Corporation to fulfill the Company’s obligations.  Other than the obligations listed in Section 3(b),
Section 7, and this Section 27, Resaca shall have no further
responsibilities or obligations under or pursuant to this Agreement.

 

12

 

[Remainder of Page Intentionally Left Blank]

 

13

 

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING AGREEMENT, THAT
I UNDERSTAND ALL OF ITS TERMS AND THAT I AM RELEASING CLAIMS AND THAT I AM
ENTERING INTO IT VOLUNTARILY.

 

AGREED
TO BY:

 

 

	
  /s/
  Benjamin L. Daitch

  	
   

  	
   

  
	
  Benjamin
  L. Daitch

  	
   

  	
  Date:
  September 29, 2009

  

 

 

STATE
OF TEXAS

 

COUNTY
OF TARRANT

 

Before
me, a Notary Public, on this day personally appeared Benjamin L. Daitch known
to me to be the person whose name is subscribed to the foregoing instrument,
and acknowledges to me that he has executed this Agreement on behalf of himself
and his heirs, for the purposes and consideration therein expressed.

 

Given
under my hand and seal of office this 29th day of September, 2009.

 

 

	
   

  	
  /s/
  Sandra C. Durazo

  
	
   

  	
  Notary
  Public in and for the State of Texas

  

 

(PERSONALIZED
SEAL)

 

14

 

CANO PETROLEUM, INC.

 

 

	
  By:

  	
  /s/
  Phillip B. Feiner

  	
   

  
	
  Name:  Phillip B. Feiner

  	
   

  
	
  Title:
  V.P. & General Counsel

  	
   

  

 

Date: 9/29/09

 

STATE
OF TEXAS

 

COUNTY
OF DALLAS

 

Before
me, a Notary Public, on this day personally appeared Phillip B. Feiner, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of Cano Petroleum, Inc.,
and that s/he has executed the same on behalf of said corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.

 

Given
under my hand and seal of office this 29th day of
September, 2009.

 

 

	
   

  	
  /s/
  Jessica Hammons

  
	
   

  	
  Notary
  Public in and for the State of Texas

  

 

(PERSONALIZED
SEAL)

 

15

 

RESACA EXPLOITATION, INC.

 

 

	
  By:

  	
  /s/
  Chris Work

  	
   

  
	
   

  	
  Chris Work

  	
   

  
	
   

  	
  Vice President and Chief Financial Officer

  	
   

  

 

Date: September 29, 2009

 

STATE
OF TEXAS

 

COUNTY
OF HARRIS

 

Before
me, a Notary Public, on this day personally appeared Chris Work, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of Resaca Exploitation, Inc.,
and that he has executed the same on behalf of said corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.

 

Given
under my hand and seal of office this 29th day of September, 2009.

 

 

	
   

  	
  /s/
  Barbara W. Fontenot

  
	
   

  	
  Notary
  Public in and for the State of Texas

  

 

(PERSONALIZED
SEAL)

 

16

 

EXHIBIT A

 

Waiver and Release of Claims

 

1.                                      Introduction.  This Release is made and entered into between
Cano Petroleum, Inc., a Delaware Corporation (“Cano”
or the “Company”) and Benjamin L.
Daitch (“Executive”).  Executive understands that his employment
with Cano (as referenced in the Recitals section of the Separation Agreement
and Release entered into on September 29, 2009 (“Separation
Agreement”)) ends on the Closing Date.  In return for the Mutual Release contained
herein and other good and valuable consideration, including, without
limitation, the consideration given to Executive in the Separation Agreement,
the receipt and sufficiency of which the Parties acknowledge, Executive and the
Company are entering into this Mutual Release (“Release”).

 

2.                                      Executive’s
Global Release.  Executive,
on behalf of himself, his heirs, executors, insurers, successors and assigns
and all persons or entities acting by, through, under or in concert with any of
them, irrevocably and unconditionally releases, waives, and forever discharges
the Company, Resaca Exploitation, Inc. (“Resaca”),
and the Surviving Corporation (as that term is defined in the Recitals section
of the Separation Agreement) and all of their parents, divisions, partnerships,
joint ventures, subsidiaries, affiliates, and related companies, and their
present and former agents, employees, officers, directors, partners, members,
attorneys, stockholders, plan fiduciaries, employee benefit committees,
successors and assigns, and all other persons, individuals or entities acting
by, through, under, or in concert with any of them (collectively, “Company Released Parties”), from any
and all claims, demands, actions, causes of action, costs, attorney fees, and
all liability whatsoever, whether known or unknown, fixed or contingent, which
Executive has, had, or may ever have against the Company Released Parties
relating to or arising out of Executive’s employment or separation from
employment with the Company, from the beginning of time and up to and including
the date Executive executes this Release. 
This Release includes, without limitation, (i) law or equity
claims; (ii) contract (express or implied) or tort claims; (iii) claims
for wrongful discharge, retaliatory discharge, whistleblowing, libel, slander,
defamation, unpaid compensation, intentional infliction of emotional distress,
fraud, public policy contract or tort, and implied covenant of good faith and
fair dealing; (iv) claims arising under any federal, state, or local laws
of any jurisdiction that prohibit age, sex, gender, race, national origin,
color, disability, religion, veteran, military status, sexual orientation, or
any other form of discrimination, harassment, or retaliation (including,
without limitation, the Age Discrimination in Employment Act, the Americans
with Disabilities Act, the ADA Amendments Act of 2008, Title VII of the 1964 Civil
Rights Act, the Civil Rights Act of 1991, the Civil Rights Acts of 1866 and/or
1871, 42 U.S.C. Section 1981, the Rehabilitation Act, the Family and
Medical Leave Act, the Sarbanes-Oxley Act, the
Employee Polygraph Protection Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act,  the Texas
Commission on Human Rights Act (and any similarly named statute in the Texas
Labor Code), the Texas Labor Code, or any other federal, state,
or local laws of any jurisdiction), (v) claims arising under the Employee
Retirement Income Security Act, and (vi) any other statutory or common law
claims related to Executive’s employment with the Company or the separation of
Executive’s employment with the Company. 
This Release does not affect, waive or release (a) any claim for
breach or enforcement of the Separation Agreement or this Release; (b) any
claim that may arise after the date this Release is signed by Executive; (c) any
claim for worker’s compensation benefits, or (d) Executive’s vested
rights, if any, under the terms of any employee benefit plans maintained by the
Company or Administaff (as defined in the Separation Agreement) for the benefit
of Company employees, including without limitation Executive’s entitlement to
the funds contained in Executive’s 401(k) Plan account with the Company..

 

3.                                      The Company’s
Release.  In consideration for
Executive’s release of the Company Released Parties, the Company hereby
releases Executive from any and all claims, demands, actions, causes of action,
costs, fees, attorneys’ fees, and all liabilities whatsoever, fixed or
contingent which the Company or the 

 

17

 

Company Released Parties have, had or may ever have against Executive
up to and including the date of execution of this Release to the extent known
to any member of the Company or the Company Released Parties or to the extent
that any such member of the Company or the Company Released Parties should reasonably
have been aware of its existence.  This
Release does not affect, waive or release (a) any claim for breach or
enforcement of the Separation Agreement or this Release; (b) any claim
that may arise after the date this Release is signed by the Company; or (c) any
claim for fraud, gross negligence, or intentional misconduct by the Executive,
including without limitation claims for any intentional torts, gross
negligence, illegal acts, or acts for which criminal penalties are available.

 

4.                                      No
Admission of Liability. 
Executive understands and agrees that this Release shall not in any way
be construed as an admission by Company Released Parties of any unlawful or
wrongful acts whatsoever against Executive or any other person. Company
Released Parties specifically disclaim any liability to or wrongful acts
against Executive or any other person.

 

5.                                      Time to
Consider Release.  Cano
advises Executive to consult an attorney before executing this Release.  Executive further acknowledges that he has
been given a period of forty-five (45) calendar days within which to review and
consider the provisions of this Release.

 

6.                                      Revocation
Period.  Executive understands and
acknowledges that he has seven (7) calendar days following the
execution of this Release to revoke his acceptance of this Release.  This Release will not become effective or
enforceable, until after the seven (7) day period to revoke this Release
has expired without Executive’s revocation.

 

7.                                      Knowing
and Voluntary Release. 
Executive understands it is his choice whether to enter into this
Release and that his decision to do so is voluntary and is made knowingly.

 

8.                                      No
Prior Representations or Inducements.  Executive represents and acknowledges that in
executing this Release, he does not rely, and has not relied, on any
communications, statements, promises, inducements, or representation(s), oral
or written, by any of Company Released Parties, except as expressly contained
in this Release and the Separation Agreement. 
This Release and the Separation Agreement constitute the sole and entire
agreement of the parties with respect to their subject matters; supersede all
prior verbal and written understandings and agreements between the parties
relating to subject matters; and may not be modified except in a writing signed
by both parties.

 

9.                                      Binding
Release.  Executive
agrees that this Release shall be binding on him and his heirs, administrators,
representatives, executors, successors and assigns, and shall inure to the
benefit of his heirs, administrators, representatives, executors, successors
and assigns.

 

10.                               Choice
of Law.  This Release shall, in all
respects, be interpreted, enforced, and governed under the laws of the State of
Texas.  Cano and Executive agree that the
language of this Release shall, in all cases, be construed as a whole,
according to its fair meaning, and not strictly for, or against, any of the
parties.

 

11.                               Severability.  Cano and Executive agree that should a court
declare or determine that any provision of this Release is illegal or invalid,
the validity of the remaining parts, terms or provisions of this Release will
not be affected and any illegal or invalid part, term, or provision, will not
be deemed to be a part of this Release.

 

12.                               Counterparts.  Cano and Executive agree that this Release
may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall be deemed one and the same
instrument.

 

18

 

PLEASE
READ CAREFULLY AS THIS DOCUMENT INCLUDES A RELEASE OF CLAIMS.

 

As evidenced by his
signature below, Executive certifies that he has read the above Release and
agrees to its terms.

 

 

	
   

  	
   

  	
   

  
	
  Benjamin
  L. Daitch

  	
   

  	
  Cano
  Petroleum, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
					

 

19Exhibit
10.3

 

SEPARATION
AGREEMENT AND RELEASE

 

This
Separation Agreement and Release (this “Agreement”) is entered into by Cano
Petroleum, Inc., a Delaware corporation (the “Company”),
Resaca Exploitation, Inc., a Texas corporation (“Resaca”),
and S. Jeffrey Johnson (“Executive”)
as of September 29, 2009. 
The Company and Executive are collectively referred to herein as the “Parties” and Resaca joins in this Agreement solely for
the purposes set forth in Section 3(b), Section 7, and Section 27
and shall not be considered a “Party” for any other purpose.   This Agreement cancels and supersedes
all prior agreements relating to Executive’s employment with the Company,
except as provided in this Agreement.

 

RECITALS

 

WHEREAS, Executive is
employed as the Chairman and Chief Executive Officer of the Company under an
Employment Agreement, dated January 1, 2006, as amended by the First
Amendment to the Employment Agreement between the Company and Executive, dated May 31,
2008, and the Second Amendment to the Employment Agreement between the Company
and Executive, dated December 31, 2008 (as amended, the “Employment Agreement”),
under which Executive and the Company agreed to certain terms and conditions of
Executive’s employment with the Company;

 

WHEREAS, because of
his employment as a Company employee, Executive has obtained intimate and
unique knowledge of all Company business operations, current and future plans,
financial plans and other confidential and proprietary information;

 

WHEREAS, the Company
and Resaca anticipate entering into the Agreement and Plan of Merger by and
among the Company, Resaca and Resaca Acquisition Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Resaca (the “Merger
Sub”), dated of even date herewith
(the “Merger Agreement”), under
which the Company will merge with and into the Merger Sub (the “Merger”) and the Company will be the
surviving corporation and subsidiary of Resaca (the “Surviving
Corporation”) effective as of the Closing Date (as defined in
the Merger Agreement);

 

WHEREAS, in connection
with the Merger, the Parties have agreed that Executive’s employment with the
Company and all other officer and representative positions, if any, held by
Executive in the Company or any of its subsidiaries or affiliates will terminate
effective as of the Closing Date (which date shall be referred to herein as the “Separation Date”);
and

 

WHEREAS, the Parties
desire to finally, fully and completely resolve all disputes that now or may
exist between them, including, without limitation, those concerning Executive’s
job performance and activities while employed with the Company and his hiring,
employment, and termination from employment with the Company, and all disputes
over benefits and compensation concerning his Company employment, and without
limitation, any disputes arising from the terms of Executive’s employment as
set forth in the Employment Agreement.

 

AGREEMENT
TERMS

 

NOW,
THEREFORE, in consideration of the premises and mutual
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which the Parties
acknowledge, the Parties agree as follows:

 

1.             Termination of Executive’s Employment.  Executive’s employment with the Company is
terminated as of the Separation Date. 
Executive agrees that this Agreement supersedes any and all prior 

 

 

agreements
with the Company and its subsidiaries and affiliates (including, without
limitation, the Employment Agreement), which terminate upon the Separation
Date.  Effective as of the Separation
Date. Executive shall and hereby does resign from all corporate, board and
other offices and positions he then holds with the Company and all of its
affiliates.  As of the Separation Date, Executive
shall incur a separation from service from the Company and its affiliates
within the meaning of Section 409A of the Internal Revenue Code of 1986,
as amended (“Section 409A”).  The Parties agree that, as of the Separation
Date, Executive, the Company and its subsidiaries and affiliates shall have no
further liabilities, obligations, or duties under such prior agreements,
including the Employment Agreement, except as provided in this Agreement.  Notwithstanding any other provision of this
Agreement, until the Separation Date, Executive’s employment with the Company
shall continue to be governed by the terms, conditions and provisions of the
Employment Agreement, which shall continue in full force and effect until the
Separation Date, including without limitation, the provisions relating to
Executive’s terms and conditions of employment, salary, benefits, insurance
(e.g., directors and officers insurance), authority and responsibilities.

 

2.             Termination of this Agreement.  Notwithstanding any other provision of this
Agreement, if the Closing Date does not occur and the Merger Agreement is
terminated, this Agreement shall immediately terminate in full and become null
and void, with no Party having any rights or obligations under this Agreement,
and Executive shall retain any and all claims, rights, legal obligations,
authority, or power he possessed under any prior agreement, including without
limitation the Employment Agreement, bylaw, article of incorporation, statute,
or law prior to the date of this Agreement, or accruing thereafter under the
terms of such agreement, bylaw, article of incorporation, statute, or law.

 

3.             Certain
Payments and Benefits.

 

(a)           Accrued
Obligations.  On or
within six (6) days following the Closing, the Company shall pay Executive
for all (i) unpaid salary through the Separation Date, and (ii) any
accrued but unused vacation through the Separation Date.  In the next regular payroll date of the
Company immediately following the Separation Date, the Company shall reimburse
Executive for reasonable and necessary business expenses incurred by Executive
in accordance with his duties and responsibilities through the Separation Date,
if any, provided Executive provides substantiating documentation for such
expenses and such expenses are reimbursable in accordance with the Company’s
policies and procedures.  Except as
stated in this Agreement or as required by law, all other compensation and
benefits that relate to Executive’s employment with the Company, including any
benefits set forth in any policy or program, will cease as of the Separation
Date.

 

(b)           Separation
Payment.  Subject to
Executive’s consent to and fulfillment of Executive’s obligations in this
Agreement, and provided that Executive does not revoke this Agreement under Section 24,
the Company shall pay, or cause to be paid, Executive severance pay equal to: (i) $1,290,288
in cash if the Separation Date occurs on or before December 31, 2009 or
$1,366,308 in cash if the Separation Date occurs on or after January 1,
2010; and (ii) the number of whole shares of common stock, par value $0.01
per share, of Resaca (“Resaca Common Stock”)
with a Fair Market Value on the Separation Date equal to $645,144 if the
Separation Date occurs on or before December 31, 2009 or $683,304 if the
Separation Date occurs on or after January 1, 2010 (collectively, subsections (i), and (ii), the
“Separation Payment”).  The Separation Payment shall be made in one
lump sum on the first Business Day immediately following the date that is six (6) months
and one (1) day following the Separation Date. The Separation Payment
shall not be treated as 

 

2

 

compensation under the Company’s 401(k) Plan
or any other retirement plan.  Executive
recognizes and agrees that he is not otherwise entitled to the Separation
Payment, that the Separation Payment is in addition to anything Executive is
otherwise entitled to based on his employment relationship with the Company,
and that he will receive the Separation Payment only as a condition of signing
this Agreement and executing the additional waiver in accordance with Sections
5 and 6. For purposes of this Section 3(b), “Fair
Market Value” means, as of a particular date, the closing sales
price per share of Resaca Common Stock on the AIM Market of the London Stock
Exchange, or, if there was no such sale reported on that date, on the last
preceding date on which such a sale was reported.  In addition, Executive’s options to purchase
the Company’s common stock and restricted shares of the Company’s common stock
shall vest and become nonforfeitable on the Separation Date in accordance with
the terms and conditions of the applicable award agreement for the same.

 

(c)           Indemnification Coverage.    To the fullest extent permitted by
applicable law, Executive shall be entitled to indemnification following the
Separation Date on the same terms as indemnification is provided by the Company
to other employees, officers, and directors through the Company’s Directors and
Officers insurance coverage and/or bylaws. 
Such indemnification shall remain effective after the Separation Date
with respect to the actions or omissions of Executive on or before the
Separation Date.

 

(d)           Waiver of
Additional Compensation or Benefits.  Executive’s participation in and eligibility
for any compensation, bonus, or benefits plans or practices of the Company
shall terminate on the Separation Date. 
Notwithstanding any other provision in this Agreement, nothing in this
Agreement shall affect (i) Executive’s vested right, if any, under the
terms of such plans or any other employee benefit plans maintained by the
Company or Administaff Companies II, L.P. or its affiliates (together “Administaff”) for the benefit of the
Company’s employees; or (ii) Executive’s right to continue or convert
coverage under such employee benefit plans, in accordance with the terms of
those plans and applicable law, including without limitation, Executive’s right
to elect continued insurance coverage in accordance with the Consolidated
Omnibus Budget Reconciliation Act (“COBRA”).  Except as otherwise provided in this
Agreement, Executive shall not be entitled to any additional compensation,
nor shall Executive be entitled to any benefits, payments or grants under
any benefit plan, severance plan or bonus or incentive program the Company or
any of its affiliates has established. 
Executive agrees that the release in Section 5 covers any claims
that arise before the date he signs this Agreement regarding his compensation,
bonuses, stock options or grants and any other benefits Executive may or may
not have received during the course of his employment relationship with the
Company and its subsidiaries and affiliates.

 

(e)           Medical
Insurance Premiums.  In
the event Executive timely exercises his right to elect medical benefit
continuation under COBRA, the Company shall reimburse Executive for the
difference between the cost of the COBRA premiums paid by Executive during the
first 12 months following the Separation Date and the cost of premium payments
that the Executive otherwise would have been required to pay during the
12-month period in the event his employment had not terminated.  The Company’s reimbursement of the COBRA
premiums for the first six months of 

 

3

 

COBRA coverage
shall be paid on a monthly basis unless such monthly reimbursement may not be
made without adverse tax consequences to Executive under Section 409A, in
which case such reimbursement shall be made in a lump sum  on the first
Business Day immediately following the date that is six (6) months and one
(1) day following the Separation Date. Thereafter, the Company shall
reimburse Executive on a monthly basis for the remaining six months during
which Executive maintains coverage under COBRA.

 

4.             Orderly
Marketing Deed.  Executive
agrees to execute an Orderly Marketing Deed to be effective for the six (6) month
period immediately following the Separation Date with respect to all shares of
common stock of the Company, all shares of preferred stock of the Company, all
shares of Resaca Common Stock, all shares of any preferred stock of Resaca, and
any other shares of stock of the Company or Resaca owned by Executive as of the
Closing Date in the form attached hereto as Exhibit A.

 

5.             General Release and Waiver by Executive.  In consideration for the
Company’s payments in Section 3 and other valuable consideration specified
in this Agreement, Executive, on behalf of himself, his heirs, executors,
successors and assigns, and all persons or entities acting by, through, under
or in concert with any of them, irrevocably and unconditionally releases,
waives, and forever discharges the Company, Resaca, and the Surviving
Corporation and all of their parents, divisions, partnerships, joint ventures,
subsidiaries, affiliates, and related companies, and their present and former
agents, employees, officers, directors, partners, members, attorneys,
stockholders, plan fiduciaries, employee benefit committees, successors and
assigns (collectively, “Company  Released Parties”), from any
and all claims, demands, actions, causes of action, costs, attorney fees, and
all liability whatsoever, whether known or unknown, fixed or contingent, which
Executive has, had, or may ever have against the Company Released Parties
relating to or arising out of Executive’s employment or separation from
employment with the Company, from the beginning of time and up to and including
the date Executive executes this Agreement. 
This Agreement includes, without limitation, (i) law or equity
claims; (ii) contract (express or implied) or tort claims; (iii) claims
for wrongful discharge, retaliatory discharge, whistle blowing, libel, slander,
defamation, unpaid compensation, intentional infliction of emotional distress,
fraud, public policy contract or tort, and implied covenant of good faith and
fair dealing; (iv) claims arising under any federal, state, or local laws
of any jurisdiction that prohibit age, sex, race, national origin, color,
disability, religion, veteran, military status, sexual orientation, or any
other form of discrimination, harassment, or retaliation (including, without
limitation, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, the ADA Amendments Act of 2008, Title VII of the 1964 Civil
Rights Act, the Civil Rights Act of 1991, the Civil Rights Acts of 1866 and/or
1871, 42 U.S.C. Section 1981, the Rehabilitation Act, the Family and
Medical Leave Act, the Sarbanes-Oxley Act, the
Employee Polygraph Protection Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act,  the Texas
Commission on Human Rights Act (and any similarly named statute in the Texas
Labor Code), the Texas Labor Code, or any other federal, state,
or local laws of any jurisdiction), (v) claims arising under the Employee
Retirement Income Security Act, and (vi) any other statutory or common law
claims related to Executive’s employment with the Company or the separation of
Executive’s employment with the Company. 
This Agreement does not affect, waive or release (a) any claim for
breach or enforcement of this Agreement; (b) any claim that may arise
after the date this Agreement is signed by Executive; (c) any claim for
worker’s compensation benefits, or (d) Executive’s vested rights, if any,
under the terms of any employee benefit plans maintained by the Company or
Administaff for the benefit of Company employees, including without limitation
Executive’s entitlement to the funds contained in Executive’s 401(k) Plan
account with the Company.

 

6.             Additional
Waiver and Release of Claims.  Executive
agrees to execute a Waiver and Release of Claims, in the form attached hereto
as Exhibit B  (the “Closing Date Waiver and Release”),
on the Separation Date, to irrevocably and unconditionally release, waive, and
forever discharge the Company 

 

4

 

Released
Parties from any and all claims, demands, actions, causes of action, costs,
attorney fees, and all liability whatsoever against the Company Released
Parties relating to or arising out of Executive’s employment or separation from
employment with the Company, from the date of the execution of this Agreement
and up to and including the Separation Date.

 

7.             General
Release and Waiver by the Company and Resaca. 
In consideration for Executive’s release and waiver, as set forth in
the preceding Sections 5 and 6, and other good and valuable consideration
provided for in this Agreement, the Company, Resaca and the Surviving
Corporation (as defined in the Merger Agreement), on behalf of itself and
themselves and its and their affiliated, related, subsidiary, predecessor or
successor corporation or businesses 
(collectively “Company Releasing Parties”)
hereby release, waive and fully discharge Executive and his agents, attorneys,
heirs, successors and assigns (collectively “Executive
Released Parties”) from any and all claims, rights, demands,
actions, obligations, liabilities, and causes of action of any and every kind,
nature, and character whatsoever, known or unknown, that the Company Releasing
Parties or any of them, may now have, may ever have had, or may ever believe it
has against the Executive Released Parties or any of them, based upon any act
or omission by the Executive Released Parties, or any of them, prior to the
date of execution of this Agreement by Executive, including, but not limited
to, any and all claims arising from or in any way related to Executive’s
employment by Company, the termination thereof, or any claims that were raised,
or could have been raised, prior to the execution of the Agreement, whether
based on tort, contract (express or implied), or any federal, state or local
law, statute or regulation.  This
Agreement does not affect, waive or release (a) any claim for breach or
enforcement of this Agreement; (b) any claim that may arise after the date
this Agreement is signed by the Company and Resaca; and (c) any claim for
fraud, gross negligence, or intentional misconduct by the Executive.

 

8.             No
Admission of
Liability.  This Agreement
shall not in any way be construed as an admission by the Company or any of its
subsidiaries or affiliates or Executive of any acts of wrongdoing or violation
of any statute, law, or legal right.

 

9.             Non-Disclosure and Confidentiality.  Executive agrees to abide by the Company’s
confidentiality policies and any agreement regarding confidentiality that
Executive has with the Company as of the date hereof and through the Separation
Date, including without limitation Section 9 (Confidential Information) of
the Employment Agreement.  Executive
further acknowledges and agrees that during his Company employment, the Company
and its subsidiaries and affiliates (the “Company Group”)
disclosed to Executive the Company Group’s unique concepts, sales
presentations, marketing programs, marketing strategies, business practices,
methods of operation, pricing information, cost information, trademarks,
licenses, technical information, proprietary information, computer software
programs, tapes and disks concerning its operations systems, customer lists,
customer names, account information, customer leads, documents identifying
past, present and future customers, customer profile and preference data,
electronically stored information, hiring and training methods, investment
policies, financial and other confidential, proprietary and/or trade secret
information concerning its operations and expansion plans (“Confidential Information”).  The Confidential Information includes,
without limitation, information about the Company Group’s business,
proprietary, and technical information not known to others that could have
economic value to others if improperly disclosed.  Confidential Information also means any
information the Company Group discloses to Executive, either directly or
indirectly, in writing, orally or by inspection of tangible objects, including,
without limitation, information and technical data contained in the Company
Group’s manuals, booklets, publications and materials, equipment of every kind
and character, as well as documents, prototypes, samples, prospects,
inventions, product ideas, know-how, processes, plans (including, without
limitation, market plans and strategies), specifications, designs, techniques,
technology formulas, software, improvements, forecasts, and research.

 

5

 

Confidential
Information shall not include any information (a) in the public domain,
through no disclosure or wrongful act of Executive, to such an extent as to be
readily available to competitors; or (b) required to be
disclosed by Executive pursuant to applicable law or valid legal process (in
which case, Executive agrees to provide notice to the Company of such required
disclosure, if possible, before such disclosure, or if notice before such
disclosure is not possible, immediately following such disclosure).

 

Executive
agrees that he will not at any time disclose to anyone, including, without
limitation, any person, firm, corporation, or other entity, or publish, or use
for any purpose, any Confidential Information, except as the Company directs
and authorizes.  Executive agrees that he
shall take all reasonable measures to protect the secrecy of and avoid
disclosure and unauthorized use of the Confidential Information and agrees to
immediately notify the Company in the event of any unauthorized use or
disclosure of the Confidential Information. 
Additionally, if Executive is required to disclose any Confidential
Information by a court order, subpoena, or government directive, Executive
shall immediately notify the Company no later than two (2) days after
Executive receives notice of the court order, subpoena or government directive
to allow the Company to seek a protective order.

 

10.          Non-Disparagement.

 

(a)           Executive agrees that he
will not, and he will use reasonable efforts to cause his family members not
to, directly or indirectly, disclose, communicate, or publish any disparaging
or defamatory information, written communications, oral communications,
electronic or magnetic communications, writings, oral or written statements,
comments, opinions, facts, or remarks, of any kind or nature whatsoever
(collectively, “Disparaging Information”),
concerning or regarding the Company Group, Resaca or any subsidiary of Resaca
(or any of their respective current or former officers, directors, or
employees).  Executive understands and
acknowledges that this non-disparagement clause prevents him from disclosing,
communicating, or publishing, directly or indirectly, any Disparaging
Information concerning or related to the Company Group, Resaca or any
subsidiary of Resaca (or any of their respective current or former officers,
directors, or employees), including, without limitation, information regarding
businesses, customers or clients, proprietary or technical information,
documents, operations, inventions, trade secrets, product ideas, technical
information, know how, processes, plans (including, without limitation,
marketing plans and strategies), specifications, designs, methods of operation,
techniques, technology, formulas, software, improvements, internal or external
audits, internal controls, or any financial, marketing or accounting
information of any nature whatsoever. 
Further, Executive acknowledges that in executing this Agreement, he has
knowingly, voluntarily, and intelligently waived any free speech, free
association, free press or First Amendment to the United States Constitution
(including, without limitation, any counterpart or similar provision or right
under the Texas Constitution) rights to disclose, communicate, or publish
Disparaging Information concerning or related to the Company Group, Resaca or
any subsidiary of Resaca (or any of their respective current or former
officers, directors, or employees). 
Executive also understands and agrees that he has had a reasonable
period of time to consider this non-disparagement clause, to review the
non-disparagement clause with his attorney, and to consent to this clause and
its terms knowingly and voluntarily. Executive’s obligations under this section  shall not (i) apply to private
statements by Executive to his immediate family members or tax, financial, or
legal advisors or (ii) prohibit truthful statements by Executive that are
required by law or valid legal process (in which case, Executive agrees to provide
notice to the Company of such law or legal process, if possible, before making
such statements, or if notice before making such statements is not possible,
promptly following such statements).

 

(b)           The Company and Resaca agree
that they will not, directly or indirectly, disclose, communicate, or publish
any Disparaging Information concerning or regarding Executive.  The 

 

6

 

Company and Resaca understand and acknowledge
that this non-disparagement clause prevents them from disclosing,
communicating, or publishing, directly or indirectly, any Disparaging
Information concerning or related to the Executive.  The Parties agree that for purposes of this
Section, the Company’s and Resaca’s obligation shall be limited to their
respective members of the Board of Directors and officers of the Company.  The Company’s obligations under this Section shall
not (i) apply to statements to Company officers, directors, employees, tax
advisors, financial advisors, or legal advisors or (ii) prohibit truthful
statements required by law or valid legal process.

 

(c)           Statements that “the Company
and I mutually agreed to separate in connection with the merger transaction” or
similar words to that effect shall not violate this Section.

 

11.          Non-Recruitment.  Executive agrees that for a period of one (1) year
following the Separation Date, he will not, without the Company’s or Resaca’s
prior written consent, directly or indirectly, either as a principal, manager,
agent, employee, consultant, officer, director, stockholder, partner, investor
or lender, or in any other capacity, and whether personally or through other
persons: solicit, call on, induce or attempt to solicit or induce, on behalf of
himself or any other person or entity, any employee of the Company Group,
Resaca or any subsidiary of Resaca to terminate his or her employment
relationship with any such company.

 

12.          Announcements.  Executive
agrees that he will not discuss, and he will use all reasonable efforts to
cause his family members not to discuss, the terms of this Agreement, the
Merger Agreement or the circumstances of Executive’ s termination of employment
with the Company with any third party, including, without limitation, the press
or the employees of the Company, except to the extent (i) as agreed to, in
writing, by the Company and Resaca, or (ii) as required by law (in which
case, Executive agrees to provide notice to the Company of such required
discussion, if possible, before the such discussion, or if notice before the
discussion is not possible, immediately following such discussion).  Executive’s obligations under this Section shall
not (a) apply to private statements by Executive to his family members or
tax, financial or legal advisors or (b) prohibit truthful statements by
Executive that are required by law or valid legal process.  Furthermore, statements by Executive to third
parties that “the Company and I mutually agreed to separate in connection with
a merger transaction” or similar words to that effect shall not violate this
Section.

 

13.          Cooperation.  As a further
material inducement to the Company to make the Separation Payment described in
this Agreement and for Executive to accept same, Executive agrees to (a) provide
his full cooperation, at the Company’s request and at reasonable times and
without unreasonable interference with his personal or business activities,
with any of the Company Released Parties in any and all investigations or other
legal, equitable or business matters or proceedings which involve any matters
for which Executive worked on or had responsibility during his employment with
the Company; and (b) to be reasonably available to the Company, Resaca, or
their representatives to provide general advice or assistance as requested by the
Company or Resaca.  This includes,
without limitation, to testifying (and preparing to testify) as a witness in
any proceeding or otherwise providing information or reasonable assistance to
the Company and Resaca in connection with any investigation, claim or suit, and
cooperating with the Company and Resaca regarding any investigation,
litigation, claims or other disputed matters involving the Company or Resaca or
their subsidiaries and affiliates that relate to matters within the knowledge
or responsibility of Executive. 
Specifically, Executive agrees (i) to meet with the Company’s and
Resaca’s representatives, their counsel or other designees at reasonable times
and places with respect to any items within the scope of this provision; (ii) to
provide truthful testimony regarding same to any court, agency or other
adjudicatory body; (iii) to provide the Company with immediate notice of
contact or subpoena by any non-governmental adverse party, and (iv) not to
voluntarily assist any non-governmental adverse party or non-governmental
adverse party’s representatives. 
Executive acknowledges and understands that his cooperation obligations
under this Section 13 are not limited in time and may include, but shall
not be limited to, the need for or availability for testimony.  In addition to the consideration identified
in Section 3, Executive shall receive compensation for his time spent
assisting the 

 

7

 

Company
or Resaca under this Section 13 at the rate of $250 per hour plus
reasonable and necessary expenses incurred by Executive; provided, however,
that the Company shall reimburse Executive, upon submission of substantiating
documentation, for necessary and reasonable expenses incurred by him as a
result of such assistance, and the Company shall not be obligated to reimburse
Executive for any time spent actually testifying, as opposed to preparing to
testify, in any judicial or administrative proceeding.  Such hourly rate and expenses will be paid on
a monthly basis within 15 days following receipt of an invoice from
Executive.   Executive shall invoice the
Company or Resaca on a monthly basis. 
Executive’s cooperation under this Section shall be limited by the
Company so that such cooperation shall not result in him failing to incur a
separation from service from the Company and its affiliates within the meaning
of Section 409A.

 

14.          No Re-Employment with the Company.  Executive waives and relinquishes all rights
to employment, reemployment or reinstatement (collectively “employment”) with the Company and
Resaca and their respective affiliates and subsidiaries.  Executive agrees that he will not work for
the Company, Resaca and their respective affiliates and subsidiaries, or apply
for employment with them, or accept employment with them in any capacity.  Executive further acknowledges that if he
applies for or seeks employment with any of the Company, Resaca and their
respective affiliates and subsidiaries, their refusal to hire Executive based
on this provision will provide a complete defense to any claims arising from
his attempt to apply for employment.  In
addition, for a period of five (5) years beginning on the Closing Date,
Executive agrees that he will not serve as a member of the board of directors
or officer of any of the Company, Resaca and their respective affiliates and
subsidiaries.

 

15.          Return
of Company Property.  On or prior to the Separation Date, Executive
shall, to the extent not previously returned or delivered: (a) return all
equipment, records, files, programs or other materials and property in his
possession which belongs to any member of the Company Group or any one or more
of its subsidiaries or affiliates, including, without limitation, all, computer
access codes, Blackberries, credit cards, keys and access cards; and (b) deliver
all original and copies of notes, materials, records, plans, technical data or
other documents, files or programs (whether stored in paper form, computer
form, digital form, electronically or otherwise) that relate or refer to (1) the
Company or any one or more of its subsidiaries or affiliates, or (2) the
Company or any one or more of the Company’s subsidiaries’ or affiliates’
financial statements, business contacts, and sales.  Executive further agrees that he will not
improperly copy, alter, destroy, or delete any Company (including other Company
Group members) files, documents or other materials currently in his possession
and he will not improperly use or disclose such materials in any way, or in any
format, including written information in any form, information stored by
electronic means, and any and all copies of these materials.  By signing this Agreement, Executive
represents and warrants that he has not retained and has or will timely return
and deliver all the items described or referenced in subsections (a) or (b) above;
and, that should he later discover additional items described or referenced in
subsections (a) or (b) above, he will promptly notify the Company and
return/deliver such items to the Company. 
This Section does not apply to, and Executive may retain a copy of,
personnel, benefit or payroll documents of the Company concerning him, or any
contacts, personal non-work related e-mails, calendars or any items that
Executive owned and brought to the Company himself.

 

16.          Return
of Company Credit Card and Club Membership.

 

(a)           Executive agrees that he
shall return any Company credit cards in his possession to the Company on the
Separation Date.  During the period
beginning on the date hereof, and ending on the Closing Date, Executive agrees
that (i) he shall use the Company credit cards to pay for only reasonable
and necessary business expenses incurred in the ordinary course of business and
consistent with the Company’s expense policies and procedures; and (ii) the
Company may deduct from the Separation Payment any expenses that, in the
Company’s sole discretion, are not 

 

8

 

reasonable and necessary expenses incurred in
the ordinary course of business or are in violation of the Company’s expense
reimbursement policies and procedures.

 

(b)           For all periods on and after
the Separation Date, Executive, and not the Company or Resaca, shall be solely
responsible for all fees, costs, and expenses associated with his membership at  the Fort Worth Club.

 

17.          Breach of Agreement.  In the event Executive fails to materially fulfill any of his
obligations in this Agreement, or Executive or anyone acting on his behalf
brings suit against the Company or Resaca seeking to declare any term of this
Agreement void or unenforceable, and if in such suit one or more material terms
of this Agreement are ruled by a court to be void or unenforceable or subject
to reduction or modification, then the Company shall be entitled to (a) terminate
this Agreement, (b) terminate any remaining Separation Payments set forth
in Section 3, and Executive shall not be entitled to receive any remaining
Separation Payments, (c) recover Separation Payments and all other
benefits set forth in Section 3 already paid to Executive upon court
order, (d) recover attorneys’ fees, expenses and costs the Company incurs
in any court action the Company or Resaca lodges to pursue any remedies for
breach of this Agreement, and/or (e) recover any and all other damages to
which the Company may be entitled at law or in equity as a result of a breach
of this Agreement.  The Company and
Executive agree that at the time Executive and the Company enter into this
Agreement, the damages remedies for Executive’s breach of this Agreement cannot
be easily ascertained and the damages remedies specified in this Section 17
are a reasonable forecast of just compensation to the Company for any
breach.  The Company and Executive
understand and willingly agree that the damages remedies for any breach of the
Agreement are not disproportionate to any actual damages amount and are not a
penalty.  If Executive breaches this
Agreement, the Company may seek all other equitable and legal relief including,
without limitation, a temporary restraining order, temporary injunctive relief,
and a permanent injunction against Executive and any other persons,
individuals, corporations, businesses, groups, partnerships or other entities
acting by, through, under, or in concert with Executive.  At the Company’s sole option, the remaining
terms of this Agreement shall continue in full force and effect.

 

18.          No
Assignment of Claims. 
Executive represents that he has not transferred or assigned, to any
person or entity, any claim released by this Agreement, or any portion thereof
or interest therein.

 

19.          Binding Effect of Agreement.  This Agreement shall be binding upon
Executive and his heirs, spouse, representatives, successors and assigns.  This
Agreement shall be binding upon the Company, Resaca and their respective
representatives, successors and assigns.

 

20.          Controlling
Law.  This Agreement shall in all
respects be interpreted, enforced, and governed under the laws of the State of
Texas.  The Company and Executive agree
that the language on this Agreement shall, in all cases, be construed as a
whole, according to its fair meaning, and not strictly for, or against, any of
the Parties.

 

21.          Severability.  Should any provision of this Agreement be
declared or determined to be illegal or invalid by any government agency or
court of competent jurisdiction, the validity of the remaining parts, terms or
provisions of this Agreement shall not be affected and such provisions shall
remain in full force and effect.  In
addition, any illegal, invalid or unenforceable provisions shall be, and are,
automatically reformed to the maximum limitation permitted by applicable law.

 

22.          Entire
Agreement.  This
Agreement sets forth the entire agreement between the Parties, and fully
supersedes any and all prior agreements, understandings, or representations
between the Parties pertaining to Executive’s employment with the Company, the
subject matter of this Agreement or any other term or condition of the
relationship between the Company and Executive, including, without limitation,
the 

 

9

 

Employment
Agreement.  Executive represents and
acknowledges that in executing this Agreement, he does not rely, and has not
relied, upon any representation(s) by the Company or Resaca or their agents
except as expressly contained in this Agreement.  No oral statements or prior written material
purporting to be part of this Agreement not specifically incorporated in this
Agreement shall be of any force and effect, and no changes in or additions to
this Agreement shall be recognized, unless incorporated in this Agreement by
written amendment, such amendment to become effective on the date stipulated in
it.  Any amendment to this Agreement must
be signed by all Parties to this Agreement, and consented to in writing by
Resaca.

 

22.          Notices.  All notices and other
communications hereunder will be in writing. Any notice or other communication
hereunder shall be deemed duly given if it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth:

 

If to the Company:

 

Cano Petroleum, Inc.

Burnett Plaza

801 Cherry Street, Suite 3200

Fort Worth, Texas 76102

Telephone: 817-698-0900

Facsimile: 817-334-0222

Attention: Phillip B. Feiner, Esq.,
General Counsel

 

With a copy (which shall not
constitute notice) to:

 

Resaca
Exploitation, Inc.

1331
Lamar, Suite 1450

Houston, Texas 77010

Telephone: 713-753-1406

Facsimile: 713-753-1537

Attention: Chris Work, Chief
Financial Officer

 

Thompson &
Knight LLP

1722
Routh Street, Suite 1500

Dallas,
Texas 75201-2533

Telephone:
214-969-1303

Facsimile:
214-999-1695

Attention: Arthur J. Wright, Esq.

 

Haynes and Boone, LLP

One Houston Center

1221 McKinney Street, Suite 2100

Houston, TX 77010

Telephone: 713-547-2007

Facsimile: 713-236-5540

Attention: Bryce D.
Linsenmayer, Esq. and Amy Moss, Esq.

 

If to Executive:

 

S. Jeffrey Johnson

8916 Estribo Circle

 

10

 

Benbrook, Texas 76126

Telephone: 817-460-0401

 

With a copy (which shall not
constitute notice) to:

 

Shannon Gracey, Ratliff &
Miller, LLP

777 Main Street, Ste. 3800

Fort Worth, TX 76102

Telephone: 817-336-9333

Facsimile: 817-336-3735

Attention: Patrick J. Maher, Esq.

 

Any
Party may send any notice or other communication hereunder to the intended
recipient at the address set forth using any other means (including personal
delivery, expedited courier, messenger services, fax, ordinary mail or
electronic mail), but no such notice or other communication shall be deemed to
have been duly given unless and until it is actually received by the intended
recipient.  Any Party may change the
address to which notices and other communications are to be delivered by giving
the other Party notice.

 

23.          Independent Representation.  Executive acknowledges and agrees that he is
not relying on any Released Party and any of their advisors, including, without
limitation, Haynes and Boone, LLP and Thompson & Knight LLP, for
advice, including with respect to tax or legal matters, that he has been
advised by the Company to consult advisors of his choice prior to executing
this Agreement, and that he shall be solely responsible for all taxes due with
respect to any payments made to Executive pursuant to this Agreement,
including, without limitation, taxes due under Code Section 280G and/or
Code Section 409A, if any.

 

24.          Knowing and Voluntary Waiver.  Executive, by his free and voluntary act of
signing below, acknowledges that (i) he has been given a period of
forty-five (45) days to consider whether to agree to the terms contained in
this Agreement, (ii) the Company advises him to consult with an attorney
before executing this Agreement, (iii) he understands that this Agreement
specifically releases and waives all rights and claims he may have under the
ADEA before the date on which he signs this Agreement, (iv) he agrees to
all of the Agreement terms and intends to be legally bound by them, and (v) he
has received, contemporaneous with this Agreement, a Supplemental Age
Distribution Information Memorandum and a Supplemental Age Distribution
Information Chart (together, the “OWBPA Memorandum”),
which identify the job titles and ages of all employees of the Company who have
been offered a Separation Agreement and Release Agreement in connection with
Transactions (as defined in the Merger Agreement).  Further, Executive acknowledges that the
payments and benefits provided for in Section 3 of this Agreement will be
delayed until both this Agreement and the Closing Date Waiver and Release
become effective, enforceable and irrevocable. 
The Parties acknowledge and agree that each Party has reviewed and
negotiated the terms and provisions of this Agreement and has contributed to
its preparation (with advice of counsel). 
Accordingly, the rule of construction that ambiguities are resolved
against the drafting party shall not be employed in interpreting this
Agreement. Rather, this Agreement’s terms shall be construed fairly as to the
Parties and not in favor of or against either Party, regardless of which Party
generally was responsible for the Agreement’s preparation.

 

The
Company’s offer of this Agreement shall expire after a period of forty-five
(45) days after the date on which Executive first received this Agreement and
the OWBPA Memorandum for consideration (the “Expiration
Date”).   During the
seven-day period after Executive signs this Agreement, Executive may revoke his
agreement to accept the Agreement’s terms by representing in writing to the
Company his intention to revoke.  If
Executive exercises his right to revoke this Agreement, he shall forfeit his
right to receive any of the payments, stock or benefits provided for herein,
and to the extent such payments or benefits have already 

 

11

 

been made, Executive agrees
that he will immediately reimburse the Company for the amounts of such payments
and benefits.

 

25.          Defined
Terms.  Any capitalized terms not
otherwise defined in this Agreement shall have the meanings assigned to such
terms in the Merger Agreement.

 

26.          Company
Authorization.  The Company
acknowledges and agrees that this Agreement and the Separation Payment in Section 3(b) have
been reviewed, approved, and authorized by the Board of Directors of the
Company.

 

27.          Resaca
Obligations.   In the
event that the Company does not perform its obligations with respect paying the
Separation Payment and other payments under Section 3, Resaca agrees to
pay the Separation Payment and such other payments to Executive.  Furthermore, to the extent the Company does
not fulfill its obligations under this Agreement, Resaca agrees to cause the
Surviving Corporation to fulfill the Company’s obligations.  Other than the obligations listed in Section 3(b),
Section 7, and this Section 27, Resaca shall have no further
responsibilities or obligations under or pursuant to this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

12

 

I ACKNOWLEDGE THAT I HAVE CAREFULLY READ THE FOREGOING AGREEMENT, THAT
I UNDERSTAND ALL OF ITS TERMS AND THAT I AM RELEASING CLAIMS AND THAT I AM
ENTERING INTO IT VOLUNTARILY.

 

AGREED
TO BY:

 

 

	
  /s/
  S. Jeffrey Johnson

  	
   

  	
   

  
	
  S.
  Jeffrey Johnson

  	
   

  	
  Date:
  September 29, 2009

  

 

 

STATE
OF TEXAS

 

COUNTY
OF TARRANT

 

Before
me, a Notary Public, on this day personally appeared S. Jeffrey Johnson known
to me to be the person whose name is subscribed to the foregoing instrument,
and acknowledges to me that he has executed this Agreement on behalf of himself
and his heirs, for the purposes and consideration therein expressed.

 

Given
under my hand and seal of office this 29th day of September, 2009.

 

 

	
   

  	
  /s/
  Sandra C. Durazo

  
	
   

  	
  Notary
  Public in and for the State of Texas

  

 

(PERSONALIZED
SEAL)

 

13

 

CANO PETROLEUM, INC.

 

 

	
  By:

  	
  /s/
  Phillip B. Feiner

  	
   

  
	
  Name:

  	
  Phillip
  B. Feiner

  	
   

  
	
  Title:

  	
  V.P. &
  General Counsel

  	
   

  

 

Date: 9/29/09

 

 

STATE
OF TEXAS

 

COUNTY
OF DALLAS

 

Before
me, a Notary Public, on this day personally appeared Phillip B. Feiner, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of Cano Petroleum, Inc.,
and that s/he has executed the same on behalf of said corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.

 

Given
under my hand and seal of office this 29th day of
September, 2009.

 

 

	
   

  	
  /s/
  Jessica Hammons

  
	
   

  	
  Notary
  Public in and for the State of Texas

  

 

(PERSONALIZED
SEAL)

 

14

 

RESACA EXPLOITATION, INC.

 

 

	
  By:

  	
  /s/
  Chris Work

  	
   

  
	
   

  	
  Chris Work

  	
   

  
	
   

  	
  Vice President and Chief Financial Officer

  	
   

  

 

Date: September 29, 2009

 

 

STATE
OF TEXAS

 

COUNTY
OF HARRIS

 

Before
me, a Notary Public, on this day personally appeared Chris Work, known to me to
be the person and officer whose name is subscribed to the foregoing instrument
and acknowledged to me that the same was the act of Resaca Exploitation, Inc.,
and that he has executed the same on behalf of said corporation for the
purposes and consideration therein expressed, and in the capacity therein
stated.

 

Given
under my hand and seal of office this 29th day of September, 2009.

 

 

	
   

  	
  /s/
  Barbara W. Fontenot

  
	
   

  	
  Notary
  Public in and for the State of Texas

  

 

(PERSONALIZED
SEAL)

 

15

 

EXHIBIT A

 

Orderly Marketing Deed

 

16

 

EXHIBIT B

 

Waiver and Release of Claims

 

1.             Introduction.  This Release is made and entered into between
Cano Petroleum, Inc., a Delaware Corporation (“Cano”
or the “Company”) and S. Jeffrey
Johnson (“Executive”).  Executive understands that his employment
with Cano (as referenced in the Recitals section of the Separation Agreement
and Release entered into on September 29, 2009 (“Separation
Agreement”)) ends on the Closing Date.  In return for the Mutual Release contained
herein and other good and valuable consideration, including, without
limitation, the consideration given to Executive in the Separation Agreement,
the receipt and sufficiency of which the Parties acknowledge, Executive and the
Company are entering into this Mutual Release (“Release”).

 

2.             Executive’s Global Release.  Executive, on behalf of himself, his heirs,
executors, insurers, successors and assigns and all persons or entities acting
by, through, under or in concert with any of them, irrevocably and
unconditionally releases, waives, and forever discharges the Company, Resaca
Exploitation, Inc. (“Resaca”),
and the Surviving Corporation (as that term is defined in the Recitals section
of the Separation Agreement) and all of their parents, divisions, partnerships,
joint ventures, subsidiaries, affiliates, and related companies, and their
present and former agents, employees, officers, directors, partners, members,
attorneys, stockholders, plan fiduciaries, employee benefit committees,
successors and assigns, and all other persons, individuals or entities acting
by, through, under, or in concert with any of them (collectively, “Company Released Parties”), from any
and all claims, demands, actions, causes of action, costs, attorney fees, and
all liability whatsoever, whether known or unknown, fixed or contingent, which
Executive has, had, or may ever have against the Company Released Parties
relating to or arising out of Executive’s employment or separation from
employment with the Company, from the beginning of time and up to and including
the date Executive executes this Release. 
This Release includes, without limitation, (i) law or equity
claims; (ii) contract (express or implied) or tort claims; (iii) claims
for wrongful discharge, retaliatory discharge, whistleblowing, libel, slander,
defamation, unpaid compensation, intentional infliction of emotional distress,
fraud, public policy contract or tort, and implied covenant of good faith and
fair dealing; (iv) claims arising under any federal, state, or local laws
of any jurisdiction that prohibit age, sex, gender, race, national origin,
color, disability, religion, veteran, military status, sexual orientation, or
any other form of discrimination, harassment, or retaliation (including,
without limitation, the Age Discrimination in Employment Act, the Americans
with Disabilities Act, the ADA Amendments Act of 2008, Title VII of the 1964
Civil Rights Act, the Civil Rights Act of 1991, the Civil Rights Acts of 1866
and/or 1871, 42 U.S.C. Section 1981, the Rehabilitation Act, the Family
and Medical Leave Act, the Sarbanes-Oxley Act,
the Employee Polygraph Protection Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act,  the Texas
Commission on Human Rights Act (and any similarly named statute in the Texas
Labor Code), the Texas Labor Code, or any other federal, state,
or local laws of any jurisdiction), (v) claims arising under the Employee
Retirement Income Security Act, and (vi) any other statutory or common law
claims related to Executive’s employment with the Company or the separation of Executive’s
employment with the Company.    This
Release does not affect, waive or release (a) any claim for breach or
enforcement of the Separation Agreement or this Release; (b) any claim
that may arise after the date this Release is signed by Executive; (c) any
claim for worker’s compensation benefits, or (d) Executive’s vested
rights, if any, under the terms of any employee benefit plans maintained by the
Company or Administaff (as defined in the Separation Agreement) for the benefit
of Company employees, including without limitation Executive’s entitlement to
the funds contained in Executive’s 401(k) Plan account with the Company..

 

3.             The Company’s Release.  In consideration for Executive’s release of
the Company Released Parties, the Company hereby releases Executive from any
and all claims, demands, actions, causes of action, costs, fees, attorneys’
fees, and all liabilities whatsoever, fixed or contingent which the Company or
the 

 

17

 

Company Released Parties have, had or may ever have against Executive
up to and including the date of execution of this Release to the extent known
to any member of the Company or the Company Released Parties or to the extent
that any such member of the Company or the Company Released Parties should
reasonably have been aware of its existence.   
This Release does not affect, waive or release (a) any claim for
breach or enforcement of the Separation Agreement or this Release; (b) any
claim that may arise after the date this Release is signed by the Company; or (c) any
claim for fraud, gross negligence, or intentional misconduct by the Executive,
including without limitation claims for any intentional torts, gross
negligence, illegal acts, or acts for which criminal penalties are available.

 

4.             No Admission of Liability.  Executive understands and agrees that this
Release shall not in any way be construed as an admission by Company Released
Parties of any unlawful or wrongful acts whatsoever against Executive or any
other person. Company Released Parties specifically disclaim any liability to
or wrongful acts against Executive or any other person.

 

5.             Time to Consider Release.  Cano advises Executive to consult an attorney
before executing this Release.  Executive
further acknowledges that he has been given a period of forty-five (45)
calendar days within which to review and consider the provisions of this
Release.

 

6.             Revocation Period.  Executive understands and acknowledges that
he has seven (7) calendar days following the execution of this
Release to revoke his acceptance of this Release.  This Release will not become effective or
enforceable, until after the seven (7) day period to revoke this Release
has expired without Executive’s revocation.

 

7.             Knowing and Voluntary Release.  Executive understands it is his choice
whether to enter into this Release and that his decision to do so is voluntary
and is made knowingly.

 

8.             No Prior Representations or
Inducements.  Executive
represents and acknowledges that in executing this Release, he does not rely,
and has not relied, on any communications, statements, promises, inducements,
or representation(s), oral or written, by any of Company Released Parties,
except as expressly contained in this Release and the Separation Agreement.  This Release and the Separation Agreement
constitute the sole and entire agreement of the parties with respect to their
subject matters; supersede all prior verbal and written understandings and
agreements between the parties relating to subject matters; and may not be
modified except in a writing signed by both parties.

 

9.             Binding Release.  Executive agrees that this Release shall be
binding on him and his heirs, administrators, representatives, executors,
successors and assigns, and shall inure to the benefit of his heirs,
administrators, representatives, executors, successors and assigns.

 

10.          Choice of Law.  This Release shall, in all respects, be
interpreted, enforced, and governed under the laws of the State of Texas.  Cano and Executive agree that the language of
this Release shall, in all cases, be construed as a whole, according to its
fair meaning, and not strictly for, or against, any of the parties.

 

11.          Severability.  Cano and Executive agree that should a court
declare or determine that any provision of this Release is illegal or invalid,
the validity of the remaining parts, terms or provisions of this Release will
not be affected and any illegal or invalid part, term, or provision, will not
be deemed to be a part of this Release.

 

12.          Counterparts.  Cano and Executive agree that this Release
may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall be deemed one and the same
instrument.

 

18

 

PLEASE
READ CAREFULLY AS THIS DOCUMENT INCLUDES A RELEASE OF CLAIMS.

 

As evidenced by his
signature below, Executive certifies that he has read the above Release and
agrees to its terms.

 

 

	
   

  	
   

  	
   

  
	
  S.
  Jeffrey Johnson

  	
   

  	
  Cano
  Petroleum, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
					

 

19

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