Document:

Exhibit 10.2

 

ZENITH NATIONAL INSURANCE CORP.

 

FORM

OF

RESTRICTED STOCK AWARD AGREEMENT

FOR EMPLOYEES

(TIME-BASED VESTING)

 

THIS RESTRICTED STOCK AWARD
AGREEMENT (the “Award Agreement”) is made and
entered into as of «Award_Date» (the “Date of Grant”), by and between Zenith National Insurance
Corp., a Delaware corporation (the “Company”), and «Name» (the “Grantee”).  Capitalized terms not defined herein shall
have the meaning ascribed to them in the Zenith National Insurance Corp. 2004
Restricted Stock Plan, as may be amended and restated from time to time and in
effect at the time of this Award Agreement (the “Plan”).  Where the context permits, references to the
Company or any of its Subsidiaries shall include the successors to the
foregoing.

 

Pursuant to the Plan, the
Administrator has determined that the Grantee is to be granted Restricted
Stock, subject to the terms, conditions and restrictions set forth in the Plan
and herein, and hereby grants such Restricted Stock.

 

1.             Grant of Restricted Stock.  The Company hereby grants to the Grantee «Award2» shares of Restricted Stock (the “Award”) on the terms, conditions and restrictions set forth
in this Award Agreement and as otherwise provided in the Plan.

 

2.             Purchase Price; Method of
Payment.  The purchase price per share
of Restricted Stock shall be $1.00.  The
purchase price may be paid (i) in cash or its equivalent, (ii) shares
of unrestricted Stock owned by the Grantee for greater than six (6) months,
the Fair Market Value of which on the purchase date is equal to the purchase
price of the Restricted Stock, (iii) to the extent permitted by law,
cancellation of indebtedness, (iv) services rendered or (v) any
combination of the foregoing.  In the
absence of any other form of payment tendered by the Grantee, the purchase
price shall be paid by services rendered.

 

3.             Restrictions with Respect to
Restricted Stock.

 

(a)           Restrictions.  The Restricted Stock granted hereunder and
any interest therein, may not be sold, transferred, pledged, hypothecated,
assigned or otherwise disposed of, except by will or the laws of descent and
distribution, prior to the lapsing of restrictions set forth in the Plan and
this Award Agreement.  Any attempt to
dispose of any Restricted Stock in contravention of any such restrictions shall
be null and void and without effect.

 

(b)           Restricted Period; Lapse of
Restrictions.  Except as
otherwise provided in the Plan or this Award Agreement, the restrictions set
forth in Paragraph 3(a) shall lapse with respect to fifty percent (50%) of
the shares of Restricted Stock granted hereunder on the second

 

 

(2nd) anniversary
of the Date of Grant, and with respect to the remaining fifty percent (50%) of
such shares on of the fourth (4th) anniversary of the Date of Grant, so long as the
Grantee is employed by the Company or any Subsidiary as of each such
anniversary.

 

4.             Form of Restricted
Stock.  The Company may, in its
discretion, reflect ownership of Restricted Stock through the issuance of stock
certificates, in book-entry form or any combination thereof, in accordance with
Section 5(e) of the Plan.

 

5.             Unrestricted Shares.  Promptly after each lapse of restrictions
relating to the Restricted Stock without forfeiture, and provided that the
Grantee shall have complied with his or her obligations under Paragraph 9
hereof, the Company shall, with respect to such Unrestricted Shares:

 

(a)           If such Unrestricted Shares were initially issued in
certificated form, issue to the Grantee or the Grantee’s personal
representative a stock certificate representing a number of shares of Stock,
free of the restrictive legend described in Paragraph 7, equal to the number of
shares of Restricted Stock with respect to which such restrictions have
lapsed.  If certificates representing
such Restricted Stock shall have theretofore been delivered to the Grantee,
such certificates shall be returned to the Company, complete with any necessary
signatures or instruments of transfer prior to the issuance by the Company of
such unlegended shares of Stock; or

 

(b)           If such Unrestricted Shares were initially issued in
book-entry form, transfer such Unrestricted Shares to the Grantee in the form
and registration as indicated by the Grantee.

 

6.             Rights as a Stockholder.  Subject to the restrictions set forth in the
Plan and this Award Agreement, the Grantee shall possess all incidents of
ownership with respect to the Restricted Stock granted hereunder, including the
right to vote such Restricted Stock and the right to receive dividends (whether
ordinary, extraordinary or in kind) with respect to such Restricted Stock;
provided, however, that all dividends accrued on shares of Restricted Stock
while they are still subject to the restrictions set forth in Paragraph 3(a) will
not be paid by the Company to the Grantee until the restrictions with respect
to such shares have lapsed in accordance with Paragraph 3(b).

 

If the restrictions set
forth in Paragraph 3(a) do not lapse in accordance with Paragraph 3(b),
then, as of the date that it is determined that the restrictions will not
lapse, (a) the Restricted Stock shall be cancelled, (b) the Grantee
shall possess no further incidents of ownership of such Restricted Stock and (c) the
Grantee shall not be entitled to any of the dividends accrued on the shares of
Restricted Stock while they were subject to the restrictions set forth in
Paragraph 3(a).

 

7.             Certificate; Restrictive
Legend.  Any certificate issued for
Restricted Stock prior to the lapse of any outstanding restrictions relating
thereto shall be inscribed with the following legend, or such other legend as
determined by the Administrator:

 

THIS CERTIFICATE AND THE
SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS,
INCLUDING FORFEITURE

 

 

PROVISIONS AND RESTRICTIONS
AGAINST TRANSFER (THE “RESTRICTIONS”), CONTAINED IN THE ZENITH NATIONAL
INSURANCE CORP. AMENDED AND RESTATED 2004 RESTRICTED STOCK PLAN AND THE
RESTRICTED STOCK AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND
THE COMPANY.  ANY ATTEMPT TO DISPOSE OF
THESE SHARES IN CONTRAVENTION OF THE RESTRICTIONS, INCLUDING BY WAY OF SALE,
ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHERWISE, SHALL BE NULL AND
VOID AND WITHOUT EFFECT.

 

8.             Termination of Employment.  Except as may otherwise be set forth in this
Award Agreement or the Plan [or the written Employment Agreement, if any,
between the Grantee and the Company or its subsidiary], the following
provisions shall apply upon the termination of Grantee’s employment:

 

(a)           Upon the Grantee’s death or termination of employment due to
Disability, the restrictions set forth in Paragraph 3(a) shall lapse.

 

(b)           Upon termination of the Grantee’s employment with the Company
or any Subsidiary thereof for any reason (other than death or Disability) prior
to the lapsing of restrictions with respect to any portion of the Restricted
Stock granted hereunder, the Grantee shall forfeit any rights to the shares of
Restricted Stock with respect to which the restrictions have not lapsed and
shall have no further rights thereto.

 

(c)           Upon forfeiture of any shares of Restricted Stock, to the
extent the Grantee paid the purchase price of such forfeited shares in a manner
other than services rendered, the Company shall repurchase such shares from the
Grantee at a price per share equal to the lesser of (i) the Fair Market
Value of such shares at the time of forfeiture or (ii) the price Grantee
paid for such shares initially.

 

9.             Taxes.  Pursuant to Section 9(d) of the
Plan, the Company (or Subsidiary, as the case may be) may require the Grantee
to remit to the Company (or Subsidiary, as the case may be) in cash an amount
sufficient to satisfy any federal, state and local tax withholding requirements
related to the Award.  With the approval
of the Administrator, the Grantee may satisfy the foregoing requirement by
electing to have the Company withhold from delivery shares of Stock or by
delivering shares of Stock already owned by the Grantee for at least 6 months,
in each case, having a value equal to the minimum amount of tax required to be
withheld.  Such shares shall be valued at
their Fair Market Value on the date on which the amount of tax to be withheld
is determined, and fractional share amounts shall be settled in cash.  Such an election may be made with respect to
all or any portion of the shares of Stock to be delivered pursuant to the
Award.

 

The Grantee shall promptly
notify the Company of any election made pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended.

 

10.           Adjustments.  The Award and all rights and obligations
under this Award Agreement are subject to Section 3 of the Plan.

 

 

11.           Notices.  Whenever any notice is required or permitted
hereunder, such notice shall be in writing and shall be given by personal
delivery or first class, certified or registered mail with return receipt
requested.  Any notice required or
permitted to be delivered hereunder shall be deemed to have been duly given on
the date which it is personally delivered or, whether actually received or not,
on the third business day after mailing to the respective parties named below.

 

	
  If to the Company:

  	
  Zenith National Insurance Corp.

  
	
   

  	
  21255 Califa St

  
	
   

  	
  Woodland Hills, CA 91367

  
	
   

  	
  Attn.: Michael E. Jansen, Executive Vice President

  
	
   

  	
  and General Counsel

  
	
   

  	
  Facsimile: 818-713-0177

  
	
   

  	
   

  
	
  If to the Grantee:

  	
  «Name»

  
	
   

  	
  «Address_Line_1»

  
	
   

  	
  «City_State_Zip»

  

 

Either party may change such
party’s address for notices by duly giving notice pursuant hereto.

 

12.           Compliance with Laws.

 

(a)           Shares of Stock shall not be issued pursuant to the Award
granted hereunder unless the issuance or delivery of such shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933 (the “Securities
Act”) and the Exchange Act, shall be subject to the requirements of
any stock exchange upon which the Stock may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.  The Company shall be under
no obligation to effect the registration pursuant to the Securities Act, of any
interests in the Plan or any shares of Stock to be issued hereunder or to
effect similar compliance under any state laws.

 

(b)           All certificates for shares of Stock delivered under the Plan
shall be subject to such stop-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock may then be listed, and any applicable federal or state
securities law, and the Administrator may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions.  The Administrator may
require, as a condition of the issuance or delivery of certificates evidencing
shares of Stock pursuant to the terms hereof, that the recipient of such shares
make such agreements and representations as the Administrator, in its sole
discretion, deems necessary or desirable.

 

13.           Protections Against
Violations of Agreement.  No
purported sale, assignment, mortgage, hypothecation, transfer, pledge,
encumbrance, gift, transfer in trust (voting or other) or other disposition of,
or creation of a security interest in or lien on, any of the shares of Stock
underlying the Award by any holder thereof in violation of the provisions of
this Award

 

 

Agreement, the Plan or the certificate of incorporation or the bylaws
of the Company, will be valid, and the Company will not transfer any such
shares on its books nor will any such shares be entitled to vote, nor will any
dividends be paid thereon, unless and until there has been full compliance with
such provisions to the satisfaction of the Company.  The foregoing restrictions are in addition to
and not in lieu of any other remedies, legal or equitable, available to enforce
said provisions.

 

14.           Failure to Enforce Not a
Waiver.  The failure of the Company to
enforce at any time any provision of the Award Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.

 

15.           Governing Law.  The Award Agreement shall be governed by and
construed according to the laws of the State of Delaware without regard to its
principles of conflict of laws.

 

16.           Incorporation of the Plan.   The Plan, as it exists on the date of the
Award Agreement and as amended from time to time, is hereby incorporated by
reference and made a part hereof, and the Award and this Award Agreement shall
be subject to all terms and conditions of the Plan.  In the event of any conflict between the
provisions of the Award Agreement and the provisions of the Plan, the terms of
the Plan shall control, except as expressly stated otherwise.  The term “Section” generally refers to
provisions within the Plan (except where denoted otherwise); provided, however,
the term “Paragraph” shall refer to a provision of this Award Agreement.

 

17.           Amendments.  This Award Agreement may be amended or
modified at any time, but only by an instrument in writing signed by each of
the parties hereto.

 

18.           Counterparts.        This Award Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

 

19.           Invalid Provision.   The invalidity or unenforceability of any
particular provision hereof shall not affect the other provisions hereof, and
this Award Agreement shall be construed in all respects as if such invalid or
unenforceable provision had been omitted.

 

20.           Entire Agreement.    This Award Agreement and the Plan, as it
exists on the date of this Award Agreement and as amended from time to time
[and the written Employment Agreement, if any, between the Grantee and the
Company or its subsidiary], contain the entire agreement and understanding of
the parties hereto with respect to the subject matter contained herein and therein
and supersede all prior communications, representations and negotiations in
respect thereto.

 

21.           Captions and Headings.   The captions and headings of the paragraphs
and subparagraphs of this Award Agreement are provided for convenience only and
are not to serve as a basis for interpreting or construing this Award
Agreement.

 

22.           Agreement Not a Contract of
Employment.  Neither the
Plan, the granting of the Award, the Award Agreement nor any other action taken
pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that the Grantee has a right

 

 

to continue to be employed by, or to provide services as a director,
consultant or advisor to, the Company, any Subsidiary or affiliate thereof for
any period of time or at any specific rate of compensation.

 

23.           Authority of the
Administrator.  The
Administrator shall have full authority to interpret and construe the terms of
the Plan and the Award Agreement.  The
determination of the Administrator as to any such matter of interpretation or
construction shall be final, binding and conclusive.

 

24.           Binding Effect.  The Award Agreement shall apply to and bind
the Grantee and the Company and their respective permitted assignees or
transferees, heirs, legatees, executors, administrators and legal successors.

 

25.           Tax Representation.  The Grantee has reviewed with his or her own
tax advisors the federal, state, local and foreign tax consequences of the
transactions contemplated by this Award Agreement.  The Grantee is relying solely on such
advisors and not on any statement or representations of the Company or any of
its agents.  The Grantee understands that
he or she (and not the Company) shall be responsible for any tax liability that
may arise as a result of the transactions contemplated by the Award Agreement.

 

26.           Acceptance.  The Grantee hereby acknowledges receipt of a
copy of the Plan, the prospectus and this Award Agreement.  Grantee has read and understands the terms
and provisions thereof, and accepts the Award subject to all the terms and
conditions of the Plan and the Award Agreement.

 

IN WITNESS WHEREOF, the
parties hereto have executed and delivered the Award Agreement as of the day
and year first above written.

 

	
   

  	
  ZENITH NATIONAL INSURANCE
  CORP.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  [                                 ]

  
	
   

  	
  Title: 

  	
  [                                 ]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  
	
   

  	
  Name:

  	
  «Name»

  
	
   

  	
  Address:

  	
  «Address_Line_1»

  
	
   

  	
   

  	
  «City_State_Zip»

  
	
   

  	
  Social Security No.: «SSN»

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:Exhibit
10.1

 

STOCK VOTING AGREEMENT

 

STOCK
VOTING AGREEMENT, dated as of                           ,
20     (this “Agreement”),
is by and among the undersigned stockholder (the “Stockholder”),
and Cano Petroleum, Inc.,
a Delaware corporation (the “Company”).

 

WHEREAS, concurrently
herewith, Resaca Exploitation, Inc., a Texas corporation (“Resaca”),
Resaca Acquisition Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of Resaca (“Merger Sub”), and
the Company are entering into an Agreement and Plan of Merger of even date
herewith (the “Merger Agreement”),
pursuant to which Merger Sub will merge with and into Company (the “Merger”).  Each capitalized term used herein and not
otherwise defined shall have the meaning set forth in the Merger Agreement;

 

WHEREAS, the
Stockholder, as of the date hereof, has Beneficial Ownership, as defined in Section 6
hereof, of the number of shares of Series D Convertible Preferred Stock,
no par value per share, of the Company (“Company
Preferred Stock”) set forth on Exhibit A
hereto (together with any shares of Company Preferred Stock or common stock,
par value $0.0001 per share, of the Company (“Company Common Stock”)
acquired by the Stockholder after the date hereof and prior to the termination
of this Agreement whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable shares, or by means of
purchase, dividend, distribution or otherwise, hereinafter collectively
referred to as the “Shares”); and

 

WHEREAS, the Company
has required, as condition to it entering into the Merger Agreement, that the
Stockholder enter into this Agreement.

 

NOW,
THEREFORE, in consideration of the Company’s execution of the
Merger Agreement and the mutual covenants and agreements herein contained and
other good and valuable consideration, and intending to be legally bound
hereby, it is agreed as follows:

 

1.                                       Vote.

 

1.1                                 Agreement
to Vote.  The Stockholder hereby revokes any and all
previous proxies with respect to the Stockholder’s Shares and irrevocably
agrees to vote and otherwise act (including pursuant to written consent) with
respect to all of such Shares:  (i) in
favor of the amendment to the Certificate of Designations, Preferences and
Rights of Series D Convertible Preferred Stock of the Company, filed with
the Secretary of State of Delaware on August 31, 2006 (the “Original
Certificate”), attached hereto as Exhibit B (the “Amendment”),
(ii) in favor of the adoption and approval of the Merger Agreement (or any
amended version or versions of the Merger Agreement, and (iii) in accordance with the recommendation of the
Board of Directors of the Company in connection with any Target Acquisition
Proposal, and, in each case, take all actions required in furtherance thereof,
at any meeting or meetings of the stockholders of the Company, and at any
adjournment, postponement or continuation thereof, at which the such matter is
submitted for the consideration and vote of the stockholders of the Company.  The Stockholder shall not enter into any
agreement or understanding with any person or entity the effect of which would
be inconsistent or violative of the provisions and agreements contained in this
Section 1.  The obligations
of the Stockholder under this Section 1 shall remain in effect with
respect to the Shares until, and shall terminate upon, the earlier to occur of
the Effective Time or the termination of the Merger Agreement in accordance
with its terms.  The Stockholder hereby
agrees to execute such additional documents as the Company may reasonably
request to effectuate the foregoing.

 

 

1.2                                 Irrevocable
Proxy.  Concurrently with the execution of this Agreement, the
Stockholder agrees to deliver to the Company a proxy in the form attached
hereto as Exhibit C (the “Proxy”), which shall be irrevocable to the
fullest extent permissible by applicable law, with respect to the Shares.

 

2.                                       Representations and Warranties of the
Stockholder.  The Stockholder represents and warrants to
the Company as follows:

 

2.1                                 Ownership
of Shares.  On the date hereof, the Shares are all of the
Shares currently Beneficially Owned by the Stockholder.  The Stockholder has sole voting power and
sole power to issue instructions with respect to the matters set forth in Section 1
hereof, sole power of disposition, sole power of conversion and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Shares set forth on Exhibit A hereto, with no
limitations, qualifications or restrictions on such rights, subject to applicable
securities laws and the terms of this Agreement.  The Stockholder currently has, and at all
times during the term hereof will have, good, valid and marketable title to the
Shares, free and clear of all liens, encumbrances and security interests (other
than the encumbrances created by this Agreement and other than restrictions on
transfer under applicable federal and state securities laws) and free of other
restrictions, options, rights to purchase or other claims that would adversely
affect the ability of the Stockholder to perform its obligations hereunder or
pursuant to which the Stockholder could be required to sell, assign or
otherwise transfer the Shares.

 

2.2                                 Authority;
Binding Agreement.  The
Stockholder has the full legal right, power and authority to enter into and
perform all of its obligations under this Agreement. This Agreement has been
duly executed and delivered by the Stockholder and constitutes a legal, valid
and binding agreement of the Stockholder, enforceable in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors’ rights and to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).  Neither the execution and delivery
of this Agreement nor the consummation by the Stockholder of the transactions
contemplated hereby will (i) violate, or require any consent, approval or
notice under, any provision of any judgment, order, decree, statute, law, rule or
regulation applicable to the Stockholder or the Shares or (ii) constitute
a violation of, conflict with or constitute a default under, any contract,
commitment, agreement, understanding, arrangement or other restriction of any
kind to which the Stockholder is a party or by which the Stockholder is bound,
in each case the effect of which would adversely affect the ability of the
Stockholder to perform his obligations hereunder.

 

3.                                       Certain Covenants of the Stockholder. 
Except in accordance with the provisions of this Agreement, the
Stockholder agrees with and covenants to the Company as follows:

 

3.1                                 Transfer. 
Prior to the termination of this Agreement, except as otherwise provided
herein, the Stockholder shall not:  (i) transfer
(which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge, assignment, encumbrance or other
disposition), whether directly or indirectly (including by operation of law),
or consent to any transfer of, any or all of the Shares or any interest
therein, except pursuant to the Merger; (ii) grant any proxies,
powers-of-attorney or other authorizations or consents with respect to the
Shares, deposit the Shares into a voting trust or enter into a voting agreement
or similar arrangement with respect to the Shares; or (iii) enter into any
contract, option or other agreement or understanding with respect to any
transfer of any or all such Shares or any interest therein.

 

3.2                                 Stop
Transfer.  The Stockholder hereby agrees with and
covenants to each other party hereto that the Stockholder shall not request
that the Company register the transfer (book entry or otherwise) of any
certificate or uncertified interest representing any of its Shares, unless such
transfer is 

 

2

 

made in compliance with this Agreement.

 

3.3                                 Notifications. 
The Stockholder shall, while this Agreement is in effect, notify the
Company promptly, but in no event later than two business days, of the number
of any shares of Company Common Stock acquired by the Stockholder after the
date hereof.

 

3.4                                 Waiver
of Claims. 
The Stockholder agrees that it will not bring, commence, institute,
maintain, prosecute, participate in or voluntarily aid any action, claim, suit
or cause of action, in law or in equity, in any court or before any
governmental entity, which challenges the validity of or seeks to enjoin the
operation of any provision of this Agreement; provided, that the Stockholder
may defend against, contest or settle any such action, claim, suit or cause of
action brought against the Stockholder that relates to the Stockholder’s
capacity as a director or officer of the Company.

 

3.5                                 Appraisal
Rights.  To the extent permitted by applicable law,
the Stockholder shall not exercise any rights (including, without limitation,
under Section 262 of the DGCL) to demand appraisal of any Shares that may
arise with respect to the Merger.

 

3.6                                 Additional
Voting Agreements.  If requested by the Company, the Stockholder
agrees to use its commercially reasonable efforts to cause the other beneficial
owners of any shares of capital stock of the Company over which the Stockholder
has shared voting or dispositive power (such shares, the “Shared Securities”)
to execute stock voting agreements and Irrevocable Proxies, in substantially
similar form to this Agreement and the Irrevocable Proxy attached hereto, prior
to the Effective Time.  If not so
requested by the Company, the Stockholder nonetheless agrees to use its
commercially reasonable efforts to cause the Shared Securities to be voted in a
manner consistent with this Agreement.

 

4.                                       Effect
of Purported Transfer.  The
Company agrees with, and covenants with, the Stockholder that the Company shall
not register the transfer (book entry or otherwise) of any certificate or
uncertified interest representing any of the Shares, unless such transfer is
made in compliance with this Agreement. 
The parties hereto agree that any transfer of the Shares made other than
in compliance with this Agreement shall be null and void.  Any such transfer shall convey no interest in
any of the Shares purported to be transferred, and the transferee shall not be
deemed to be a stockholder of the Company nor entitled to receive a new share
certificate or any rights, dividends or other distributions on or with respect
to such Shares.

 

5.                                       Termination. This Agreement shall terminate, and
neither the Company nor the Stockholder shall have any rights or obligations
hereunder, and this Agreement shall become null and void and have no effect on
the earlier of (i) the Effective Time, (ii) upon the termination of the
Merger Agreement in accordance with its terms, (iii) upon any amendment,
modification or supplement to the Merger Agreement or any waiver by any party
thereto that is individually or in the aggregate adverse to the interests of
the Stockholder without the prior written consent of the Stockholder, or (iv) the
failure of Resaca to assume the Company’s obligations under the Transaction
Documents (as defined in the Original Certificate) to the extent not otherwise
eliminated pursuant to proposed Section (23) of the Amendment with respect
to the Merger.

 

6.                                       Definitions. 
For the purposes of this Agreement:

 

6.1                                 “Beneficial
Ownership” or “Beneficial Owner” with respect to any securities shall mean
having “beneficial ownership” of such securities (as determined pursuant to Rule 13d-3
under the Securities Exchange Act of 1934 (the “Exchange Act”),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing; provided, however, that notwithstanding Rule 13d-3
under the Exchange Act, “Beneficial Ownership” or “Beneficial Owner” for
purposes of this 

 

3

 

Agreement shall include only those securities
over which the Stockholder has sole voting and dispositive power.  Without duplicative counting of the same
security by the same holder, securities Beneficially Owned by a Person shall
include securities Beneficially Owned by all other Persons with whom such
Person would constitute a “group” as within the meaning of Section 13(d)(3) of
the Exchange Act.

 

6.2                                 “Person” shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.

 

7.                                       Miscellaneous.

 

7.1                                 Notices. 
Any notice or communication required or permitted hereunder shall be in
writing and either delivered personally, telegraphed or telecopied or sent by
certified or registered mail, postage prepaid, and shall be deemed to be given,
dated and received (i) when so delivered personally, (ii) upon
receipt of an appropriate electronic answerback or confirmation when so
delivered by telegraph or telecopy (to such number specified below or another
number or numbers as such person may subsequently designate by notice given
hereunder), or (iii) five business days after the date of mailing to the
following address or to such other address or addresses as such person may
subsequently designate by notice given hereunder, if so delivered by mail:

 

	
  If to the Company:

  	
   

  	
  Cano
  Petroleum, Inc.

  
	
   

  	
   

  	
  Burnett
  Plaza

  
	
   

  	
   

  	
  801
  Cherry St., Suite 3200

  
	
   

  	
   

  	
  Fort
  Worth, Texas 76102

  
	
   

  	
   

  	
  Telephone:
  (817) 698-0900

  
	
   

  	
   

  	
  Facsimile:
  (817) 334-0222

  
	
   

  	
   

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

  

 

	
  with
  a copy to:

  	
   

  	
  Thompson & Knight LLP

  
	
   

  	
   

  	
  1722 Routh Street

  
	
   

  	
   

  	
  Suite 1500

  
	
   

  	
   

  	
  Dallas, Texas 75201-2533

  
	
   

  	
   

  	
  Telephone: (214) 969-1303

  
	
   

  	
   

  	
  Facsimile:
  (214) 999-1695

  
	
   

  	
   

  	
  Attention: Wesley P. Williams

  

 

If to the Stockholder: at the
address set forth on Exhibit A

 

7.2                                 Tax
Matters.  The parties agree to treat the exchange
of Company Preferred Stock for Parent Series A Shares as qualifying
for non-recognition of gain or loss for federal and any applicable state or
local income tax purposes, except to the extent of payments received for
accrued dividends, and further agree to file all U.S. federal, state and local
income tax and information returns and reports consistent with such treatment
unless and until the occurrence of a “determination” to the contrary under
section 1313 of the Internal Revenue Code of 1986, as amended.

 

7.3                                 Further
Actions. 
Each
of the parties hereto agrees that it will use its commercially reasonable
efforts to do all things necessary to effectuate this Agreement.  The Stockholder and the Company hereby
covenant and agree to execute and deliver any additional documents reasonably
necessary or desirable to carry out the purpose and intent of this Agreement.

 

7.4                                 Entire
Agreement.  This Agreement, together with the documents
expressly referred to herein, constitutes the entire agreement, and supersedes
all prior agreements and understandings, both 

 

4

 

written and oral, among the parties with respect
to the subject matter hereof.

 

7.5                                 Amendments. 
This Agreement may not be modified, amended, altered or supplemented,
except upon the execution and delivery of a written agreement executed by the
parties hereto.  The failure of any party
hereto to exercise any right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to insist upon
compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.

 

7.6                                 Expenses. 
All costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense.  Notwithstanding the foregoing, the Company
will reimburse to Stockholder its reasonable out-of-pocket expenses (including
attorneys fees, etc.).

 

7.7                                 Specific
Performance.  Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole
by monetary damages. It is accordingly agreed that the parties hereto (i) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (ii) shall be entitled, in addition to any other remedy
to which they may be entitled at law or in equity, including monetary damages,
to compel specific performance of this Agreement without the necessity of
posting bond or proving actual damages.

 

7.8                                 Assignment. 
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns and personal
representatives, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties.

 

7.9                                 Governing
Law.  This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.

 

7.10                           Counterparts. 
This Agreement may be executed manually or by facsimile in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when a counterpart hereof shall have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.

 

7.11                           Severability. 
Any term or provision of this Agreement that is invalid or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction.  If
any provision of this Agreement is so broad as to be unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.

 

7.12                           Effect of
Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.

 

[SIGNATURE
PAGE FOLLOWS]

 

5

 

IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed, as of the date and year
first above written.

 

	
   

  	
  CANO PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  Benjamin Daitch

  
	
   

  	
  Title:
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Printed
  Name of Stockholder)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

SIGNATURE PAGE TO STOCK VOTING AGREEMENT

 

1

 

EXHIBIT A

 

Stock Ownership and Address Notice List

 

	
  Beneficial Ownership:

  	
   

  	
                      shares
  of Company Preferred Stock

  
	
   

  	
   

  	
                      shares
  of Company Common Stock, acquirable upon conversion of the Company Preferred
  Stock.

  

 

 

Address
for Notices:

 

A-1

 

EXHIBIT B

 

CERTIFICATE OF AMENDMENT

TO

CERTIFICATE OF DESIGNATIONS, PREFERENCES

AND RIGHTS OF SERIES D CONVERTIBLE PREFERRED STOCK

OF

CANO PETROLEUM, INC.

 

 

Cano
Petroleum, Inc., a corporation organized and existing under the laws of
the State of Delaware (the “Company”), DOES
HEREBY CERTIFY as follows:

 

FIRST:  That the Board of Directors of the Company,
at a duly convened meeting on September 29, 2009, duly adopted resolutions
approving and adopting the amendments set forth below to the Certificate of
Designations of Series D Convertible Preferred Stock of the Company (the “Certificate of Designations”), and that such amendments have
been approved and adopted by the requisite number of existing holders of the
Common Stock and the Series D Convertible Preferred Stock of the Company.

 

SECOND:  That the amendments set forth below have been
duly adopted in accordance with the applicable provisions of Section 242
of the General Corporation Law of the State of Delaware.

 

THIRD:
That the Certificate of Designations is hereby amended as follows:

 

A.                                   The following
is added as Section (23) of the Certificate of Designations:

 

Notwithstanding
anything to the contrary contained in the Transaction Documents, the holders of
the Preferred Shares shall have none of the preferences, rights, privileges or
powers of, or restrictions provided for the benefit of, the Preferred Shares
contained in the Transaction Documents relating to, arising out of or caused by
the execution and delivery of that certain Agreement and Plan of Merger dated September 29,
2009, by and among Resaca Exploitation, Inc., a Texas corporation (“Resaca”), Resaca Acquisition Sub, Inc., a Delaware
corporation and the Company (the “Merger Agreement”)
and the consummation of the transactions contemplated thereby (the “Merger”) (including, without limitation, any rights to
require the Company to redeem any of the Preferred Shares or notice, voting or
consent rights), except to receive the Preferred Conversion Consideration (as
such term is defined in the Merger Agreement) pursuant to the terms of the
Merger Agreement and such other rights (including registration rights and
preemptive rights having terms consistent with those presently contained in the
Transaction Documents) not inconsistent with the foregoing as shall be
reasonably acceptable to the Company, Resaca and the Required Holders.  In the event that (i) the Merger
Agreement is terminated in accordance with its terms, (ii) the Merger
Agreement is amended, modified or 

 

B-1

 

supplemented
or any waiver is given by any party thereto that is individually or in the
aggregate adverse to the interests of the holders of the Preferred Shares
without the prior written consent of the Required Holders or (iii) Parent fails
to assume the Company’s obligations under the Transaction Documents to the
extent not otherwise eliminated pursuant to this Section (23) with respect
to the Merger, this Section (23) shall be inoperative and of no force or
effect.

 

IN
WITNESS WHEREOF, the Company has caused this Certificate of Amendment to be signed
by S. Jeffrey Johnson, its Chairman of the Board of Directors and Chief
Executive Officer, as of the        day of                         ,
2009.

 

	
   

  	
  CANO
  PETROLEUM, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  

  	
  S.
  Jeffrey Johnson,

  
	
   

  	
  Title: 

  	
  Chairman of the Board of
  Directors and Chief Executive Officer

  
				

 

B-2

 

EXHIBIT C

 

Irrevocable Proxy

 

The
undersigned stockholder of Cano Petroleum, Inc., a Delaware corporation
(the “Company”), hereby irrevocably (to the fullest extent permitted by
law) appoints the directors on the board of directors of the Company, and each
of them, as the sole and exclusive attorneys and proxies of the undersigned,
with full power of substitution and resubstitution, to vote and exercise all
voting and related rights (to the full extent that the undersigned is entitled
to do so) with respect to all of the shares of capital stock of the Company
that now or hereafter may be beneficially owned by the undersigned, and any and
all other shares or securities of the Company issued or issuable in respect
thereof on or after the date hereof (collectively, the “Shares”) in
accordance with the terms of this Proxy. 
The Shares beneficially owned by the undersigned stockholder of the
Company as of the date of this Proxy are listed on the final page of this
Proxy.  Upon the execution of this Proxy
by the undersigned, any and all prior proxies given by the undersigned with
respect to any Shares shall be revoked and the undersigned hereby agrees not to
grant any subsequent proxies with respect to the Shares until after the
Expiration Date (as defined below).

 

This
Proxy is irrevocable (to the fullest extent permitted by law), is coupled with
an interest and is granted pursuant to the Stock Voting Agreement of even date
herewith by and between the Company and the undersigned stockholder (the “Stock
Voting Agreement”), and is granted in consideration of the Company entering
into the Agreement and Plan of Merger (the “Merger Agreement”), by and
among the Resaca, Merger Sub and the Company, which provides for the merger of
Merger Sub with and into the Company, with the Company being the surviving
corporation (the “Merger”).  This
Proxy shall terminate and be of no further force and effect automatically upon
the Expiration Date.  As used herein, the
term “Expiration Date” shall mean the date that the Stock Voting
Agreement terminates in accordance with its terms.

 

The
attorneys and proxies named above, and each of them, are hereby authorized and
empowered by the undersigned, at any time prior to the Expiration Date, to act
as the undersigned’s attorney and proxy to vote the Shares, and to exercise all
voting, consent and similar rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents) (i) in favor of the Amendment (as such term is defined in the
Stock Voting Agreement) and (ii) in favor of the adoption and approval of
the Merger Agreement (or any amended version or versions of the Merger
Agreement), and all actions required in furtherance thereof, at any meeting or
meetings of the stockholders of the Company, and at any adjournment,
postponement or continuation thereof, at which the Amendment and/or the Merger
Agreement (or any amended version or versions of the Merger Agreement) are
submitted for the consideration and vote of the stockholders of the Company.

 

The
attorneys and proxies named above may not exercise this Proxy to vote, consent
or act on any other matter except as provided above.  The undersigned stockholder may vote the
Shares on all other matters.

 

Any
obligation of the undersigned hereunder shall be binding upon the successors
and assigns of the undersigned.

 

[Remainder of Page Intentionally Left Blank]

 

C-1

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Stockholder:

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Print
  Name of Stockholder:

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Shares
  beneficially owned:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                      shares
  of Company Preferred Stock

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                      shares
  of Company Common Stock

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                      shares
  of Company Common Stock issuable upon the exercise of outstanding options,
  warrants or other rights (including upon conversion shares of Company
  Preferred Stock)

  

 

C-2

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