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.
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.
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
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.
(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.
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
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.
(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 acknowledge