Exhibit 10.1
SEPARATION AGREEMENT AND RELEASE
     This Separation Agreement and Release (the “Agreement”) is dated July 6,
2006 and is effective on the date described in Section 15. This Agreement is
made as a mutually agreed compromise between the Parties (as defined below) for
the complete and final settlement of all claims, differences, and alleged causes
of action existing between them as of the Effective Date.
PARTIES
     The Parties to this Agreement are Encysive Pharmaceuticals Inc. (the
“Company”) and Terrance C. Coyne, M.D. (“Executive”). The Company and Executive
are referred to collectively as the “Parties.”
PREAMBLE
     WHEREAS, Executive was previously employed as the Chief Medical Officer of
the Company, pursuant to that certain Termination Agreement dated September 10,
2003, as amended from time to time (the “Termination Agreement”);
     WHEREAS, the Parties intend to terminate the Termination Agreement as of
the Effective Date (except with respect to Executive’s and the Company’s
continuing obligations under Sections 8, 9, 10, 12 and 13.8 thereof) and enter
into this Agreement;
     WHEREAS, the Parties intend that this Agreement shall operate as a complete
and final settlement of all claims, differences and alleged causes of action
existing between them as of the Effective Date of this Agreement;
     WHEREAS, Executive has had at least 21 days to consider this Agreement;
     WHEREAS, the Company has advised Executive in writing to consult with
independent counsel respecting this Agreement;
     WHEREAS, Executive has had an opportunity to consult with independent
counsel with respect to the terms, meaning and effect of this Agreement; and
     WHEREAS, Executive understands that the Company regards the above
representations as material and that the Company is relying on these
representations in entering into this Agreement.
     NOW, THEREFORE, in consideration of the mutual promises and obligations
contained and exchanged in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties agree as follows:

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     1. Definitions.
     1.1 “Base Salary” means the Executive’s base salary in effect on the date
of this Agreement.
     1.2 “Company and/or its Affiliates” means and includes the Company, its
Affiliates, and all of their predecessors, successors and assigns and parents,
subsidiaries, divisions or other affiliated companies, partners, partnerships,
present and former officers, directors, employees, stockholders, agents,
employee benefit plans or programs and their fiduciaries, whether in their
individual or official capacities and all of the successors and assigns of the
foregoing. “Affiliates” also includes a person or entity who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company.
     1.3 “Date of Termination” means June 26, 2006.
     Other defined terms are defined as provided herein.
2. Termination of the Termination Agreement. The Parties agree that the
Termination Agreement is hereby terminated and of no further force and effect as
of the Effective Date, except with respect to Executive’s and Company’s
obligations under Section 8, Executive’s Confidentiality Obligation; Section 9,
Disclosure of Information Ideas, Concepts, Improvements, Discoveries and
Inventions; Section 10, Ownership of Information, Ideas, Concepts, Improvements,
Discoveries, and Inventions and all Original Works of Authorship; Section 12,
Executive’s Non-Competition Obligation; and Section 13.8, Defense of Claims.
3. Pay Through Date of Termination. Executive acknowledges that he has received
all salary, wages and other compensation earned on or before the Date of
Termination.
4. Resignation by Executive. Effective as of the Date of Termination, Executive
shall resign all positions he holds with the Company and/or its Affiliates.
5. Payments to Executive. In accordance with Section 6.3 of the Termination
Agreement, and subject to Executive’s execution of this Agreement containing a
release from liability and waiver of right to sue the Company and/or its
Affiliates, the Company agrees to pay Executive payments as follows:
          a. The Company shall, promptly upon submission by the Executive of
supporting documentation, pay or reimburse to the Executive any unreimbursed
costs and expenses paid or incurred by the Executive prior to the Date of
Termination which would have been payable under Section 4.6 of the Termination
Agreement if the Executive’s employment had not terminated.
          b. During the 12-month period commencing on the Date of Termination,
the Company shall continue benefits (other than disability benefits), at the
Company’s expense, to the Executive and/or the Executive’s family at least equal
to those which would have been provided to them under Section 4.5 of the
Termination Agreement if the Executive’s employment had not been terminated.
Benefits otherwise receivable by the Executive pursuant to this Section shall be
reduced to the extent substantially similar benefits are actually received

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by or made available to the Executive by any other employer during the same time
period for which such benefits would be provided pursuant to this Section at a
cost to the Executive that is commensurate with the cost incurred by the
Executive immediately prior to the Date of Termination; provided, however, that
if the Executive becomes employed by a new employer which maintains a medical
plan that either (i) does not cover the Executive or a family member or
dependent with respect to a preexisting condition which was covered under the
applicable Company medical plan, or (ii) does not cover the Executive or a
family member or dependent for a designated waiting period, the Executive’s
coverage under the applicable Company medical plan shall continue (but shall be
limited in the event of noncoverage due to a preexisting condition, to such
preexisting condition) until the earlier of the end of the applicable period of
noncoverage under the new employer’s plan or the first anniversary of the Date
of Termination. The Executive agrees to report to the Company any coverage and
benefits actually received by the Executive or made available to the Executive
from such other employer(s). The Executive shall be entitled to elect to change
his level of coverage and/or his choice of coverage options (such as Executive
only or family medical coverage) with respect to the benefits to be provided by
the Company to the Executive to the same extent that actively employed senior
executive officers of the Company are permitted to make such changes; provided,
however, that in the event of any such changes the Executive shall pay the
amount of any cost increase that would actually be paid by an actively employed
senior executive officer of the Company by reason of making the same change in
his level of coverage or coverage options.
          c. During the 12-month period following the Date of Termination, the
Company shall pay to the Executive, in equal semi-monthly installments, the
Executive’s Base Salary (as in effect on the Date of Termination).
          d. During the 12-month period after the Date of Termination, all stock
options and restricted stock held by the Executive will continue to vest and be
exercisable in accordance with their terms in effect on the Date of Termination.
On the conclusion of said 12-month period, all unexpired, unexercised options
will be fully vested and all restricted stock will be fully vested. Thereafter,
all such fully vested stock options will be exercisable by the Executive until
the earlier to occur of the expiration of the term of each stock option or
12 months after the date they become fully vested.
          e. Executive’s participation in all other employee benefit plans and
programs maintained by the Company and/or its Affiliates shall cease on the Date
of Termination.
     Notwithstanding any of the above to the contrary, Executive will not be
entitled to any of the benefits or payments provided in this Section 5 if
Executive breaches this Agreement or the provisions of Sections 8, 9, 10, 12 or
13.8 of the Termination Agreement.

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6. Additional Payment to Executive. In addition to the payments required
pursuant to Section 6.3 of the Termination Agreement, the Company shall continue
the benefits specified in Section 5.b for an additional six-month period
following the first anniversary of the Date of Termination so that the Executive
shall receive such benefits for a total of 18 months. The Company will also
provide the Executive with a three month executive outplacement program with Lee
Hecht Harrison.
7. Release by Executive. Executive unconditionally, fully and forever waives,
releases, discharges, agrees to hold harmless, and promises not to sue the
Company and/or its Affiliates, from and for any claim, action or right of any
sort, known or unknown, arising on or before the Effective Date.
     7.1 This release includes, but is not limited to, any claim arising out of
or related to the following: any claim for any wages, salary, compensation, sick
time, vacation time, paid leave or other remuneration of any kind; any claim for
additional or different compensation or benefits of any sort, including any
participation in any severance pay plan; any claim of discrimination or
retaliation on the basis of age, race, sex, religion, marital status, sexual
preference, national origin, handicap or disability, veteran status, or special
disabled veteran status; any claim arising under Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Employee Retirement Income Security Act of 1974, the Americans
with Disabilities Act, the Family and Medical Leave Act, the Fair Labor
Standards Act of 1938, the Texas Commission on Human Rights Act, Chapter 451 of
the Texas Labor Code, or the Texas Payday Law, as such statutes may be amended
from time to time; any other claim based on any statutory prohibition; any claim
arising out of or related to an express or implied employment contract, any
other contract affecting terms and conditions of employment, or a covenant of
good faith and fair dealing; any tort claim or other claim for personal injury,
death or property damage or loss; any claim for fraud or misrepresentation; and
any personal gain with respect to any claim arising under any whistleblower or
qui tam provisions of any state or federal law.
     7.2 Executive represents that Executive has read and understands this
release provision and that (i) rights and claims under the Age Discrimination in
Employment Act of 1967 are among the rights and claims against the Company that
Executive is releasing and (ii) Executive is not releasing any rights or claims
arising after the Date of Termination.
8. Consideration. As consideration for the Executive’s execution and performance
of his obligations under this Agreement, the Company will perform its remaining
obligations pursuant to this Agreement and provide Executive with the additional
six months of benefits as described in Section 6 above. Executive agrees that
all of this consideration is in addition to anything of value to which he
already is entitled from the Company.
9. Future Employment. Executive agrees not to seek or accept employment with the
Company and/or its Affiliates and acknowledges that the Company and/or its
Affiliates are not obligated to offer employment to Executive, now or in the
future.
10. No Other Claims. Executive represents that Executive has not filed or
authorized the filing of any complaints, charges or lawsuits against the Company
and/or its Affiliates with any

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federal, state or local court, governmental agency, or administrative agency,
and that if, unbeknownst to Executive, any such complaint has been filed on
Executive’s behalf, Executive will use Executive’s best efforts to cause it to
be withdrawn immediately and dismissed with prejudice.
11. Confidentiality and Defense of Claims.
          11.1 Both Parties shall keep strictly confidential all the terms and
conditions, including amounts payable, in the Agreement and shall not disclose
them to any person other than legal and/or financial advisors, government
officials who seek such information in the course of their official duties,
individuals at the Company responsible for implementing the Agreement, and
Executive’s spouse, unless compelled to do so by law or regulation, or business
necessity (including the requirement to file this Agreement with the Securities
and Exchange Commission or tax reporting obligations). Nothing in this Section
is intended to prevent Executive from disclosing the fact that he was employed
by the Company or from describing his employment duties.
          11.2 The Executive agrees that from the Effective Date until two
(2) years after the Date of Termination, upon request from the Company, he will
reasonably cooperate with the Company and/or its Affiliates in the defense of
any claims or actions that may be made by or against the Company and/or its
Affiliates that affect his prior areas of responsibility, except if the
Executive’s reasonable interests are adverse to the Company and/or its
Affiliates in such claim or action. To the extent travel is required to comply
with the requirements of this Section 11.2, the Company shall, to the extent
possible, provide the Executive with notice at least 10 days prior to the date
on which such travel would be required. The Company agrees to promptly pay or
reimburse the Executive upon demand for all of his reasonable travel and other
direct expenses incurred, or to be reasonably incurred, to comply with his
obligations under this Section 11.2.
12. Consultation With Counsel. The Company advises Executive to consult with
independent counsel prior to executing this Agreement, and Executive
acknowledges being given that advice.
13. No Defamatory Statements. Executive agrees that he will refrain from making
any representation, statement, comment or any other form of communication
(hereinafter collectively referred to as “representation”), whether written or
oral, to any person or entity, including but not limited to the principals,
officers, directors, employees, advisors, agents, customers, suppliers and
competitors of Company and/or its Affiliates, which representation has the
effect or tendency to disparage, denigrate, or otherwise reflect negatively on
Company and/or its Affiliates and/or their business, officers, directors,
shareholders, employees, agents, advisors or investors. The Company agrees to
give Executive an opportunity to review and make comments on any press releases
the Company may issue describing Executive’s departure from the Company. The
Company agrees that its senior management will not disparage Executive. The
Company likewise agrees that it will make no disparaging statements regarding
Executive in any official corporate (1) publication; (2) broadcast;
(3) telecast; or (4) presentation. Executive agrees to advise any prospective
employers to contact the Director of Human Resources at the Company if they need
information regarding the circumstances of Executive’s departure from the
Company. In response to any such inquiry, the Director of Human Resources will
respond

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only that Executive’s departure from the Company was without cause and not the
result of any malfeasance on Executive’s part.
14. Return of Company Materials. Executive agrees to deliver to the Company
promptly after the Date of Termination all originals and copies of Company
materials and all other property of the Company and/or its Affiliates in the
Executive’s possession, custody or control.
15. Revocation of Agreement; Effective Date. Executive, at Executive’s sole
discretion, may revoke this Agreement on or before the expiration of seven
calendar days after signing it. Revocation shall be in writing and effective
upon dispatch to the following: Paul S. Manierre, General Counsel, Encysive
Pharmaceuticals Inc., 4848 Loop Central Drive, 7th Floor, Houston, Texas 77081.
If Executive elects to revoke the Agreement, all of the provisions of the
Agreement shall be void and unenforceable. If Executive does not so elect, the
Agreement shall become effective at the expiration of the revocation period
(i.e., on the eighth day after Executive signs the Agreement) (the “Effective
Date”).
16. Miscellaneous.
     16.1 The Parties acknowledge that this Agreement is the result of a
compromise and shall never be construed as, or said by either of them to be, an
admission by the other of any liability, wrongdoing, or responsibility. The
Parties expressly disclaim any such liability, wrongdoing, fault, or
responsibility.
     16.2 This Agreement constitutes the entire agreement between the Parties,
except to the extent that it expressly incorporates provisions of the
Termination Agreement. This Agreement may be executed in identical counterparts,
each of which shall constitute an original and both of which shall constitute
one and the same agreement. Except as expressly provided herein, this Agreement
supersedes the Termination Agreement and any severance benefit plan or program
and any bonus program at the Company and/or its Affiliates.
     16.3 The Parties understand and agree that any breach of the terms of this
Agreement may give rise to liability for money damages and other legal or
equitable relief.
     16.4 The Parties warrant that no representations have been made other than
those contained in the written provisions of this Agreement, and that they do
not rely on any representations not stated in this Agreement.
     16.5 The Parties further warrant that they or their undersigned
representatives are legally competent and fully authorized to execute and
deliver this Agreement.
     16.6 The Parties confirm they have had the opportunity to have this
Agreement explained to them by independent counsel of their choice, and that
they execute this Agreement freely, knowingly and voluntarily. The Company is
relying on its own judgment and on the advice of its independent counsel and not
upon any recommendation of Executive or his agents, independent counsel or other
representatives. Likewise, Executive is relying on his own judgment and on the
advice of his independent counsel, and not upon any recommendation of the
Company or its directors, officers, employees, agents, independent counsel or
other representatives. By voluntarily executing this Agreement, both Parties
confirm their competence

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to understand and do hereby accept the terms of this Agreement as resolving
fully all differences, disputes and claims that may exist within the scope of
this Agreement.
     16.7 This Agreement may not be modified or amended except by a writing
signed by both Parties. No waiver of this Agreement or of any of the promises,
obligations, terms, or conditions contained in it shall be valid unless it is in
writing signed by the Party against whom the waiver is to be enforced. The
waiver by either Party hereto of a breach of any provision of this Agreement
shall neither operate nor be construed as a waiver of any subsequent breach by
any Party. Except as expressly provided for herein, the failure of either Party
hereto to take any action by reason of any breach will not deprive such Party of
the right to take action at any time while such breach occurs.
     16.8 If any part or any provision of this Agreement shall be finally
determined to be invalid or unenforceable under applicable law by a court of
competent jurisdiction, that part shall be ineffective to the extent of such
invalidity or unenforceability only, without in any way affecting the remaining
parts of said provision or the remaining provisions of the Agreement.
     16.9 The Parties have cooperated in the preparation of this Agreement.
Hence, the Agreement shall not be interpreted or construed against or in favor
of either Party by virtue of the identity, interest, or affiliation of its
preparer.
     16.10 This Agreement is made and shall be enforced pursuant to the laws of
the State of Texas, without regard to its law governing conflicts of law. All
performance required by the terms of this Agreement shall take place in Harris
County, Texas.
     16.11 The amount of benefits payable under this Agreement shall be paid
from the general assets of the Company and there shall be no separate trust
established to pay any benefits under this Agreement. Executive’s status with
respect to the payment of benefits under this Agreement shall be as a general
unsecured creditor of the Company.
     16.12 All payments and benefits payable under this Agreement shall be
subject to all applicable federal, state and local taxes and tax requirements
and any elections by Executive for payouts or deferrals under any Company
benefit plan or program.
     16.13 This Agreement shall be binding on and inure to the benefit of the
successors and assigns of the Parties. No rights or obligations, benefits of or
payments to Executive under this Agreement may be subject to claims of
Executive’s creditors, or in any manner may be assigned or transferred by
Executive other than his rights to compensation and benefits that are
transferred by will or to his estate by operation of law.
     16.14 All notices and other communications required or permitted hereunder
or necessary or convenient in connection herewith shall be in writing and shall
be deemed to have been given when (i) delivered by hand or sent by facsimile, or
(ii) on the third business day following deposit in the United States mail by
registered or certified mail, return receipt requested, to the addresses as
follows (provided that notice of change of address shall be deemed given only
when received):

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If to the Company to:
Encysive Pharmaceuticals Inc.
4848 Loop Central Drive, Suite 700
Houston, Texas 77081
Attention: General Counsel
Facsimile No.: (713) 782-8232
If to the Executive to:
Terrance C. Coyne, M.D.
3110 Cason Street
Houston, Texas 77005
or to such other addresses as the Company or the Executive, as the case may be,
shall designate by notice to the other party hereto in the manner specified in
this Section 16.14.
     16.15 Titles and headings to Sections are for the purpose of reference only
and shall in no way limit, define or otherwise affect the provisions hereof. Any
and all Exhibits referred to in this Agreement are, by such reference,
incorporated herein and made a part hereof for all purposes. The words “herein”,
“hereof”, “hereunder” and other compounds of the word “here” shall refer to the
entire Agreement and not to any particular provision hereof.
     16.16 Wherever appropriate to the intention of the parties hereto, the
respective rights and obligations of said parties, including, but not limited
to, the rights and obligations set forth in Sections 11 through 14 hereof and
this Section 16, shall survive any termination or expiration of this Agreement.
[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date indicated below

     
TERRANCE C. COYNE, M.D. (“Executive”)
  ENCYSIVE PHARMACEUTICALS, INC. (“Company”)
 
   
/s/ Terrance C. Coyne, M.D.
  By:/s/ Bruce D. Given, M.D.
 
   
 
       Bruce D. Given, M.D.,
 
       Chief Executive Officer
Date: July 6, 2006
  Date:July 11, 2006

     
THE STATE OF TEXAS
  §
 
  §
COUNTY OF Harris _______
  §

     BEFORE ME, the undersigned authority, on this day personally appeared
Terrance C. Coyne, M.D. who, being by me first duly sworn, upon his oath deposed
and stated that he has read the foregoing Agreement; that he has been advised to
discuss the provisions of this Agreement with an attorney of his choice before
signing it; that he fully understands the terms and conditions of this
Agreement; that he is legally competent to execute this Agreement; and that he
has voluntarily executed this Agreement for the purposes and consideration
therein expressed.
     Given under my hand and seal of office on this 6th day of July, 2006.

                  /s/ James Paul       NOTARY PUBLIC IN AND FOR      THE STATE
OF TEXAS     

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THE STATE OF TEXAS
  §
 
  §
COUNTY OF HARRIS
  §

     BEFORE ME, the undersigned authority, on this day personally appeared Bruce
D. Given, M.D., who being by me first duly sworn, upon his oath deposed and
stated that he is the Chief Executive Officer of Encysive Pharmaceuticals, Inc.
(the “Company”); that he has read the foregoing Agreement; that he has discussed
the provisions of this Agreement with any attorney of his choice; that he fully
understands the terms and conditions of this Agreement; that he is legally
competent and fully authorized to execute this agreement on behalf of the
Company; and that he has voluntarily executed this Agreement for the purposes
and consideration therein expressed.
     Given under my hand and seal of office on this 11th day of July, 2006.

                  /s/ Heather P. Woltz       NOTARY PUBLIC IN AND FOR      THE
STATE OF TEXAS     

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