<PAGE>

                                                                   EXHIBIT 10.37

                         SEVERANCE AGREEMENT AND RELEASE

                                    RECITALS

      This Severance Agreement and Release ("Agreement") is made by and between
Phillip Kagel ("Employee") and SIPEX Corporation ("Company") (collectively
referred to as the "Parties"):

      WHEREAS, Employee was employed by the Company;

      WHEREAS, the Company and Employee are parties to that certain Offer Letter
executed as of February 2nd, 2003 (the "Offer Letter");

      WHEREAS, the Company and Employee entered into that certain Employee
Non-Competition, Non-Disclosure and Developments Agreement dated February 10,
2003 (the "Employment Agreement");

      WHEREAS, the Company and Employee are parties to that certain employee
Stock Option Agreement attached hereto as Exhibit A (the "Stock Option
Agreement");

      WHEREAS, the Company and Employee entered into that certain
Indemnification Agreement dated October 24, 2003;

      WHEREAS, Employee's employment with Company is terminated effective April
2, 2004 (the "Termination Date") Employee's eligibility for coverage under
Sipex's group medical and dental insurance plans will cease as of April 2, 2004,
however, Employee may elect to continue to participate in the plans under the
Consolidated Omnibus Budget and Reconciliation Act ("COBRA") for the time period
described and under such conditions as are provided under COBRA and its
regulations;

      WHEREAS, Employee agrees to actively support the transition of his duties
and responsibilities to his replacement;

      WHEREAS, the Parties, and each of them, wish to resolve any and all
disputes, claims, complaints, grievances, charges, actions, petitions and
demands that the Employee may have against the Company as defined herein,
including, but not limited to, any and all claims arising or in any way related
to Employee's employment with, or separation from, the Company;

      NOW THEREFORE, in consideration of the promises made herein, the Parties
hereby agree as follows:

                                    COVENANTS

      1. Consideration.

            (a) Termination: Other than as specifically set forth in this
section 1, the Parties agree that Employee is entitled to no other severance or
benefits under the Offer Letter and that upon receipt of the consideration set
forth in this section 1 the Company has met any and all obligations it may have
under the Offer Letter.

<PAGE>

            (b) The Company agrees to pay Employee a sum equivalent to six (6)
months of Employee's base salary, less applicable withholding, in accordance
with the Company's normal payroll policies.


            (c) 50% of any unvested shares of any option shall immediately vest
and become exercisable, in addition to any shares already vested, until the
earlier of (i) the original term of the option or (ii) twelve (12) months from
the date of termination.

      2. Confidential Information. Employee shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company
and shall continue to comply with the terms and conditions of the
Confidentiality Agreement between Employee and the Company. Employee shall
return all of the Company's property and confidential and proprietary
information in his possession to the Company on the Effective Date of this
Agreement. By signing this Agreement, Employee represents and declares under
penalty of perjury under the laws of the State of California that he has
returned all Company property.

      3. Payment of Salary. Employee acknowledges and represents that the
Company has paid all salary, wages, bonuses, accrued vacation, commissions and
any and all other benefits due to Employee once the above noted payments and
benefits are received.

      4. Release of Claims. Employee agrees that the foregoing consideration
represents settlement in full of all outstanding obligations owed to Employee by
the Company and its officers, managers, supervisors, agents and employees,
including without limitation, the obligations of the Company under the Offer
Letter, Employment Agreement, Confidentiality Agreement, Stock Option
Agreements.

            (a) Employee, on his own behalf, and on behalf of his respective
heirs, family members, executors, agents, and assigns, hereby fully and forever
release the Company and its officers, directors, employees, agents, investors,
stockholders, administrators, affiliates, divisions, subsidiaries, predecessor
and successor corporations and assigns (the "Releasees"), from, and agrees not
to sue concerning, any claim, duty, obligation or cause of action relating to
any matters of any kind, whether presently known or unknown, suspected or
unsuspected, that Employee may possess arising from any omissions, acts or facts
that have occurred up until and including the Effective Date of this Agreement
including, without limitation:

                  (i) any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;

                  (ii) any and all claims relating to, or arising from,
Employee's right to purchase, or actual purchase of shares of stock of the
Company, including, without limitation, any claims for fraud, misrepresentation,
breach of fiduciary duty, breach of duty under applicable state corporate law,
and securities fraud under any state or federal law;

                                      -2-
<PAGE>

                  (iii) any and all claims under the law of any jurisdiction
including, but not limited to, wrongful discharge of employment; constructive
discharge from employment; termination in violation of public policy;
discrimination; breach of contract, both express and implied; breach of a
covenant of good faith and fair dealing, both express and implied; promissory
estoppel; negligent or intentional infliction of emotional distress; negligent
or intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;

                  (iv) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the Employee Retirement Income Security Act of 1974, The Worker
Adjustment and Retraining Notification Act, Older Workers Benefit Protection
Act; 42 U.S.C. Section 1981, the California Fair Employment and Housing Act
("FEHA"), The California Labor Code, the California Constitution, the California
Family Rights Act, the Family Medical Leave Act, the Fair Employment and Housing
Act and any and all other laws and regulations related to employment
termination, employment discrimination, harassment or retaliation claims for
wages, hours, benefits, compensation: and

                  (v) any and all claims for violation of the federal, or any
state, constitution;

                  (vi) any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination;

                  (vii) any claim for any loss, cost, damage, or expense arising
out of any dispute over the non-withholding or other tax treatment of any of the
proceeds received by Employee as a result of this Agreement; and

                  (viii) any and all claims for attorneys' fees and costs.

            (b) The Company and Employee agree that the release set forth in
this section shall be and remain in effect in all respects as a complete general
release as to the matters released. This release does not extend to any
obligations incurred under this Agreement.

      THIS MEANS THAT BY SIGNING THIS AGREEMENT, KAGEL WILL HAVE WAIVED ANY
      RIGHT HE HAD TO BRING A LAWSUIT AGAINST ANY OF THE RELEASEES BASED ON ANY
      ACTIONS TAKEN BY ANY OF THE RELEASEES UP TO THE DATE OF THE SIGNING OF
      THIS AGREEMENT, AND THAT KAGEL WILL HAVE RELEASED THE RELEASEES OF ANY AND
      ALL CLAIMS OF ANY NATURE ARISING UP TO THE DATE OF THE SIGNING OF THIS
      AGREEMENT.

            (c) Employee acknowledges and agrees that any breach of any
provision of this Agreement shall constitute a material breach of this Agreement
and shall entitle the Company immediately to recover and cease the severance
benefits provided to Employee under this Agreement.

                                      -3-
<PAGE>

      5. Employee's Waiver of Rights Known or Unknown. As further consideration
and inducement for this Agreement, Employee waives and releases any and all
rights under Section 1542 of the California Civil Code, so far as it may apply,
which he has or may have with respect to Sipex releasees. California Civil Code
Section 1542 provides as follows:

      A general release does not extend to claims that the creditor does not
      know or suspect to exist in his favor at the time of executing the
      release, which if know by him must have materially affected his settlement
      with the debtor.

            Employee understands that Section 1542, to the extent it applies,
gives him the right not to release existing claims of which he is not now aware.
Having been so apprised, Employee nevertheless hereby voluntarily elects to, and
does, waive any right he may have that are described in Section 1542, and elects
to assume all risks for claims that exist in his favor, known or unknown, which
arise from the subject of the Agreement.

      6. Acknowledgement of Waiver of Claims Under ADEA. Employee acknowledges
that he/she is waiving and releasing any rights he/she may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Employee and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Agreement. Employee acknowledges that the
consideration given for this waiver and release Agreement is in addition to
anything of value to which Employee was already entitled. Employee further
acknowledges that he/she has been advised by this writing that

            (a) he should consult with an attorney prior to executing this
Agreement;

            (b) he has up to 21 days within which to consider this Agreement;

            (c) he has 7 days following his/her execution of this Agreement to
revoke this Agreement;

            (d) this Agreement shall not be effective until the revocation
period has expired; and,

            (e) nothing in this Agreement prevents or precludes Employee from
challenging or seeking a determination in good faith of the validity of this
waiver under the ADEA, nor does it impose any condition precedent, penalties or
costs for doing so, unless specifically authorized by federal law.

      7. No Pending or Future Lawsuits. Employee represents that he/she has no
lawsuits, claims, or actions pending in his/her name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein. Employee also represents that he/she does not intend to bring any claims
on his/her own behalf or on behalf of any other person or entity against the
Company or any other person or entity referred to herein.

                                      -4-
<PAGE>

      8. Application for Employment. Employee understands and agrees that, as a
condition of this Agreement, he/she shall not be entitled to any employment with
the Company, its subsidiaries, or any successor, and he/she hereby waives any
right, or alleged right, of employment or re-employment with the Company, its
subsidiaries or related companies, or any successor.

      9. Confidentiality. The Parties acknowledge that Employee's agreement to
keep the terms and conditions of this Agreement confidential was a material
factor on which all parties relied in entering into this Agreement. Employee
hereto agrees to use his best efforts to maintain in confidence: (i) the
existence of this Agreement, (ii) the contents and terms of this Agreement,
(iii) the consideration for this Agreement, and (iv) any allegations relating to
the Company or its officers or employees with respect to Employee's employment
with the Company, except as otherwise provided for in this Agreement
(hereinafter collectively referred to as "Settlement Information"). Employee
agrees to take every reasonable precaution to prevent disclosure of any
Settlement Information to third parties, and agrees that there will be no
publicity, directly or indirectly, concerning any Settlement Information.
Employee agrees to take every precaution to disclose Settlement Information only
to those attorneys, accountants, governmental entities, and family members who
have a reasonable need to know of such Settlement Information. The Parties agree
that if Company proves that Employee breached this Confidentiality provision, it
shall be entitled to an award of its costs spent enforcing this provision,
including all reasonable attorneys' fees associated with the enforcement action,
without regard to whether the Company can establish actual damages from the
breach by Employee.

      10. No Cooperation. Employee agrees he/she will not act in any manner that
might damage the business of the Company. Employee agrees that he will not
counsel or assist any attorneys or their clients in the presentation or
prosecution of any disputes, differences, grievances, claims, charges, or
complaints by any third party against the Company and/or any officer, director,
employee, agent, representative, shareholder or attorney of the Company, unless
under a subpoena or other court order to do so. Employee further agrees both to
immediately notify the Company upon receipt of any court order, subpoena, or any
legal discovery device that seeks or might require the disclosure or production
of the existence or terms of this Agreement, and to furnish, within 3 business
days of its receipt, a copy of such subpoena or legal discovery device to the
Company.

      11. Non-Disparagement. Employee agrees to refrain from any defamation,
libel or slander of the Releasees. Employee agrees to refrain from any tortious
interference with the contracts and relationships of the Company. All inquiries
by potential future employers of Employee will be directed to James G. Chalmers,
Director of Human Resources. Upon inquiry, the Company shall release only the
following information: Employee's last position and dates of employment.

      12. Breach. Employee acknowledges and agrees that any breach of any
provision of this Agreement, except as permitted by paragraph 5(e), shall
constitute a material breach of this Agreement and shall entitle the Company
immediately to recover and/or cease the severance benefits provided to Employee
under this Agreement. Employee shall also be responsible to the Company for all
costs, attorneys' fees and any and all damages incurred by the Company in (a)
enforcing the

                                      -5-
<PAGE>

obligation, including the bringing of any suit to recover the monetary
consideration and (b) defending against a claim or suit pursued by Employee in
violation of this provision.

      13. Non-Solicitation. Employee agrees that for a period of 12 months
immediately following the Effective Date of this Agreement, Employee shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage, take away or hire employees of
the Company, either for him/herself or any other person or entity.

      14. No Admission of Liability. The Parties understand and acknowledge that
this Agreement constitutes a compromise and settlement of disputed claims. No
action taken by the Parties hereto, or either of them, either previously or in
connection with this Agreement shall be deemed or construed to be: (a) an
admission of the truth or falsity of any claims heretofore made or (b) an
acknowledgment or admission by either party of any fault or liability whatsoever
to the other party or to any third party.

      15. No Knowledge of Wrongdoing. Employee represents that he/she has no
knowledge of any wrongdoing involving improper or false claims against a federal
or state governmental agency, or any other wrongdoing that involves Employee or
other present or former Company employees.

      16. Tax Consequences. The Company makes no representations or warranties
with respect to the tax consequences of the payment of any sums to Employee
under the terms of this Agreement. Employee agrees and understands that he/she
is responsible for payment, if any, of local, state and/or federal taxes on the
sums paid hereunder by the Company and any penalties or assessments thereon.
Employee further agrees to indemnify and hold the Company harmless from any
claims, demands, deficiencies, penalties, assessments, executions, judgments, or
recoveries by any government agency against the Company for any amounts claimed
due on account of Employee's failure to pay federal or state taxes or damages
sustained by the Company by reason of any such claims, including reasonable
attorneys' fees.

      17. Costs. The Parties shall each bear their own costs, expert fees,
attorneys' fees and other fees incurred in connection with the execution of this
Agreement.

      18. Indemnification. Employee agreed to indemnify and hold harmless the
Company from and against any and all loss, costs, damages or expenses,
including, without limitation, attorneys' fees or expenses incurred by the
Company arising out of the breach of this Agreement by Employee, or from any
false representation made herein by Employee, or from any action or proceeding
which may be commenced, prosecuted or threatened by Employee or for Employee's
benefit, upon Employee's initiative, or with Employee's aid or approval,
contrary to the provisions of this Agreement. Employee further agrees that in
any such action or proceeding, this Agreement may be pled by the Company as a
complete defense, or may be asserted by way of counterclaim or cross-claim.

      19. Authority. The Company represents and warrants that the undersigned
has the authority to act on behalf of the Company and to bind the Company and
all who may claim through it to the terms and conditions of this Agreement.
Employee represents and warrants that he has the capacity to act on his own
behalf and on behalf of all who might claim through him to bind them to the
terms

                                      -6-
<PAGE>

and conditions of this Agreement. Each party warrants and represents that there
are no liens or claims of lien or assignments in law or equity or otherwise of
or against any of the claims or causes of action released herein.

      20. No Representations. Each party represents that it has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement. Neither party has
relied upon any representations or statements made by the other party hereto
which are not specifically set forth in this Agreement.

      21. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision so long as the remaining provisions remain intelligible and continue
to reflect the original intent of the Parties.

      22. Entire Agreement. This Agreement represents the entire agreement and
understanding between the Company and Employee concerning the subject matter of
this Agreement and Employee's relationship with the Company, and supersedes and
replaces any and all prior agreements and understandings between the Parties
concerning the subject matter of this Agreement and Employee's relationship with
the Company, with the exception of the Confidentiality Agreement,
Indemnification Agreement and the Stock Option Agreement.

      23. No Waiver. The failure of any party to insist upon the performance of
any of the terms and conditions in this Agreement, or the failure to prosecute
any breach of any of the terms and conditions of this Agreement, shall not be
construed thereafter as a waiver of any such terms or conditions. This entire
Agreement shall remain in full force and effect as if no such forbearance or
failure of performance had occurred.

      24. No Oral Modification. Any modification or amendment of this Agreement,
or additional obligation assumed by either party in connection with this
Agreement, shall be effective only if placed in writing and signed by both
Parties or by authorized representatives of each party.

      25. Governing Law. This Agreement shall be deemed to have been executed
and delivered within the State of California, and it shall be construed,
interpreted, governed, and enforced in accordance with the laws of the State of
California, without regard to conflict of law principles. Each party hereby
consents to personal and exclusive jurisdiction and venue in the state and
federal courts of the State of California.

      26. Attorneys' Fees. In the event that either Party brings an action to
enforce or effect its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including the costs of mediation,
arbitration, litigation, court fees, plus reasonable attorneys' fees, incurred
in connection with such an action.

      27. Effective Date. This Agreement is effective after it has been signed
by both parties and after 8 days have passed since Employee has signed the
Agreement (the "Effective Date"), unless revoked by Employee within 7 days after
the date the Agreement was signed by Employee.

                                      -7-
<PAGE>

      28. Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.

      29. Voluntary Execution of Agreement. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:

            (a) They have read this Agreement;

            (b) They have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that they
have voluntarily declined to seek such counsel;

            (c) They understand the terms and consequences of this Agreement and
of the releases it contains; and

            (d) They are fully aware of the legal and binding effect of this
Agreement.

      IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.

                                             SIPEX Corporation

Dated: 4/29/04                      By /s/ Walid Maghribi
      -----------------                -----------------------------------
                                               Walid Maghribi
                                               Chief Executive Officer

                                             Phillip Kagel, an individual

Dated: 4/21/04                         /s/ Phillip Kagel
      -----------------                -----------------------------------
                                             Phillip Kagel

                                      -8-