Exhibit 10.2**TRANSITION AGREEMENT**     This Transition Agreement (the “Agreement”) is dated as of March 30, 2006 (the “EffectiveDate”). This Agreement is made as a mutually agreed compromise between the Parties (as definedbelow) for the settlement of all claims, differences, and alleged causes of action existing betweenthem as of the Effective Date.**PARTIES**     The Parties to this Agreement are Encysive Pharmaceuticals Inc. (the “Company”) and Stephen L.Mueller (“Executive”). The Company and Executive are referred to collectively as the “Parties.”**PREAMBLE**     WHEREAS, Executive was previously employed as the Vice President of Finance andAdministration, Secretary and Treasurer of the Company, pursuant to an Agreement (entitled“Termination Agreement”) dated March 20, 2003, as amended from time to time (the “EmploymentAgreement”);     WHEREAS, the Parties intend to terminate the Employment Agreement as of the Termination DateAugust 31, 2006, (except with respect to Executive’s and the Company’s obligations under Sections4.8, 8, 9, 10, 12.6, 12.7, 12.8, 12.10 and 12.11 thereof) and enter into this Agreement; pursuantto which Executive will terminate his employment positions August 31, 2006.     WHEREAS, the Company has advised Executive in writing to consult with independent counselrespecting this Agreement;     WHEREAS, Executive has had an opportunity to consult with independent counsel with respect tothe terms, meaning and effect of this Agreement; and     WHEREAS, Executive understands that the Company regards the above representations as materialand that the Company is relying on these representations in entering into this Agreement.     WHEREAS, the Company has advised Executive that it is not aware of any pending or threatenedlitigation, arbitration, or regulatory or investigative matter that will involve Executive as adefendant, respondent, target or significant witness, and the Company understands that Executive isrelying on these representations in entering this Agreement     NOW, THEREFORE, in consideration of the mutual promises and obligations contained in thisAgreement and other good and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the Parties agree as follows:
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1. Definitions.     1.1 “Base Salary” means the Executive’s annual base salary in effect on the date of thisAgreement, i.e. $250,000.00.     1.2 “Company and/or its Affiliates” means and includes the Company, its Affiliates, and all oftheir predecessors, successors and assigns and parents, subsidiaries, divisions or other affiliatedcompanies, partners, partnerships, present and former officers, directors, employees, stockholders,agents, employee benefit plans or programs and their fiduciaries, whether in their individual orofficial capacities and all of the successors and assigns of the foregoing. “Affiliates” alsoincludes 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 August 31, 2006.     Other defined terms are defined as provided herein.2. Termination of the Employment Agreement. The Parties agree that the EmploymentAgreement is terminated and of no further force and effect as of August 31, 2006, and no payments,benefits, or obligations are due or payable pursuant to the Employment Agreement, except withrespect to Executive’s and Company’s obligations under Section 4.8, Indemnification Agreements,Section 8, Executive’s Confidentiality Obligation; Section 9, Disclosure of Information Ideas,Concepts, Improvements, Discoveries and Inventories; Section 10, Ownership of Information, Ideas,Concepts, Improvements, Discoveries, and Inventions and all Original Works of Authorship; Section12.7, Corporate Authority, 12.10, Nonalienation, Section 12.8, Defense of Claims of the EmploymentAgreement and Section 12.11, Incompetent or Minor Payees.3. Salary, Duties and Benefits. From the Effective Date until the Date of Termination,August 31, 2006, Executive will be employed by the Company in such position and with such duties asdetermined by the Chief Executive Officer or the Chief Financial Officer of the Company and withsuch compensation and benefits as currently provided in Sections 4.1 (except that Executives annualBase Salary shall be $250,000.00), 4.3, 4.4, 4.5, 4.6, and 4.8 of the Employment Agreement.Executive shall be paid for any accrued but unused vacation as of August 31, 2006.4. Resignation by Executive. Effective as of the Date of Termination, August 31, 2006,Executive shall resign all positions he holds with the Company and/or its Affiliates.5. Payments and Benefits to Executive. In accordance with Section 6.3 of the EmploymentAgreement, and subject to Executive’s execution of a release from liability and waiver of right tosue the Company and/or its Affiliates, in the form attached hereto as Exhibit A, the Company agreesto pay Executive severance payments and benefits 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 theExecutive prior to the Date of Termination which would have
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been payable under Section 4.6 of the Employment Agreement if the Executive’s employment hadnot been terminated.          b. During the 12-month period commencing on the Date of Termination, the Company shallmaintain COBRA (medical and dental) and group life insurance coverage, at the Company’s expense forthe Executive and/or the Executive’s family at least equal to those which would have been providedto the Executive and his family if the Executive had not been terminated. Alternatively, at thewritten direction of Executive, the Company will not maintain COBRA medical coverage but willinstead pay to Executive the cash equivalent of the Employer’s portion of Executive’s medicalinsurance premium payment on a monthly basis. After the 12-month period commencing on the Date ofTermination, Executive shall be responsible for all premium payments necessary to continue suchCOBRA coverage, should he desire to do so. The Company will not maintain disability benefits afterthe Date of Termination. Benefits (including COBRA and/or cash payments) otherwise receivable bythe Executive pursuant to this Section 5b shall be reduced to the extent substantially similarbenefits are actually received by or made available to the Executive by any subsequent employer ofExecutive during the same time period for which such benefits would be provided pursuant to thisSection 5b at a cost to the Executive that is commensurate with the cost incurred by the Executiveimmediately prior to the Date of Termination; provided, however, that if the Executive becomesemployed by a new employer which maintains a medical plan that either (i) does not cover theExecutive or a family member or dependent with respect to a preexisting condition which was coveredunder the applicable Company medical plan, or (ii) does not cover the Executive or a family memberor dependent for a designated waiting period, the Executive’s coverage under the applicable Companymedical plan shall continue (but shall be limited in the event of noncoverage due to a preexistingcondition, to such preexisting condition) until the earlier of the end of the applicable period ofnoncoverage under the new employer’s plan or the first anniversary of the Date of Termination. TheExecutive agrees to report to the Company any coverage and benefits actually received by theExecutive or made available to the Executive from such other employer(s). The Executive shall beentitled to elect to change his level of coverage and/or his choice of coverage options (such asExecutive only or family medical coverage) with respect to the benefits to be provided by theCompany to the Executive to the same extent that actively employed senior executive officers of theCompany are permitted to make such changes; provided, however, that in the event of any suchchanges the Executive shall pay the amount of any cost increase that would actually be paid by anactively employed senior executive officer of the Company by reason of making the same change inhis level of coverage or coverage options.          c. During the 12-month period following the Date of Termination, the Company shall pay to theExecutive, in equal semi-monthly installments, the Executive’s annual Base Salary, i.e.,$250,000.00, paid on a semi-monthly basis with no offsets for income of Executive from otheremployment or business enterprise of the Executive..          d. During the 12-month period after the Date of Termination, all stock options and restrictedstock held by the Executive will continue to vest and be exercisable in accordance with their termsin effect on the Date of Termination, provided however that on the conclusion of said 12-monthperiod, all unexpired, unexercised options and restricted stock shall be fully vested, andthereafter, all such fully vested stock options will be exercisable by the Executive
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until the earlier to occur of the expiration of the term of each stock option or 12 monthsafter the date they become fully vested.          e. Executive’s participation in all other employee benefit plans and programs maintained bythe 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 thebenefits or payments provided in this Section 5 if (i) Executive breaches this Agreement or theprovisions of Sections 8, 9, 10 or 12.8 of the Employment Agreement, or (ii) Executive fails toexecute a release from liability and waiver of right to sue the Company and/or its Affiliates inthe form attached hereto as Exhibit A. Except as otherwise provided herein or as may be required byCode Section 409A or by the terms of welfare, benefit and pension plans, all payments to Executiveprovided for in this Agreement shall be paid within 10 days after the Effective Date of the ReleaseAgreement, Exhibit A hereto (as defined therein).6. Confidentiality and Defense of Claims.6.1 Both Parties shall keep strictly confidential all the terms and conditions, including amountspayable, in the Agreement and shall not disclose them to any person other than legal and/orfinancial advisors, government officials who seek such information in the course of their officialduties, individuals at the Company responsible for implementing the Agreement, and Executive’sspouse, unless compelled to do so by law or regulation, or business necessity (including theCompany’s requirement to file this Agreement with the Securities and Exchange Commission, theParties’ tax reporting obligations, Executive’s continuing obligation s under Sections 8, 9, 10,and 12.8 of the Employment Agreement, if disclosure needs to be made to prospective or subsequentemployers of Executive). Nothing in this Section is intended to prevent Executive from disclosingthe fact that he was employed by the Company or from describing his employment duties orcompensation throught August 31, 2006.6.2 The Executive agrees that from the Effective Date until two (2) years after the Date ofTermination, upon request from the Company, he will reasonably cooperate with the Company and/orits Affiliates in the defense of any claims or actions that may be made by or against the Companyand/or its Affiliates that affect his prior areas of responsibility, except if the Executive’sreasonable interests are adverse to the Company and/or its Affiliates in such claim or action. Tothe extent travel is required to comply with the requirements of this Section 6.2, the Companyshall, to the extent possible, provide the Executive with notice at least 10 days prior to the dateon which such travel would be required. The Company agrees to promptly pay or reimburse theExecutive upon demand for all of his reasonable travel and other direct expenses incurred, or to bereasonably incurred, to comply with his obligations under this Section 6.2. In addition, Executiveshall be reimbursed at the rate of $200.00 per hour for the time he is required by the Company todevote to the fulfillment of his obligations under this Section. Furthermore, the Company’srequests that Executive fulfill his obligations under this Section shall not unreasonably interferewith his subsequent employment or business enterprise7. Consultation With Counsel. The Company advises Executive to consult with independentcounsel prior to executing this Agreement, and Executive acknowledges being given that advice.
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8. No Defamatory Statements. Executive agrees that he will refrain from making anyrepresentation, statement, comment or any other form of communication (hereinafter collectivelyreferred to as “representation”), whether written or oral, to any person or entity, including butnot limited to the principals, officers, directors, employees, advisors, agents, customers,suppliers and competitors of Company and/or its Affiliates, which representation has the effect ortendency to disparage, denigrate, or otherwise reflect negatively on Company and/or its Affiliatesand/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 pressreleases the Company may issue describing Executive’s departure from the Company. The Companyagrees that senior executives of the company shall not disparage Executive. This section is notintended to limit either Party’s right to tell the truth.9. Return of Company Materials.Executive agrees to deliver to the Company promptly after the Date of Termination all originals andcopies of Company materials and all other property of the Company and/or its Affiliates in theExecutive’s possession, custody or control.10. Miscellaneous10.1 The Parties acknowledge that this Agreement is the result of a compromise and shall never beconstrued 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.10.2 This Agreement and the Release Agreement constitute the entire agreement between the Parties,except to the extent that it expressly incorporates provisions of the Employment Agreement. ThisAgreement may be executed in identical counterparts, each of which shall constitute an original andboth of which shall constitute one and the same agreement. Except as expressly provided herein,this Agreement supersedes the Employment Agreement and any severance benefit plan or program andany bonus program at the Company and/or its Affiliates. The parties may (but are not obligated to)enter into an independent contractor agreement at the hourly rate specified in Section 6.2 of thisAgreement, which, if done, shall be another agreement in addition to this entire agreement.10.3 The Parties warrant that no representations have been made other than those contained in thewritten provisions of this Agreement, and that they do not rely on any representations not statedin this Agreement.10.4 The Parties further warrant that they or their undersigned representatives are legallycompetent and fully authorized to execute and deliver this Agreement.10.5 The Parties confirm they have had the opportunity to have this Agreement explained to them byindependent counsel of their choice, and that they execute this Agreement freely, knowingly andvoluntarily. The Company is relying on its own judgment and on the advice of its independentcounsel and not upon any recommendation of Executive or his agents, independent counsel or otherrepresentatives. Likewise, Executive is relying on his own judgment and on the advice of hisindependent counsel, and not upon any recommendation of the
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Company or its directors, officers, employees, agents, independent counsel or otherrepresentatives. By voluntarily executing this Agreement, both Parties confirm their competence tounderstand 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.10.6 This Agreement may not be modified or amended except by a writing signed by both Parties. Nowaiver of this Agreement or of any of the promises, obligations, terms, or conditions contained init shall be valid unless it is in writing signed by the Party against whom the waiver is to beenforced. The waiver by either Party hereto of a breach of any provision of this Agreement shallneither operate nor be construed as a waiver of any subsequent breach by any Party. Except asexpressly provided for herein, the failure of either Party hereto to take any action by reason ofany breach will not deprive such Party of the right to take action at any time while such breachoccurs.10.7 If any part or any provision of this Agreement shall be finally determined to be invalid orunenforceable under applicable law by a court of competent jurisdiction, that part shall beineffective to the extent of such invalidity or unenforceability only, without in any way affectingthe remaining parts of said provision or the remaining provisions of the Agreement.10.8 The Parties have cooperated in the preparation of this Agreement. Hence, the Agreement shallnot be interpreted or construed against or in favor of either Party by virtue of the identity,interest, or affiliation of its preparer.10.9 This Agreement is made and shall be enforced pursuant to the laws of the State of Texas, orfederal law, as applicable, without regard to Texas’ law governing conflicts of law. Allperformance required by the terms of this Agreement shall take place in Harris County, Texas.10.10 The amount of benefits payable under this Agreement shall be paid from the general assets ofthe Company and there shall be no separate trust established to pay any benefits under thisAgreement. Executive’s status with respect to the payment of benefits under this Agreement shallbe as a general unsecured creditor of the Company.10.11 All payments and benefits payable under this Agreement shall be subject to all applicablefederal, state and local taxes and tax requirements and any elections by Executive for payouts ordeferrals under any Company benefit plan or program.10.12 This Agreement shall be binding on and inure to the benefit of the successors and assigns ofthe Parties. No rights or obligations, benefits of or payments to Executive under this Agreementmay be subject to claims of Executive’s creditors, or in any manner may be assigned or transferredby Executive other than his rights to compensation and benefits that are transferred by will or tohis estate by operation of law.10.13 All notices and other communications required or permitted hereunder or necessary orconvenient 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 inthe United States mail by registered or certified mail, return receipt requested, to the addressesas 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.