Document:

exv10w2

 

Exhibit 10.2

NORTH POINTE HOLDINGS CORPORATION

EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD

Dear :

You have been granted an award of shares of common stock of North Pointe Holdings Corporation (the
“Company”) constituting a Restricted Stock award under the North Pointe Holdings Corporation Equity
Incentive Plan (the “Plan”) with the following terms and conditions:

	 	 	 
	Grant Date:
	 	 
	 
	 	 
	Number of Restricted
Shares:
	 	 
	 
	 	 
	Vesting Schedule:

	 	Your Restricted Shares vest in accordance with the
following schedule, provided you are employed by the
Company or an Affiliate on the applicable vesting date:
	 
	 	 
	 
	 	 
	 

	 	Your Restricted Shares will become immediately vested if
your employment terminates as a result of death or
Disability. For purposes of this Agreement, “Disability”
means your inability to perform the material duties of your
occupation as a result of a medically-determinable physical
or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a
period of at least 12 months, as determined by the
Committee. The Committee may require you to submit such
medical evidence or to undergo a medical examination by a
doctor selected by the Committee as the Committee
determines is necessary in order to make a determination
hereunder.
	 
	 	 
	 

	 	Upon any other termination of employment prior to the date
the Restricted Shares are vested, you will forfeit the
Restricted Shares.
	 
	 	 
	Escrow of Certificates

	 	Your Restricted Shares will be held in escrow by the
Company, as escrow agent. The Company will give you a
receipt for the Shares

 

 

	 	 	 
	 

	 	held in escrow that will state that
the Company holds such Shares in escrow for your account,
subject to the terms of this Award, and you will give the
Company a stock power for such Shares duly endorsed in
blank which will be used in the event such Shares are
forfeited in whole or in part. As soon as practicable
after the vesting date, the Restricted Shares will cease to
be held in escrow, and certificate(s) for such number of
Shares will be delivered to you or, in the case of your
death, to your estate.
	 
	 	 
	Transferability of
Restricted Shares:

	 	You may not sell, transfer or otherwise alienate or
hypothecate any of your Restricted Shares until they are
vested. In addition, by accepting this Award, you agree
not to sell any Shares acquired under this Award at a time
when applicable laws, Company policies (including, without
limitation, the Company’s Insider Trading Policy) or an
agreement between the Company and its underwriters prohibit
a sale.
	 
	 	 
	Voting and Dividends:

	 	While the Restricted Shares are subject to forfeiture, you
may exercise full voting rights and will receive all
dividends and other distributions paid with respect to the
Restricted Shares, in each case so long as the applicable
record date occurs before you forfeit such Shares. If,
however, any such dividends or distributions are paid in
Shares, such Shares will be subject to the same risk of
forfeiture, restrictions on transferability and other terms
of this Award as are the Restricted Shares with respect to
which they were paid.
	 
	 	 
	Transferability of Award:

	 	You may not transfer or assign this Award for any reason,
other than under your will or as required by intestate
laws. Any attempted transfer or assignment in violation of
this provision will be null and void.
	 
	 	 
	Tax Withholding:

	 	To the extent that the receipt of the Restricted Shares or
the vesting of the Restricted Shares results in income to
you for federal, state or local income tax purposes, you
shall deliver to the Company at the time the Company is
obligated to withhold taxes in connection with such receipt
or vesting, as the case may be, such amount as the Company
requires to meet its withholding obligation under
applicable tax laws or regulations, and if you fail to do
so, the Company has the right and authority to deduct or
withhold from other compensation payable to you an amount
sufficient to satisfy its withholding obligations. If you
do not make an election under Section 83(b) of the Code, in
connection with this Award, you may satisfy the withholding
requirement, in whole or in part, by electing to have the
Company withhold for its own account that number of
Restricted Shares otherwise

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	 	deliverable to you from escrow
hereunder on the date the tax is to be determined having an
aggregate Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax that
the Company must withhold in connection with the vesting of
such Shares. Your election must be irrevocable, in
writing, and submitted to the Secretary of the Company
before the applicable vesting date. The Fair Market Value
of any fractional Share not used to satisfy the withholding
obligation (as determined on the date the tax is
determined) will be paid to you in cash.
	 
	 	 
	Amendment:

	 	This Restricted Stock Award may be amended only by written
consent of the Company and the Recipient, unless the
amendment is not to the detriment of the Recipient.
	 
	 	 
	Counterparts:

	 	This Restricted Stock Award may be executed in counterparts.
	 
	 	 
	Governing Law:

	 	The provisions of Section 9(f) of the Plan apply to this
Restricted Stock Award.

This Restricted Stock Award is granted under and governed by the terms and conditions of the Plan.
Additional provisions regarding your Award and definitions of capitalized terms used and not
defined in this Award can be found in the Plan.

BY SIGNING BELOW AND ACCEPTING THIS RESTRICTED STOCK AWARD, YOU AGREE TO ALL OF THE TERMS AND

CONDITIONS DESCRIBED HEREIN AND IN THE PLAN. YOU ALSO ACKNOWLEDGE RECEIPT OF THE PLAN.

	 	 	 
	 
	 	 
	 
	 	 
	 

	 	 
	Authorized Officer

	 	Recipient

3exv10w1

 

Exh. 10.1

TERMINATION AGREEMENT

     THIS TERMINATION AGREEMENT (this “Agreement”) is made and entered into this 25th
day of October, 2005, by and between Encysive Pharmaceuticals Inc., a Delaware corporation having
its principal executive office at 4848 Loop Central Drive, 7th Floor, Houston, Texas 77081
(hereinafter referred to as the “Company”), and George W. Cole (hereinafter referred to as the
“Executive”).

WITNESSETH:

     WHEREAS, the Company desires to employ the Executive in an executive capacity and the
Executive desires to enter the Company’s employ.

     NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Executive hereby agree as follows:

1. Certain Definitions.

     As used in this Agreement, the following terms have the meanings prescribed below:

     AAA shall have the meaning assigned thereto in Section 13.13 hereof

     Affiliate is used in this Agreement to define a relationship to a person or entity and
means a person or entity who, directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such person or entity.

     Agreement shall have the meaning assigned thereto in the preamble.

     Altana Agreements means the Contract of Employment dated June 23, 1994, as amended,
and the Confidentiality, Developments and No-Solicitation Agreement entered into by the Executive
and Altana, Inc., copies of which have been provided to the Company.

     Annual Bonus shall have the meaning assigned thereto in Section 4.2 hereof.

     Base Salary shall have the meaning assigned thereto in Section 4.1 hereof.

     Board means the Board of Directors of the Company.

     Bonus Payment shall have the meaning assigned thereto in Section 11.2 hereof.

     Cause shall have the meaning assigned thereto in Section 5.3 hereof.

 

 

     Change in Control of the Company shall be deemed to have occurred if any of the events
set forth in any one of the following paragraphs shall occur:

     (a) any “person” (as defined in section 3(a)(9) of the Exchange Act, and as such term is
modified in sections 13(d) and 14(d) of the Exchange Act), excluding the Company or any of its
subsidiaries, a trustee or any fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, an underwriter temporarily holding securities pursuant to an
offering of such securities or a corporation owned, directly or indirectly, by stockholders of the
Company in substantially the same proportions as their ownership of the Company, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power of the Company’s
then outstanding securities; or

     (b) during any period of not more than two consecutive years, individuals who at the beginning
of such period constitute the Board and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a transaction described in
clause (a), (c) or (d) of this definition) whose election by the Board or nomination for election
by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to constitute a majority
thereof; or

     (c) the stockholders of the Company approve a merger or consolidation of the Company with any
other corporation, other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary holder of securities under an
employee benefit plan of the Company, at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than 50% of the combined voting
power of the Company’s then outstanding securities; or

     (d) the stockholders of the Company approve a plan of complete liquidation of the Company or
an agreement for the sale or disposition by the Company of all or substantially all of the
Company’s assets.

     Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if there
is consummated any transaction or series of integrated transactions immediately following which, in
the judgment of the Compensation Committee of the Board, the holders of the Common Stock,
immediately prior to such transaction or series of transactions continue to have the same
proportionate ownership in an entity which owns all or substantially all of the assets of the
Company immediately prior to such transaction or series of transactions. Except during a Potential
Change in Control of the Company, the Board may (i) deem any other corporate event affecting the
Company (other than those described in clauses (a)-(d) of this definition) to be a “Change in
Control,” and (ii) may amend this definition of “Change in Control” in connection

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with an identical amendment being made to termination agreements entered into by the Company
and all of its senior executive officers.

     Code means the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated by the Internal Revenue Service thereunder, all as in effect from time to
time during the Employment Period.

     Common Stock means the Company’s common stock, par value $.05 per share.

     Company means Encysive Pharmaceuticals Inc., a Delaware corporation, the principal
executive office of which is located at 4848 Loop Central Drive, 7th Floor, Houston, Texas 77081.

     Competing Business means any individual, business, firm, company, partnership, joint
venture, organization, or other entity that markets or has entered clinical development of any
product addressing the same disease target as a product discovered by, or licensed to, the Company
which is either (i) in Phase III of clinical development, (ii) pending approval at U.S. Food & Drug
Administration or (iii) marketed by the Company or its licensee.

     Confidential Information shall have the meaning assigned thereto in Section 8.2
hereof.

     Date of Termination means the earliest to occur of (i) the date of the Executive’s
death or (ii) the date of receipt of the Notice of Termination, or such later date as may be
prescribed in the Notice of Termination in accordance with Section 5.6 hereof.

     Disability means an illness or other disability that prevents the Executive from
discharging his responsibilities under this Agreement for a period of 180 consecutive calendar
days, or an aggregate of 180 calendar days in any calendar year, during the Employment Period, all
as determined in good faith by the Board (or a committee thereof).

     Effective Date means November 14, 2005.

     Employment Period shall have the meaning assigned thereto in Section 3 hereof.

     Executive means George W. Cole, an individual residing at 4 Thackery Lane, Mendham, NJ
07945.

     Exchange Act means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Securities and Exchange Commission thereunder, all as in effect from
time to time during the Employment Period.

     Excise Taxes shall have the meaning assigned thereto in Section 11.1 hereof.

     Good Reason shall have the meaning assigned thereto in Section 5.5 hereof.

     Initial Term shall have the meaning assigned thereto in Section 3 hereof.

     Losses shall have the meaning assigned thereto in Section 11.8 hereof.

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     Material Injury shall have the meaning assigned thereto in Section 5.3 hereof.

     Notice of Termination shall have the meaning assigned thereto in Section 5.6 hereof.

     Potential Change in Control of the Company shall be deemed to have occurred if (a) the
Company enters into an agreement the consummation of which would result in the occurrence of a
Change in Control, (b) any person (including the Company) publicly announces an intention to take
or consider taking action which if consummated would constitute a Change in Control or (c) the
Board adopts a resolution to the effect that a potential Change in Control of the Company has
occurred.

     Proprietary Agreement shall have the meaning assigned thereto in Section 10.4 hereof.

     Rules shall have the meaning assigned thereto in Section 13.13 hereof.

     Successor Provisions shall have the meaning assigned thereto in Section 11.5 hereof.

     Tax Consultant shall have the meaning assigned thereto in Section 11.6 hereof.

     Vacation Time shall have the meaning assigned thereto in Section 4.3 hereof.

     Without Cause shall have the meaning assigned thereto in Section 5.4 hereof.

2. General Duties of the Company and the Executive.

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     2.1 (a) The Company agrees to employ the Executive, and the Executive agrees to accept
employment by the Company and to serve the Company as its Chief Operating Officer. The Executive
shall report to and be subject to the direction of the Chief Executive Officer and the Board. The
Executive shall have the authority, duties and responsibilities that are normally associated with
and inherent in the executive capacity in which the Executive will be performing, and shall have
such other or additional duties which are not inconsistent with the Executive’s position, as may
from time to time be reasonably assigned to the Executive by the Chief Executive Officer or the
Board (or a committee thereof). While employed hereunder, the Executive shall devote full time and
attention during normal business hours to the affairs of the Company and use his best efforts to
perform faithfully and efficiently his duties and responsibilities. The Executive agrees to
cooperate fully with the Chief Executive Officer and the Board, and other executive officers of the
Company, and not to engage in any activity which conflicts with or interferes with the performance
of his duties hereunder. During the Employment Period, the Executive shall devote his best efforts
and skills to the business and interests of the Company, do his utmost to further enhance and
develop the Company’s best interests and welfare, and endeavor to improve his ability and knowledge
of the Company’s business, in an effort to increase the value of his services for the mutual
benefit of the parties hereto. During the Employment Period, it shall not be a violation of this
Agreement for the Executive (i) serve on any corporate board or committee thereof with the approval
of the Board, (ii) to serve on any civic, or charitable boards or committees (except for boards or
committees of a Competing Business unless approved by the Board), (iii) deliver lectures, fulfill
teaching or speaking engagements, (iv) testify as a witness in litigation involving a former
employer or (v) manage personal investments; provided, however, any such activities must not
materially interfere with performance of the Executive’s responsibilities under this Agreement.

     (b) The Executive represents and covenants to the Company that, except for the Altana
Agreements, he is not subject or a party to any employment agreement, noncompetition covenant,
nondisclosure agreement, or any similar agreement or covenant that would prohibit the Executive
from executing this Agreement and fully performing his duties and responsibilities hereunder, or
would in any manner, directly or indirectly, limit or affect the duties and responsibilities that
may now or in the future be assigned to the Executive hereunder. The Executive further represents
and warrants that he is not presently subject to any legal actions, claims or administrative
proceedings, including bankruptcy proceedings or IRS audits or proceedings, which would affect his
ability to perform his responsibilities hereunder.

     2.2 The Executive agrees and acknowledges that he owes a fiduciary duty of loyalty, fidelity
and allegiance to act at all times in the best interests of the Company and to do no act and to
make no statement, oral or written, which would injure the Company’s business, its interests or its
reputation.

     2.3 The Executive agrees to execute and comply at all times during the Employment Period with
all applicable policies, rules and regulations of the Company, including, without limitation, the
Company’s business ethics policy and the Company’s policy regarding trading in the Common Stock, as
each is in effect from time to time during the Employment Period.

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3. Term.

     Unless sooner terminated pursuant to other provisions hereof, the Executive’s period of
employment under this Agreement shall be a period of one year beginning on the Effective Date (the
“Initial Term”). The Executive’s period of employment under this Agreement shall be automatically
renewed for successive one-year terms on each anniversary of the Effective Date (the Initial Term
and any and all renewals thereof are referred to herein collectively as the “Employment Period”),
unless written notice of nonrenewal is delivered by one party to the other at least 60 days before
the end of the Initial Term or any such one-year renewal term.

4. Compensation and Benefits.

     4.1 Base Salary. As compensation for services to the Company, the Company shall pay
to the Executive from the Effective Date until the Date of Termination an annual base salary of
$425,000 (the “Base Salary”). The Board (or a committee thereof) will conduct an annual review of
the Executive’s compensation and, in its discretion, may increase the Base Salary based upon
relevant circumstances. The Executive’s first performance review will occur in March 2006. The
Base Salary shall be payable in equal semi-monthly installments or in accordance with the Company’s
established policy, subject only to such payroll and withholding deductions as may be required by
law and other deductions (consistent with Company policy for all employees) relating to the
Executive’s election to participate in the Company’s insurance and other employee benefit plans.

     4.2 Bonus. In addition to the Base Salary, the Executive shall be awarded, for each
fiscal year until the Date of Termination, an annual bonus to be determined by the Board (or a
committee thereof), in its sole discretion pursuant to the incentive or bonus plan for the
Company’s management as in effect from time to time (the “Annual Bonus”). For the purposes of this
Agreement, the term “Annual Bonus” will refer only to the cash bonus, and not to long-term
incentives to be paid pursuant to the current compensation plan. Each such Annual Bonus shall be
payable at a time to be determined by the Board (or a committee thereof) in its sole discretion.
The current bonus plan in effect for the Company’s management, which may be changed at the
discretion of the Board, provides that the Executive is eligible to receive a target Annual Bonus
of up to 65% of his salary based on the achievement of 100% of individual and corporate goals
determined by the Board or a committee thereof. Any bonus paid for fiscal year 2005 will not be
prorated based on the number of days during fiscal year 2005 that the Executive was employed by the
Company.

     4.3 Vacation. Until the Date of Termination, the Executive shall be entitled to four
(4) weeks paid vacation during each one-year period commencing on the Effective Date (the “Vacation
Time”). The use of any Vacation Time not taken during the applicable one-year period will be
subject to the Company’s vacation policy as in effect from time to time.

     4.4 Incentive, Savings and Retirement Plans. Until the Date of Termination, the
Executive shall be eligible to participate in and shall receive all benefits under all executive
incentive, savings and retirement plans and programs currently maintained or hereinafter
established by the Company for the benefit of its senior executive officers and/or employees.

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     4.5 Benefit Plans. Until the Date of Termination, the Executive and/or the
Executive’s family, as the case may be, shall be eligible to participate in and shall receive all
benefits under each welfare benefit plan of the Company currently maintained or hereinafter
established by the Company for the benefit of its employees. Such welfare benefit plans may
include, without limitation, medical, dental, disability, group life, accidental death and travel
accident insurance plans and programs. The Company shall not be obligated to institute, maintain,
or refrain from changing, amending, or discontinuing, any such employee benefit program or plan, so
long as such actions are similarly applicable to covered employees generally.

     4.6 Reimbursement of Expenses. The Executive may from time to time until the Date of
Termination incur various business expenses customarily incurred by persons holding positions of
like responsibility, including, without limitation, travel, entertainment and similar expenses
incurred for the benefit of the Company. Subject to the Executive complying with the Company’s
policy regarding the reimbursement of such expenses as in effect from time to time during the
Employment Period, which does not necessarily allow reimbursement of all such expenses, the Company
shall reimburse the Executive for such expenses from time to time, at the Executive’s request, and
the Executive shall account to the Company for all such expenses.

     4.7 Stock Options and Restricted Stock.

     (a) The Compensation Committee of the Board, in its sole discretion, may grant to the
Executive options to acquire shares of Common Stock and restricted shares of Common Stock with such
terms and conditions as determined by the Compensation Committee of the Board in its sole
discretion. The long-term incentive portion of the current compensation plan in effect for the
Company’s management, which may be changed at the discretion of the Board, provides that the
Executive is eligible to receive grants of options to acquire shares of Common Stock and restricted
shares of Common Stock based on the achievement of individual and corporate goals determined by the
Board or a committee thereof. For Executive’s position, the current combined annual target range
for stock options and restricted stock grants is $450,000 to $700,000.

     (b) On the Effective Date, the Company will grant to the Executive options (the “Options”) to
acquire the number of shares of Common Stock having an aggregate Black-Scholes value (or other
suitable valuation model used by the Company) of $200,000 (based on the exercise price of the
Options), with the exercise price to be the closing sales price for the Common Stock on The Nasdaq
National Market on the trading day immediately preceding the Effective Date. The Options will
provide for the vesting of one-half of the shares covered by the Options on each of November 30,
2007, and November 30, 2008. The Options will be granted pursuant to, and will be governed by the
terms of, the Company’s incentive stock plans as then in effect, and the provisions of this
Agreement (including Section 6.3(e) hereof). At the request of the Executive, the Company will
cause the Options to be granted as Incentive Stock Options under the Code, to the extent permitted,
and subject to the terms provided under, the Code. All Options will provide that they will not
continue to vest after the breach (and failure to cure such breach as provided for therein) by the
Executive of any of Sections 7, 8, 9, 10 or 12 of this Agreement.

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     (c) On the Effective Date, the Company will grant the Executive the number of restricted
shares of Common Stock having an aggregate fair market value of $200,000 based on the closing sales
price for the Common Stock on The Nasdaq National Market on the trading day immediately preceding
the Effective Date. These shares granted by the Company will be issued as “restricted stock” under
the Company’s incentive stock plans, and will vest in one-half increments on each of November 30,
2007, and November 30, 2008. Prior to vesting, these shares will be held by the Company and will
bear the restrictive legends set forth in, and be governed by the terms of, the Company’s incentive
stock plans. This restricted stock will not be transferable or saleable until vested, and all
unvested restricted stock will be forfeited and cancelled by the Company if the Executive
terminates his employment for any reason or is terminated for Cause by the Company prior to
November 30, 2008. Upon death or Disability of the Executive, the unvested restricted stock will
vest in full. Upon the termination of Executive by the Company Without Cause prior to November 30,
2008, all unvested restricted shares will vest. All unvested shares of restricted stock will
provide that they will be forfeited after the breach (and failure to cure such breach as provided
for therein) by the Executive of any of Sections 7, 8, 9, 10 and 12 of this Agreement. Upon the
vesting of these shares of restricted stock, the Company will cause the removal of the restrictive
legends on the certificates representing such shares that relate to the vesting conditions
described in this Section 4.7(c).

     (d) The Company will cause the Options and restricted stock to be issued under the Company’s
1999 Incentive Stock Plan (the “1999 Plan”) by the execution and delivery of agreements containing
the terms and conditions set forth in this Agreement, and the other terms and conditions of the
1999 Plan that are not inconsistent herewith. The Compensation Committee has, pursuant to the 1999
Plan, authorized such agreements to be issued on the terms set forth herein pursuant to the
authority granted to the Compensation Committee to alter appropriate terms and conditions of the
1999 Plan when granting incentive awards under the 1999 Plan.

     4.8 Indemnification Agreements. The Company has entered into an Indemnification
Agreement regarding indemnification of the Executive in the form of such agreements entered into
with the Company’s other executive officers. The Company will also cause the Executive to be
covered by its director and officer insurance policies as they are in effect from time to time for
its executive officers

     4.9 Relocation Expenses. The Company will provide for reimbursement of moving and
relocation expenses of the Executive and his family as set forth on Exhibit A attached
hereto. In addition, the Company, at its cost, shall provide temporary furnished housing for the
Executive pending the Executive’s relocation to Houston. The Executive will permanently relocate
to the Houston, Texas metropolitan area by the one-year anniversary of the Effective Date.

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5. Termination.

     5.1 Death. This Agreement shall terminate automatically upon the death of the
Executive.

     5.2 Disability. The Company may terminate this Agreement, upon written notice to the
Executive delivered in accordance with Sections 5.6 and 13.1 hereof, upon the Disability of the
Executive.

     5.3 Cause. The Company may terminate this Agreement, upon written notice to the
Executive delivered in accordance with Sections 5.6 and 13.1 hereof, for Cause. For purposes of
this definition of “Cause,” the term “Company” shall mean the Company and/or its Affiliates. For
purposes of this Agreement, subject to the notice provisions set forth below, “Cause” means (i) the
conviction (or plea of nolo contendere or equivalent plea) of the Executive of a felony (which,
through lapse of time or otherwise, is not subject to appeal), (ii) the Executive having engaged in
intentional misconduct causing a violation by the Company of any state or federal laws which
results in a material injury to the business, condition (financial or otherwise), results of
operations or prospects of the Company as determined in good faith by the Board or a committee
thereof (a “Material Injury”), (iii) the Executive having engaged in a theft of corporate funds or
corporate assets of the Company or in an act of fraud upon the Company, (iv) an act of personal
dishonesty taken by the Executive that was intended to result in personal enrichment of the
Executive at the expense of the Company, (v) the Executive’s refusal, without proper legal cause,
to perform his duties and responsibilities as contemplated in this Agreement or any other breach by
the Executive of this Agreement, and (vi) the Executive’s engaging in activities which would
constitute a breach of the Company’s business ethics policy, the Company’s policies regarding
trading in the Common Stock or any other applicable policies, rules or regulations of the Company
which results in a Material Injury. If the Company desires to terminate the Executive for Cause
pursuant to the provisions of this Section 5.3, the Executive will be given a written notice by the
Board of the facts and circumstances providing the basis for termination for Cause, and the
Executive will have 30 days from the date of such notice to remedy, cure or rectify the situation
giving rise to termination for Cause to the reasonable satisfaction of the Board (except in the
event of termination for Cause pursuant to subparagraph (i) above as to which no cure period will
be permitted).

     5.4 Without Cause. The Company may terminate this Agreement Without Cause, upon
written notice to the Executive delivered in accordance with Sections 5.6 and 13.1 hereof. For
purposes of this Agreement, the Executive will be deemed to have been terminated “Without Cause” if
the Executive is terminated by the Company for any reason other than Cause, Disability or death or
if the Company delivers a notice of nonrenewal of this Agreement pursuant to Section 3 hereof.

     5.5 Good Reason. The Executive may terminate this Agreement for Good Reason, upon
written notice to the Company delivered in accordance with Sections 5.6 and 13.1 hereof. For
purposes of this definition of “Good Reason,” the term “Company” shall mean the Company and/or its
Affiliates. For purposes of this Agreement, “Good Reason” means (i) the assignment to the
Executive of any duties materially inconsistent in any respect with the Executive’s duties or
responsibilities as contemplated in this Agreement, provided that the

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Executive specifically terminates his employment for Good Reason hereunder within 120 days
from the date that he has actual notice of such material breach; (ii) any other action by the
Company which results in a material diminishment in the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties or responsibilities, provided that
the Executive specifically terminates his employment for Good Reason hereunder within 120 days from
the date that he has actual notice of such material breach; (iii) any breach by the Company of any
of the provisions of this Agreement, provided that the Executive specifically terminates his
employment for Good Reason hereunder within 120 days from the date that he has actual notice of
such material breach; (iv) requiring the Executive to relocate to any office or location other than
the Houston, Texas metropolitan area, without his consent; (v) a 5% or more reduction, or attempted
reduction, at any time during the Employment Period, of the Base Salary of the Executive unless
such reduction is also applied to all other senior executive officers of the Company; or (vi) the
taking of any action by the Company which would adversely affect the Executive’s participation in
or materially reduce the Executive’s benefits provided under Section 4.5 hereof, unless (A) there
is substituted a comparable benefit that is at least economically equivalent (in terms of the
benefit offered to the Executive) to the benefit in which the Executive’s participation is being
adversely affected or to the Executive’s benefits that are being materially reduced, or (B) the
taking of such action affects all other senior executive officers of the Company.

     Notwithstanding the preceding provisions of this Section 5.5, if the Executive desires to
terminate his employment for Good Reason, he shall first give written notice of the facts and
circumstances providing the basis for Good Reason to the Board or the Compensation Committee
thereof, and allow the Company thirty (30) days from the date of such notice to remedy, cure or
rectify the situation giving rise to Good Reason to the reasonable satisfaction of the Executive.

     5.6 Notice of Termination. Any termination of this Agreement by the Company or the
Executive, shall be communicated by Notice of Termination to the other party hereto given in
accordance with this Agreement. For purposes of this Agreement, a “Notice of Termination” means a
written notice which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive’s employment under the provision so indicated and (iii) specifies
the termination date, if such date is other than the date of receipt of such notice (which
termination date shall not be more than 15 days after the giving of such notice, unless otherwise
provided herein). Notwithstanding the foregoing, the Company may elect to consider the Executive
as an employee after the Date of Termination for purposes of complying with the provisions of
Section 6 hereof.

6. Obligations of the Company upon Termination.

     6.1 Cause; Other Than Good Reason. If this Agreement shall be terminated either by
the Company for Cause or by the Executive for any reason other than Good Reason (including delivery
by the Executive of a notice of nonrenewal of this Agreement pursuant to Section 3 hereof), the
Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of
Termination, the aggregate of the Executive’s Base Salary (as in effect on the Date of Termination)
through the Date of Termination, if not theretofore paid, and, in the case of

10

 

compensation previously deferred by the Executive, all amounts of such compensation previously
deferred and not yet paid by the Company. All other obligations of the Company and rights of the
Executive hereunder shall terminate effective as of the Date of Termination, except as provided for
in any benefit plans, incentive stock plans or other compensation plans and as otherwise provided
in this Agreement.

     6.2 Death or Disability. If this Agreement is terminated as a result of the
Executive’s death or Disability, the Company shall pay to the Executive or his estate, in a lump
sum in cash within 30 days of the Date of Termination, the Executive’s Base Salary (as in effect on
the Date of Termination) through the Date of Termination, if not theretofore paid, and, in the case
of compensation previously deferred and bonuses previously earned by the Executive, all amounts of
such compensation previously deferred and earned and not yet paid by the Company. The Executive or
his estate shall also be entitled to receive those death and Disability benefits to which the
Executive is entitled under the Company’s benefit and insurance plans. All other obligations of
the Company and rights of the Executive hereunder shall terminate effective as of the Date of
Termination, except as provided for in any benefit plans, incentive stock plans or other
compensation plans and as otherwise provided in this Agreement.

     6.3 Good Reason; Without Cause; Nonrenewal. If this Agreement shall be terminated
either by the Executive for Good Reason or by the Company Without Cause (which includes delivery by
the Company of a notice of nonrenewal of this Agreement pursuant to Section 3 hereof):

     (a) The Company shall pay to the Executive in a lump sum in cash within 30 days after the Date
of Termination, if not theretofore paid, the Executive’s Base Salary (as in effect on the Date of
Termination) through the Date of Termination, and in the case of compensation previously deferred
and bonuses previously earned by the Executive, all amounts of such compensation previously
deferred and earned and not yet paid by the Company.

     (b) The Company shall, promptly upon submission by the Executive of supporting documentation,
pay or reimburse to the Executive any costs and expenses paid or incurred by the Executive which
would have been payable under Section 4.6 hereof if the Executive’s employment had not terminated.

     (c) 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 hereof 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 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 (without giving effect to any increase in costs paid by the
Executive after the Change in Control which constitutes or may constitute Good Reason); 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

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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.

     (d) 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).

     (e) 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.

     Notwithstanding any of the above to the contrary, the Executive will not be entitled to any of
the benefits or payments provided in Section 6.3 (c), (d) or (e) hereof if (i) the Executive
breaches this Agreement including the provisions of Sections 8, 9, 10 and 12 hereof, or (ii) the
Executive fails to execute a release from liability and waiver of right to sue the Company or its
Affiliates in a form reasonably acceptable to the Company.

     6.4 Termination of Employment Following a Change in Control.

     (a) If this Agreement shall be terminated within two years after a Change in Control which
occurs during the term of this Agreement, provided such termination is by the Executive for Good
Reason or by the Company Without Cause (which includes delivery by the Company of a notice of
nonrenewal of this Agreement pursuant to Section 3 hereof), in lieu of any obligation the Company
may have pursuant to Section 6.3 hereof:

     (1) The Company shall pay to the Executive in a lump sum in cash within five
(5) days after the Date of Termination, if not theretofore paid, the Executive’s
Base Salary (as in effect on the Date of Termination) through the Date of
Termination, and in the case of compensation previously deferred and bonuses
previously earned by the Executive, all amounts of such compensation previously
deferred and earned and not yet paid by the Company.

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     (2) The Company shall, promptly upon submission by the Executive of supporting
documentation, pay or reimburse to the Executive any costs and expenses paid or
incurred by the Executive which would have been payable under Section 4.6 hereof if
the Executive’s employment had not terminated.

     (3) The Company shall pay to the Executive in a lump sum in cash within five
(5) days after the Date of Termination a severance payment equal to three (3) times
the sum of (i) the Executive’s Base Salary (as in effect on Date of Termination) and
(ii) the Executive’s most recent Annual Bonus.

     (4) During the 18-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 hereof if the Executive’s
employment had not been terminated (without giving effect to any reduction in such
benefits subsequent to the Change in Control which reduction constitutes or may
constitute Good Reason).

     (b) The Company shall pay to the Executive all legal fees and expenses incurred by the
Executive as a result of a termination which entitles the Executive to any payments under Section
6.4 hereof including all such fees and expenses, if any, incurred in contesting or disputing any
Notice of Termination under Section 5.3 hereof or in seeking to obtain or enforce any right or
benefit provided by Section 6.4 hereof. Such payments shall be made within five (5) days after
delivery of the Executive’s respective written requests for payment accompanied by such evidence of
fees and expenses incurred as the Company reasonably may require.

     (c) Any determination by the Executive pursuant to this Section 6.4 that Good Reason exists
for the Executive’s termination of employment and that adequate remedy has not occurred shall be
presumed correct and shall govern unless the party contesting the determination shows by a clear
preponderance of the evidence that it was not a good faith reasonable determination.

     (d) Notwithstanding any dispute concerning whether Good Reason exists for termination of
employment or whether adequate remedy has occurred, the Company shall immediately pay to the
Executive any amounts otherwise due under this Section 6.4. The Executive may be required to repay
such amounts to the Company if any such dispute is finally determined adversely to the Executive.

     (e) The Executive shall not be required to mitigate damages with respect to the amount of any
payment provided under this Section 6.4 by seeking other employment or otherwise, nor shall the
amount of any payment provided under this Section 6.4 be reduced by retirement benefits, deferred
compensation or any compensation earned by the Executive as a result of employment by another
employer.

13

 

7. Executive’s Obligation to Avoid Conflicts of Interest. For purposes of this Section 7,
all references to the Company shall mean and include its Affiliates. The Executive further agrees
to comply with the Company’s conflict of interest policy, including the Company’s business ethics
policy, as in effect from time to time.

8. Executive’s Confidentiality Obligation.

     8.1 For purposes of this Section 8, all references to the Company shall mean and include its
Affiliates. The Executive hereby acknowledges, understands and agrees that all Confidential
Information, as defined in Section 8.2 hereof, whether developed by the Executive or others
employed by or in any way associated with the Executive or the Company, is the exclusive and
confidential property of the Company and shall be regarded, treated and protected as such in
accordance with this Agreement. The Executive acknowledges that all such Confidential Information
is in the nature of a trade secret. Failure to mark any writing confidential shall not affect the
confidential nature of such writing or the information contained therein.

     8.2 For purposes of this Agreement, “Confidential Information” means information, which is
used in the business of the Company and (i) is proprietary to, about or created by the Company,
(ii) gives the Company some competitive business advantage or the opportunity of obtaining such
advantage or the disclosure of which could be detrimental to the interests of the Company, (iii) is
designated as Confidential Information by the Company, is known by the Executive to be considered
confidential by the Company, or from all the relevant circumstances should reasonably be assumed by
the Executive to be confidential and proprietary to the Company, or (iv) is not generally known by
non-Company personnel. Confidential Information excludes, however, any information that is
lawfully in the public domain or has been publicly disclosed by the Company. Such Confidential
Information includes, without limitation, the following types of information and other information
of a similar nature (whether or not reduced to writing or designated as confidential):

     (a) Internal personnel and financial information of the Company, vendor information (including
vendor characteristics, services, prices, lists and agreements), purchasing and internal cost
information, internal service and operational manuals, and the manner and methods of conducting the
business of the Company;

     (b) Marketing and development plans, price and cost data, price and fee amounts, pricing and
billing policies, quoting procedures, marketing techniques, forecasts and forecast assumptions and
volumes, and future plans and potential strategies (including, without limitation, all information
relating to any acquisition prospect and the identity of any key contact within the organization of
any acquisition prospect) of the Company which have been or are being discussed;

     (c) Names of customers and their representatives, contracts (including their contents and
parties), customer services, and the type, quantity, specifications and content of products and
services purchased, leased, licensed or received by customers of the Company;

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     (d) Confidential and proprietary information provided to the Company by any actual or
potential customer, government agency or other third party (including businesses, consultants and
other entities and individuals); and

     (e) Work product resulting from or related to the research, development or production of the
drug development programs of the Company.

     8.3 As a consequence of the Executive’s acquisition or anticipated acquisition of Confidential
Information, the Executive shall occupy a position of trust and confidence with respect to the
affairs and business of the Company. In view of the foregoing and of the consideration to be
provided to the Executive, the Executive agrees that it is reasonable and necessary that the
Executive make each of the following covenants:

     (a) At any time during the Employment Period and thereafter, the Executive shall not disclose
Confidential Information to any person or entity, either inside or outside of the Company, other
than as necessary in carrying out his duties and responsibilities as set forth in Section 2 hereof,
without first obtaining the Company’s prior written consent (unless such disclosure is compelled
pursuant to court orders or subpoena, and at which time the Executive shall give prior written
notice of such proceedings to the Company).

     (b) At any time during the Employment Period and thereafter, the Executive shall not use, copy
or transfer Confidential Information other than as necessary in carrying out his duties and
responsibilities as set forth in Section 2 hereof, without first obtaining the Company’s prior
written consent.

     (c) On the Date of Termination, the Executive shall promptly deliver to the Company (or its
designee) all written materials, records and documents made by the Executive or which came into his
possession prior to or during the Employment Period concerning the business or affairs of the
Company, including, without limitation, all materials containing Confidential Information.

9. Disclosure of Information, Ideas, Concepts, Improvements, Discoveries and Inventions.

     As part of the Executive’s fiduciary duties to the Company, the Executive agrees that during
his employment by the Company and thereafter following the Date of Termination, the Executive shall
promptly disclose in writing to the Company all information, ideas, concepts, improvements,
discoveries and inventions, whether patentable or not, and whether or not reduced to practice,
which are conceived, developed, made or acquired by the Executive during the Employment Period,
either individually or jointly with others, and which relate to the business, products or services
of the Company or its Affiliates, irrespective of whether the Executive used the Company’s time or
facilities and irrespective of whether such information, idea, concept, improvement, discovery or
invention was conceived, developed, discovered or acquired by the Executive on the job, at home, or
elsewhere. This obligation extends to all types of information, ideas and concepts, including
information, ideas and concepts relating to research and development of drugs, drug discovery and
manufacturing processes, new types of services, corporate opportunities, acquisition prospects,
prospective names or service marks for the Company’s business activities, and the like.

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	10.	 	Ownership of Information, Ideas, Concepts, Improvements, Discoveries and Inventions, and
all Original Works of Authorship.

     10.1 All references in this Section 10 to the Company shall mean and include its Affiliates.
All information, ideas, concepts, improvements, discoveries and inventions, whether patentable or
not, which are conceived, made, developed or acquired by the Executive or which are disclosed or
made known to the Executive, individually or in conjunction with others, during the Executive’s
employment by the Company and which relate to the business, products or services of the Company or
its Affiliates (including, without limitation, all such information relating to research and
development of drugs, drug discovery and manufacturing processes, corporate opportunities,
research, financial and sales data, pricing and trading terms, evaluations, opinions,
interpretations, acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customers’ organizations, marketing and merchandising
techniques, and prospective names and service marks) are and shall be the sole and exclusive
property of the Company. Furthermore, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all other writings or
materials of any type embodying any of such information, ideas, concepts, improvements, discoveries
and inventions are and shall be the sole and exclusive property of the Company.

     10.2 In particular, the Executive hereby specifically sells, assigns, transfers and conveys to
the Company all of his worldwide right, title and interest in and to all such information, ideas,
concepts, improvements, discoveries or inventions, and any United States or foreign applications
for patents, inventor’s certificates or other industrial rights which may be filed in respect
thereof, including divisions, continuations, continuations-in-part, reissues and/or extensions
thereof, and applications for registration of such names and service marks. The Executive shall
assist the Company and its nominee at all times, during the Employment Period and thereafter, in
the protection of such information, ideas, concepts, improvements, discoveries or inventions, both
in the United States and all foreign countries, which assistance shall include, but shall not be
limited to, the execution of all lawful oaths and all assignment documents requested by the Company
or its nominee in connection with the preparation, prosecution, issuance or enforcement of any
applications for United States or foreign letters patent, including divisions, continuations,
continuations-in-part, reissues and/or extensions thereof, and any application for the registration
of such names and service marks.

     10.3 In the event the Executive creates, during the Employment Period, any original work of
authorship fixed in any tangible medium of expression which is the subject matter of copyright
(such as, videotapes, written presentations on acquisitions, computer programs, drawings, maps,
architectural renditions, models, manuals, brochures or the like) relating to the Company’s
business, products or services, whether such work is created solely by the Executive or jointly
with others, the Company shall be deemed the author of such work if the work is prepared by the
Executive in the scope of his employment; or, if the work is not prepared by the Executive within
the scope of his employment but is specially ordered by the Company as a contribution to a
collective work, as a part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work shall be considered
to be work made for hire, and the Company shall be the author of such work. If such work is
neither prepared by the Executive within the

16

 

scope of his employment nor a work specially ordered and deemed to be a work made for hire,
then the Executive hereby agrees to sell, transfer, assign and convey, and by these presents, does
sell, transfer, assign and convey, to the Company all of the Executive’s worldwide right, title and
interest in and to such work and all rights of copyright therein. The Executive agrees to assist
the Company and its Affiliates, at all times, during the Employment Period and thereafter, in the
protection of the Company’s worldwide right, title and interest in and to such work and all rights
of copyright therein, which assistance shall include, but shall not be limited to, the execution of
all documents requested by the Company or its nominee and the execution of all lawful oaths and
applications for registration of copyright in the United States and foreign countries.

     10.4 The provisions of this Section 10 shall not supersede any proprietary information
agreement (the “Proprietary Agreement”) between the Executive and the Company which shall remain in
full force and effect and, moreover, this Agreement, the Proprietary Agreement and any such other
similar agreement between the parties shall be construed and applied as being mutually consistent
to the fullest extent possible.

11. Certain Payments by the Company

     11.1 In the event that the Executive is deemed to have received an “excess parachute payment”
(as defined in Section 280G(b) of the Code) which is subject to the excise taxes (the “Excise
Taxes”) imposed by Section 4999 of the Code in respect of any payment pursuant to this Agreement or
any other agreement, plan, instrument or obligation, in whatever form, the Company shall make the
Bonus Payment (defined below) to the Executive notwithstanding any contrary provision in this
Agreement or any other agreement, plan, instrument or obligation.

     11.2 The term “Bonus Payment” means a cash payment in an amount equal to the sum of (i) all
Excise Taxes payable by the Executive, plus (ii) all additional Excise Taxes and federal or state
income taxes to the extent such taxes are imposed in respect of the Bonus Payment, such that the
Executive shall be in the same after-tax position and shall have received the same benefits that he
would have received if the Excise Taxes had not been imposed. For purposes of calculating any
income taxes attributable to the Bonus Payment, the Executive shall be deemed for all purposes to
be paying income taxes at the highest marginal federal income tax rate, taking into account any
applicable surtaxes and other generally applicable taxes which have the effect of increasing the
marginal federal income tax rate and, if applicable, at the highest marginal state income tax rate,
to which the Bonus Payment and the Executive are subject. An example of the calculation of the
Bonus Payment is set forth below. Assume that the Excise Tax rate is 20%, the highest federal
marginal income tax rate is 40% and the Executive is not subject to state income taxes. Further
assume that the Executive has received an excess parachute payment in the amount of $200,000, on
which $40,000 ($200,000 x 20%) in Excise Taxes are payable. The amount of the required Bonus
Payment is thus computed to be $100,000, i.e., the Bonus Payment of $100,000, less additional
Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x $100,000) and income taxes of $40,000
(i.e., 40% x $100,000), yields $40,000, the amount of the Excise Taxes payable in respect of the
original excess parachute payment.

     11.3 The Executive agrees to reasonably cooperate with the Company to minimize the amount of
the excess parachute payments, including, without limitation, assisting the Company

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in establishing that some or all of the payments received by the Executive that are
“contingent on a change,” as described in Section 280G(b)(2)(A)(i) of the Code, are reasonable
compensation for personal services actually rendered by the Executive before the date of such
change or to be rendered by the Executive on or after the date of such change. In the event that
the Company is able to establish that the amount of the excess parachute payments is less than
originally anticipated by the Executive, the Executive shall refund to the Company any excess Bonus
Payment to the extent not required to pay Excise Taxes or income taxes (including those incurred in
respect of receipt of the Bonus Payment). Notwithstanding the foregoing, the Executive shall not
be required to take any action which his attorney or tax advisor advises him in writing (i) is
improper or (ii) exposes the Executive to personal liability. The Executive may require the
Company to deliver to the Executive an indemnification agreement in form and substance reasonably
satisfactory to the Executive as a condition to taking any action required by this Section 11.3.

     11.4 The Company shall make any payment required to be made under Section 11 hereof in a cash
lump sum after the date on which the Executive received or is deemed to have received any such
excess parachute payment. Any payment required to be paid by the Company under Section 11 hereof
which is not paid within 30 days of receipt by the Company of the Executive’s written demand
therefor, delivered in accordance with Section 13.1 hereof, shall thereafter be deemed delinquent,
and the Company shall pay to the Executive immediately upon demand interest at the highest
nonusurious rate per annum allowed by applicable law from the date such payment becomes delinquent
to the date of payment of such delinquent sum with interest.

     11.5 In the event that there is any change to the Code which results in the recodification of
Section 280G or Section 4999 of the Code, or in the event that either such section of the Code is
amended, replaced or supplemented by other provisions of the Code of similar import (“Successor
Provisions”), then this Agreement shall be applied and enforced with respect to such new Code
provisions in a manner consistent with the intent of the parties as expressed herein, which is to
assure that the Executive is in the same after-tax position and has received the same benefits that
he would have been in and received if any taxes imposed by Section 4999 (or any Successor
Provisions) had not been imposed.

     11.6 All determinations required to be made under Section 11 hereof including, without
limitation, whether and when a Bonus Payment is required, and the amount of such Bonus Payment and
the assumptions to be utilized in arriving at such determinations, unless otherwise expressly set
forth in this Agreement, shall be made within 30 days from the Date of Termination by the
independent tax consultant(s) selected by the Company and reasonably acceptable to the Executive
(the “Tax Consultant”). The Tax Consultant must be a qualified tax attorney or certified public
accountant. All fees and expenses of the Tax Consultant shall be paid in full by the Company. Any
Excise Taxes as determined pursuant to Section 11 hereof shall be paid by the Company to the
Internal Revenue Service or any other appropriate taxing authority on the Executive’s behalf within
five (5) business days after receipt of the Tax Consultant’s final determination by the Company and
the Executive.

     11.7 If the Tax Consultant determines that there is substantial authority (within the meaning
of Section 6662 of the Code) that no Excise Taxes are payable by the Executive, the

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Tax Consultant shall furnish the Executive with a written opinion that failure to disclose or
report the Excise Taxes on the Executive’s federal income tax return will not constitute a
substantial understatement of tax or be reasonably likely to result in the imposition of a
negligence or any other penalty.

     11.8 The Company shall indemnify and hold harmless the Executive, on an after-tax basis, from
any costs, expenses, penalties, fines, interest or other liabilities (“Losses”) incurred by the
Executive with respect to the exercise by the Company of any of its rights under Section 11 hereof,
including, without limitation, any Losses related to the Company’s decision to contest a claim of
any imputed income to the Executive. The Company shall pay all fees and expenses incurred under
Section 11 hereof, and shall promptly reimburse the Executive for the reasonable expenses incurred
by the Executive in connection with any actions taken by the Company or required to be taken by the
Executive hereunder. Any payments owing to the Executive and not made within 30 days of delivery,
in accordance with Section 13.1 hereof, to the Company of evidence of the Executive’s entitlement
thereto shall be paid to the Executive together with interest at the maximum nonusurious rate
permitted by law.

12. Executive’s Non-Competition Obligation.

     12.1 (a) All references in this Section 12 to the Company shall mean and include its
Affiliates. During the Employment Period and for the 12-month period following the Date of
Termination hereof, the Executive shall not, acting alone or in conjunction with others, directly
or indirectly, in the United States and any other business territories in which the Company is
presently or from time to time during the Employment Period conducting business, invest or engage,
directly or indirectly, in any Competing Business or accept employment with or render services to
such a Competing Business as a director, officer, agent, executive or consultant or in any other
capacity; provided, however, that this Section 12.1(a) shall not be deemed violated if the
Executive is or becomes the Beneficial Owner of up to three percent of the Voting Stock of any
corporation subject to the periodic reporting requirements of the Exchange Act. Notwithstanding
the above, the Executive may serve as an officer, director, agent, employee or consultant to a
Competing Business whose business is diversified and which is, as to the part of its business to
which the Executive is providing services, not a Competing Business; provided, that prior to
accepting employment or providing services to such a Competing Business, the Executive and the
Competing Business will provide written assurances satisfactory to the Company that the Executive
will not render services directly or indirectly for a 12-month period to any portion of the
Competing Business which competes directly or indirectly with the Company.

       (b) In addition to the other obligations agreed to by the Executive in this Agreement, the
Executive agrees that for 12 months following the Date of Termination hereof, he shall not directly
or indirectly, (i) hire or attempt to hire any employee of the Company, or induce, entice,
encourage or solicit any employee of the Company to leave his or her employment, or (ii) contact,
communicate or solicit any distributor, customer or acquisition or business prospect or business
opportunity of the Company for the purpose of causing them to terminate or alter or amend their
business relationship with the Company to the Company’s detriment.

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     Notwithstanding the foregoing, if the Company fails to make the payments to the Executive set
forth in Section 6.3 or 6.4 hereof, then the terms of this Section 12.1 will not be effective from
the date of such nonpayment; provided, that if the Company subsequently makes any such payments,
this Section 12.1 will become effective in accordance with its terms for so long as the Company
continues to make the payments required by Section 6.3 or 6.4 hereof.

     12.2 (a) The Executive hereby specifically acknowledges and agrees that:

     (1) The Company expended and will continue to expend substantial time, money
and effort in developing its business;

     (2) The Executive will, in the course of his employment, be personally
entrusted with and exposed to Confidential Information;

     (3) The Company, during the Employment Period and thereafter, will be engaged
in its highly competitive business in which many firms compete;

     (4) The Executive could, after having access to the Company’s financial
records, contracts, and other Confidential Information and know-how and, after
receiving training by and experience with the Company, become a competitor;

     (5) The Company will suffer great loss and irreparable harm if the Executive
terminates his employment and enters, directly or indirectly, into competition with
the Company;

     (6) The temporal and other restrictions contained in this Section 12 are in all
respects reasonable and necessary to protect the business goodwill, trade secrets,
prospects and other reasonable business interests of the Company;

     (7) The enforcement of this Agreement in general, and of this Section 12 in
particular, will not work an undue or unfair hardship on the Executive or otherwise
be oppressive to him; it being specifically acknowledged and agreed by the Executive
that he has activities and other business interests and opportunities which will
provide him adequate means of support if the provisions of this Section 12 are
enforced after the Termination Date; and

     (8) The enforcement of this Agreement in general, and of this Section 12 in
particular, will neither deprive the public of needed goods or services nor
otherwise be injurious to the public.

     (b) The Executive agrees that if an arbitrator (pursuant to Section 13.13 hereof) or a court
of competent jurisdiction determines that the length of time or any other restriction, or portion
thereof, set forth in this Section 12 is overly restrictive and unenforceable, the arbitrator or
court shall reduce or modify such restrictions to those which it deems reasonable and enforceable
under the circumstances, and as so reduced or modified, the parties hereto agree that the
restrictions of this Section 12 shall remain in full force and effect. The Executive further
agrees that if an arbitrator or court of competent jurisdiction determines that any provision of
this

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Section 12 is invalid or against public policy, the remaining provisions of this Section 12
and the remainder of this Agreement shall not be affected thereby, and shall remain in full force
and effect.

     (c) In the event of any pending, threatened or actual breach of any of the covenants or
provisions of Sections 8, 9, 10 or 12 hereof, as determined by a court of competent jurisdiction,
it is understood and agreed by the Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate and, therefore, the Company shall be
entitled to a restraining order or injunctive relief in addition to any other remedies at law and
in equity, as determined by a court of competent jurisdiction. Should a court of competent
jurisdiction or an arbitrator (pursuant to Section 13.13 hereof) declare any provision of Sections
8, 9, 10 or 12 hereof to be unenforceable due to an unreasonable restriction of duration or
geographical area, or for any other reason, such court or arbitrator is hereby granted the consent
of each of the Executive and the Company to reform such provision and/or to grant the Company any
relief, at law or in equity, reasonably necessary to protect the reasonable business interests of
the Company or any of its Affiliates. The Executive hereby acknowledges and agrees that all of the
covenants and other provisions of Sections 8, 9, 10 or 12 hereof are reasonable and necessary for
the protection of the Company’s reasonable business interests. The Executive hereby agrees that if
the Company prevails in any action, suit or proceeding with respect to any matter arising out of or
in connection with Sections 8, 9, 10 or 12 hereof, the Company shall be entitled to all equitable
and legal remedies, including, but not limited to, injunctive relief and compensatory damages, as
determined by a court of competent jurisdiction.

     (d) It is acknowledged, understood and agreed by and between the parties hereto that the
covenants made by the Executive in this Section 12 are essential elements of this Agreement and
that, but for the agreement of the Executive to comply with such covenants, the Company would not
have entered into this Agreement.

13. Miscellaneous.

     13.1 Notices. 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):

If to the Company to:

Encysive Pharmaceuticals Inc.

4848 Loop Central Drive, 7th Floor

Houston, Texas 77081

Attention: Chief Executive Officer

Facsimile No.: (713) 782-8232

If to the Executive to:

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George W. Cole

Encysive Pharmaceuticals Inc.

4848 Loop Central Drive, 7th Floor

Houston, Texas 77081

Facsimile No.: (713) 782-8232

or to such other names or 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 13.1.

     13.2 Waiver of Breach. The waiver by any 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.

     13.3 Assignment. This Agreement shall be binding upon and inure to the benefit of the
Company, its successors, legal representatives and assigns, and upon the Executive, his heirs,
executors, administrators, representatives and assigns; provided, however, the Executive agrees
that his rights and obligations hereunder are personal to him and may not be assigned without the
express written consent of the Company. Any reference to “Company” herein shall mean the Company
as well as any successors thereto.

     13.4 Entire Agreement; No Oral Amendments. This Agreement, together with any exhibit
attached hereto and any document, policy, rule or regulation referred to herein, replaces all
previous agreements and discussions relating to the same or similar subject matter between the
Executive and the Company, and constitutes the entire agreement between the Executive and the
Company with respect to the subject matter of this Agreement. This Agreement may not be modified
in any respect by any verbal statement, representation or agreement made by any executive, officer,
or representative of the Company or by any written agreement unless signed by an officer of the
Company who is expressly authorized by the Company to execute such document.

     13.5 Enforceability. If any provision of this Agreement or application thereof to
anyone or under any circumstances shall be determined to be invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions or applications of this
Agreement which can be given effect without the invalid or unenforceable provision or application.

     13.6 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.

     13.7 Corporate Authority. The Company has all corporate power and authority necessary
to enter into this Agreement and to perform its obligations hereunder. This Agreement has been
duly authorized, executed and delivered by the Company.

     13.8 Defense of Claims. The Executive agrees that, during the Employment Period and
for a period of two (2) years after his Termination Date, upon request from the Company, he

22

 

will reasonably cooperate with the Company and its Affiliates in the defense of any claims or
actions that may be made by or against the Company or any of its Affiliates that affect his prior
areas of responsibility, except if the Executive’s reasonable interests are adverse to the Company
or Affiliates in such claim or action. To the extent travel is required to comply with the
requirements of this Section 13.8, 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 13.8.

     13.9 Withholdings: Right of Offset. The Company may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local
and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b)
all other employee deductions made with respect to the Company’s employees generally, and (c) any
advances made to the Executive and owed to the Company.

     13.10 Nonalienation. The right to receive payments under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or
encumbrance by the Executive, his dependents or beneficiaries, or to any other person who is or may
become entitled to receive such payments hereunder. The right to receive payments hereunder shall
not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any
person who is or may become entitled to receive such payments, nor may the same be subject to
attachment or seizure by any creditor of such person under any circumstances, and any such
attempted attachment or seizure shall be void and of no force and effect.

     13.11 Incompetent or Minor Payees. Should the Board determine that any person to whom
any payment is payable under this Agreement has been determined to be legally incompetent or is a
minor, any payment due hereunder may, notwithstanding any other provision of this Agreement to the
contrary, be made in any one or more of the following ways: (a) directly to such minor or person;
(b) to the legal guardian or other duly appointed personal representative of the person or estate
of such minor or person; or (c) to such adult or adults as have, in the good faith knowledge of the
Board, assumed custody and support of such minor or person; and any payment so made shall
constitute full and complete discharge of any liability under this Agreement in respect to the
amount paid.

     13.12 Title and Headings; Construction. Titles and headings to Sections hereof 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.

     13.13 Arbitration.

     (a) If any dispute or controversy arises between the Executive and the Company relating to (1)
this Agreement in any way or arising out of the parties’ respective rights or obligations under
this Agreement or (2) the employment of the Executive or the termination of

23

 

such employment, then either party may submit the dispute or controversy to arbitration under
the then-current Commercial Arbitration Rules (the “Rules”) of the American Arbitration Association
(the “AAA”). Any arbitration hereunder shall be conducted before a panel of three arbitrators
unless the parties mutually agree that the arbitration shall be conducted before a single
arbitrator. The arbitrators shall be selected (from lists provided by the AAA) through mutual
agreement of the parties, if possible. If the parties fail to reach agreement upon appointment of
arbitrators within twenty (20) days following receipt by one party of the other party’s notice of
desire to arbitrate, then within five (5) days following the end of such 20-day period, each party
shall select one arbitrator who, in turn, shall within five (5) days jointly select the third
arbitrator to comprise the arbitration panel hereunder. The site for any arbitration hereunder
shall be in Harris County, Texas, unless otherwise mutually agreed by the parties, and the parties
hereby waive any objection that the forum is inconvenient.

     (b) The party submitting any matter to arbitration shall do so in accordance with the Rules.
Notice to the other party shall state the question or questions to be submitted for decision or
award by arbitration. Notwithstanding any provision of this Section 13.13, the Executive shall be
entitled to seek specific performance of the Executive’s right to be paid during the pendency of
any dispute or controversy arising under this Agreement. In order to prevent irreparable harm, the
arbitrator may grant temporary or permanent injunctive or other equitable relief for the protection
of property rights.

     (c) The arbitrator shall set the date, time and place for each hearing, and shall give the
parties advance written notice in accordance with the Rules. Any party may be represented by
counsel or other authorized representative at any hearing. The arbitration shall be governed by
the Federal Arbitration Act, 9 U.S.C. Sections 1 et. seq. (or its successor). The arbitrator shall
apply the substantive law and the law of remedies, if applicable) of the State of Texas to the
claims asserted to the extent that the arbitrator determines that federal law is not controlling.

     (d) (1) Any award of an arbitrator shall be final and binding upon the parties to such
arbitration, and each party shall immediately make such changes in its conduct or provide such
monetary payment or other relief as such award requires. The parties agree that the award of the
arbitrator shall be final and binding and shall be subject only to the judicial review permitted by
the Federal Arbitration Act.

     (2) The parties hereto agree that the arbitration award may he entered with any
court having jurisdiction and the award may then be enforced as between the parties,
without further evidentiary proceedings, the same as if entered by the court at the
conclusion of a judicial proceeding in which no appeal was taken. The Company and
the Executive hereby agree that a judgment upon any award rendered by an arbitrator
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

     (e) Each party shall pay any monetary amount required by the arbitrator’s award, and the fees,
costs and expenses for its own counsel, witnesses and exhibits, unless otherwise determined by the
arbitrator in the award. The compensation and costs and expenses assessed by the arbitrator(s) and
the AAA shall be split evenly between the parties unless otherwise

24

 

determined by the arbitrator in the award. If court proceedings to stay litigation or compel
arbitration are necessary, the party who opposes such proceedings to stay litigation or compel
arbitration, if such party is unsuccessful, shall pay all associated costs, expenses, and
attorney’s fees which are reasonably incurred by the other party as determined by the arbitrator.

     13.14 Survival of Certain Provisions. 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 8 through 12 hereof and this Section 13, shall
survive any termination or expiration of this Agreement.

     13.15 No Strict Construction. The Executive represents to the Company that he is
knowledgeable and sophisticated as to business matters, including the subject matter of this
Agreement, that he has read the Agreement and that he understands its terms and conditions. The
parties hereto agree that the language used in this Agreement shall be deemed to be the language
chosen by them to express their mutual intent, and no rule of strict construction shall be applied
against either party hereto. The Executive acknowledges that he has had the opportunity to consult
with counsel of his choice, independent of the Company’s counsel, regarding the terms and
conditions of this Agreement and has done so to the extent that he, in his discretion, deemed to be
appropriate.

[Signature page follows]

25

 

     IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this
Agreement as of the date first written above.

	 	 	 	 	 	 	 
	 	 	Encysive Pharmaceuticals Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 
	/s/ Bruce D. Given, M.D.
 

Bruce D. Given, M.D.,
	 	 
	 

	 	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Executive:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	/s/ George W. Cole
 

George W. Cole
	 	 

26

 

Exhibit A

Relocation Policy

(See Attached)

27

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