Document:

exv10w18

 

EXHIBIT 4.3 & 10.18

     THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER SECTION 4(2) AND/OR 4(6)
OF THE SECURITIES ACT OF 1933.

     THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER AUTHORITY HAS PASSED UPON OR ENDORSED
THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED TO THE
INVESTORS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE COMPANY, AND THE RISKS, MERITS AND TERMS OF THIS OFFERING IN MAKING AN
INVESTMENT DECISION.

CANEUM, INC.

GRANT OF STOCK OPTION

     This Grant of Stock Option is hereby offered to Optionee with respect to the following option
grant (the “Option”) to purchase shares of the Common Stock of Caneum, Inc. (the “Corporation”):

			
	     Optionee:	 	
 

			
	     Grant Date:	 	
 

			
	     Vesting Commencement:	 	
 

     Exercise Price: $                     per share

     Number of Option Shares:                                         shares

			
	     Expiration Date:	 	
 

	 	 	 
	     Type of Option:

	 	               Non-Statutory
	 

	 	               Incentive Stock Option

     Date Exercisable: Following Vesting

			
	     Vesting Schedule:	 	
 

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     Optionee understands and agrees that the Option is granted subject to and in accordance with
the terms of the Company’s 2002 Stock Option/Stock Issuance Plan (the “Plan”). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock
Option Agreement, a copy of which is attached hereto as Exhibit A.

     Optionee understands that any Option Shares purchased under the Option will be subject to the
terms set forth in the Stock Purchase Agreement attached hereto as Exhibit B. Optionee hereby
acknowledges receipt of a copy of the Plan in the form attached hereto as Exhibit C.

     All capitalized terms in this Grant form shall have the meaning assigned to them in this form
or in the attached Plan.

     Assuming that you are in agreement with the terms of this Grant of Stock Option, please sign
your name in the space indicated below.

	 	 	 	 	 
	 	Caneum, Inc.

By                                                                                

Suki Mudan, President

 	 
	 	 	 
	 	 	 
	 	 	 
	 

AGREED:

 

OPTIONEE

     

Address:                                                            

 

	 	 	 
	Exhibit A

	 	Stock Option Agreement
	Exhibit B

	 	Stock Purchase Agreement
	Exhibit C

	 	2002 Stock Option/Stock Issuance Plan

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EXHIBIT A

CANEUM, INC.

(formerly SAIPHT CORPORATION)

STOCK OPTION AGREEMENT

RECITALS

     A. The Board has adopted the Plan for the purpose of retaining the services of selected
Employees, non-employee members of the Board or the Board of Directors of any Parent or Subsidiary
and consultants and other independent advisors in the service of the Corporation (or any Parent or
Subsidiary).

     B. Optionee is to render valuable services to the Corporation (or a Parent or Subsidiary), and
this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation’s grant of an option to Optionee.

     C. All capitalized terms in this Agreement shall have the meaning assigned to them in the
attached Appendix.

     NOW, THEREFORE, it is hereby agreed as follows:

     1. Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date,
an option to purchase up to the number of Option Shares specified in the Grant Form. The Option
Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at
the Exercise Price.

     2. Option Term. This option shall have a term commencing on the Grant Date and shall
accordingly expire at the close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5 or 6.

     3. Limited Transferability. During Optionee’s lifetime, this option shall be
exercisable only by Optionee and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following Optionee’s death.

     4. Dates of Exercise. This option shall become exercisable for the Option Shares in
one or more installments as specified in the Grant Form. As the option becomes exercisable for
such installments, those installments shall accumulate and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

     5. Cessation of Service. Except as provided in the Grant Form or the Plan, the option
term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior
to the Expiration Date should the Optionee cease to remain in Service as provided in the Plan,
provided, however, that notwithstanding the foregoing and notwithstanding

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the provisions of paragraph II(B)(4)(a) of the Plan, the option may be exercised up until the
Expiration Date of the option. Except as provided in the Grant Form or the Plan, during the
limited period of post-Service exercisability, this option may not be exercised in the aggregate
for more than the number of Option Shares in which Optionee is, at the time of Optionee’s cessation
of Service, vested pursuant to the Vesting Schedule specified in the Grant Form. Upon the
expiration of such limited exercise period or (if earlier) upon the Expiration Date, this option
shall terminate and cease to be outstanding for any vested Option Shares for which the option has
not been exercised. To the extent Optionee is not vested in the Option Shares at the time of
Optionee’s cessation of Service, this option shall immediately terminate and cease to be
outstanding with respect to those shares. In the event of a Corporate Transaction, the provisions
of Paragraph 6 shall govern the period for which this option is to remain exercisable following
Optionee’s cessation of Service and shall supersede any provisions to the contrary in this
paragraph.

     6. Corporate Transaction

     (a) The vesting provisions set forth in the Grant Form shall apply in the event of a Corporate
Transaction (as defined in the appendix to this Agreement).

     (b) Any unvested option shall immediately vest in its entirety effective upon the time
immediately prior to the consummation of a Corporate Transaction .

     (c) If this option is assumed in connection with a Corporate Transaction, then this option
shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the
number and class of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of such Corporate
Transaction and (ii) the Exercise Price, provided, the aggregate Exercise Price shall remain the
same.

     (d) This Agreement shall not in any way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

     7. Adjustment in Option Shares. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or
class of securities subject to this option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.

     8. Shareholder Rights. The holder of this option shall not have any shareholder
rights with respect to the Option Shares until such person shall have exercised the option, paid
the Exercise Price and become a holder of record of the purchased shares.

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     9. Manner of Exercising Option.

     (a) In order to exercise this option with respect to all or any part of the Option Shares for
which this option is at the time exercisable, Optionee (or any other person or persons exercising
the option) must take the following actions:

       (i) Execute and deliver to the Corporation a Purchase Agreement for the Option Shares for
which the option is exercised.

       (ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following
forms:

         (A) cash or check made payable to the Corporation; or

         (B) a promissory note payable to the Corporation, but only to the extent authorized by the
Plan Administrator in accordance with Paragraph 13.

         (C) in shares of Common Stock held by Optionee (or any other person or persons exercising the
option) for the requisite period necessary to avoid a charge to the Corporation’s earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise Date; or

         (D) to the extent the option is exercised for vested Option Shares, through a special sale and
remittance procedure pursuant to which Optionee (or any other person or persons exercising the
option) shall concurrently provide irrevocable instructions (a) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by reason of such exercise and (b)
to the Corporation to deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.

     Except to the extent the sale and remittance procedure is utilized in connection with the
option exercise, payment of the Exercise Price must accompany the Purchase Agreement delivered to
the Corporation in connection with the option exercise.

       (iii) Furnish to the Corporation appropriate documentation that the person or persons
exercising the option (if other than Optionee) have the right to exercise this option.

       (iv) Execute and deliver to the Corporation such written representations as may be requested
by the Corporation in order for it to comply with the applicable requirements of Federal and state
securities laws.

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       (v) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or
retaining Optionee) for the satisfaction of all federal, state and local income and employment tax
withholding requirements applicable to the option exercise.

     (b) As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf
of Optionee (or any other person or persons exercising this option) a certificate for the purchased
Option Shares, with the appropriate legends affixed thereto.

     (c) In no event may this option be exercised for any fractional shares.

     10. Compliance with Laws and Regulations.

     (a) The exercise of this option and the issuance of the Option Shares upon such exercise shall
be subject to compliance by the Corporation and Optionee with all applicable requirements of law
relating thereto and with all applicable regulations of any stock exchange (or the NASDAQ National
Market, if applicable) on which the Common Stock may be listed for trading at the time of such
exercise and issuance.

     (b) The inability of the Corporation to obtain approval from any regulatory body having
authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common
Stock pursuant to this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such approvals.

     11. Successors and Assigns. Except to the extent otherwise provided in Paragraphs 3
and 6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the
Corporation and its successors and assigns and Optionee, Optionee’s assigns and the legal
representatives, heirs and legatees of Optionee’s estate.

     12. Notices. Any notice required to be given or delivered to the Corporation under
the terms of this Agreement shall be in writing and addressed to the Corporation at its principal
corporate offices. Any notice required to be given or delivered to Optionee shall be in writing
and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant
Form. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.

     13. Financing. The Plan Administrator may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the purchased Option Shares by
delivering a full-recourse, interest-bearing promissory note secured by those Option Shares. The
payment schedule in effect for any such promissory note shall be established by the Plan
Administrator in its sole discretion.

     14. Construction. This Agreement and the option evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to the terms of the

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Plan. All decisions of the Plan Administrator with respect to any question or issue arising under
the Plan or this Agreement shall be conclusive and binding on all persons having an interest in
this option.

     15. Shareholder Approval. If the Option Shares covered by this Agreement exceed, as
of the Grant Date, the number of shares of Common Stock which may be issued under the Plan as last
approved by the shareholders, then this option shall be void with respect to such excess shares,
unless shareholder approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of the Plan.

     16. Additional Terms Applicable to an Incentive Option. To the extent any option
designated in the Grant Form as an Incentive Option would not qualify in whole or in part for
favorable tax treatment as an Incentive Option at the time of exercise, such option may
nevertheless be exercised by the Optionee as a Non-Statutory Option.

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APPENDIX

The following definitions shall be in effect under the Agreement:

	1.	 	Agreement shall mean this Stock Option Agreement.
	 
	2.	 	Board shall mean the Corporation’s Board of Directors.
	 
	3.	 	Code shall mean the Internal Revenue Code of 1986, as amended.
	 
	4.	 	Committee shall mean a committee of two (2) or more non-employee Board members appointed
by the Board to exercise one or more administrative functions under the Plan.
	 
	5.	 	Common Stock shall mean the Corporation’s common stock.
	 
	6.	 	Corporate Transaction shall mean either of the following shareholder approved
transactions to which the Corporation is a party:

(a) a merger or consolidation in which securities possessing more than fifty percent (50%)

of the total combined voting power of the Corporation’s outstanding securities are

transferred to a person or persons different from the persons holding those securities

immediately prior to such transaction, or

(b) the sale, transfer or other disposition of all or substantially all of the Corporation’s

assets in complete liquidation or dissolution of the Corporation.

	7.	 	Corporation shall mean Caneum, Inc., a Nevada corporation, and any successor
corporation to all or substantially all of the assets or voting stock of Caneum, Inc. which
shall by appropriate action adopt the Plan.
	 
	8.	 	Disability shall mean the inability of the Optionee or the Participant to engage in
any substantial gainful activity by reason of any medically determinable physical or mental
impairment and shall be determined by the Plan Administrator on the basis of such medical
evidence as the Plan Administrator deems warranted under the circumstances.
	 
	9.	 	Employee shall mean an individual who is in the employ of the Corporation (or any
Parent or Subsidiary), subject to the control and direction of the employer entity as to both
the work to be performed and the manner and method of performance.
	 
	10.	 	Exercise Date shall mean the date on which the option shall have been exercised in
accordance with Paragraph 9 of the Agreement.
	 
	11.	 	Exercise Price shall mean the exercise price payable per Option Share as specified in
the Grant Form.

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	12.	 	Expiration Date shall mean the date on which the option expires as specified in the
Grant Form.
	 
	13.	 	Fair Market Value per share of Common Stock on any relevant date shall be determined
in accordance with the following provisions:

(a) If the Common Stock is at the time traded on the NASDAQ National Market, then the

Fair Market Value shall be the closing selling price per share of Common Stock on the date

in question, as such price is reported by the National Association of Securities Dealers on

the NASDAQ National Market or any successor system. If there is no closing selling price

for the Common Stock on the date in question, then the Fair Market Value shall be the

closing selling price on the last preceding date for which such quotation exists.

(b) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market

Value shall be the closing selling price per share of Common Stock on the date in question

on the Stock Exchange determined by the Plan Administrator to be the primary market for the

Common Stock, as such price is officially quoted in the composite tape of transactions on

such exchange. If there is no closing selling price for the Common Stock on the date in

question, then the Fair Market Value shall be the closing selling price on the last

preceding date for which such quotation exists.

(c) If the Common Stock is at the time neither listed on any Stock Exchange nor traded on

the NASDAQ National Market, then the Fair Market Value shall be determined by the Plan

Administrator after taking into account such factors as the Plan Administrator shall deem

appropriate.

	14.	 	Grant Date shall mean the date of grant of the option as specified in the Grant Form.
	 
	15.	 	Grant Form shall mean the Grant of Stock Option accompanying the Agreement, pursuant
to which Optionee has been informed of the basic terms of the option evidenced hereby.
	 
	16.	 	Incentive Option shall mean an option which satisfies the requirements of Code
Section 422.
	 
	17.	 	Involuntary Termination shall mean the termination of the Service of any individual
which occurs by reason of :

(a) such individual’s involuntary dismissal or discharge by the Corporation for reasons

other than Misconduct, or

(b) such individual’s voluntary resignation following (A) a change in his or her position

with the Corporation which materially reduces his or her level of responsibility, (B) a

reduction in his or her level of compensation (including base salary, fringe benefits and

target bonuses under any corporate performance based bonus or incentive programs)

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by more than fifteen percent (15%), or (c) a relocation of such individual’s place of

employment by more than fifty (50) miles, provided and only if such change, reduction or

relocation is effected without the individual’s consent.

The Plan Administrator shall be entitled to revise the definition of Involuntary Termination

and Misconduct with respect to individual Optionees or Participants under the Plan.

	18.	 	Misconduct shall mean (i) the final conviction of Employee of, or Employee’s plea of
guilty or nolo contendere to, any felony involving moral turpitude, (ii) fraud,
misappropriation or embezzlement by Employee in connection with Employee’s duties to the
Corporation (or any Parent of Subsidiary), or (iii) Employee’s willful failure or gross
misconduct in the performance of his duties to the Corporation (or any Parent or Subsidiary).
	 
	19.	 	1934 Act shall mean the Securities Exchange Act of 1934, as amended.
	 
	20.	 	Non-Statutory Option shall mean an option not intended to satisfy the requirements of
Code Section 422.
	 
	21.	 	Option Shares shall mean the number of shares of Common Stock subject to the option.
	 
	22.	 	Optionee shall mean the person to whom the option is granted as specified in the
Grant Form.
	 
	23.	 	Parent shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
	 
	24.	 	Plan shall mean the Corporation’s 2002 Stock Option/Stock Issuance Plan.
	 
	25.	 	Plan Administrator shall mean either the Board or the Committee of the Board acting
in its capacity as administrator of the Plan.
	 
	26.	 	Purchase Agreement shall mean the stock purchase agreement in substantially the form
of Exhibit B to the Grant Form.
	 
	27.	 	Service shall mean the provision of services to the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of
directors or a consultant or independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant.
	 
	28.	 	Stock Exchange shall mean the American Stock Exchange or the New York Stock

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	 	 	Exchange.
	29.	 	Subsidiary shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than
the last corporation) in the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
	 
	30.	 	Vesting Schedule shall mean the vesting schedule specified in the Grant Form pursuant
to which the Optionee is to vest in the Option Shares in a series of installments over his or
her period of Service.

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EXHIBIT B

CANEUM, INC.

(formerly SAIPHT CORPORATION)

STOCK PURCHASE AGREEMENT

     AGREEMENT made this                      day of                                         
, 20        , by and between Caneum,
Inc., a Nevada corporation, and                                                           , Optionee under the Corporation’s 2002 Stock Option/Stock Issuance
Plan.

     All capitalized terms in this Agreement shall have the meaning assigned to them in this
Agreement or in the attached Appendix.

A. EXERCISE OF OPTION

     1. Exercise.
Optionee hereby purchases                                                             
shares of Common Stock (the “Purchased
Shares”) pursuant to that certain option (the
“Option”) granted Optionee on
                                                            ,
20      (the
“Grant Date”) to purchase up to shares of Common Stock (the “Option Shares”) under the Plan at the
exercise price of $                                            per share (the “Exercise Price”).

     2. Payment. Concurrently with the delivery of this Agreement to the Corporation,
Optionee shall pay the Exercise Price for the Purchased Shares in accordance with the provisions of
the Option Agreement and shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise.

     3. Shareholder Rights. Optionee (or any successor in interest) shall have all the
rights of a shareholder (including voting, dividend and liquidation rights) with respect to the
Purchased Shares, subject, however, to the transfer restrictions of Sections B and C.

B. SPECIAL TAX ELECTION

     In the event the Purchased Shares include Option Shares which have not yet vested as of the
date hereof, the acquisition of the Purchased Shares may result in adverse tax consequences which
may be avoided or mitigated by filing an election under Code Section 83(b). Such election must be
filed within thirty (30) days after the date of this Agreement. OPTIONEE SHOULD CONSULT WITH HIS
OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED SHARES AND THE
ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. OPTIONEE ACKNOWLEDGES THAT
IT IS OPTIONEE’S SOLE RESPONSIBILITY, AND NOT THE CORPORATION’S, TO FILE A TIMELY ELECTION UNDER
CODE SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS
FILING ON HIS OR HER BEHALF.

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C. GENERAL PROVISIONS

     1. No Employment or Service Contract. Nothing in this Agreement or in the Plan shall
confer upon Optionee any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are hereby expressly
reserved by each, to terminate Optionee’s Service at any time for any reason, with or without
cause.

     2. Notices. Any notice required to be given under this Agreement shall be in writing
and shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, registered
or certified, postage prepaid and properly addressed to the party entitled to such notice at the
address indicated below such party’s signature line on this Agreement or at such other address as
such party may designate by ten (10) days advance written notice under this paragraph to all other
parties to this Agreement.

     3. No Waiver. No waiver of any breach or condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like or different nature.

D. MISCELLANEOUS PROVISIONS

     1. Optionee Undertaking. Optionee hereby agrees to take whatever additional action
and execute whatever additional documents the Corporation may deem necessary or advisable in order
to carry out or effect one or more of the obligations or restrictions imposed on either Optionee or
the Purchased Shares pursuant to the provisions of this Agreement.

     2. Agreement is Entire Contract. This Agreement constitutes the entire contract
between the parties hereto with regard to the subject matter hereof. This Agreement is made
pursuant to the provisions of the Plan and shall in all respects be construed in conformity with
the terms of the Plan.

     3. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one and the same
instrument.

     4. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns and upon Optionee,
Optionee’s permitted assigns and the legal representatives, heirs and legatees of Optionee’s
estate, whether or not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms hereof

     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year

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first
indicated above.

	 	 	 	 	 
	 	 	Caneum, Inc.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	OPTIONEE
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 	 	(Signature)
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 	 	(Print Name)
	 
	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	 

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SPOUSAL ACKNOWLEDGMENT

     The undersigned spouse of Optionee has read and hereby approves the foregoing Stock Purchase
Agreement. In consideration of the Corporation’s granting Optionee the right to acquire the
Purchased Shares in accordance with the terms of such Agreement, the undersigned hereby agrees to
be irrevocably bound by all the terms of such Agreement, including (without limitation) the right
of the Corporation (or its assigns) to purchase any Purchased Shares in which Optionee is not
vested at time of his or her cessation of Service.

	 	 	 	 	 
	 
	 	 	 	 
	 	 	 
	 	 	OPTIONEE’S SPOUSE
	 
	 	 	 	 
	 

	 	Address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	 

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APPENDIX

	 	 	The following definitions shall be in effect under the Agreement:
	 
	1.	 	Agreement shall mean this Stock Purchase Agreement.
	 
	2.	 	Board shall mean the Corporation’s Board of Directors.
	 
	3.	 	Code shall mean the Internal Revenue Code of 1986, as amended.
	 
	4.	 	Committee shall mean a committee of two (2) or more non-employee Board members
appointed by the Board to exercise one or more administrative functions under the Plan.
	 
	5.	 	Common Stock shall mean the Corporation’s common stock.
	 
	6.	 	Corporate Transaction shall mean either of the following shareholder approved
transactions to which the Corporation is a party:
	 
	 	 	(a)   a merger or consolidation in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those securities
immediately prior to such transaction, or
	 
	 	 	(b)   the sale, transfer or other disposition of all or substantially all of the Corporation’s
assets in complete liquidation or dissolution of the Corporation.
	 
	7.	 	Corporation shall mean Caneum, Inc., a Nevada corporation.
	 
	8.	 	Exercise Price shall have the meaning assigned to such term in Section A.1.
	 
	9.	 	Fair Market Value per share of Common Stock on any relevant date shall be determined
in accordance with the following provisions:
	 
	 	 	(a)   If the Common Stock is at the time traded on the NASDAQ National Market, then the
Fair Market Value shall be the closing selling price per share of Common Stock on the date
in question, as such price is reported by the National Association of Securities Dealers on
the NASDAQ National Market or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation exists.
	 
	 	 	(b)   If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market
Value shall be the closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of

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	 	 	transactions on such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
	 
	 	 	(c)   If the Common Stock is at the time neither listed on any Stock Exchange nor traded on
the NASDAQ National Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator shall deem
appropriate.
	 
	10.	 	Grant Date shall have the meaning assigned to such term in Section A.1.
	 
	11.	 	Grant Form shall mean the Grant of Stock Option pursuant to which Optionee has been
informed of the basic terms of the Option.
	 
	12.	 	Incentive Option shall mean an option which satisfies the requirements of Code
Section 422.
	 
	13.	 	1933 Act shall mean the Securities Act of 1933, as amended.
	 
	14.	 	1934 Act shall mean the Securities Exchange Act of 1934, as amended.
	 
	15.	 	Non-Statutory Option shall mean an option not intended to satisfy the requirements of
Code Section 422.
	 
	16.	 	Option shall have the meaning assigned to such term in Section A.1.
	 
	17.	 	Option Agreement shall mean all agreements and other documents evidencing the Option.
	 
	18.	 	Optionee shall mean the person to whom the Option is granted under the Plan.
	 
	19.	 	Parent shall mean any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
	 
	20.	 	Plan shall mean the Corporation’s 2002 Stock Option/Stock Issuance Plan.
	 
	21.	 	Plan Administrator shall mean either the Board or the Committee acting in its
capacity as administrator of the Plan.
	 
	22.	 	Purchased Shares shall have the meaning assigned to such term in Section A.1.

6

 

	23.	 	Recapitalization shall mean any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the Corporation’s
outstanding Common Stock as a class without the Corporation’s receipt of consideration.
	 
	24.	 	SEC shall mean the Securities and Exchange Commission.
	 
	25.	 	Service shall mean the provision of services to the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of
directors or a consultant or independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant.
	 
	26.	 	Subsidiary shall mean any corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each corporation (other than
the last corporation) in the unbroken chain owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
	 
	27.	 	Vesting Schedule shall mean the vesting schedule specified in the Grant Form pursuant
to which the Optionee is to vest in the Option Shares in a series of installments over his or
her period of Service.

7exv10w1

 

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”).

W I T N E S S E T H:

     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

2

 

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.

3

 

     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.

4

 

     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.

3. Term.

5

 

     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.

     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

6

 

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.

7

 

     (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.

8

 

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

9

 

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

11

 

a new employer which maintains a medical plan that either (i) does not cover the
Executive or a family member or dependent with respect to a preexisting condition which was
covered under the applicable Company medical plan, or (ii) does not cover the Executive or a
family member or dependent for a designated waiting period, the Executive’s coverage under
the applicable Company medical plan shall continue (but shall be limited in the event of
noncoverage due to a preexisting condition, to such preexisting condition) until the earlier
of the end of the applicable period of noncoverage under the new employer’s plan or the
first anniversary of the Date of Termination. The Executive agrees to report to the Company
any coverage and benefits actually received by the Executive or made available to the
Executive from such other employer(s). The Executive shall be entitled to elect to change
his level of coverage and/or his choice of coverage options (such as Executive only or
family medical coverage) with respect to the benefits to be provided by the Company to the
Executive to the same extent that actively employed senior executive officers of the Company
are permitted to make such changes; provided, however, that in the event of any such changes
the Executive shall pay the amount of any cost increase that would actually be paid by an
actively employed senior executive officer of the Company by reason of making the same
change in his level of coverage or coverage options.

     (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:

12

 

          (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.

          (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.

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     (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.

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;

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     (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;

     (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

15

 

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.

	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

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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 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

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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 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

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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 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

19

 

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.

     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.

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     (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 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):

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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:

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.

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     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 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

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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 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.

24

 

          (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
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]

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     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

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Exhibit A

Relocation Policy

(See Attached)

27

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