<PAGE>





                              DURA PHARMACEUTICALS, INC.


                               (a Delaware corporation)


                       Convertible Subordinated Notes due 2002





                                  PURCHASE AGREEMENT







Dated:  July 24, 1997
<PAGE>

                                  TABLE OF CONTENTS

                                                                      Pages(s)
                                                                      --------
PURCHASE AGREEMENT.......................................................  1

    SECTION 1.    REPRESENTATIONS AND WARRANTIES.........................  3
    (a)  REPRESENTATIONS AND WARRANTIES BY THE COMPANY...................  3
         (i)      COMPLIANCE WITH REGISTRATION REQUIREMENTS..............  3
         (ii)     INCORPORATED DOCUMENTS.................................  4
         (iii)    INDEPENDENT ACCOUNTANTS................................  4
         (iv)     FINANCIAL STATEMENTS...................................  4
         (v)      NO MATERIAL ADVERSE CHANGE IN BUSINESS.................  5
         (vi)     GOOD STANDING OF THE COMPANY...........................  5
         (vii)    GOOD STANDING OF SUBSIDIARIES..........................  5
         (viii)   CAPITALIZATION.........................................  6
         (ix)     AUTHORIZATION OF AGREEMENT.............................  6
         (x)      AUTHORIZATION OF THE INDENTURE.........................  6
         (xi)     AUTHORIZATION OF THE SECURITIES........................  6
         (xii)    DESCRIPTION OF THE SECURITIES AND THE INDENTURE........  6
         (xiii)   AUTHORIZATION AND DESCRIPTION OF COMMON STOCK..........  7
         (xiv)    REGISTRATION OR SIMILAR RIGHTS WAIVED..................  7
         (xv)     ABSENCE OF DEFAULTS AND CONFLICTS......................  7
         (xvi)    COMPLIANCE WITH LAWS...................................  8
         (xvii)   ABSENCE OF LABOR DISPUTE...............................  8
         (xviii)  ABSENCE OF PROCEEDINGS.................................  8
         (xix)    ACCURACY OF EXHIBITS...................................  8
         (xx)     POSSESSION OF INTELLECTUAL PROPERTY....................  8
         (xxi)    ABSENCE OF FURTHER REQUIREMENTS........................  9
         (xxii)   POSSESSION OF LICENSES AND PERMITS.....................  9
         (xxiii)  TITLE TO PROPERTY......................................  9
         (xxiv)   COMPLIANCE WITH CUBA ACT...............................  9
         (xxv)    INVESTMENT COMPANY ACT................................. 10
         (xxvi)   ENVIRONMENTAL LAWS..................................... 10
         (xxvii)  TAXES.................................................. 10
         (xxviii) INSURANCE.............................................. 10
         (xxix)   ACCOUNTING CONTROLS.................................... 10
         (xxx)    MARKET STABILIZATION................................... 11
         (xxxi)   LOCK-UP AGREEMENTS..................................... 11
         (xxxii)  AFFILIATE TRANSACTIONS................................. 11
         (xxxiii) DISTRIBUTION OF PROSPECTUS............................. 11
    (b)  OFFICER'S CERTIFICATES.......................................... 11


                                      i
<PAGE>

                                                                      Pages(s)
                                                                      --------
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING................... 12
    (a)    INITIAL SECURITIES........................................... 12
    (b)    OPTION SECURITIES............................................ 12
    (c)    PAYMENT...................................................... 12
    (d)    DENOMINATIONS; REGISTRATION.................................. 13
SECTION 3. COVENANTS OF THE COMPANY..................................... 13
    (a)    COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
             REQUESTS................................................... 13
    (b)    FILING OF AMENDMENTS......................................... 13
    (c)    DELIVERY OF REGISTRATION STATEMENTS.......................... 14
    (d)    DELIVERY OF PROSPECTUSES..................................... 14
    (e)    CONTINUED COMPLIANCE WITH SECURITIES LAWS.................... 14
    (f)    BLUE SKY QUALIFICATIONS...................................... 15
    (g)    RULE 158..................................................... 15
    (h)    USE OF PROCEEDS.............................................. 15
    (i)    LISTING...................................................... 15
    (j)    RESTRICTION ON SALE OF DEBT SECURITIES....................... 15
    (k)    RESTRICTION ON SALE OF CERTAIN SECURITIES.................... 15
    (l)    REPORTING REQUIREMENTS....................................... 16

SECTION 4. PAYMENT OF EXPENSES.......................................... 16
    (a)    EXPENSES..................................................... 16
    (b)    TERMINATION OF AGREEMENT..................................... 17

SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS...................... 17
    (a)    EFFECTIVENESS OF REGISTRATION STATEMENT...................... 17
    (b)    OPINION OF COUNSEL FOR COMPANY............................... 17
    (c)    OPINION OF PATENT COUNSEL FOR COMPANY........................ 17
    (d)    OPINION OF REGULATORY COUNSEL FOR COMPANY.................... 17
    (e)    OPINION OF COUNSEL FOR UNDERWRITERS.......................... 17
    (f)    OFFICERS' CERTIFICATE........................................ 18
    (g)    ACCOUNTANT'S COMFORT LETTER.................................. 18
    (h)    BRING-DOWN COMFORT LETTER.................................... 18
    (i)    MAINTENANCE OF RATING........................................ 18
    (j)    APPROVAL OF LISTING.......................................... 19
    (k)    NO OBJECTION................................................. 19
    (l)    LOCK-UP AGREEMENTS........................................... 19
    (m)    CONDITIONS TO PURCHASE OF OPTION SECURITIES.................. 19
           (i)   OFFICERS' CERTIFICATE.................................. 19
           (ii)  OPINION OF COUNSEL FOR COMPANY......................... 19
           (iii) OPINION OF PATENT COUNSEL FOR COMPANY.................. 19


                                       ii
<PAGE>

                                                                      Pages(s)
                                                                      --------
            (iv)  OPINION OF REGULATORY COUNSEL FOR COMPANY.............. 19
            (v)   OPINION OF COUNSEL FOR UNDERWRITERS.................... 19
            (vi)  BRING-DOWN COMFORT LETTER.............................. 20
            (vii) NO DOWNGRADING......................................... 20
    (n)     ADDITIONAL DOCUMENTS......................................... 20
    (o)     TERMINATION OF AGREEMENT..................................... 20
    (p)     CONSENT OF BANK OF AMERICA................................... 20

SECTION 6.  INDEMNIFICATION.............................................. 20
    (a)     INDEMNIFICATION OF UNDERWRITERS.............................. 20
    (b)     INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS........... 21
    (c)     ACTIONS AGAINST PARTIES; NOTIFICATION........................ 22
    (d)     SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE........... 22

SECTION 7.  CONTRIBUTION................................................. 22

SECTION 8.  REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
    DELIVERY............................................................ 24

SECTION 9.  TERMINATION OF AGREEMENT..................................... 24
    (a)     TERMINATION; GENERAL......................................... 24
    (b)     LIABILITIES...................................................24

SECTION 10. NOTICES...................................................... 25

SECTION 11. PARTIES...................................................... 25

SECTION 12. GOVERNING LAW AND TIME....................................... 26

SECTION 13.   EFFECT OF HEADINGS......................................... 26


SCHEDULES
    Schedule A - List of Underwriters................................Sch A-1
    Schedule B - Pricing Information.................................Sch B-1
    Schedule C - List of Persons and Entities Subject to Lock-Up.....Sch C-1

EXHIBITS
    Exhibit A - Form of Lock-up Letter...................................A-1
    Exhibit B - Form of Opinion of Company's Counsel.....................B-1
    Exhibit C - Form of Opinion of Patent Counsel........................C-1
    Exhibit D - Form of Opinion of Regulatory Counsel....................D-1


                                     iii
<PAGE>

                              DURA PHARMACEUTICALS, INC.

                               (a Delaware corporation)

                                     $250,000,000

                       Convertible Subordinated Notes due 2002


                                  PURCHASE AGREEMENT

                                                                   July 24, 1997

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith 
    Incorporated
Goldman, Sachs & Co.
c/o  Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
    Incorporated
North Tower
World Financial Center
New York, New York  10281-1209

Ladies and Gentlemen:

    Dura Pharmaceuticals, Inc., a Delaware corporation (the "Company"), 
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, 
Fenner & Smith Incorporated ("Merrill Lynch") and Goldman, Sachs & Co. 
(collectively, the "Underwriters"), with respect to the issue and sale by the 
Company and the purchase by the Underwriters, acting severally and not 
jointly, of the respective principal amounts set forth in said Schedule A of 
$250,000,000 aggregate principal amount of the Company's Convertible 
Subordinated Notes due 2002 (the "Notes"), and with respect to the grant by 
the Company to the Underwriters, acting severally and not jointly, of the 
option described in Section 2(b) hereof to purchase all or any part of an 
additional $37,500,000 aggregate principal amount of Notes to cover 
over-allotments, if any.  The aforesaid $250,000,000 aggregate principal 
amount of Notes (the "Initial Securities") to be purchased by the 
Underwriters and all or any part of the $37,500,000 aggregate principal 
amount of Notes subject to the option described in Section 2(b) hereof (the 
"Option Securities") are hereinafter called, collectively, the "Securities."  
The Securities are to be issued pursuant to an indenture, dated as of July 
30, 1997 (the "Indenture"), between the Company and Chase Trust Company of 
California, as trustee (the "Trustee").

    The Securities are convertible into shares of common stock, par value 
$.001 per share, of the Company (the "Common Stock") in accordance with the 
terms of the Securities and the Indenture, at the initial conversion price 
specified in Schedule B hereto.

                                       1
<PAGE>

    The Company understands that the Underwriters propose to make a public 
offering of the Securities as soon as they deem advisable after this 
Agreement has been executed and delivered and the Indenture has been 
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").

    The Company has filed with the Securities and Exchange Commission (the 
"Commission") a registration statement on Form S-3 (No. 333-30851) covering 
the registration of the Securities under the Securities Act of 1933, as 
amended (the "1933 Act"), including the related preliminary prospectus or 
prospectuses. Promptly after execution and delivery of this Agreement, the 
Company will either (i) prepare and file a prospectus in accordance with the 
provisions of Rule 430A ("Rule 430A") of the rules and regulations of the 
Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) 
of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the 
Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act 
Regulations, prepare and file a term sheet (a "Term Sheet") in accordance 
with the provisions of Rule 434 and Rule 424(b). The information included in 
such prospectus or in such Term Sheet, as the case may be, that was omitted 
from such registration statement at the time it became effective but that is 
deemed to be part of such registration statement at the time it became 
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to 
as "Rule 434 Information."  Each prospectus used before such registration 
statement became effective, and any prospectus that omitted, as applicable, 
the Rule 430A Information or the Rule 434 Information, that was used after 
such effectiveness and prior to the execution and delivery of this Agreement, 
is herein called a "preliminary prospectus."  Such registration statement, 
including the exhibits thereto, schedules thereto, if any, and the documents 
incorporated by reference therein pursuant to Item 12 of Form S-3 under the 
1933 Act, at the time it became effective and including the Rule 430A 
Information and the Rule 434 Information, as applicable, is herein called the 
"Registration Statement."  Any registration statement filed pursuant to Rule 
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) 
Registration Statement," and after such filing the term "Registration 
Statement" shall include the Rule 462(b) Registration Statement.  The final 
prospectus, including the documents incorporated by reference therein 
pursuant to Item 12 of Form S-3 under the 1933 Act, in the form first 
furnished to the Underwriters for use in connection with the offering of the 
Securities is herein called the "Prospectus."  If Rule 434 is relied on, the 
term "Prospectus" shall refer to the preliminary prospectus, dated July 15, 
1997, together with the Term Sheet and all references in this Agreement to 
the date of the Prospectus shall mean the date of the Term Sheet.  For 
purposes of this Agreement, all references to the Registration Statement, any 
preliminary prospectus, the Prospectus or any Term Sheet or any amendment or 
supplement to any of the foregoing shall be deemed to include the copy filed 
with the Commission pursuant to its Electronic Data Gathering, Analysis and 
Retrieval system ("EDGAR").

    All references in this Agreement to financial statements and schedules 
and other information which is "contained," "included" or "stated" in the 
Registration Statement, any preliminary prospectus or the Prospectus (or 
other references of like import) shall be deemed to mean and include all such 
financial statements and schedules and other information which is 
incorporated by reference in the Registration Statement, any preliminary 
prospectus or the Prospectus, as the case may be; and

                                       2
<PAGE>

all references in this Agreement to amendments or supplements to the 
Registration Statement, any preliminary prospectus or the Prospectus shall be 
deemed to mean and include the filing of any document under the Securities 
Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in 
the Registration Statement, such preliminary prospectus or the Prospectus, as 
the case may be.

    SECTION 1.  REPRESENTATIONS AND WARRANTIES.

    (a)  REPRESENTATIONS AND WARRANTIES BY THE COMPANY.  The Company 
represents and warrants to each Underwriter as of the date hereof, as of the 
Closing Time referred to in Section 2(c) hereof, and as of each Date of 
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each 
Underwriter, as follows:

         (i)      COMPLIANCE WITH REGISTRATION REQUIREMENTS.  The Company 
meets the requirements for use of Form S-3 under the 1933 Act.  Each of the 
Registration Statement and any Rule 462(b) Registration Statement has become 
effective under the 1933 Act and no stop order suspending the effectiveness 
of the Registration Statement or any Rule 462(b) Registration Statement has 
been issued under the 1933 Act and no proceedings for that purpose have been 
instituted or are pending or, to the knowledge of the Company, are 
contemplated by the Commission, and any request on the part of the Commission 
for additional information has been complied with.  

         At the respective times the Registration Statement, any Rule 462(b) 
Registration Statement and any post-effective amendments thereto became 
effective and at the Closing Time (and, if any Option Securities are 
purchased, at the Date of Delivery), the Registration Statement, the Rule 
462(b) Registration Statement and any amendments and supplements thereto 
complied and will comply in all material respects with the requirements of 
the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and 
regulations of the Commission under the 1939 Act (the "1939 Act 
Regulations"), and did not and will not contain an untrue statement of a 
material fact or omit to state a material fact required to be stated therein 
or necessary to make the statements therein not misleading.  Neither the 
Prospectus nor any amendments or supplements thereto, at the time the 
Prospectus or any such amendment or supplement was issued and at the Closing 
Time (and, if any Option Securities are purchased, at the Date of Delivery), 
included or will include an untrue statement of a material fact or omitted or 
will omit to state a material fact necessary in order to make the statements 
therein, in the light of the circumstances under which they were made, not 
misleading.  If Rule 434 is used, the Company will comply with the 
requirements of Rule 434.   The representations and warranties in this 
subsection shall not apply to statements in or omissions from the 
Registration Statement or Prospectus made in reliance upon and in conformity 
with information furnished to the Company in writing by any Underwriter 
through Merrill Lynch expressly for use in the Registration Statement or 
Prospectus.

         Each preliminary prospectus and the prospectus filed as part of the 
Registration Statement as originally filed or as part of any amendment 
thereto, or filed pursuant to Rule 424 under

                                       3
<PAGE>

the 1933 Act, complied when so filed in all material respects with the 1933 
Act Regulations and each preliminary prospectus and the Prospectus delivered 
to the Underwriters for use in connection with this offering was identical to 
the electronically transmitted copies thereof filed with the Commission 
pursuant to EDGAR, except to the extent permitted by Regulation S-T.

         (ii)     INCORPORATED DOCUMENTS.  The documents incorporated or 
deemed to be incorporated by reference in the Registration Statement and the 
Prospectus, when they became effective or at the time they were or hereafter 
are filed with the Commission, complied and will comply in all material 
respects with the requirements of the 1933 Act and the 1933 Act Regulations 
or the 1934 Act and the rules and regulations of the Commission thereunder 
(the "1934 Act Regulations"), as applicable, and, when read together with the 
other information in the Prospectus, at the time the Registration Statement 
became effective, at the time the Prospectus was issued and at the Closing 
Time (and if any Option Securities are purchased, at the Date of Delivery), 
did not and will not contain an untrue statement of a material fact or omit 
to state a material fact required to be stated therein or necessary to make 
the statements therein, in light of the circumstances under which they were 
made, not misleading.

         (iii)    INDEPENDENT ACCOUNTANTS.  The accountants who certified the 
financial statements and supporting schedules included in the Registration 
Statement are independent public accountants as required by the 1933 Act and 
the 1933 Act Regulations.

         (iv)     FINANCIAL STATEMENTS.  The financial statements included in 
the Registration Statement and the Prospectus, together with the related 
schedules and notes, present fairly the financial position of the Company 
(and, for relevant periods consistent with the Commission's rules and 
regulations, the Company's Subsidiaries (as defined in clause (vii) below)) 
at the dates indicated and the statements of operations, shareholders' equity 
and cash flows of the Company (and, for relevant periods consistent with the 
Commission's rules and regulations, each of the Subsidiaries) for the periods 
specified; except as otherwise stated in the Registration Statement, said 
financial statements have been prepared in conformity with generally accepted 
accounting principles ("GAAP") applied on a consistent basis throughout the 
periods involved.  The supporting schedules, if any, included in the 
Registration Statement present fairly in accordance with GAAP the information 
required to be stated therein. The selected financial data and the summary 
financial information included in the Prospectus present fairly in accordance 
with GAAP the information shown therein and have been compiled on a basis 
consistent with that of the audited financial statements included in the 
Registration Statement.  The pro forma financial statements and the related 
notes thereto included in the Registration Statement and the Prospectus 
present fairly in accordance with GAAP the information shown therein, have 
been prepared in accordance with the Commission's rules and guidelines with 
respect to pro forma financial statements and have been properly compiled on 
the bases described therein, and the assumptions used in the preparation 
thereof are reasonable and the adjustments used therein are appropriate to 
give effect to the transactions and circumstances referred to therein.  No 
other financial statements or schedules are required to be included in the 
Registration Statement.

                                       4
<PAGE>

         (v)      NO MATERIAL ADVERSE CHANGE IN BUSINESS.  Since the 
respective dates as of which information is given in the Registration 
Statement and the Prospectus, except as otherwise stated therein, (A) there 
has been no material adverse change in the condition, financial or otherwise, 
or in the earnings, business affairs or business prospects of the Company and 
the Subsidiaries considered as one enterprise, whether or not arising in the 
ordinary course of business (a "Material Adverse Effect"), (B) there have 
been no transactions entered into by the Company or any Subsidiary, other 
than those in the ordinary course of business, which are material with 
respect to the Company and its Subsidiaries considered as one enterprise, and 
(C) there has been no dividend or distribution of any kind declared, paid or 
made by the Company on any class of its capital stock.

         (vi)     GOOD STANDING OF THE COMPANY.  The Company has been duly 
organized and is validly existing as a corporation in good standing under the 
laws of the State of Delaware and has corporate power and authority to own, 
lease and operate its properties and to conduct its business as described in 
the Prospectus and to enter into and perform its obligations under this 
Agreement, the Indenture and the Notes; and the Company is duly qualified as 
a foreign corporation to transact business and is in good standing in each 
other jurisdiction in which such qualification is required, whether by reason 
of the ownership or leasing of property or the conduct of business, except 
where the failure so to qualify or to be in good standing would not result in 
a Material Adverse Effect.

         (vii)     GOOD STANDING OF SUBSIDIARIES.  Dura Delivery Systems, 
Inc., a Delaware corporation ("DDSI"), Health Script Pharmacy Services, Inc., 
a Colorado corporation ("Health Script"), Healthco Solutions, Inc., a 
Colorado corporation ("Healthco"), HS Wholesaler, Inc., a Colorado 
corporation ("HS Wholesaler") and DCI, Ltd., a corporation organized under 
the laws of the Cayman Islands ("DCI") (DDSI, Health Script, Healthco, HS 
Wholesaler and DCI are hereinafter referred to as the "Subsidiaries") are the 
only subsidiaries of the Company.  Except for the Subsidiaries, neither the 
Company nor any Subsidiary owns any shares of stock or any other equity 
securities of any corporation or has any equity interests in any firm, 
partnership, association or other entity. Each Subsidiary has been duly 
organized and is validly existing as a corporation in good standing under the 
laws of the jurisdiction of its incorporation, has corporate power and 
authority to own, lease and operate its properties and to conduct its 
business as described in the Prospectus and is duly qualified as a foreign 
corporation to transact business and is in good standing in each jurisdiction 
in which such qualification is required, whether by reason of the ownership 
or leasing of property or the conduct of business, except where the failure 
so to qualify or to be in good standing would not result in a Material 
Adverse Effect; all of the issued and outstanding capital stock of each such 
Subsidiary has been duly authorized and validly issued, is fully paid and 
non-assessable and is owned solely by the Company free and clear of any 
security interest, mortgage, pledge, lien, encumbrance, claim or equity; none 
of the outstanding shares of capital stock of any Subsidiary was issued in 
violation of the preemptive or similar rights of any securityholder of such 
Subsidiary arising by operation of law, under the charter or by-laws of such 
Subsidiary or under any agreement to which the Company or such Subsidiary is 
a party. 

         (viii)   CAPITALIZATION.  The authorized, issued and outstanding 
capital stock of the Company is as set forth in the Prospectus in the column 
entitled "Actual" under the caption

                                       5
<PAGE>

"Capitalization" (except for subsequent issuances, if any, pursuant to 
reservations, agreements or employee benefit plans referred to in the 
Prospectus or incorporated by reference therein or pursuant to the exercise 
of convertible securities, warrants or options referred to in the 
Prospectus).  The shares of issued and outstanding capital stock of the 
Company have been duly authorized and validly issued and are fully paid and 
non-assessable; none of the outstanding shares of capital stock of the 
Company was issued in violation of the preemptive or other similar rights of 
any securityholder of the Company arising by operation of law, under the 
charter or by-laws of the Company or under any agreement to which the Company 
is a party. Except as disclosed in the Prospectus or incorporated by 
reference therein, there are no outstanding options, warrants or other rights 
calling for the issuance of, and no commitments, plans or arrangements to 
issue, any shares of capital stock of the Company or any Subsidiary or any 
security convertible into or exchangeable for capital stock of the Company or 
any Subsidiary.

         (ix)     AUTHORIZATION OF AGREEMENT.  This Agreement has been duly 
authorized, executed and delivered by the Company.

         (x)      AUTHORIZATION OF THE INDENTURE.  The Indenture has been 
duly authorized by the Company and duly qualified under the 1939 Act and, 
when duly executed and delivered by the Company and the Trustee, will 
constitute a valid and binding agreement of the Company, enforceable against 
the Company in accordance with its terms, except as the enforcement thereof 
may be limited by bankruptcy, insolvency (including, without limitation, all 
laws relating to fraudulent transfers), reorganization, moratorium or similar 
laws affecting enforcement of creditors' rights generally and except as 
enforcement thereof is subject to general principles of equity (regardless of 
whether enforcement is considered in a proceeding in equity or at law).

         (xi)     AUTHORIZATION OF THE SECURITIES.  The Securities have been 
duly authorized and, at the Closing Time, will have been duly executed by the 
Company and, when authenticated, issued and delivered in the manner provided 
for in the Indenture and delivered against payment of the purchase price 
therefor as provided in this Agreement, will constitute valid and binding 
obligations of the Company, enforceable against the Company in accordance 
with their terms, except as the enforcement thereof may be limited by 
bankruptcy, insolvency (including, without limitation, all laws relating to 
fraudulent transfers), reorganization, moratorium or similar laws affecting 
enforcement of creditors' rights generally and except as enforcement thereof 
is subject to general principles of equity (regardless of whether enforcement 
is considered in a proceeding in equity or at law), and will be in the form 
contemplated by, and entitled to the benefits of, the Indenture.

         (xii)    DESCRIPTION OF THE SECURITIES AND THE INDENTURE.  The 
Securities and the Indenture will conform in all material respects to the 
respective statements relating thereto contained in the Prospectus and will 
be in substantially the respective forms filed or incorporated by reference, 
as the case may be, as exhibits to the Registration Statement.

         (xiii)   AUTHORIZATION AND DESCRIPTION OF COMMON STOCK.  The Common 
Stock conforms to all statements relating thereto contained or incorporated 
by reference in the Prospectus

                                       6
<PAGE>

and such description conforms to the rights set forth in the instruments 
defining the same.  Upon issuance and delivery of the Securities in 
accordance with this Agreement and the Indenture, the Securities will be 
convertible at the option of the holder thereof for shares of Common Stock in 
accordance with the terms of the Securities and the Indenture; the shares of 
Common Stock issuable upon conversion of the Securities have been duly 
authorized and reserved for issuance upon such conversion by all necessary 
corporate action and such shares, when issued upon such conversion, will be 
validly issued and will be fully paid and non-assessable; no holder of such 
shares will be subject to personal liability by reason of being such a 
holder; and the issuance of such shares upon such conversion will not be 
subject to the preemptive or other similar rights of any securityholder of 
the Company.

         (xiv)    REGISTRATION OR SIMILAR RIGHTS WAIVED.  There are no 
persons with registration or other similar rights to have any securities 
registered pursuant to the Registration Statement or otherwise registered by 
the Company under the 1933 Act who have not waived such rights.

         (xv)     ABSENCE OF DEFAULTS AND CONFLICTS.  Neither the Company nor 
any Subsidiary is in violation of its charter or by-laws or in default in the 
performance or observance of any obligation, agreement, covenant or condition 
contained in any contract, indenture, mortgage, deed of trust, loan or credit 
agreement, note, lease or other agreement or instrument to which the Company 
or any Subsidiary is a party or by which it or any of them may be bound, or 
to which any of the property or assets of the Company or any Subsidiary is 
subject (collectively, "Agreements and Instruments") except for such defaults 
that would not result in a Material Adverse Effect; and the execution, 
delivery and performance of this Agreement, the Indenture and the Securities 
and the consummation of the transactions contemplated herein, therein and in 
the Registration Statement (including the issuance and sale of the Securities 
and the use of the proceeds from the sale of the Securities as described in 
the Prospectus under the caption "Use of Proceeds" and the issuance of the 
shares of Common Stock issuable upon conversion of the Securities) and 
compliance by the Company with its obligations hereunder and under the 
Indenture and the Securities have been duly authorized by all necessary 
corporate action and do not and will not, whether with or without the giving 
of notice or passage of time or both, conflict with or constitute a breach 
of, or default or Repayment Event (as defined below) under, or result in the 
creation or imposition of any lien, charge or encumbrance upon any property 
or assets of the Company or any Subsidiary pursuant to, the Agreements and 
Instruments (except for such conflicts, breaches or defaults or liens, 
charges or encumbrances that would not result in a Material Adverse Effect), 
nor will such action result in any violation of the provisions of the charter 
or by-laws of the Company or any Subsidiary or any applicable material law, 
statute, rule, regulation, judgment, order, writ or decree of any government, 
government instrumentality or court, domestic or foreign, having jurisdiction 
over the Company or any Subsidiary or any of their assets, properties or 
operations.  As used herein, a "Repayment Event" means any event or condition 
which gives the holder of any note, debenture or other evidence of 
indebtedness (or any person acting on such holder's behalf) the right to 
require the repurchase, redemption or repayment of all or a portion of such 
indebtedness by the Company or any Subsidiary.

                                       7
<PAGE>

         (xvi)    COMPLIANCE WITH LAWS.  Except as set forth in the 
Prospectus, the Company and the Subsidiaries are in compliance in all 
material respects with all applicable laws, statutes, ordinances, rules or 
regulations, the enforcement of which, individually or in the aggregate, 
would be reasonably expected to have a Material Adverse Effect.

         (xvii)   ABSENCE OF LABOR DISPUTE.  No labor dispute with the 
employees of the Company or any Subsidiary exists or, to the knowledge of the 
Company, is imminent, and the Company is not aware of any existing or 
imminent labor disturbance by the employees of any of its or any Subsidiary's 
principal suppliers, manufacturers, customers or contractors, which, in 
either case, may reasonably be expected to result in a Material Adverse 
Effect.

         (xviii)  ABSENCE OF PROCEEDINGS.  There is no action, suit, 
proceeding, inquiry or investigation before or brought by any court or 
governmental agency or body, domestic or foreign, now pending, or, to the 
knowledge of the Company, threatened, against or affecting the Company or any 
Subsidiary, which is required to be disclosed in the Prospectus (other than 
as disclosed therein), or which might reasonably be expected to result in a 
Material Adverse Effect, or which might reasonably be expected to materially 
and adversely affect the properties or assets thereof or the consummation of 
the transactions contemplated in this Agreement or the performance by the 
Company of its obligations hereunder; the aggregate of all pending legal or 
governmental proceedings to which the Company or any Subsidiary is a party or 
of which any of their respective property or assets is the subject which are 
not described in the Prospectus, including ordinary routine litigation 
incidental to the business, could not reasonably be expected to result in a 
Material Adverse Effect.

         (xix)    ACCURACY OF EXHIBITS.  There are no contracts or documents 
which are required to be described in the Registration Statement, the 
Prospectus or the documents incorporated by reference therein or to be filed 
as exhibits thereto which have not been so described and filed as required. 

         (xx)     POSSESSION OF INTELLECTUAL PROPERTY.  Except as set forth 
in the Prospectus, the Company and its Subsidiaries own or possess adequate 
licenses or other rights to use the patents, patent rights, licenses, 
inventions, copyrights, know-how (including trade secrets and other 
unpatented and/or unpatentable proprietary or confidential information, 
systems or procedures), trademarks, service marks and trade names 
(collectively, "patent and proprietary rights") presently employed by them in 
connection with the business now operated by them and neither the Company nor 
any Subsidiary has received any notice or is otherwise aware of any 
infringement of or conflict with asserted rights of others with respect to 
any patent and proprietary rights or of any facts or circumstances that would 
render any patent and proprietary rights invalid or inadequate to protect the 
interest of the Company or the affected Subsidiaries therein, and which 
infringement or conflict (if the subject of any unfavorable decision, ruling 
or finding) or invalidity or inadequacy, singly or in the aggregate, would 
result in a Material Adverse Effect.

                                       8
<PAGE>

         (xxi)    ABSENCE OF FURTHER REQUIREMENTS.  No filing with, or 
authorization, approval, consent, license, order, registration, qualification 
or decree of, any court or governmental authority or agency is necessary or 
required for the performance by the Company of its obligations hereunder, in 
connection with the offering, issuance or sale of the Securities hereunder, 
the issuance of shares of Common Stock upon conversion of Securities or the 
consummation of the transactions contemplated by this Agreement or for the 
due execution, delivery or performance of the Indenture by the Company, 
except such as have been already obtained or as may be required under the 
1933 Act or the 1933 Act Regulations or state securities laws and except for 
the qualification of the Indenture under the 1939 Act.

         (xxii)   POSSESSION OF LICENSES AND PERMITS.  The Company and its 
Subsidiaries possess such permits, licenses, approvals, consents and other 
authorizations (collectively, "Governmental Licenses") issued by the 
appropriate federal, state, local or foreign regulatory agencies or bodies 
material to the conduct of the business now operated by them; the Company and 
its Subsidiaries are in compliance with the terms and conditions of all such 
Governmental Licenses, except where the failure so to comply would not, 
singly or in the aggregate, have a Material Adverse Effect; all of the 
Governmental Licenses are valid and in full force and effect, except when the 
invalidity of such Governmental Licenses or the failure of such Governmental 
Licenses to be in full force and effect would not have a Material Adverse 
Effect; and neither the Company nor any Subsidiary has received any notice of 
proceedings relating to the revocation or modification of any such 
Governmental Licenses which, singly or in the aggregate, if the subject of an 
unfavorable decision, ruling or finding, would result in a Material Adverse 
Effect.

         (xxiii)  TITLE TO PROPERTY.  The Company and its Subsidiaries have 
good and marketable title to all material properties owned by the Company and 
its Subsidiaries and good title to all other properties owned by them, in 
each case, free and clear of all mortgages, pledges, liens, security 
interests, claims, restrictions or encumbrances of any kind except such as 
(a) are described or incorporated by reference in the Prospectus or (b) do 
not, singly or in the aggregate, materially affect the value of such property 
and do not interfere with the use made and proposed to be made of such 
property by the Company or the affected Subsidiaries; and all properties held 
under lease by the Company or any Subsidiary are held under valid, subsisting 
and enforceable leases.

         (xxiv)   COMPLIANCE WITH CUBA ACT.  The Company has complied with, 
and is and will be in compliance with, the provisions of that certain Florida 
act relating to disclosure of doing business with Cuba, codified as Section 
517.075 of the Florida statutes, and the rules and regulations thereunder 
(collectively, the "Cuba Act") or is exempt therefrom.

         (xxv)    INVESTMENT COMPANY ACT.  The Company is not, and upon the 
issuance and sale of the Securities as herein contemplated and the 
application of the net proceeds therefrom as described in the Prospectus will 
not be, an "investment company" or an entity "controlled" by an "investment 
company" as such terms are defined in the Investment Company Act of 1940, as 
amended (the "1940 Act").

                                       9
<PAGE>

         (xxvi)   ENVIRONMENTAL LAWS.  Except as described in the Prospectus 
or except as would not, singly or in the aggregate, result in a Material 
Adverse Effect, (A) neither the Company nor any Subsidiary is in material 
violation of any federal, state, local or foreign law, rule, regulation, 
ordinance or any judicial or administrative interpretation thereof, including 
any judicial or administrative order, consent, decree or judgment relating to 
pollution or protection of human health, the environment (including, without 
limitation, ambient air, surface water, groundwater, land surface or 
subsurface strata) or wildlife, including, without limitation, laws and 
regulations relating to the release or threatened release of chemicals, 
pollutants, contaminants, wastes, toxic substances, hazardous substances, 
petroleum or petroleum products (collectively, "Hazardous Materials") or to 
the manufacture, processing, distribution, use, treatment, storage, disposal, 
transport or handling of Hazardous Materials (collectively, "Environmental 
Laws"), (B) the Company and its Subsidiaries have all permits, authorizations 
and approvals required under any applicable Environmental Laws and are each 
in compliance with their requirements, (C) there are no pending or threatened 
administrative, regulatory or judicial actions, suits, demands, demand 
letters, claims, liens, notices of noncompliance or violation, investigation 
or proceedings relating to any Environmental Law against the Company or any 
Subsidiary and (D) to the best of the Company's knowledge, there are no 
events or circumstances that could form the basis of an order for clean-up or 
remediation, or an action, suit or proceeding by any private party or 
governmental body or agency, against or affecting the Company or any 
Subsidiary relating to Hazardous Materials or any Environmental Laws.

         (xxvii)  TAXES.  The Company and the Subsidiaries have filed all 
federal, state, local and foreign tax returns that are required to be filed 
or have duly requested extensions thereof and have paid all taxes required to 
be paid by any of them and any related assessments, fines or penalties, 
except for any such tax, assessment, fine or penalty that is being contested 
in good faith and by appropriate proceedings; and adequate charges, accruals 
and reserves have been provided for in the financial statements referred to 
in Section 1(a)(iv) above in respect of all federal, state, local and foreign 
taxes for all periods as to which the tax liability of the Company or any 
Subsidiary has not been finally determined or remains open to examination by 
applicable taxing authorities.

         (xxviii) INSURANCE.  The Company and the Subsidiaries carry or are 
entitled to the benefits of insurance in such amounts and covering such risks 
as is generally maintained by companies of established repute engaged in the 
same or similar business and all such insurance is in full force and effect.

         (xxix)   ACCOUNTING CONTROLS.  The Company and the Subsidiaries 
maintain a system of internal accounting controls sufficient to provide 
reasonable assurance that (A) transactions are executed in accordance with 
management's general and specific authorizations; (B) transactions are 
recorded as necessary to permit preparations of financial statements in 
conformity with GAAP and to maintain accountability for assets; (C) access to 
assets is permitted only in accordance with management's general or specific 
authorizations; and (D) the recorded accountability for assets is compared 
with the existing assets at reasonable intervals and appropriate action is 
taken with respect to any differences.

                                       10
<PAGE>

         (xxx)    MARKET STABILIZATION.  The Company and the Subsidiaries 
have not (A) taken, directly or indirectly, any action designed to cause or 
to result in, or that has constituted or which might reasonably be expected 
to constitute, the stabilization or manipulation of the price of any security 
of the Company to facilitate the sale or resale of the Securities or (B) 
since the initial filing of the Registration Statement (1) sold, bid for, 
purchased, or attempted to induce any person to bid for or purchase, or paid 
anyone any compensation for soliciting purchases of, the Securities, (2) paid 
or agreed to pay to any person any compensation for soliciting another to 
purchase any other securities of the Company, or (3) engaged, directly or 
indirectly, in any other transaction in violation of Regulation M under the 
1934 Act.

         (xxxi)   LOCK-UP AGREEMENTS.  The Company has obtained and delivered 
to the Underwriters the agreements, in the form of Exhibit A hereto, of the 
persons and entities named in Schedule C annexed hereto to the effect that 
each such person will not, for a period of 90 days from the date of this 
Agreement and except as otherwise provided in their respective agreement, 
without the prior written consent of Merrill Lynch, directly or indirectly, 
offer to sell, grant any option for the sale of, or otherwise dispose of any 
shares of Common Stock or any securities convertible into or exercisable for 
Common Stock owned by such person or entity or with respect to which such 
person has the power of disposition.

         (xxxii)  AFFILIATE TRANSACTIONS.  No relationship, direct or 
indirect, exists between or among any of the Company or any affiliate of the 
Company, on the one hand, and any director, officer, shareholder, customer or 
supplier of any of them, on the other hand, which is required by the 1933 Act 
or by the 1933 Act Regulations to be described in the Registration Statement 
or the Prospectus and which is not so described or is not described as 
required.

         (xxxiii) DISTRIBUTION OF PROSPECTUS.  The Company has not 
distributed and, prior to the later to occur of (A) Closing Time and (B) 
completion of the distribution of the Securities, will not distribute any 
prospectus (as such term is defined in the 1933 Act and the 1933 Act 
Regulations) in connection with the offering and sale of the Securities other 
than the Registration Statement, any preliminary prospectus, the Prospectus 
or other materials, if any, permitted by the 1933 Act or by the 1933 Act 
Regulations and approved by the Underwriters.

    (b)  OFFICER'S CERTIFICATES.  Any certificate signed by any officer of 
the Company or any of its Subsidiaries delivered to the Underwriters or to 
counsel for the Underwriters shall be deemed a representation and warranty by 
the Company to each Underwriter as to the matters covered thereby.

    SECTION 2.     SALE AND DELIVERY TO UNDERWRITERS; CLOSING.

    (a)  INITIAL SECURITIES.  On the basis of the representations and 
warranties herein contained and subject to the terms and conditions herein 
set forth, the Company agrees to sell to each Underwriter, severally and not 
jointly, and each Underwriter, severally and not jointly, agrees to

                                       11
<PAGE>

purchase from the Company, at the price set forth in Schedule B, the 
aggregate principal amount of Initial Securities set forth in Schedule A 
opposite the name of such Underwriter.

    (b)  OPTION SECURITIES.  In addition, on the basis of the representations 
and warranties herein contained and subject to the terms and conditions 
herein set forth, the Company hereby grants an option to the Underwriters, 
severally and not jointly, to purchase up to an additional $37,500,000 
aggregate principal amount of Securities at the same price per share set 
forth in Schedule B for the Initial Securities, plus accrued interest, if 
any, from the Closing Date to the Date of Delivery (as defined below).  The 
option hereby granted will expire 30 days after the date hereof and may be 
exercised in whole or in part from time to time only for the purpose of 
covering over-allotments which may be made in connection with the offering 
and distribution of the Initial Securities upon notice by the Underwriters to 
the Company setting forth the number of Option Securities as to which the 
several Underwriters are then exercising the option and the time and date of 
payment and delivery for such Option Securities.  Any such time and date of 
delivery (a "Date of Delivery") shall be determined by the Underwriters, but 
shall not be later than seven full business days after the exercise of said 
option, nor in any event prior to the Closing Time, as hereinafter defined.  
If the option is exercised as to all or any portion of the Option Securities, 
each of the Underwriters, acting severally and not jointly, will purchase 
that proportion of the total number of Option Securities then being purchased 
which the number of Initial Securities set forth in Schedule A opposite the 
name of such Underwriter bears to the total number of Initial Securities.

    (c)  PAYMENT.  Payment of the purchase price for, and delivery of 
certificates for, the Initial Securities shall be made at the offices of 
Brobeck, Phleger & Harrison LLP, 550 West C Street, San Diego, California 
92101 or at such other place as shall be agreed upon by the Underwriters and 
the Company, at 7:00 A.M. (California time) on the third (fourth, if the 
pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day 
after the date hereof, or such other time not later than ten business days 
after such date as shall be agreed upon by the Underwriters and the Company 
(such time and date of payment and delivery being herein called "Closing 
Time").

    In addition, in the event that any or all of the Option Securities are 
purchased by the Underwriters, payment of the purchase price for, and 
delivery of certificates for, such Option Securities shall be made at the 
above-mentioned offices, or at such other place as shall be agreed upon by 
the Underwriters and the Company, on each Date of Delivery as specified in 
the notice from the Underwriters to the Company.

    Payment shall be made to the Company by wire transfer of immediately 
available funds to a bank account designated by the Company, against delivery 
to the Underwriters of certificates for the Securities to be purchased by 
them. Merrill Lynch, individually and not as representative of the 
Underwriters, may (but shall not be obligated to) make payment of the 
purchase price for the Initial Securities or the Option Securities, if any, 
to be purchased by any Underwriter whose funds have not been received by the 
Closing Time or the relevant Date of Delivery, as the case may be, but such 
payment shall not relieve such Underwriter from its obligations hereunder.

                                       12
<PAGE>

    (d)  DENOMINATIONS; REGISTRATION.  Certificates for the Initial 
Securities and the Option Securities, if any, shall be in such denominations 
($1,000 or integral multiples thereof) and registered in such names as the 
Underwriters may request in writing at least one full business day before the 
Closing Time or the relevant Date of Delivery, as the case may be.  The 
certificates, which may be in temporary form, for the Initial Securities and 
the Option Securities, if any, will be made available for examination and 
packaging by the Underwriters in The City of New York not later than 10:00 
A.M. (Eastern time) on the business day prior to the Closing Time or the 
relevant Date of Delivery, as the case may be.

    SECTION 3.     COVENANTS OF THE COMPANY.  The Company covenants with each 
Underwriter as follows:

    (a)  COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.  The 
Company, subject to Section 3(b), will comply with the requirements of Rule 
430A or Rule 434, as applicable, and will notify the Underwriters 
immediately, and confirm the notice in writing, (i) when any post-effective 
amendment to the Registration Statement shall become effective, or any 
supplement to the Prospectus or any amended Prospectus shall have been filed, 
(ii) of the receipt of any comments from the Commission, (iii) of any request 
by the Commission for any amendment to the Registration Statement or any 
amendment or supplement to the Prospectus or for additional information, and 
(iv) of the issuance by the Commission of any stop order suspending the 
effectiveness of the Registration Statement or of any order preventing or 
suspending the use of any preliminary prospectus, or of the suspension of the 
qualification of the Securities for offering or sale in any jurisdiction, or 
of the initiation or threatening of any proceedings for any of such purposes. 
 The Company will promptly effect the filings necessary pursuant to Rule 
424(b) and will take such steps as it deems necessary to ascertain promptly 
whether the form of prospectus transmitted for filing under Rule 424(b) was 
received for filing by the Commission and, in the event that it was not, it 
will promptly file such prospectus.  The Company will make every reasonable 
effort to prevent the issuance of any stop order and, if any stop order is 
issued, to obtain the lifting thereof at the earliest possible moment.

    (b)  FILING OF AMENDMENTS.  The Company will give the Underwriters notice 
of its intention to file or prepare any amendment to the Registration 
Statement (including any filing under Rule 462(b)), any Term Sheet or any 
amendment, supplement or revision to either the prospectus included in the 
Registration Statement at the time it became effective or to the Prospectus, 
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the 
Underwriters with copies of any such documents a reasonable amount of time 
prior to such proposed filing or use, as the case may be, and will not file 
or use any such document to which the Underwriters or counsel for the 
Underwriters shall object.

    (c)  DELIVERY OF REGISTRATION STATEMENTS.  The Company has furnished or 
will deliver to the Underwriters and counsel for the Underwriters, without 
charge, signed copies of the Registration Statement as originally filed and 
of each amendment thereto (including exhibits filed therewith or incorporated 
by reference therein and documents incorporated or deemed to be incorporated 
by

                                       13
<PAGE>

reference therein) and signed copies of all consents and certificates of 
experts, and will also deliver to the Underwriters, without charge, a 
conformed copy of the Registration Statement as originally filed and of each 
amendment thereto (without exhibits).  The copies of the Registration 
Statement and each amendment thereto furnished to the Underwriters will be 
identical to the electronically transmitted copies thereof filed with the 
Commission pursuant to EDGAR, except to the extent permitted by Regulation 
S-T.

    (d)  DELIVERY OF PROSPECTUSES. The Company has delivered to each 
Underwriter, without charge, as many copies of each preliminary prospectus as 
such Underwriter reasonably requested, and the Company hereby consents to the 
use of such copies for purposes permitted by the 1933 Act.  The Company will 
furnish to each Underwriter, without charge, during the period when the 
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, 
such number of copies of the Prospectus (as amended or supplemented) as such 
Underwriter may reasonably request.  The Prospectus and any amendments or 
supplements thereto furnished to the Underwriters will be identical to the 
electronically transmitted copies thereof filed with the Commission pursuant 
to EDGAR, except to the extent permitted by Regulation S-T.

    (e)  CONTINUED COMPLIANCE WITH SECURITIES LAWS.  The Company will comply 
with the 1933 Act and the 1933 Act Regulations, the 1934 Act and the 1934 Act 
Regulations and the 1939 Act and the 1939 Act Regulations so as to permit the 
completion of the distribution of the Securities as contemplated in this 
Agreement and in the Prospectus.  If at any time when a prospectus is 
required by the 1933 Act to be delivered in connection with sales of the 
Securities, any event shall occur or condition shall exist as a result of 
which it is necessary, in the opinion of counsel for the Underwriters or for 
the Company, to amend the Registration Statement or amend or supplement the 
Prospectus in order that the Prospectus will not include any untrue 
statements of a material fact or omit to state a material fact necessary in 
order to make the statements therein not misleading in the light of the 
circumstances existing at the time it is delivered to a purchaser, or if it 
shall be necessary, in the opinion of such counsel, at any such time to amend 
the Registration Statement or amend or supplement the Prospectus in order to 
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the 
Company will promptly prepare and file with the Commission, subject to 
Section 3(b), such amendment or supplement as may be necessary to correct 
such statement or omission or to make the Registration Statement or the 
Prospectus comply with such requirements, and the Company will furnish to the 
Underwriters such number of copies of such amendment or supplement as the 
Underwriters may reasonably request.

    (f)  BLUE SKY QUALIFICATIONS.  The Company will use its best efforts, in 
cooperation with the Underwriters, to qualify the Securities and the shares 
of Common Stock issuable upon conversion of Securities for offering and sale 
under the applicable securities laws of such states and other jurisdictions 
as the Underwriters may designate and to maintain such qualifications in 
effect for a period of not less than one year from the later of the effective 
date of the Registration Statement and any Rule 462(b) Registration 
Statement; provided, however, that the Company shall not be obligated to file 
any general consent to service of process or to qualify as a foreign 
corporation or as a dealer in securities in any jurisdiction in which it is 
not so qualified or to subject itself to

                                       14
<PAGE>

taxation in respect of doing business in any jurisdiction in which it is not 
otherwise so subject.  In each jurisdiction in which the Securities have been 
so qualified, the Company will file such statements and reports as may be 
required by the laws of such jurisdiction to continue such qualification in 
effect for a period of not less than one year from the effective date of the 
Registration Statement and any Rule 462(b) Registration Statement.  The 
Company will also supply the Underwriters with such information as is 
necessary for the determination of the legality of the Securities for 
investment under the laws of such jurisdictions as the Underwriters may 
reasonably request.

    (g)  RULE 158.  The Company will timely file such reports pursuant to the 
1934 Act as are necessary in order to make generally available to its 
securityholders as soon as practicable an earnings statement for the purposes 
of, and to provide the benefits contemplated by, the last paragraph of 
Section 11(a) of the 1933 Act.

    (h)  USE OF PROCEEDS.  The Company will use the net proceeds received by 
it from the sale of the Securities in the manner specified in the Prospectus 
under "Use of Proceeds."

    (i)  LISTING.  The Company will use its best efforts to effect and 
maintain the quotation of the Securities on the Nasdaq SmallCap Market and 
the Common Stock issuable upon conversion thereof on the Nasdaq National 
Market and will file with the Nasdaq SmallCap and National Markets all 
documents and notices required thereby of companies that have securities that 
are traded in the over-the-counter market and quotations for which are 
reported by the Nasdaq SmallCap and National Markets.

    (j)  RESTRICTION ON SALE OF DEBT SECURITIES.  During a period of ninety 
(90) days from the date of the Prospectus, the Company will not, without the 
prior written consent of Merrill Lynch, directly or indirectly, issue, sell, 
offer or contract to sell, grant any option for the sale of, or otherwise 
transfer or dispose of, any debt securities of the Company.

    (k)  RESTRICTION ON SALE OF CERTAIN SECURITIES.  During a period of 
ninety (90) days from the date of the Prospectus, the Company will not, 
without the prior written consent of Merrill Lynch, (i) directly or 
indirectly, offer, pledge, sell, contract to sell, sell any option or 
contract to purchase, purchase any option or contract to sell, grant any 
option, right or warrant to purchase or otherwise transfer or dispose of any 
share of Common Stock or any securities convertible into or exercisable or 
exchangeable for Common Stock or file any registration statement under the 
1933 Act with respect to any of the foregoing or (ii) enter into any swap or 
any other agreement or any transaction that transfers, in whole or in part, 
directly or indirectly, the economic consequence of ownership of the Common 
Stock, whether any such swap or transaction described in clause (i) or (ii) 
above is to be settled by delivery of Common Stock or such other securities, 
in cash or otherwise.  The foregoing sentence shall not apply to (A) the 
Securities to be sold hereunder, (B) any shares of Common Stock issued by the 
Company upon the exercise of an option or warrant or the conversion of a 
security outstanding on the date hereof and referred to in the Prospectus or 
(C) any shares of

                                       15
<PAGE>

Common Stock issued or options to purchase Common Stock granted pursuant to 
existing employee benefit plans of the Company referred to in the Prospectus.

    (l)  REPORTING REQUIREMENTS.  The Company, during the period when the 
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, 
will file all documents required to be filed with the Commission pursuant to 
the 1934 Act within the time periods required by the 1934 Act and the 1934 
Act Regulations.

    SECTION 4.     PAYMENT OF EXPENSES.

    (a)  EXPENSES.  The Company will pay all expenses incident to the 
performance of its obligations under this Agreement, including (i) the 
preparation, printing and filing of the Registration Statement (including 
financial statements and exhibits) as originally filed and of each amendment 
thereto, (ii) the preparation, printing and delivery to the Underwriters of 
this Agreement, any Agreement among Underwriters, the Indenture and such 
other documents as may be required in connection with the offering, purchase, 
sale, issuance or delivery of the Securities or the issuance or delivery of 
the Common Stock issuable upon conversion thereof, (iii) the preparation, 
issuance and delivery of the certificates for the Securities to the 
Underwriters and the certificates for the Common Stock issuable upon 
conversion thereof, (iv) the fees and disbursements of the Company's counsel, 
accountants and other advisors, (v) the qualification of the Securities and 
the Common Stock under securities laws in accordance with the provisions of 
Section 3(f) hereof, including filing fees and the reasonable fees and 
disbursements of counsel for the Underwriters in connection therewith and in 
connection with the preparation of the Blue Sky Survey and any supplement 
thereto, (vi) the printing and delivery to the Underwriters of copies of each 
preliminary prospectus, any Term Sheets and of the Prospectus and any 
amendments or supplements thereto, (vii) the preparation, printing and 
delivery to the Underwriters of copies of the Blue Sky Survey and any 
supplement thereto, (viii) the fees and expenses of the Trustee, including 
the fees and disbursements of counsel for the Trustee in connection with the 
Indenture and the Securities, (ix) the fees and expenses of any transfer 
agent or registrar for the Common Stock, (x) any fees payable in connection 
with the rating of the Securities, (xi) the filing fees incident to, and the 
reasonable fees and disbursements of counsel to the Underwriters in 
connection with, the review by the National Association of Securities 
Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and 
(xii) the fees and expenses incurred in connection with the inclusion of the 
Securities in the Nasdaq SmallCap Market and the Common Stock issuable upon 
conversion thereof in the Nasdaq National Market.

    (b)  TERMINATION OF AGREEMENT.  If this Agreement is terminated by the 
Underwriters in accordance with the provisions of Section 5 or Section 
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their 
out-of-pocket expenses, including the reasonable fees and disbursements of 
counsel for the Underwriters.

    SECTION 5.     CONDITIONS OF UNDERWRITERS' OBLIGATIONS.  The obligations 
of the several Underwriters hereunder are subject to the accuracy of the 
representations and warranties of the Company contained in Section 1 hereof 
or in certificates of any officer of the Company or any

                                       16
<PAGE>

Subsidiary of the Company delivered pursuant to the provisions hereof, to the 
performance by the Company of its covenants and other obligations hereunder, 
and to the following further conditions:

    (a)  EFFECTIVENESS OF REGISTRATION STATEMENT.  The Registration 
Statement, including any Rule 462(b) Registration Statement, has become 
effective and at Closing Time no stop order suspending the effectiveness of 
the Registration Statement shall have been issued under the 1933 Act or 
proceedings therefor initiated or threatened by the Commission, and any 
request on the part of the Commission for additional information shall have 
been complied with to the reasonable satisfaction of counsel to the 
Underwriters. A prospectus containing the Rule 430A Information shall have 
been filed with the Commission in accordance with Rule 424(b) (or a 
post-effective amendment providing such information shall have been filed and 
declared effective in accordance with the requirements of Rule 430A) or, if 
the Company has elected to rely upon Rule 434, a Term Sheet shall have been 
filed with the Commission in accordance with Rule 424(b).

    (b)  OPINION OF COUNSEL FOR COMPANY.  At Closing Time, the Underwriters 
shall have received the favorable opinions, dated as of Closing Time, of 
Brobeck, Phleger & Harrison LLP, counsel for the Company, and, to the extent 
provided in Exhibit B hereto, Mitchell R. Woodbury, General Counsel of the 
Company, in form and substance satisfactory to counsel for the Underwriters, 
to the effect set forth in Exhibit B hereto.

    (c)  OPINION OF PATENT COUNSEL FOR COMPANY.  At Closing Time, the 
Underwriters shall have received the favorable opinion, dated as of Closing 
Time, of Lyon & Lyon LLP (solely with respect to patents concerning the 
Spiros product), counsel for the Company, in form and substance satisfactory 
to counsel for the Underwriters, to the effect set forth in Exhibit C hereto.

    (d)  OPINION OF REGULATORY COUNSEL FOR COMPANY.  At Closing Time, the 
Underwriters shall have received the favorable opinion, dated as of Closing 
Time, of Kleinfeld, Kaplan and Becker, regulatory counsel for the Company, in 
form and substance satisfactory to counsel for the Underwriters, to the 
effect set forth in Exhibit D hereto.

    (e)  OPINION OF COUNSEL FOR UNDERWRITERS.  At Closing Time, the 
Underwriters shall have received the favorable opinion, dated as of Closing 
Time, of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the 
Underwriters, with respect to such matters as the Underwriters may reasonably 
request.  In giving such opinion such counsel may rely, as to all matters 
governed by the laws of jurisdictions other than the law of the States of New 
York and California and the federal law of the United States and the General 
Corporation Law of the State of Delaware, upon the opinions of counsel 
satisfactory to the Underwriters.  Such counsel may also state that, insofar 
as such opinion involves factual matters, they have relied upon certificates 
of officers and other representatives of the Company and its Subsidiaries and 
certificates of public officials.

    (f)  OFFICERS' CERTIFICATE.  At Closing Time, there shall not have been, 
since the date hereof or since the respective dates as of which information 
is given in the Prospectus, any material adverse change in the condition, 
financial or otherwise, or in the earnings, business affairs or

                                       17
<PAGE>

business prospects of the Company and its Subsidiaries considered as one 
enterprise, whether or not arising in the ordinary course of business, and 
the Underwriters shall have received a certificate of the President or a Vice 
President of the Company and of the chief financial or chief accounting 
officer of the Company, dated as of Closing Time, to the effect that (i) 
there has been no such material adverse change, (ii) the representations and 
warranties in Section 1(a) hereof are true and correct with the same force 
and effect as though expressly made at and as of Closing Time, (iii) the 
Company has complied with all agreements and satisfied all conditions on its 
part to be performed or satisfied at or prior to Closing Time, and (iv) no 
stop order suspending the effectiveness of the Registration Statement has 
been issued and no proceedings for that purpose have been instituted or are 
pending or are contemplated by the Commission.

    (g)  ACCOUNTANT'S COMFORT LETTER.  At the time of the execution of this 
Agreement, the Underwriters shall have received from Deloitte & Touche LLP a 
letter dated such date, in form and substance satisfactory to the 
Underwriters, containing statements and information of the type ordinarily 
included in accountants' "comfort letters" to underwriters with respect to 
the financial statements and certain financial information contained in the 
Registration Statement and the Prospectus.

    (h)  BRING-DOWN COMFORT LETTER.  At Closing Time, the Underwriters shall 
have received from Deloitte & Touche LLP a letter, dated as of Closing Time, 
to the effect that they reaffirm the statements made in the letter furnished 
pursuant to subsection (g) of this Section, except that the specified date 
referred to shall be a date not more than three business days prior to 
Closing Time.

    (i)  MAINTENANCE OF RATING.  At Closing Time, the Securities shall be 
rated at least "B-1" by Moody's Investor's Service Inc. and "B" by Standard & 
Poor's Ratings Group, a division of McGraw-Hill, Inc., and the Company shall 
have delivered to the Underwriters a letter dated the Closing Time, from each 
such rating agency, or other evidence satisfactory to the Underwriters, 
confirming that the Securities have such ratings; and since the date of this 
Agreement, there shall not have occurred a downgrading in the rating assigned 
to the Securities or any of the Company's other debt securities by any 
"nationally recognized statistical rating agency," as that term is defined by 
the Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such 
organization shall have publicly announced that it has under surveillance or 
review its rating of the Securities or any of the Company's other debt 
securities.

    (j)  APPROVAL OF LISTING.  At Closing Time, the Securities and the Common 
Stock issuable on conversion thereof shall have been approved for inclusion 
in the Nasdaq SmallCap and National Markets, respectively, subject only to 
official notice of issuance.

    (k)  NO OBJECTION.  The NASD has confirmed that it has not raised any 
objection with respect to the fairness and reasonableness of the underwriting 
terms and arrangements.

                                       18
<PAGE>

    (l)  LOCK-UP AGREEMENTS.  At the date of this Agreement, the Underwriters 
shall have received an agreement substantially in the form of Exhibit A 
hereto signed by the persons listed on Schedule C hereto.

    (m)  CONDITIONS TO PURCHASE OF OPTION SECURITIES.  In the event that the 
Underwriters exercise their option provided in Section 2(b) hereof to 
purchase all or any portion of the Option Securities, the representations and 
warranties of the Company contained herein and the statements in any 
certificates furnished by the Company or any Subsidiary of the Company 
hereunder shall be true and correct as of each Date of Delivery and, at the 
relevant Date of Delivery, the Underwriters shall have received:

         (i)    OFFICERS' CERTIFICATE.  A certificate, dated such Date of 
Delivery, of the President or a Vice President of the Company and of the 
chief financial or chief accounting officer of the Company confirming that 
the certificate delivered at the Closing Time pursuant to Section 5(f) hereof 
remains true and correct as of such Date of Delivery.

         (ii)   OPINION OF COUNSEL FOR COMPANY.  The favorable opinion of 
Brobeck, Phleger & Harrison LLP, counsel for the Company, in form and 
substance satisfactory to counsel for the Underwriters, dated such Date of 
Delivery, relating to the Option Securities to be purchased on such Date of 
Delivery and otherwise to the same effect as the opinion required by Section 
5(b) hereof.

         (iii)  OPINION OF PATENT COUNSEL FOR COMPANY.  The favorable opinion 
of Lyon & Lyon LLP, patent counsel for the Company, dated such Date of 
Delivery, to the same effect as the opinion required by Section 5(c) hereof.

         (iv)   OPINION OF REGULATORY COUNSEL FOR COMPANY.  The favorable 
opinion of Kleinfeld, Kaplan and Becker, regulatory counsel for the Company, 
dated such Date of Delivery, to the same effect as the opinion required by 
Section 5(d) hereof.

         (v)    OPINION OF COUNSEL FOR UNDERWRITERS.  The favorable opinion 
of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters, 
dated such Date of Delivery, relating to the Option Securities to be 
purchased on such Date of Delivery and otherwise to the same effect as the 
opinion required by Section 5(e) hereof.

         (vi)   BRING-DOWN COMFORT LETTER.  A letter from Deloitte & Touche 
LLP, in form and substance satisfactory to the Underwriters and dated such 
Date of Delivery, substantially in the same form and substance as the letter 
furnished to the Underwriters pursuant to Section 5(h) hereof, except that 
the "specified date" in the letter furnished pursuant to this paragraph shall 
be a date not more than five days prior to such Date of Delivery.

         (vii)  NO DOWNGRADING.  Subsequent to the date of this Agreement, no 
downgrading shall have occurred in the rating accorded the Securities or of 
any of the Company's other securities by any "nationally recognized 
statistical rating organization," as that term is defined by the

                                       19
<PAGE>

Commission for purposes of Rule 436(g)(2) under the 1933 Act, and no such 
organization shall have publicly announced that it has under surveillance or 
review its ratings of any of the Company's securities.

    (n)  ADDITIONAL DOCUMENTS.  At Closing Time and at each Date of Delivery, 
counsel for the Underwriters shall have been furnished with such documents 
and opinions as they may require for the purpose of enabling them to pass 
upon the issuance and sale of the Securities as herein contemplated, or in 
order to evidence the accuracy of any of the representations or warranties, 
or the fulfillment of any of the conditions, herein contained; and all 
proceedings taken by the Company in connection with the issuance and sale of 
the Securities as herein contemplated shall be reasonably satisfactory in 
form and substance to the Underwriters and counsel for the Underwriters.

    (o)  TERMINATION OF AGREEMENT.  If any condition specified in this 
Section shall not have been fulfilled when and as required to be fulfilled, 
this Agreement, or, in the case of any condition to the purchase of Option 
Securities, on a Date of Delivery which is after the Closing Time, the 
obligations of the several Underwriters to purchase the relevant Option 
Securities, may be terminated by the Underwriters by notice to the Company at 
any time at or prior to Closing Time or such Date of Delivery, as the case 
may be, and such termination shall be without liability of any party to any 
other party except as provided in Section 4 and except that Sections 1, 6, 7 
and 8 shall survive any such termination and remain in full force and effect.

    (p)  CONSENT OF BANK OF AMERICA.  The Company shall have received from 
the Bank of America National Trust & Savings Association (the "Bank"), in 
connection with that certain Business Loan Agreement, dated April 14, 1997, 
between the Company and the Bank (the "Loan Agreement"), a consent to the 
sale of the Securities, or shall have provided evidence to the Underwriters 
of termination of the Loan Agreement, in either case, in form and substance 
reasonably satisfactory to the Underwriters and their counsel.

    SECTION 6.  INDEMNIFICATION.  

    (a)  INDEMNIFICATION OF UNDERWRITERS.  The Company agrees to indemnify 
and hold harmless each Underwriter and each person, if any, who controls any 
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of 
the 1934 Act as follows:

         (i)    against any and all loss, liability, claim, damage and 
expense whatsoever, as incurred, arising out of any untrue statement or 
alleged untrue statement of a material fact contained in the Registration 
Statement (or any amendment thereto), including the Rule 430A Information and 
the Rule 434 Information, if applicable, or the omission or alleged omission 
therefrom of a material fact required to be stated therein or necessary to 
make the statements therein not misleading or arising out of any untrue 
statement or alleged untrue statement of a material fact included in any 
preliminary prospectus or the Prospectus (or any amendment or supplement 
thereto), or the omission or alleged omission therefrom of a material fact 
necessary in order to make the statements therein, in the light of the 
circumstances under which they were made, not misleading;

                                       20
<PAGE>

         (ii)   against any and all loss, liability, claim, damage and 
expense whatsoever, as incurred, to the extent of the aggregate amount paid 
in settlement of any litigation, or any investigation or proceeding by any 
governmental agency or body, commenced or threatened, or of any claim 
whatsoever based upon any such untrue statement or omission, or any such 
alleged untrue statement or omission; provided that (subject to Section 6(d) 
below) any such settlement is effected with the written consent of the 
Company; and

         (iii)  against any and all expense whatsoever, as incurred 
(including the fees and disbursements of counsel chosen by Merrill Lynch), 
reasonably incurred in investigating, preparing or defending against any 
litigation, or any investigation or proceeding by any governmental agency or 
body, commenced or threatened, or any claim whatsoever based upon any such 
untrue statement or omission, or any such alleged untrue statement or 
omission, to the extent that any such expense is not paid under (i) or (ii) 
above;

PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss, 
liability, claim, damage or expense to the extent arising out of any untrue 
statement or omission or alleged untrue statement or omission made in 
reliance upon and in conformity with written information furnished to the 
Company by any Underwriter through Merrill Lynch expressly for use in the 
Registration Statement (or any amendment thereto), including the Rule 430A 
Information and the Rule 434 Information, if applicable, or any preliminary 
prospectus or the Prospectus (or any amendment or supplement thereto).

    (b)  INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS.   Each 
Underwriter severally agrees to indemnify and hold harmless the Company, its 
directors, each of its officers who signed the Registration Statement, and 
each person, if any, who controls the Company within the meaning of Section 
15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, 
liability, claim, damage and expense described in the indemnity contained in 
subsection (a) of this Section, as incurred, but only with respect to untrue 
statements or omissions, or alleged untrue statements or omissions, made in 
the Registration Statement (or any amendment thereto), including the Rule 
430A Information and the Rule 434 Information, if applicable, or any 
preliminary prospectus or the Prospectus (or any amendment or supplement 
thereto) in reliance upon and in conformity with written information 
furnished to the Company by such Underwriter through Merrill Lynch expressly 
for use in the Registration Statement (or any amendment thereto) or such 
preliminary prospectus or the Prospectus (or any amendment or supplement 
thereto).

    (c)  ACTIONS AGAINST PARTIES; NOTIFICATION.  Each indemnified party shall 
give notice as promptly as reasonably practicable to each indemnifying party 
of any action commenced against it in respect of which indemnity may be 
sought hereunder, but failure to so notify an indemnifying party shall not 
relieve such indemnifying party from any liability hereunder to the extent it 
is not materially prejudiced as a result thereof and in any event shall not 
relieve it from any liability which it may have otherwise than on account of 
this indemnity agreement.  In the case of parties indemnified pursuant to 
Section 6(a) above, counsel to the indemnified parties shall be selected by 
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 
6(b) above, counsel to the

                                       21
<PAGE>

indemnified parties shall be selected by the Company.  An indemnifying party 
may participate at its own expense in the defense of any such action; 
provided, however, that counsel to the indemnifying party shall not (except 
with the consent of the indemnified party) also be counsel to the indemnified 
party.  In no event shall the indemnifying parties be liable for fees and 
expenses of more than one counsel (in addition to any local counsel) separate 
from their own counsel for all indemnified parties in connection with any one 
action or separate but similar or related actions in the same jurisdiction 
arising out of the same general allegations or circumstances.  No 
indemnifying party shall, without the prior written consent of the 
indemnified parties, settle or compromise or consent to the entry of any 
judgment with respect to any litigation, or any investigation or proceeding 
by any governmental agency or body, commenced or threatened, or any claim 
whatsoever in respect of which indemnification or contribution could be 
sought under this Section 6 or Section 7 hereof (whether or not the 
indemnified parties are actual or potential parties thereto), unless such 
settlement, compromise or consent (i) includes an unconditional release of 
each indemnified party from all liability arising out of such litigation, 
investigation, proceeding or claim and (ii) does not include a statement as 
to or an admission of fault, culpability or a failure to act by or on behalf 
of any indemnified party.

    (d)  SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE.   If at any time 
an indemnified party shall have requested an indemnifying party to reimburse 
the indemnified party for fees and expenses of counsel, such indemnifying 
party agrees that it shall be liable for any settlement of the nature 
contemplated by Section 6(a) effected without its written consent if (i) such 
settlement is entered into more than 45 days after receipt by such 
indemnifying party of the aforesaid request, (ii) such indemnifying party 
shall have received notice of the terms of such settlement at least 30 days 
prior to such settlement being entered into and (iii) such indemnifying party 
shall not have reimbursed such indemnified party in accordance with such 
request prior to the date of such settlement.

    SECTION 7.  CONTRIBUTION.  If the indemnification provided for in Section 
6 hereof is for any reason unavailable to or insufficient to hold harmless an 
indemnified party in respect of any losses, liabilities, claims, damages or 
expenses referred to therein, then each indemnifying party shall contribute 
to the aggregate amount of such losses, liabilities, claims, damages and 
expenses incurred by such indemnified party, as incurred, (i) in such 
proportion as is appropriate to reflect the relative benefits received by the 
Company on the one hand and the Underwriters on the other hand from the 
offering of the Securities pursuant to this Agreement or (ii) if the 
allocation provided by clause (i) is not permitted by applicable law, in such 
proportion as is appropriate to reflect not only the relative benefits 
referred to in clause (i) above but also the relative fault of the Company on 
the one hand and of the Underwriters on the other hand in connection with the 
statements or omissions which resulted in such losses, liabilities, claims, 
damages or expenses, as well as any other relevant equitable considerations.

    The relative benefits received by the Company on the one hand and the 
Underwriters on the other hand in connection with the offering of the 
Securities pursuant to this Agreement shall be deemed to be in the same 
respective proportions as the total net proceeds from the offering of the 

                                       22
<PAGE>

Securities pursuant to this Agreement (before deducting expenses) received by 
the Company and the total underwriting discount received by the Underwriters, 
in each case as set forth on the cover of the Prospectus, or, if Rule 434 is 
used, the corresponding location on the Term Sheet, bear to the aggregate 
initial public offering price of the Securities as set forth on such cover.

    The relative fault of the Company on the one hand and the Underwriters on 
the other hand shall be determined by reference to, among other things, 
whether any such untrue or alleged untrue statement of a material fact or 
omission or alleged omission to state a material fact relates to information 
supplied by the Company or by the Underwriters and the parties' relative 
intent, knowledge, access to information and opportunity to correct or 
prevent such statement or omission.

    The Company and the Underwriters agree that it would not be just and 
equitable if contribution pursuant to this Section 7 were determined by pro 
rata allocation (even if the Underwriters were treated as one entity for such 
purpose) or by any other method of allocation which does not take account of 
the equitable considerations referred to above in this Section 7.  The 
aggregate amount of losses, liabilities, claims, damages and expenses 
incurred by an indemnified party and referred to above in this Section 7 
shall be deemed to include any legal or other expenses reasonably incurred by 
such indemnified party in investigating, preparing or defending against any 
litigation, or any investigation or proceeding by any governmental agency or 
body, commenced or threatened, or any claim whatsoever based upon any such 
untrue or alleged untrue statement or omission or alleged omission.

    Notwithstanding the provisions of this Section 7, no Underwriter shall be 
required to contribute any amount in excess of the amount by which the total 
price at which the Securities underwritten by it and distributed to the 
public were offered to the public exceeds the amount of any damages which 
such Underwriter has otherwise been required to pay by reason of any such 
untrue or alleged untrue statement or omission or alleged omission.

    No person guilty of fraudulent misrepresentation (within the meaning of 
Section 11(f) of the 1933 Act) shall be entitled to contribution from any 
person who was not guilty of such fraudulent misrepresentation.

    For purposes of this Section 7, each person, if any, who controls an 
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of 
the 1934 Act shall have the same rights to contribution as such Underwriter, 
and each director of the Company, each officer of the Company who signed the 
Registration Statement, and each person, if any, who controls the Company 
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 
Act shall have the same rights to contribution as the Company.  The 
Underwriters' respective obligations to contribute pursuant to this Section 7 
are several in proportion to the principal amount of Initial Securities set 
forth opposite their respective names in Schedule A hereto and not joint.

    SECTION 8.  REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE 
DELIVERY.  All representations, warranties and agreements contained in this 
Agreement or in certificates of officers

                                       23
<PAGE>

of the Company or any of its Subsidiaries submitted pursuant hereto, shall 
remain operative and in full force and effect, regardless of any 
investigation made by or on behalf of any Underwriter or controlling person, 
or by or on behalf of the Company, and shall survive delivery of the 
Securities to the Underwriters.

    SECTION 9.   TERMINATION OF AGREEMENT.

    (a)  TERMINATION; GENERAL.  The Underwriters may terminate this 
Agreement, by notice to the Company, at any time at or prior to Closing Time 
(i) if there has been, since the time of execution of this Agreement or since 
the respective dates as of which information is given in the Prospectus, any 
material adverse change in the condition, financial or otherwise, or in the 
earnings, business affairs or business prospects of the Company and its 
Subsidiaries considered as one enterprise, whether or not arising in the 
ordinary course of business, or (ii) if there has occurred any material 
adverse change in the financial markets in the United States or the 
international financial markets, any outbreak of hostilities or escalation 
thereof or other calamity or crisis or any change or development involving a 
prospective change in national or international political, financial or 
economic conditions, in each case the effect of which is such as to make it, 
in the judgment of the Underwriters, impracticable to market the Securities 
or to enforce contracts for the sale of the Securities, or (iii) if trading 
in any securities of the Company has been suspended or materially limited by 
the Commission or the Nasdaq National Market, or if trading generally on the 
American Stock Exchange or the New York Stock Exchange or in the Nasdaq 
National Market has been suspended or materially limited, or minimum or 
maximum prices for trading have been fixed, or maximum ranges for prices have 
been required, by any of said exchanges or by such system or by order of the 
Commission, the National Association of Securities Dealers, Inc. or any other 
governmental authority, or (iv) if a banking moratorium has been declared by 
either Federal or New York or California authorities.  

    (b)  LIABILITIES.  If this Agreement is terminated pursuant to this 
Section, such termination shall be without liability of any party to any 
other party except as provided in Section 4 hereof, and provided further that 
Sections 1, 6, 7 and 8 shall survive such termination and remain in full 
force and effect.

    SECTION 10.  NOTICES.  All notices and other communications hereunder 
shall be in writing and shall be deemed to have been duly given if mailed or 
transmitted by any standard form of telecommunication.  Notices to the 
Underwriters shall be directed to them at:

              c/o Merrill Lynch & Co.
              World Financial Center
              North Tower
              New York, New York  10281-1201
              Attn:  John B. Kiernan, Jr.

    with a copy to:

                                       24
<PAGE>

              Skadden, Arps, Slate, Meagher & Flom LLP
              300 South Grand Avenue, Suite 3400
              Los Angeles, California  90071
              Attn:  Thomas C. Janson, Jr.

    Notices to the Company shall be directed to it at:

              Dura Pharmaceuticals, Inc.
              5880 Pacific Center Boulevard
              San Diego, California  92121-4204
              Attn:  Mitchell R. Woodbury

    with a copy to:

              Brobeck, Phleger & Harrison LLP
              550 West "C" Street, Suite 1300
              San Diego, California  92101
              Attn:  Faye H. Russell

    SECTION 11.  PARTIES.  This Agreement shall each inure to the benefit of 
and be binding upon the Underwriters and the Company and their respective 
successors.  Nothing expressed or mentioned in this Agreement is intended or 
shall be construed to give any person, firm or corporation, other than the 
Underwriters and the Company and their respective successors and the 
controlling persons and officers and directors referred to in Sections 6 and 
7 and their heirs and legal representatives, any legal or equitable right, 
remedy or claim under or in respect of this Agreement or any provision herein 
contained.  This Agreement and all conditions and provisions hereof are 
intended to be for the sole and exclusive benefit of the Underwriters and the 
Company and their respective successors, and said controlling persons and 
officers and directors and their heirs and legal representatives, and for the 
benefit of no other person, firm or corporation.  No purchaser of Securities 
from any Underwriter shall be deemed to be a successor by reason merely of 
such purchase.

    SECTION 12.  GOVERNING LAW AND TIME.  THIS AGREEMENT SHALL BE GOVERNED BY 
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  EXCEPT 
AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY 
TIME.

    SECTION 13.  EFFECT OF HEADINGS.  The Article and Section headings herein 
and the Table of Contents are for convenience only and shall not affect the 
construction hereof.

                                       25
<PAGE>

    If the foregoing is in accordance with your understanding of our 
agreement, please sign and return to the Company a counterpart hereof, 
whereupon this instrument, along with all counterparts, will become a binding 
agreement between the Underwriters and the Company in accordance with its 
terms.

                                       Very truly yours,

                                       DURA PHARMACEUTICALS, INC.


                                       By: /s/ CAM L. GARNER
                                           --------------------------------
                                           Cam L. Garner
                                           Chairman, President and 
                                            Chief Executive Officer

CONFIRMED AND ACCEPTED,
 as of the date first above written:


MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
      INCORPORATED
GOLDMAN, SACHS & CO.

By:  MERRILL LYNCH, PIERCE, FENNER & 
     SMITH INCORPORATED


By: /s/ JAMES G. JACKSON
    --------------------------------
    Authorized Signatory



                                       
<PAGE>
                                 SCHEDULE A




                                                                    Principal
                                                                    Amount of
Name of Underwriter                                                Securities
-------------------                                                ----------

Merrill Lynch, Pierce, Fenner & Smith
          Incorporated.......................................     $ 150,000,000
Goldman, Sachs & Co..........................................       100,000,000

Total........................................................     $ 250,000,000
                                                                  -------------
                                                                  -------------











                                  Sch A - 1
<PAGE>

                                 SCHEDULE B

                         DURA PHARMACEUTICALS, INC.

           $250,000,000  Convertible Subordinated Notes due 2002


    1.   The initial public offering price of the Securities shall be 100% of 
the principal amount thereof, plus accrued interest, if any, from the date of 
issuance.

    2.   The purchase price to be paid by the Underwriters for the Initial 
Securities shall be 97% of the principal amount thereof.

    3.   The interest rate on the Securities shall be 3 1/2% per annum.

    4.   The Securities shall be convertible into shares of common stock, par 
value $.001 per share, of the Company at an initial conversion price of 
$50.635 per share.

    5.   The Securities may be redeemed at the option of the Company at any 
time after July 15, 2000, in whole or from time to time in part, upon not 
less than 15 nor more than 60 days' notice given to the Holders.  The 
redemption prices (including accrued and unpaid interest up to but not 
including the date of redemption), expressed as a percentage of the principal 
amount, for the 12-month periods beginning July 15, 2000 and July 15, 2001 
are 101.40% and 100.70%, respectively.











                                   Sch B - 1
<PAGE>
                                 SCHEDULE C

                        List of Persons and Entities
                             Subject to Lock-Up

<TABLE>
<CAPTION>

Name of Holder                                   Shares
--------------                                   ------
<S>                                              <C>
All directors and officers of the Company        All shares of Common Stock beneficially
                                                 owned by each such person
</TABLE>








                                    Sch C - 1
<PAGE>

                  Form of Lock-Up Pursuant to Section 5(l)

                                                                      Exhibit A

                               July ___, 1997

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith 
    Incorporated,
Goldman, Sachs & Co.
c/o  Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
    Incorporated
North Tower
World Financial Center
New York, New York  10281-1209

    Re:  PROPOSED PUBLIC OFFERING BY DURA PHARMACEUTICALS, INC.
         ------------------------------------------------------

Ladies and Gentlemen:

    The undersigned, a shareholder and/or officer and/or director of
Dura Pharmaceuticals, Inc, a Delaware corporation (the "Company"),
understands that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") and Goldman, Sachs & Co.
("Goldman, Sachs") propose to enter into a Purchase Agreement (the
"Purchase Agreement") with the Company providing for the public
offering of convertible notes (the "Securities") of the Company and
related Pricing Agreement (the "Pricing Agreement"), which will set
forth, among other things, the public offering price of the
Securities.  In recognition of the benefit that such an offering will
confer upon the undersigned as a shareholder and/or officer and/or
director of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named
in the Purchase Agreement that, during a period of ninety (90) days
from the date of the Purchase Agreement, the undersigned will not,
without the prior written consent of Merrill Lynch, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of or transfer, any shares of the Company's Common
Stock, par value $.001 per share (the "Common Stock"), or any
securities convertible into or exchangeable or exercisable for Common
Stock, whether now  

                                      A-1
<PAGE>

owned or hereafter acquired by the undersigned, or with respect to which the 
undersigned has or hereafter acquires the power of disposition, or file, 
participate in, or request the filing of any registration statement under the 
Securities Act of 1933, as amended, with respect to any of the foregoing.

                                       Very truly yours,



                                       Signature:                              
                                                 ------------------------------

                                       Print Name:                             
                                                 ------------------------------






                                      A-2
<PAGE>

                                                                Exhibit B


                    FORM OF OPINION OF COMPANY'S COUNSEL
                        TO BE DELIVERED PURSUANT TO
                                SECTION 5(b)


    (i)     The Company has been duly incorporated and is validly existing as 
a corporation in good standing under the laws of the State of Delaware.

    (ii)    The Company has full corporate power and authority to own or 
lease its properties and conduct its business as described in the 
Registration Statement and Prospectus and to enter into and perform its 
obligations under the Purchase Agreement.

    (iii)   The Company is duly qualified as a foreign corporation to 
transact business and is in good standing in each jurisdiction in which such 
qualification is required, whether by reason of the ownership or leasing of 
property or the conduct of business, except where the failure so to qualify 
or to be in good standing would not result in a Material Adverse Effect 
(which opinion may be given by the General Counsel of the Company).

    (iv)    The authorized capital stock of the Company conforms as to legal 
matters in all material respects to the description thereof contained in the 
Registration Statement and Prospectus.  The outstanding shares of capital 
stock of the Company have been duly and validly authorized and issued, are, 
to our knowledge, fully paid and non-assessable, and are not subject to any 
preemptive rights (the opinion called for by the last sentence of this 
paragraph (iv) may be given by the General Counsel of the Company).

    (v)     To our knowledge, the Subsidiaries are the Company's sole 
subsidiaries.  Each Subsidiary has been duly incorporated and is validly 
existing as a corporation in good standing under the laws of the jurisdiction 
of its incorporation, has corporate power and authority to own, lease and 
operate its properties and to conduct its business as described in the 
Registration Statement and is duly qualified as a foreign corporation to 
transact business and is in good standing in each jurisdiction in which such 
qualification is required, whether by reason of the ownership or leasing of 
property or the conduct of business, except where the failure so to qualify 
or to be in good standing would not result in a Material Adverse Effect; all 
of the issued and outstanding capital stock of each Subsidiary has been duly 
authorized and validly issued, is fully paid and non-assessable and, to the 
best of our knowledge and information, is owned by the Company free and clear 
of any security interest, mortgage, pledge, lien, encumbrance, claim or 
equity; the Company, through its ownership of the stock of each Subsidiary is 
not subject to liability by reason of being such a holder; and none of the 
shares of any Subsidiary was issued in violation of the preemptive rights of 
any stockholder or warrantholder of such Subsidiary (the opinion called for 
by the last sentence of this paragraph (v) may be given by the General 
Counsel of the Company).

                                   B-1
<PAGE>

    (vi)    The Purchase Agreement has been duly authorized, executed and 
delivered by the Company.

    (vii)   The Indenture has been duly authorized, executed and delivered by 
the Company and (assuming the due authorization, execution and delivery 
thereof by the Trustee) constitutes a valid and binding agreement of the 
Company, enforceable against the Company in accordance with its terms, except 
as the enforcement thereof may be limited by bankruptcy, insolvency 
(including, without limitation, all laws relating to fraudulent transfers), 
reorganization, moratorium or similar laws affecting enforcement of 
creditors' rights generally and except as enforcement thereof is subject to 
general principles of equity (regardless of whether enforcement is considered 
in a proceeding in equity or at law).

    (viii)  The Securities are in the form contemplated by the Indenture, 
have been duly authorized by the Company and, assuming that the Securities 
have been duly authenticated by the Trustee in the manner described in its 
certificate delivered to you today (which fact such counsel need not 
determine by an inspection of the Securities), the Securities have been duly 
executed, issued and delivered by the Company and constitute valid and 
binding obligations of the Company, enforceable against the Company in 
accordance with their terms, except as the enforcement thereof may be limited 
by bankruptcy, insolvency (including, without limitation, all laws relating 
to fraudulent transfers), reorganization, moratorium or similar laws 
affecting enforcement of creditors' rights generally and except as 
enforcement thereof is subject to general principles of equity (regardless of 
whether enforcement is considered in a proceeding in equity or at law), and 
will be entitled to the benefits of the Indenture.  

    (ix)    Upon issuance and delivery of the Securities in accordance with 
the Purchase Agreement and the Indenture, the Securities shall be convertible 
at the option of the holder thereof for shares of Common Stock in accordance 
with the terms of the Securities and the Indenture; the shares of Common 
Stock issuable upon conversion of the Securities have been duly authorized 
and reserved for issuance upon such conversion by all necessary corporate 
action; such shares, when issued upon such conversion, will be validly issued 
and will be fully paid and non-assessable and no holder of such Common Stock 
is or will be subject to personal liability by reason of being such a holder. 
 

    (x)     The issuance of the shares of Common Stock upon conversion of the 
Securities is not subject to the preemptive or other similar rights of any 
securityholder of the Company.

    (xi)    Except as disclosed in or specifically contemplated by the 
Registration Statement and Prospectus, there are no options, warrants, 
conversion privileges, preemptive rights or other rights presently 
outstanding calling for the issuance of, or to purchase from the Company, any 
of the authorized but unissued capital stock of the Company.  The outstanding 
stock options relating to the Company's Common Stock have been duly 
authorized and validly issued and the description thereof contained in the 
Prospectus is accurate in all material respects (the opinion called for by 
this paragraph (xi) may be given by the General Counsel of the Company).

                                      B-2
<PAGE>

    (xii)   The Indenture has been duly qualified under the 1939 Act.

    (xiii)  The Securities and the Indenture conform as to legal matters in 
all material respects to the descriptions thereof contained in the Prospectus.

    (xiv)   The Registration Statement, including any Rule 462(b) 
Registration Statement, has been declared effective under the 1933 Act; and, 
to our knowledge, no stop order proceedings suspending the effectiveness of 
the Registration Statement have been instituted or threatened or are pending 
under the 1933 Act.

    (xv)    The form of certificate used to evidence the Common Stock is in 
due and proper legal form.

    (xvi)   To our knowledge, there is no legal or governmental proceeding 
pending or threatened to which the Company is or may become a party or to 
which any of the properties of the Company is or may become subject that is 
required to be described in the Registration Statement or the Prospectus and 
is not so described, or of any statute or regulation that is required to be 
described in the Registration Statement or the Prospectus or to be filed as 
an exhibit to the Registration Statement that is not described or filed as 
required.

    (xvii)  The statements in the Prospectus under the caption "Description 
of Capital Stock," to the extent that such statements constitute a summary of 
documents referred to therein or matters of law, have been prepared by or 
reviewed by us and are correct in all material respects.

    (xviii) All descriptions in the Prospectus of agreements and other 
instruments to which the Company or its Subsidiaries are a party are accurate 
in all material respects.  To our knowledge, no breach or default exists 
under any agreement or instrument to which the Company or any Subsidiary is a 
party and which is filed as an Exhibit to the Registration Statement or 
incorporated by reference therein (the opinion called for by the last 
sentence of this paragraph (xviii) may be given by the General Counsel of the 
Company).

    (xix)   Neither the Company nor any Subsidiary is in violation of its 
charter or by-laws; to the best of our knowledge, the Company and its 
Subsidiaries are in compliance with all laws, rules, regulations, judgments, 
decrees, orders and statutes in the jurisdictions in which they are 
conducting their business, except where the failure to so comply would not 
have a Material Adverse Effect (which opinion may be given by the General 
Counsel of the Company).

    (xx)    The execution and delivery by the Company of, and the performance 
by the Company of its obligations under, the Purchase Agreement, the 
Indenture and the Securities will not contravene any provision of applicable 
law or the articles of incorporation or bylaws of the Company, or, to our 
knowledge, any judgment, order or decree of any governmental body, agency or 
court having jurisdiction over the Company or any of its property, or, to our 
knowledge, constitute a breach of or default or Repayment Event (as defined 
in Section 1(a)(xv) of the Purchase Agreement) under any

                                      B-3
<PAGE>

agreement or other instrument filed as an exhibit to the Registration 
Statement or incorporated by reference therein to which the Company is a 
party, and no consent, approval, authorization or order of or qualification 
with any governmental body or agency is required for the due authorization, 
execution and delivery of the Purchase Agreement or the due execution, 
delivery or performance of the Indenture by the Company or for the offering, 
issuance, sale or delivery of the Securities and the issuance of shares of 
Common Stock upon conversion of Securities, except such as may be required by 
the securities or blue sky laws of the various states (on which we need 
express no opinion) in connection with the purchase and distribution of the 
Securities by the Underwriters.

    (xxi)   To our knowledge, no holders of securities of the Company have 
rights against the Company which have not been waived to the registration of 
shares of Common Stock or other securities, because of the filing of the 
Registration Statement by the Company or the offering contemplated thereby.

    (xxii)  The Company is not an "investment company" or an entity 
"controlled" by an "investment company," as such terms are defined in the 
1940 Act.

    In addition to the foregoing, (i) the documents incorporated by reference 
in the Prospectus (other than the financial statements and supporting 
schedules included therein or omitted therefrom, as to which we need express 
no opinion), when they became effective or were filed with the Commission, as 
the case may be, complied as to form in all material respects with the 
requirements of the 1933 Act or the 1934 Act, as applicable, and the rules 
and regulations of the Commission thereunder; and (ii) the Registration 
Statement, the Prospectus, and each amendment or supplement to the 
Registration Statement and Prospectus, as of their respective effective or 
issue dates (other than the financial statements and supporting schedules 
included therein or omitted therefrom, and the Trustee's Statement of 
Eligibility on Form T-1 (the "Form T-1"), as to which we need express no 
opinion) complied as to form in all material respects with the requirements 
of the 1933 Act and the 1933 Act Regulations.  Nothing has come to our 
attention that would lead us to believe that the Registration Statement or 
the Prospectus (except for financial statements and schedules and other 
financial data included or incorporated by reference therein or omitted 
therefrom and the Form T-1, as to which we need make no statement), at the 
time the Registration Statement became effective, contained an untrue 
statement of a material fact or omitted to state a material fact required to 
be stated therein or necessary to make the statements therein not misleading 
or that the Prospectus (except for financial statements and schedules and 
other financial data included or incorporated by reference therein or omitted 
therefrom and the Form T-1, as to which we need make no statement), at the 
time the Prospectus was issued, or at the Closing Time, included or includes 
an untrue statement of a material fact or omitted or omits to state a 
material fact necessary in order to make the statements therein, in the light 
of the circumstances under which they were made, not misleading.

    In rendering such opinion, such counsel may rely (A) upon the opinions of 
Lyon & Lyon LLP and Kleinfeld, Kaplan & Becker and Mitchell R. Woodbury, Esq. 
with respect to the matters opined upon by each, and (B), as to matters of 
fact (but not as to legal conclusions), to the extent they deem proper, on 
certificates of responsible officers of the Company and public officials.  
Such

                                      B-4
<PAGE>

opinion shall not state that it is to be governed or qualified by, or that it 
is otherwise subject to, any treatise, written policy or other document 
relating to legal opinions, including, without limitation, the Legal Opinion 
Accord of the ABA Section of Business Law (1991).



                                      B-5
<PAGE>

                                                             Exhibit C


                FORM OF OPINION OF COMPANY'S PATENT COUNSEL
                  TO BE DELIVERED PURSUANT TO SECTION 5(c)


    (i)   The Company owns or possesses licenses to patents which are
directed to the Spiros and to certain uses of the Spiros.  With regard
to the business presently and as proposed to be conducted by the
Company relating to the Spiros as described in the Registration
Statement and the Prospectus, and, except as described therein, we
have not received any notice of infringement of or conflict with, and
does not otherwise know of any basis for notice of any such
infringement of or conflict with, asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights, technology or know-how.

    (ii)  To the extent that the statements relating to the Spiros
product contained in the Prospectus under the subheadings "Risk
Factors--Patents and Proprietary Rights" and the first paragraph of
"Business--Patents and Proprietary Rights" refer to opinions of
counsel or matters of law, patents or patent applications or purport
to summarize the status of litigation or the provisions of statutes,
regulations, contracts, agreements or other documents, such statements
(A) have been prepared or reviewed by us and accurately reflect the
status of any such patents or patent applications, litigation, the
provisions purported to be summarized and any of our opinions and (B)
do not contain any untrue statements of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading.


                                   C-1
<PAGE>

                                                            Exhibit D

              FORM OF OPINION OF COMPANY'S REGULATORY COUNSEL
                  TO BE DELIVERED PURSUANT TO SECTION 5(d)


    (i)    We represent the Company in certain matters relating to 
regulatory compliance under the Federal Food, Drug and Cosmetic Act 
and the obtaining of federal regulatory approvals with respect to the 
development, testing, manufacturing, safety, labeling, storage, record 
keeping or marketing of the company's products.

    (ii)   We have read the portion of the Registration Statement and 
the Prospectus entitled "Risk Factors-Government Regulation; No 
Assurance of FDA Approval"; "Business-Government Regulation" and such 
other portions which reference federal food and drug regulatory 
matters as shall have been agreed upon between us and counsel for the 
Underwriters (the "Regulatory Portion").

    (iii)  While we have not conducted an audit of the Company and are 
relying as to matters of fact on the accuracy of the Prospectus, and 
subject to the description of the status of the Company's products in 
the section of the Prospectus entitled "Business--Government 
Regulation," we have no reason to believe that the Company's current 
business is not being conducted in material compliance with currently 
applicable requirements under the Federal Food, Drug and Cosmetic Act.

    (iv)   We have no reason to believe that the information contained 
in the Regulatory Portion of the Registration Statement or the 
Prospectus at the time they became effective contained any untrue 
statement of a material fact or omitted to state any material fact 
required to be stated therein or necessary to make the statements 
therein not misleading or that, at Closing Time, the information 
contained in the Regulatory Portion of the Prospectus or any amendment 
or supplement to the Regulatory Portion of the Prospectus contained 
any untrue statement of a material fact or omitted to state a material 
fact necessary in order to make the statements therein, in the light 
of the circumstances under which they were made, not misleading.


                                   D-1