Document:

EX-10.1

EXHIBIT 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of August 20, 2007,
between Encysive Pharmaceuticals Inc., a Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its successors and assigns, a
“Purchaser” and collectively the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an
effective registration statement under the Securities Act of 1933, as amended (the “Securities
Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are hereby acknowledged,
the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions.. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the meanings set
forth in this Section 1.1:“Action” shall have the meaning ascribed to such term in
Section 3.1(j).

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person as
such terms are used in and construed under Rule 405 under the Securities Act. With respect
to a Purchaser, any investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of
such Purchaser.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York or Texas are authorized or required by law or other governmental action to
close.

“Closing” means the closing of the purchase and sale of the Securities pursuant
to Section 2.1.

“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all conditions precedent
to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities have been satisfied or waived.

“Commission” means the Securities and Exchange Commission.

1

“Common Stock” means the common stock of the Company, par value $0.005 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed into.

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.

“Company Counsel” means Porter & Hedges, L.L.P.

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

“Evaluation Date” shall have the meaning ascribed to such term in Section
3.1(r).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan duly
adopted for such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or other securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise, exchange or
conversion price of such securities and (c) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors of the Company,
provided that any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the business of the
Company and in which the Company receives benefits in addition to the investment of funds,
but shall not include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is investing in
securities.

“FWS” means Feldman Weinstein & Smith LLP with offices located at 420 Lexington
Avenue, Suite 2620, New York, New York 10170-0002.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(z).

“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).

“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such term in Section
3.1(m).

“Per Share Purchase Price” equals $1.95, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar transactions of
the Common Stock that occur after the date of this Agreement.

“Person” means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened.

“Prospectus” means the means the base prospectus contained in the Registration
Statement.

“Prospectus Supplement” means the supplement to the Prospectus complying with
Rule 424(b) of the Securities Act that is filed with the Commission and delivered by the
Company to each Purchaser at the Closing.

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

“Registration Statement” means the effective registration statement with
Commission file No. 333-116193 which registers the sale of the Shares, the Warrants and the
Warrant Shares by the Purchasers.

“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as such
Rule.

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

“Securities” means the Shares, the Warrants and the Warrant Shares.

“Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

“Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include the location and/or reservation
of borrowable shares of Common Stock). 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares and Warrants purchased hereunder as specified below such Purchaser’s name on
the signature page of this Agreement and next to the heading “Subscription Amount,” in
United States dollars and in immediately available funds.

“Subsidiary” means any subsidiary of the Company as set forth in the SEC
Reports, and shall, where applicable, include any subsidiary of the Company formed or
acquired after the date hereof.

“Trading Day” means a day on which the principal Trading Market for the Common
Stock is open for trading.

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the
New York Stock Exchange.

“Transaction Documents” means this Agreement, the Warrants and any other
documents or agreements executed in connection with the transactions contemplated hereunder.

“Transfer Agent” means The Bank of New York, the current transfer agent of the
Company, with a mailing address of 101 Barclay Street — 11E, New York, New York 10007 and a
facsimile number of (212) 815-7048 and any successor transfer agent of the Company.

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted for
trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City
time) to 4:02 p.m. (New York City time); (b)  if the OTC Bulletin Board is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the
Purchasers of a majority in interest of the Shares then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.

“Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall
be exercisable after the six-month anniversary of the date hereof and have a term of five
years, in the form of Exhibit A attached hereto.

“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

ARTICLE II.

PURCHASE AND SALE

2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set
forth herein, substantially concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree
to purchase, up to an aggregate of $15,000,000 of Shares and Warrants. Each Purchaser shall
deliver to the Company, via wire transfer or a certified check, immediately available funds equal
to its Subscription Amount and the Company shall deliver to each Purchaser its respective Shares
and a Warrant as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall
deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of
the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the
offices of FWS or such other location as the parties shall mutually agree.

2.2 Deliveries.

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:

(i) this Agreement duly executed by the Company;

(ii) a legal opinion of Company Counsel, substantially in the form of
Exhibit B attached hereto;

(iii) a copy of the irrevocable instructions to the Company’s transfer agent
instructing the transfer agent to deliver via the Depository Trust Company Deposit
Withdrawal Agent Commission System (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the name
of such Purchaser;

(iv) a Warrant registered in the name of such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of the number of Shares purchased by
such Purchaser, with an exercise price equal to $1.95, subject to adjustment therein
(such Warrant certificate may be delivered within three Trading Days of the Closing
Date); and

(v) the Prospectus and Prospectus Supplement (which may be delivered in
accordance with Rule 172 under the Securities Act).

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

(i) this Agreement duly executed by such Purchaser; and

(ii) such Purchaser’s Subscription Amount by wire transfer to the account as
specified in writing by the Company.

2.3 Closing Conditions. 

(a) The obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

(i) the accuracy in all material respects when made and on the Closing Date of
the representations and warranties of the Purchasers contained herein;

(ii) all obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed;

(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement; and

(iv) no Purchaser, together with its Affiliates, will beneficially hold more
than 15% of the Common Stock.

(b) The respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:

(i) the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;

(ii) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;

(iv) there shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and

(v) from the date hereof to the Closing Date, trading in the Common Stock shall
not have been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time prior
to the Closing Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or international
calamity of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each Purchaser,
makes it impracticable or inadvisable to purchase the Securities at the Closing.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify
any representation or warranty otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules, the Company hereby makes the following
representations and warranties to each Purchaser:

(a) Subsidiaries. All of the Subsidiaries of the Company are set forth in the
SEC Reports. Except as disclosed in the SEC Reports, the Company owns, directly or
indirectly, all of the capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.

(b) Organization and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as applicable),
with the requisite power and authority to own and use its properties and assets and to carry
on its business as currently conducted. Neither the Company nor any Subsidiary is in
violation or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by each of the
Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and no further action is
required by the Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities and the consummation by
the Company of the other transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as could not have or reasonably be expected to result
in a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the Company of
the Transaction Documents, other than (i) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the listing of the Securities for
trading thereon in the time and manner required thereby and (iv) such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

(f) Issuance of the Securities; Registration. The Securities are duly
authorized and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company. The Warrant Shares, when issued in accordance with the
terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company other than restrictions on transfer provided in the
Transaction Documents. The Company has reserved from its duly authorized capital stock the
maximum number of shares of Common Stock issuable pursuant to this Agreement and the
Warrants. The Company has prepared and filed the Registration Statement in conformity with
the requirements of the Securities Act, which became effective on June 23, 2004 (the
“Effective Date”), including the Prospectus, and such amendments and supplements
thereto as may have been required to the date of this Agreement. The Registration Statement
is effective under the Securities Act and no stop order preventing or suspending the
effectiveness of the Registration Statement or suspending or preventing the use of the
Prospectus has been issued by the Commission and no proceedings for that purpose have been
instituted or, to the knowledge of the Company, are threatened by the Commission. The
Company, if required by the rules and regulations of the Commission, proposes to file the
Prospectus Supplement, with the Commission pursuant to Rule 424(b). At the time the
Registration Statement and any amendments thereto became effective, at the date of this
Agreement and at the Closing Date, the Registration Statement and any amendments thereto
conformed and will conform in all material respects to the requirements of the Securities
Act and did not and will not contain any untrue statement 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; and the Prospectus and any amendments or supplements thereto, at
time the Prospectus or any amendment or supplement thereto was issued and at the Closing
Date, conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

(g) Capitalization. The capitalization of the Company is as set forth in the
SEC Reports. The Company has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the exercise of stock options
under the Company’s incentive plans, the issuance of shares of Common Stock pursuant to the
Company’s incentive plans and pursuant to the conversion or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed periodic report under the
Exchange Act. No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of the Securities or
except as set forth in the SEC Reports, there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock
Equivalents. The issuance and sale of the Securities will not obligate the Company to issue
            shares of Common Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities. All of the outstanding
            shares of capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the issuance and sale of the
Securities. Except as disclosed in the SEC Reports, there are no stockholders agreements,
voting agreements or other similar agreements with respect to the Company’s capital stock to
which the Company is a party or, to the knowledge of the Company, between or among any of
the Company’s stockholders.

(h) SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, together with the
Prospectus and the Prospectus Supplement, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports complied in all material
respects with applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes required by GAAP,
and fairly present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments.

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since
the date of the latest audited financial statements included within the SEC Reports, except
as specifically disclosed in a subsequent SEC Report filed prior to the date hereof or in
the Prospectus Supplement, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer, director or Affiliate,
except pursuant to existing Company incentive plans. The Company does not have pending
before the Commission any request for confidential treatment of information. Except for the
issuance of the Securities contemplated by this Agreement or as set forth on Schedule
3.1(i), no event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company under applicable
securities laws at the time this representation is made that has not been publicly disclosed
at least 1 Trading Day prior to the date that this representation is made.

(j) Litigation. Except as disclosed in the SEC Reports, there is no action,
suit, inquiry, notice of violation, Proceeding or investigation pending or, to the knowledge
of the Company, threatened against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii) could, if there
were an unfavorable decision, have or reasonably be expected to result in a Material Adverse
Effect. Except as disclosed in the SEC Reports, neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the Company or, to
the knowledge of the Company, any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.

(k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company which could
reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the
SEC Reports, none of the Company’s or its Subsidiaries’ employees is a member of a union
that relates to such employee’s relationship with the Company or such Subsidiary, and
neither the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships with their
employees are good. No executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive covenant in favor of any
third party, and the continued employment of each such executive officer does not subject
the Company or any of its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state,
local and foreign laws and regulations relating to employment and employment practices,
terms and conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

(l) Compliance. Neither the Company nor any Subsidiary (i) is in default under
or in violation of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws applicable to its business and
all such laws that affect the environment, except in each case as could not have or
reasonably be expected to result in a Material Adverse Effect.

(m) Regulatory Permits. Except as disclosed in the SEC Reports, the Company
and the Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the failure to
possess such permits could not reasonably be expected to result in a Material Adverse Effect
(“Material Permits”), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material Permit.

(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and the Subsidiaries and Liens
for the payment of federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance.

(o) Patents and Trademarks. To the Company’s knowledge, the Company and the
Subsidiaries have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or material for
use in connection with their respective businesses as described in the SEC Reports and which
the failure to so have could have a Material Adverse Effect (collectively, the
“Intellectual Property Rights”). Neither the Company nor any Subsidiary has
received a written notice that any of the Intellectual Property Rights used by the Company
or any Subsidiary violates or infringes upon the intellectual property rights of any Person.
To the knowledge of the Company, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the Intellectual Property
Rights. The Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties, except where
failure to do so could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.

(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as the
Company deems adequate for the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a significant
increase in cost.

(q) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports, none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any transaction with
the Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or
from, or otherwise requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for (i) payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements under any stock option plan
of the Company.

(r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it
as of the Closing Date. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and designed such disclosure controls and procedures to
ensure that information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the Company’s most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The Company
presented in its most recently filed periodic report under the Exchange Act the conclusions
of the certifying officers about the effectiveness of the disclosure controls and procedures
based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as such term is
defined in the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

(s) Certain Fees. Except as set forth in the Prospectus Supplement, no
brokerage or finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the Transaction Documents.
The Purchasers shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in this Section
3.1(s) that may be due in connection with the transactions contemplated by the Transaction
Documents.

(t) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act of 1940, as amended.

(u) Registration Rights. Except as disclosed in the SEC Reports, no Person has
any right to cause the Company to effect the registration under the Securities Act of any
securities of the Company.

(v) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to, or which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received notice from any
Trading Market on which the Common Stock is or has been listed or quoted to the effect that
the Company is not in compliance with the listing or maintenance requirements of such
Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance
requirements, including, without limitation, as a result of the transactions contemplated
by the Transaction Documents; provided, the Company makes no warranty as to the future price
of its Common Stock and its impact on such listing or maintenance requirements.

(w) Application of Takeover Protections. The Company and the Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company’s issuance of
the Securities and the Purchasers’ ownership of the Securities.

(x) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in the
Prospectus Supplement. The Company understands and confirms that the Purchasers will rely
on the foregoing representation in effecting transactions in securities of the Company. All
disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company,
its business and the transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, is true and correct and does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that no Purchaser makes or has made any representations or
warranties with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.

(y) No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any sales of any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of any
applicable shareholder approval provisions of any Trading Market on which any of the
securities of the Company are listed or designated.

(z) Indebtedness. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date. The SEC Reports set forth as of the respective dates thereof all outstanding
secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” means (a) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of
business; and (c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.

(aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted or threatened against
the Company or any Subsidiary.

(bb) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of which
the Company is aware) which is in violation of law, or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(cc) Accountants. The Company’s accountants are identified in the Prospectus
or Prospectus Supplement. To the knowledge of the Company, such accountants, who the Company
expects will express their opinion with respect to the financial statements to be included
in the Company’s Annual Report on Form 10-K for the year ending December 31, 2007, are a
registered public accounting firm as required by the Securities Act.

(dd) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any advice given by
any Purchaser or any of their respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely incidental to the
Purchasers’ purchase of the Securities. The Company further represents to each Purchaser
that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby
by the Company and its representatives.

(ee) Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e)
and 4.14 hereof), it is understood and acknowledged by the Company (i) that none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser agreed, to desist
from purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities for any
specified term; (ii) that past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that any Purchaser, and
counter-parties in “derivative” transactions to which any such Purchaser is a party,
directly or indirectly, presently may have a “short” position in the Common Stock, and (iv)
that each Purchaser shall not be deemed to have any affiliation with or control over any
arm’s length counter-party in any “derivative” transaction. The Company further understands
and acknowledges that (a) one or more Purchasers may engage in hedging activities at various
times during the period that the Securities are outstanding, including, without limitation,
during the periods that the value of the Warrant Shares deliverable with respect to
Securities are being determined and (b) such hedging activities (if any) could reduce the
value of the existing stockholders’ equity interests in the Company at and after the time
that the hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the Transaction
Documents.

(ff) Regulation M Compliance.  The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
or, paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii), compensation
paid to the Company’s placement agent in connection with the placement of the Securities.

(gg) FDA. As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company or any of its
Subsidiaries (each such product, a “Pharmaceutical Product”), such Pharmaceutical
Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed
by the Company in compliance with all applicable requirements under FDCA and similar laws,
rules and regulations relating to registration, investigational use, premarket clearance,
licensure, or application approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling, advertising, record keeping and
filing of reports, except where the failure to be in compliance would not have a Material
Adverse Effect. Except as disclosed in the SEC Reports, there is no pending, completed or,
to the Company’s knowledge, threatened, action (including any lawsuit, arbitration, or legal
or administrative or regulatory proceeding, charge, complaint, or investigation) against the
Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has
received any notice, warning letter or other communication from the FDA or any other
governmental entity, which (i) contests the premarket clearance, licensure, registration, or
approval of, the uses of, the distribution of, the manufacturing or packaging of, the
testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii)
withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or
orders the withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the
Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company
or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of
permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges
any violation of any laws, rules or regulations by the Company or any of its Subsidiaries,
and which, either individually or in the aggregate, would have a Material Adverse Effect.
Except as disclosed in the SEC Reports, the Company has not been informed by the FDA that
the FDA will prohibit the marketing, sale, license or use in the United States of any
product proposed to be developed, produced or marketed by the Company nor has the FDA
expressed any concern as to approving or clearing for marketing any product being developed
or proposed to be developed by the Company.

(hh) No Additional Agreements. Neither the Company nor any Subsidiary has any
agreement or understanding with any Purchaser with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction Documents.

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:

(a) Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery of this Agreement
and performance by such Purchaser of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.

(b) Own Account. Such Purchaser is acquiring the Securities as principal for
its own account and not with a view to or for distributing or reselling such Securities or
any part thereof in violation of the Securities Act or any applicable state securities law,
has no present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding the
distribution of such Securities (this representation and warranty not limiting such
Purchaser’s right to sell the Securities immediately pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws) in violation
of the Securities Act or any applicable state securities law. Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business.

(c) Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises any Warrants,
it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer”
as defined in Rule 144A(a) under the Securities Act. Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.

(d) Experience of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such investment.

(e) Short Sales and Confidentiality Prior To The Date Hereof. Other than
consummating the transactions contemplated hereunder, such Purchaser has not, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the securities of the
Company during the period commencing from the time that such Purchaser first received a term
sheet (written or oral) from the Company or any other Person representing the Company
setting forth the material terms of the transactions contemplated hereunder until the date
hereof (“Discussion Time”). Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the existence and
terms of this transaction).

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 Warrant Shares.

(a) If all or any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the issuance or resale of the Warrant Shares or if the Warrant is
exercised via cashless exercise, the Warrant Shares issued pursuant to any such exercise shall be
issued free of all legends. If at any time following the date hereof the Registration Statement
(or any subsequent registration statement registering the Warrant Shares) is not effective or is
not otherwise available for the sale or resale of the Warrant Shares, the Company shall immediately
notify the holders of the Warrants in writing that such registration statement is not then
effective and thereafter shall promptly notify such holders when the registration statement is
effective again and available for the sale or resale of the Warrant Shares. The Company shall use
best efforts to keep a registration statement (including the Registration Statement) registering
the issuance or resale of the Warrant Shares effective during the term of the Warrants; provided,
such obligation will terminate when all Warrant Shares may be sold pursuant to Rule 144(k) or any
successor.

4.2 Furnishing of Information. Until the earliest of the time that (i) no Purchaser
owns Securities or (ii) the Warrants have expired or (iii) all Shares and Warrant Shares may be
sold under Rule 144(k), the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c)
such information as is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any holder of Securities may
reasonably request, to the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the requirements of the exemption
provided by Rule 144.

4.3 Integration. For a period of six months from the Closing Date, the Company shall
not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

4.4 Securities Laws Disclosure; Publicity. The Company shall, by 9:30 a.m. (New York
City time) on the Trading Day immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby, and within 4 Trading Days
file a Current Report on Form 8-K, and shall attach this Agreement and the form of Warrant thereto.
The Company and each Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser
shall issue any such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or without the prior
consent of each Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with the filing of final Transaction
Documents (including signature pages thereto) with the Commission and (ii) to the extent such
disclosure is required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure permitted under this clause (ii).

4.5 Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers, provided that no Purchaser, together with
its Affiliates, will beneficially hold more than 15% of the Common Stock outstanding as of the
Closing Date.

4.6 Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents prior to their public announcement,
the Company covenants and agrees that neither it nor any other Person acting on its behalf will
provide any Purchaser or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such information. The
Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company.

4.7 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder as set forth in the Prospectus Supplement and not to redeem any Common Stock
or Common Stock Equivalents.

4.8 Indemnification of Purchasers. Subject to the provisions of this Section 4.8,
the Company will indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and out-of pocket expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a)
any breach of any of the representations, warranties, covenants or agreements made by the Company
in this Agreement or in the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Purchaser’s
representations, warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any violations by the Purchaser
of state or federal securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. To the extent that a Purchaser Party fails to provide timely notice of a claim
for indemnity under this Section 4.8, and such failure materially prejudices the Company’s ability
to defend against such claim, then the Company shall have no obligation under this Section 4.8 to
indemnify the Purchaser Party for the claim (or portion thereof) that was so affected. Any
Purchaser Party shall have the right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable
opinion of such separate counsel, a material conflict on any material issue between the position of
the Company and the position of such Purchaser Party, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than one such separate counsel. The
Company will not be liable to any Purchaser Party under this Agreement (i) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents or any agreements or understandings such Purchaser may have with any such
stockholder or any violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance.

4.9 Reservation of Common Stock. As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the Company to issue Shares
pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants. 

4.10 Listing of Common Stock.

(a) The Company hereby agrees to use best efforts to maintain the listing of the Common Stock
on a Trading Market, and as soon as reasonably practicable following the Closing (but not later
than the Closing Date) to list all of the Shares and Warrant Shares on such Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded on any other Trading
Market, it will include in such application all of the Shares and Warrant Shares, and will take
such other action as is reasonably necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market
and will comply in all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Trading Market.

4.11 Equal Treatment of Purchasers. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties to the Transaction
Documents. For clarification purposes, this provision constitutes a separate right granted to each
Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the
Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or voting of Securities
or otherwise.

4.12 [INTENTIONALLY DELETED]

4.13 Subsequent Equity Sales.

(a) From the date hereof until 75 days after the Closing Date, neither the Company nor
any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents;
provided, however, the 75 day period set forth in this Section 4.13 shall be
extended for the number of Trading Days during such period in which (i) trading in the
Common Stock is suspended by any Trading Market, or (ii) following the Closing Date, the
Registration Statement is not effective or the Prospectus Supplement may not be used by the
Purchasers for the purchase of the Warrant Shares.

(b) From the date hereof until 1 year from the Closing Date, the Company shall be
prohibited from effecting or entering into an agreement to effect any Subsequent Financing
involving a Variable Rate Transaction. “Variable Rate Transaction” means a
transaction in which the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to receive
additional shares of Common Stock either (A) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or quotations for
the shares of Common Stock at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related to the
business of the Company or the market for the Common Stock or (ii) enters into any
agreement, including, but not limited to, an equity line of credit, whereby the Company may
sell securities at a future determined price. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which remedy shall be
in addition to any right to collect damages.

(c) Notwithstanding the foregoing, this Section 4.13 shall not apply in respect of an
Exempt Issuance except that no Variable Rate Transaction shall be an Exempt Issuance.

4.14 Short Sales and Confidentiality After The Date Hereof. Each Purchaser, severally
and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will execute any Short Sales during the period
commencing at the Discussion Time and ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described in Section 4.4 or this Agreement is terminated
pursuant to Section 5.1.  Each Purchaser, severally and not jointly with the other Purchasers,
covenants that until the time the transactions contemplated by this Agreement are publicly
disclosed by the Company as described in Section 4.4, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and the information included in the
Disclosure Schedules.  Notwithstanding the foregoing, no Purchaser makes any representation,
warranty or covenant hereby that it will not engage in Short Sales in the securities of the Company
after the time that the transactions contemplated by this Agreement are first publicly announced as
described in Section 4.4.  Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage separate portions of
such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities covered by this
Agreement.

4.15  Delivery of Securities After Closing. The Company shall deliver, or cause to be
delivered, the respective Securities purchased by each Purchaser to such Purchaser within 3 Trading
Days of the Company’s receipt of payment therefor.

4.16 Capital Changes. Until the one year anniversary of the Closing Date, the Company
shall not undertake a reverse or forward stock split or reclassification of the Common Stock
without the prior written consent of the Purchasers holding a majority in interest of the Shares or
if reasonably required in order to maintain a listing of the Common Stock on the Nasdaq Global
Market. No such separate approval requirement shall exist for any other proposed corporate
actions, including, without limitation, any proposed amendments to the Company’s Certificate of
Incorporation for the purpose of increasing the authorized capital stock of the Company.

ARTICLE V.

MISCELLANEOUS

5.1 Termination.  This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between
the Company and the other Purchasers, by written notice to the other parties, if the Closing has
not been consummated on or before August 24, 2007; provided, however, that no such
termination will affect the right of any party to sue for any breach by the other party (or
parties).

5.2 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company shall pay all
Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Purchasers.

5.3 Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, the Prospectus and the Prospectus Supplement, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and schedules.

5.4 Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the 2nd Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached hereto.

5.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the
Purchasers of at least 67% of the Shares still held by the Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waived provision is sought; provided that no such
amendment shall have a disproportionate impact on any Purchaser without such Purchaser’s consent.
No waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of any such right.

5.6 Headings. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided such
transferee agrees in writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”

5.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.8.

5.9 Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto or its respective affiliates,
directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of
any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by
law. If either party shall commence an action or proceeding to enforce any provisions of the
Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding.

5.10 Survival. The representations and warranties contained herein shall survive the
Closing and the delivery of the Shares and Warrant Shares for the period of the statute of
limitations applicable thereto.

5.11 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page were an original thereof.

5.12 Severability. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

5.13 [Intentionally omitted.]

5.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument, but only upon receipt an
affidavit of loss or presentation of other evidence reasonably satisfactory to the Company of such
loss, theft or destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

5.15 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each of the Purchasers and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in
any action for specific performance of any such obligation the defense that a remedy at law would
be adequate.

5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to
any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

5.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in their review and negotiation of the
Transaction Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FWS. FWS does not represent
all of the Purchasers but only Rodman & Renshaw LLC. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

5.18 [Intentionally omitted.]

5.19 Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next succeeding Business Day.

5.20 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal
rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.

5.21 Waiver of Jury Trial. In any action, suit or proceeding in any jurisdiction
brought by any party against any other party, the parties each knowingly and intentionally, to the
greatest extent permitted by applicable law, hereby absolutely, unconditionally, irrevocably and
expressly waives forever trial by jury.

(Signature Pages Follow)

2

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first indicated above.

	 	 	 
	ENCYSIVE PHARMACEUTICALS INC.

	 	Address for Notice:
	
 
	 	 
	
 
	 	4848 Loop Central Drive

Suite 700

Houston, Texas 77081

Attn: General Counsel
	By: /s/ George W. Cole

Name: George W. Cole

Title: President and Chief Executive Officer

	 	

Fax: 713 796-8232
	With a copy to (which shall not constitute notice):

	 	

	Porter & Hedges LLP

1000 Main Street, 36th Floor

Houston, TX 77002

Attn: Robert G. Reedy

Fax: 713-226-6274

	 	

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

3

[PURCHASER SIGNATURE PAGES TO ENCY SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.

	 	 	 
	Name of Purchaser: Hudson Bay Fund LP

	Signature of Authorized Signatory of Purchaser: /s/ Yoav Roth

	Name of Authorized Signatory: Yoav Roth

	Title of Authorized Signatory: Principal and Portfolio Manager

	Email Address of Purchaser: investments@husdonbaycapital.com

	Fax Number of Purchaser: 212-571-1279

	Address for Notice of Purchaser:

	 	120 Broadway, 40th Floor

New York, NY 10271

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Same as Above

Subscription Amount: $3,224,999.70

Shares: 1,653,846

Warrant Shares: 1,653,846

EIN Number: 35-2257058

[SIGNATURE PAGES CONTINUE]

4

[PURCHASER SIGNATURE PAGES TO ENCY SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.

	 	 	 
	Name of Purchaser: Hudson Bay Overseas Fund LTD

	Signature of Authorized Signatory of Purchaser: /s/ Yoav Roth

	Name of Authorized Signatory: Yoav Roth

	Title of Authorized Signatory: Principal and Portfolio Manager

	Email Address of Purchaser: investments@husdonbaycapital.com

	Fax Number of Purchaser: 212-571-1279

	Address for Notice of Purchaser:

	 	120 Broadway, 40th Floor

New York, NY 10271

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Same as Above

Subscription Amount: $4,274,998.65

Shares: 2,192,307

Warrant Shares: 2,192,307

EIN Number: N/A

[SIGNATURE PAGES CONTINUE]

5

[PURCHASER SIGNATURE PAGES TO ENCY SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Enable Growth Partners LP

Signature of Authorized Signatory of Purchaser: /s/ Brendan O’Neil

Name of Authorized Signatory: Brendan O’Neil

Title of Authorized Signatory: Principal and Portfolio Manager

Email Address of Purchaser: boneil@enablecapital.com

Fax Number of Purchaser: 415-677-1580

Address for Notice of Purchaser:

One Ferry Building Suite 255

San Francisco, CA 94111

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount: $6,332,500

Shares: 3,247,435

Warrant Shares: 3,247,435

EIN Number: 75-3030215

[SIGNATURE PAGES CONTINUE]

6

[PURCHASER SIGNATURE PAGES TO ENCY SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Enable Opportunity Partners LP

Signature of Authorized Signatory of Purchaser: /s/ Brendan O’Neil

Name of Authorized Signatory: Brendan O’Neil

Title of Authorized Signatory: Principal and Portfolio Manager

Email Address of Purchaser: boneil@enablecapital.com

Fax Number of Purchaser: 415-677-1580

Address for Notice of Purchaser:

One Ferry Building Suite 255

San Francisco, CA 94111

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount: $1,117,500

Shares: 573,076

Warrant Shares: 573,076

EIN Number: 20-1204059

[SIGNATURE PAGES CONTINUE]

7

[PURCHASER SIGNATURE PAGES TO ENCY SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly
executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Pierce Diversified Strategy Master Funds, LLC, Ena

Signature of Authorized Signatory of Purchaser: /s/ Brendan O’Neil

Name of Authorized Signatory: Brendan O’Neil

Title of Authorized Signatory: Principal and Portfolio Manager

Email Address of Purchaser: boneil@enablecapital.com

Fax Number of Purchaser: 415-677-1580

Address for Notice of Purchaser:

One Ferry Building Suite 255

San Francisco, CA 94111

Address for Delivery of Securities for Purchaser (if not same as address for notice):

Subscription Amount: $50,000

Shares: 25,641

Warrant Shares: 25,641

EIN Number: 20-3911089

[SIGNATURE PAGES CONTINUE]

8ex_10-1.htm

    Exhibit
      10.1

     

     

     

    
      AMENDED
        AND RESTATED

       

      LEGACY
        RESERVES LP

       

      LONG-TERM
        INCENTIVE PLAN

       

      Amended
        and Restated Effective as of August 17, 2007

       

      
        	
                1.

              	
                Purpose
                  of the Plan.

              

      

       

      The
        Legacy Reserves LP Long-Term Incentive Plan (the “Plan”) is
        intended to promote the interests of Legacy Reserves LP, a Delaware limited
        partnership (the “Partnership”), by providing to employees,
        consultants, and directors of Legacy Reserves GP LLC, a Delaware limited
        liability company and the sole general partner of the Partnership (the
“Company”), the Partnership and its Affiliates incentive
        compensation awards for superior performance that are based on Units. The
        Plan
        is also contemplated to enhance the ability of the Company and its Affiliates
        to
        attract and retain the services of individuals who are essential for the
        growth
        and profitability of the Partnership and to encourage them to devote their
        best
        efforts to advancing the business of the Partnership and its
        subsidiaries.

       

      
        	
                2.

              	
                Definitions.

              

      

       

      As
        used
        in the Plan, the following terms shall have the meanings set forth
        below:

       

      “Affiliate”
        means, with respect to any Person, any other Person that directly or indirectly
        through one or more intermediaries controls, is controlled by or is under
        common
        control with, the Person in question.  As used herein, the term
“control” means the possession, direct or indirect, of the power to direct or
        cause the direction of the management and policies of a Person, whether through
        ownership of voting securities, by contract or otherwise. Notwithstanding
        the
        immediately preceding two sentences, except as otherwise provided in an Award,
        to the extent that an Award provides deferred compensation subject to Section
        409A of the Code, solely for the purpose of applying Section 409A to such
        Award,
        the term “Affiliate” shall mean all persons with whom the Participant’s employer
        would be considered a single employer under Section 414(b) or Section 414(c)
        of
        the Code.

       

      “Award”
        means an Option, Restricted Unit, Unit Grant, Phantom Unit or Unit Appreciation
        Right granted under the Plan, and shall include tandem DERs granted with
        respect
        to an Option, Phantom Unit or Unit Appreciation Right.

       

      “Award
        Agreement” means the written agreement by which an Award shall be
        evidenced.

       

      “Board”
        means the Board of Directors of the Company.

       

      “Change
        of Control” means the occurrence of any of the following
        events:

       

      (i)           the
        acquisition by any “person,” as such term is used in Sections 13(d) and 14(d) of
        the Securities Exchange Act of 1934, as amended (the “Exchange
        Act”), other than the Company or an Affiliate of the Company, of
“beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act),
        directly or indirectly, of securities of the Company or the Partnership
        representing more than 35% of the combined voting power of the Company’s or the
        Partnership’s then outstanding securities entitled to vote generally in the
        election of directors; provided, however, that any acquisition of securities
        from GP Members will be disregarded for purposes of determining whether a
        Change
        of Control has occurred; or

       

      (ii)           the
        consummation of a reorganization, merger, consolidation or other form of
        business transaction or series of business transactions, in each case, with
        respect to which Persons who were the partners of the Partnership immediately
        prior to such reorganization, merger or consolidation or other transaction
        do
        not, immediately thereafter, own more than 50% 

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

      of
        the
        combined voting power entitled to vote generally in the election of directors
        of
        the reorganized, merged or consolidated entity's then outstanding voting
        securities; or

       

      (iii)           the
        sale, lease or disposition (in one or a series of related transactions) by
        the
        Partnership of all or substantially all of the Partnership’s assets to any
        Person other than the Partnership, the Company or any of their respective
        Affiliates; or

       

      (iv)           a
        change in the composition of the Board, as a result of which fewer than a
        majority of the directors are Incumbent Directors. “Incumbent
        Directors” shall mean directors who either (A) are directors of the
        Company as of the effective date of the initial offering of Units, or (B)
        are
        elected, or nominated for election, thereafter to the Board with the affirmative
        votes of at least a majority in interest of the members of the Company, or,
        if
        applicable, by the number of limited partners of the Partnership as set forth
        in
        the Partnership agreement, in each case at the time of such election or
        nomination, but “Incumbent Director” shall not include an individual whose
        election or nomination is in connection with (i) an actual or threatened
        election contest (as such terms are used in Rule 14a-11 of Regulation 14A
        promulgated under the Exchange Act) or an actual or threatened solicitation
        of
        proxies or consents by or on behalf of a Person other than the Board or (ii)
        a
        plan or agreement to replace a majority of the then Incumbent Directors,
        other
        than, in either case, as a result of the Partnership’s failure to file a
        registration statement within 240 days of the effective date of the initial
        offering of Units; or

       

      (v)           the
        approval by the Board or the members of the Company of a complete or
        substantially complete liquidation or dissolution of the
        Partnership.

       

      Except
        as
        otherwise provided in an Award, solely with respect to any Award that provides
        deferred compensation that is subject to Section 409A of the Code and payment
        of
        such Award is contingent upon the occurrence of a Change of Control, the
        above
        definition shall be void and of no effect and is hereby replaced by the
        definition of such term set forth in regulations issued under Section 409A
        of
        the Code by the appropriate governmental authority, which definition set
        forth
        in regulations issued under Section 409A of the Code is hereby incorporated
        by
        reference into and shall form part of this Plan as fully as if set forth
        herein
        verbatim and the Plan insofar as it relates to such Award shall be operated
        in
        accordance with this modified definition of Change of Control.

       

      “Code”
        means the Internal Revenue Code of 1986, as amended.

       

      “Committee”
        means the Compensation Committee of the Board or such other committee of
        the
        Board as may be appointed by the Board to administer the Plan.

       

      “Consultant”
        means an individual, other than an Employee or a Director, providing bona
        fide
        services to the Company or any of its Affiliates as a consultant or advisor,
        as
        applicable, provided that such individual is a natural person and that such
        services are not in connection with the offer or sale of securities in a
        capital-raising transaction and do not directly or indirectly promote or
        maintain a market for any securities of the Partnership.

       

      “DER”
        or “Distribution Equivalent Right” means a contingent right, granted in
        tandem with a specific Option, Unit Appreciation Right or Phantom Unit, to
        receive an amount in cash equal to the cash distributions made by the
        Partnership with respect to a Unit during the period such tandem Award is
        outstanding.

       

      “Director”
        means a member of the Board who is not an Employee.

       

      “Employee”
        means any employee of the Company or an Affiliate who performs services for
        the
        Company and its Affiliates.

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      “Exchange
        Act” means the Securities Exchange Act of 1934, as amended.

       

      “Fair
        Market Value” means the closing sales price of a Unit on the applicable
        date (or if there is no trading in the Units on such date, on the next preceding
        date on which there was trading) as reported in The Wall Street Journal
        (or other reporting service approved by the Committee). In the event Units
        are
        not publicly traded at the time a determination of fair market value is required
        to be made hereunder, the determination of fair market value shall be made
        in
        good faith by the Committee.

       

      “GP
        Members” means the members of the Company.

       

      “Option”
        means an option to purchase Units granted under the Plan.

       

      “Participant”
        means any Employee, Consultant or Director granted an Award under the
        Plan.

       

      “Partnership
        Agreement” means the Amended and Restated Limited Partnership Agreement of
        Legacy Reserves LP, as it may be subsequently amended or restated from time
        to
        time.

       

      “Person”
        means an individual or a corporation, limited liability company, partnership,
        joint venture, trust, unincorporated organization, association, government
        agency or political subdivision thereof or other entity.

       

      “Phantom
        Unit” means a phantom (notional) Unit granted under the Plan which upon
        vesting entitles the Participant to receive a Unit or an amount of cash equal
        to
        the Fair Market Value of a Unit.  Whether cash or Units are received
        for Phantom Units shall be determined in the sole discretion of the Committee
        and shall be set forth in the Award Agreement.

       

      “Restricted
        Period” means the period established by the Committee with respect to an
        Award during which the Award remains subject to forfeiture or is either not
        exercisable by or payable to the Participant, as the case may be.

       

      “Restricted
        Unit” means a Unit granted under the Plan that is subject to a Restricted
        Period.

       

      “Rule
        16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act, or
        any successor rule or regulation thereto as in effect from time to
        time.

       

      “SEC”
        means the Securities and Exchange Commission, or any successor
        thereto.

       

      “UAR”
        of “Unit Appreciation Right” means an Award that, upon exercise,
        entitles the holder to receive the excess of the Fair Market Value of a Unit
        on
        the exercise date over the exercise price established for such Unit Appreciation
        Right. Such excess may be paid in cash and/or in Units as determined in the
        sole
        discretion of the Committee and set forth in the Award Agreement.

       

      “UDR”
        or “Unit Distribution Right” means a distribution made by the
        Partnership with respect to a Restricted Unit.

       

      “Unit”
        means a Unit of the Partnership.

       

      “Unit
        Grant” means an Award of an unrestricted Unit.

       

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      
        	
                3.

              	
                Administration.

              

      

       

      The
        Plan
        shall be administered by the Committee. A majority of the Committee shall
        constitute a quorum, and the acts of the members of the Committee who are
        present at any meeting thereof at which a quorum is present, or acts unanimously
        approved by the members of the Committee in writing, shall be the acts of
        the
        Committee. Subject to the terms of the Plan and applicable law, and in addition
        to other express powers and authorizations conferred on the Committee by
        the
        Plan, the Committee shall have full power and authority to: (i) designate
        Participants; (ii) determine the type or types of Awards to be granted to
        a
        Participant; (iii) determine the number of Units to be covered by Awards;
        (iv)
        determine the terms and conditions of any Award; (v) determine whether, to
        what
        extent, and under what circumstances Awards may be settled, exercised, canceled,
        or forfeited; (vi) interpret and administer the Plan and any instrument or
        agreement relating to an Award made under the Plan; (vii) establish, amend,
        suspend, or waive such rules and regulations and appoint such agents as it
        shall
        deem appropriate for the proper administration of the Plan; and (viii) make
        any
        other determination and take any other action that the Committee deems necessary
        or desirable for the administration of the Plan. Unless otherwise expressly
        provided in the Plan, all designations, determinations, interpretations,
        and
        other decisions under or with respect to the Plan or any Award shall be within
        the sole discretion of the Committee, may be made at any time and shall be
        final, conclusive, and binding upon all Persons, including the Company, any
        Affiliate, any Participant, and any beneficiary of any Award.

       

      
        	
                4.

              	
                Units.

              

      

       

      (a)           Limits
        on Units Deliverable. Subject to adjustment as provided in Section 4(c),
        the maximum number of Units that may be delivered or reserved for delivery
        or
        underlying any Award with respect to the Plan is 2,000,000.  If any
        Award expires, is canceled, exercised, paid or otherwise terminates without
        the
        delivery of Units, or if the maximum number of Units delivered is reduced
        for
        any reason other than tax withholding or payment of the exercise price, then
        the
        Units covered by such Award, to the extent of such expiration, cancellation,
        exercise, payment or termination, shall again be Units with respect to which
        Awards may be granted.  Units that cease to be subject to an Award
        because of the exercise of the Award, or the vesting of Restricted Units
        or
        similar Awards, shall no longer be subject to or available for any further
        grant
        under this Plan. Notwithstanding the foregoing, there shall not be any
        limitation on the number of Awards that may be granted under the Plan and
        paid
        in cash.

       

      (b)           Sources
        of Units Deliverable Under Awards. Any Units delivered pursuant to an Award
        shall consist, in whole or in part, of Units acquired in the open market,
        from
        any Affiliate, the Partnership or any other Person, or any combination of
        the
        foregoing as determined by the Committee in its sole discretion.

       

      (c)           Adjustments.
        In the event that the Committee determines that any distribution (whether
        in the
        form of cash, Units, other securities, or other property), recapitalization,
        split, reverse split, reorganization, merger, consolidation, split-up, spin-off,
        combination, repurchase, or exchange of Units or other securities of the
        Partnership, issuance of warrants or other rights to purchase Units or other
        securities of the Partnership, or other similar transaction or event affects
        the
        Units such that an adjustment is determined by the Committee to be appropriate
        in order to prevent dilution or enlargement of the benefits or potential
        benefits intended to be made available under the Plan, then the Committee
        shall,
        in such manner as it may deem equitable, adjust any or all of (i) the number
        and
        type of Units (or other securities or property) with respect to which Awards
        may
        be granted, (ii) the number and type of Units (or other securities or property)
        subject to outstanding Awards, and (iii) the grant or exercise price with
        respect to any Award or, if deemed appropriate, make provision for a cash
        payment to the holder of an outstanding Award; provided, that the number
        of
        Units subject to any Award shall always be a whole number and, provided further,
        that the Committee shall not take any action otherwise authorized under this
        subparagraph (c) to the extent that (i) such action would cause (A) the
        application of Section 409A of the Code to the Award or (B) create adverse
        tax
        consequences under Section 409A of the Code should that Code section apply
        to
        the Award or (ii) except as permitted in Section 7(c), materially reduce
        the
        benefit to the Participant without the consent of the Participant.

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

       

      
        	
                5.

              	
                Eligibility.

              

      

       

      Any
        Employee, Consultant or Director shall be eligible to be designated a
        Participant and receive an Award under the Plan.

       

      
        	
                6.

              	
                Awards.

              

      

       

      (a)           Options.
        The Committee shall have the authority to determine the Employees, Consultants
        and Directors to whom Options shall be granted, the number of Units to be
        covered by each Option, whether DERs are granted with respect to such Option,
        the purchase price therefor and the conditions and limitations applicable
        to the
        exercise of the Option, including the following terms and conditions and
        such
        additional terms and conditions, as the Committee shall determine, that are
        not
        inconsistent with the provisions of the Plan.

       

      (i)           Exercise
        Price. The purchase price per Unit purchasable under an Option shall be
        determined by the Committee at the time the Option is granted, provided such
        purchase price may not be less than 100% of its Fair Market Value as of the
        date
        of grant.

       

      (ii)           Time
        and Method of Exercise. The Committee shall determine the time or times at
        which an Option may be exercised in whole or in part, which may include,
        without
        limitation, accelerated vesting upon the achievement of specified performance
        goals, and the method or methods by which payment of the exercise price with
        respect thereto may be made or deemed to have been made, which may include,
        without limitation, cash, check acceptable to the Company, a “cashless-broker”
exercise through procedures approved by the Company, with the consent of
        the
        Committee, the withholding of Units that would otherwise be delivered to
        the
        Participant upon the exercise of the Option, other securities or other property,
        or any combination thereof, having a fair market value (as determined by
        the
        Committee) on the exercise date equal to the relevant exercise
        price.

       

      (iii)           Forfeiture.
        Except as otherwise provided in the terms of the Award Agreement, upon
        termination of a Participant’s employment with or consulting services to the
        Company and its Affiliates or membership on the Board, whichever is applicable,
        for any reason prior to the date an Option becomes exercisable, all Options
        shall be forfeited by the Participant.  The Committee may in its
        discretion, waive in whole or in part such forfeiture with respect to a
        Participant’s Options.

       

      (iv)           DERs.
        To the extent provided by the Committee, in its discretion, a grant of Options
        may include a tandem DER grant, which may provide that such DERs shall be
        credited to a bookkeeping account (with or without interest in the discretion
        of
        the Committee) subject to the same vesting restrictions as the tandem Award,
        or
        be subject to such other provisions or restrictions as determined by the
        Committee in its discretion.

       

      (b)           Restricted
        Units and Unit Grants. The Committee shall have the authority to determine
        the Employees, Consultants and Directors to whom Restricted Units and Unit
        Grants shall be granted, the number of Restricted Units and/or Unit Grants
        to be
        granted to each such Participant, the Restricted Period, the conditions under
        which the Restricted Units may become vested or forfeited, and such other
        terms
        and conditions as the Committee may establish with respect to such
        Awards.

       

      (i)           UDRs.
        To the extent provided by the Committee, in its discretion, a grant of
        Restricted Units may provide that distributions made by the Partnership with
        respect to the Restricted Units shall be subject to the same forfeiture and
        other restrictions as the Restricted Unit and, if restricted, such distributions
        shall be held, without interest, until the Restricted Unit vests or is forfeited
        with the UDR being paid or forfeited at the same time, as the case may be.
        Absent such a restriction on the UDRs in the grant agreement, UDRs shall
        be paid
        to the holder of the Restricted Unit without restriction.

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

       

      (ii)           Forfeitures.
        Except as otherwise provided in the terms of the Award Agreement, upon
        termination of a Participant’s employment with or consulting services to the
        Company and its Affiliates or membership on the Board, whichever is applicable,
        for any reason during the applicable Restricted Period, all outstanding
        Restricted Units awarded the Participant shall be automatically forfeited
        on
        such termination. The Committee may in its discretion, waive in whole or
        in part
        such forfeiture with respect to a Participant’s Restricted Units.

       

      (iii)           Lapse
        of Restrictions. Upon or as soon as reasonably practical following the
        vesting of each Restricted Unit, subject to the provisions of Section 8(b), the Participant shall be entitled
        to have
        the restrictions removed from his or her Unit certificate so that the
        Participant then holds an unrestricted Unit.

       

      (c)           Phantom
        Units. The Committee shall have the authority to determine the Employees,
        Consultants and Directors to whom Phantom Units shall be granted, the number
        of
        Phantom Units to be granted to each such Participant, the Restricted Period,
        the
        time or conditions under which the Phantom Units may become vested or forfeited,
        which may include, without limitation, the accelerated vesting upon the
        achievement of specified performance goals, and such other terms and conditions
        as the Committee may establish with respect to such Awards, including whether
        DERs are granted with respect to such Phantom Units.

       

      (i)           DERs.  To
        the extent provided by the Committee, in its discretion, a grant of Phantom
        Units may include a tandem DER grant, which may provide that such DERs shall
        be
        credited to a bookkeeping account (with or without interest in the discretion
        of
        the Committee) subject to the same vesting restrictions as the tandem Award,
        or
        be subject to such other provisions or restrictions as determined by the
        Committee in its discretion.

       

      (ii)           Forfeitures.  Except
        as otherwise provided in the terms of the Award Agreement, upon termination
        of a
        Participant’s employment with or consulting services to the Company and its
        Affiliates or membership on the Board, whichever is applicable, for any reason
        during the applicable Restricted Period, all outstanding Phantom Units awarded
        the Participant shall be automatically forfeited on such
        termination.  The Committee may, in its discretion, waive in whole or
        in part such forfeiture with respect to a Participant’s Phantom
        Units.

       

      (iii)           Lapse
        of Restrictions.  Upon or as soon as reasonably practical
        following the vesting of each Phantom Unit, subject to the provisions of
        Section
        8(b), the Participant shall be entitled to receive from the Company one Unit
        or
        cash equal to the Fair Market Value of a Unit, as determined by the Committee
        in
        its discretion.

       

      (d)           Unit
        Appreciation Rights. The Committee shall have the authority to determine
        the Employees, Consultants and Directors to whom Unit Appreciation Rights
        shall
        be granted, the number of Units to be covered by each grant and the conditions
        and limitations applicable to the exercise of the Unit Appreciation Right,
        including the following terms and conditions and such additional terms and
        conditions, as the Committee shall determine, that are not inconsistent with
        the
        provisions of the Plan.

       

      (i)           Exercise
        Price. The exercise price per Unit Appreciation Right shall be not less than
        100% of its Fair Market Value as of the date of grant.

       

      (ii)           Vesting/Time
        of Payment. The Committee shall determine the time or times at which a Unit
        Appreciation Right shall become vested and exercisable and the time or times
        at
        which a Unit Appreciation Right shall be paid in whole or in part.

       

      (iii)           Forfeitures.
        Except as otherwise provided in the terms of the Award Agreement, upon
        termination of a Participant’s employment with or services to the Company and
        its Affiliates or membership on the Board, whichever is applicable, for any
        reason prior to vesting, all unvested Unit Appreciation Rights awarded the
        Participant shall be automatically forfeited on such 

       

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

       

      termination.
        The Committee may, in its discretion, waive in whole or in part such forfeiture
        with respect to a Participant’s Unit Appreciation Rights, in which case, such
        Unit Appreciation Rights shall be deemed vested upon termination of employment
        or service and paid as soon as administratively practical
        thereafter.

       

      (iv)           Unit
        Appreciation Right DERs.  To the extent provided by the Committee,
        in its discretion, a grant of Unit Appreciation Rights may include a tandem
        DER
        grant, which may provide that such DERs shall be credited to a bookkeeping
        account (with or without interest in the discretion of the Committee) subject
        to
        the same vesting restrictions as the tandem Unit Appreciation Rights Award,
        or
        be subject to such other provisions or restrictions as determined by the
        Committee in its discretion.

       

      (e)           General.

       

      (i)           Awards
        May Be Granted Separately or Together. Awards may, in the discretion of the
        Committee, be granted either alone or in addition to, in tandem with, or
        in
        substitution for any other Award granted under the Plan or any award granted
        under any other plan of the Company or any Affiliate.  No Award shall
        be issued in tandem with another Award if the tandem Awards would result
        in
        adverse tax consequences under Section 409A of the Code.  Awards
        granted in addition to or in tandem with other Awards or awards granted under
        any other plan of the Company or any Affiliate may be granted either at the
        same
        time as or at a different time from the grant of such other Awards or
        awards.

       

      (ii)           Limits
        on Transfer of Awards.

       

      (A)           Except
        as provided in Section 6(e)(ii)(C)
        below, each Award shall be exercisable or payable only to the Participant
        during
        the Participant’s lifetime, or to the person to whom the Participant’s rights
        shall pass by will or the laws of descent and distribution.

       

      (B)           Except
        as provided in Section 6(e)(ii)(C)
        below, no Award and no right under any such Award may be assigned, alienated,
        pledged, attached, sold or otherwise transferred or encumbered by a Participant
        and any such purported assignment, alienation, pledge, attachment, sale,
        transfer or encumbrance shall be void and unenforceable against the Company,
        the
        Partnership or any Affiliate.

       

      (C)           To
        the extent specifically provided by the Committee with respect to an Award,
        an
        Award may be transferred by a Participant without consideration to immediate
        family members or related family trusts, limited partnerships or similar
        entities or on such terms and conditions as the Committee may from time to
        time
        establish.

       

      (iii)           Term
        of Awards. The term of each Award shall be for such period as may be
        determined by the Committee, but shall not exceed 10 years.

       

      (iv)           Unit
        Certificates. All certificates for Units or other securities of the
        Partnership delivered under the Plan pursuant to any Award or the exercise
        thereof shall be subject to such stop transfer orders and other restrictions
        as
        the Committee may deem advisable under the Plan or the rules, regulations,
        and
        other requirements of the SEC, any stock exchange upon which such Units or
        other
        securities are then listed, and any applicable federal or state laws, and
        the
        Committee may cause a legend or legends to be put on any such certificates
        to
        make appropriate reference to such restrictions.

       

      (v)           Consideration
        for Grants. Awards may be granted for such consideration, including
        services, as the Committee determines.

       

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

      (vi)           Delivery
        of Units or other Securities and Payment by Participant of Consideration.
        Notwithstanding anything in the Plan or any grant agreement to the contrary,
        delivery of Units pursuant to the exercise or vesting of an Award may be
        deferred for any period during which, in the good faith determination of
        the
        Committee, the Company is not reasonably able to obtain Units to deliver
        pursuant to such Award without violating the rules or regulations of any
        applicable law or securities exchange. No Units or other securities shall
        be
        delivered pursuant to any Award until payment in full of any amount required
        to
        be paid pursuant to the Plan or the applicable Award grant agreement (including,
        without limitation, any exercise price or tax withholding) is received by
        the
        Company.

       

      (vii)           Change
        of Control.  Unless specifically provided otherwise in the Award
        Agreement, upon a Change of Control or such time prior thereto as established
        by
        the Committee, all outstanding Awards shall automatically vest or become
        exercisable in full, as the case may be. In this regard, all Restricted Periods
        shall terminate and all performance criteria, if any, shall be deemed to
        have
        been achieved at the maximum level.  To the extent an Option or UAR is
        not exercised, or a Phantom Unit or Restricted Unit does not vest, upon the
        Change of Control, the Committee may, in its discretion, cancel such Award
        or
        provide for an assumption of such Award or a replacement grant on substantially
        the same terms; provided, however, upon any cancellation of an Option or
        UAR
        that has a positive “spread” or a Phantom Unit or Restricted Unit, the holder
        shall be paid an amount in cash and/or other property, as determined by the
        Committee, equal to such "spread" if an Option or UAR or equal to the Fair
        Market Value of a Unit, if a Phantom Unit or Restricted Unit.

       

      (viii)           Section
        409A of the Code.  Notwithstanding any other provision of the Plan
        to the contrary, any Award granted under the Plan shall contain terms that
        (i)
        are designed to avoid application of Section 409A of the Code to the Award
        or
        (ii) are designed to avoid adverse tax consequences under Section 409A should
        that Code section apply to the Award.

       

      
        	
                7.

              	
                Amendment
                  and Termination.

              

      

       

      Except
        to
        the extent prohibited by applicable law:

       

      (a)           Amendments
        to the Plan. Except as required by the rules of the principal securities
        exchange on which the Units are traded and subject to Section 7(b) below, the Board or the Committee
        may
        amend, alter, suspend, discontinue, or terminate the Plan in any manner,
        including increasing the number of Units available for Awards under the Plan,
        without the consent of any partner, Participant, other holder or beneficiary
        of
        an Award, or other Person.

       

      (b)           Amendments
        to Awards Subject to Section 7(a). The Committee may waive
        any conditions or
        rights under, amend any terms of, or alter any Award theretofore granted,
        provided no change, other than pursuant to Section 7(c), in any Award shall materially
        reduce the
        benefit to a Participant without the consent of such Participant.

       

      (c)           Adjustment
        of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.
        The Committee is hereby authorized to make adjustments in the terms and
        conditions of, and the criteria included in, Awards in recognition of unusual
        or
        nonrecurring events (including, without limitation, the events described
        in
Section 4(c) of the Plan) affecting
        the Partnership or the financial statements of the Partnership, or of changes
        in
        applicable laws, regulations, or accounting principles, whenever the Committee
        determines that such adjustments are appropriate in order to prevent dilution
        or
        enlargement of the benefits or potential benefits intended to be made available
        to Participants under the Plan or such Award.

       

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

       

      
        	
                8.

              	
                General
                  Provisions.

              

      

       

      (a)           No
        Rights to Award. No Person shall have any claim to be granted any Award
        under the Plan, and there is no obligation for uniformity of treatment of
        Participants. The terms and conditions of Awards need not be the same with
        respect to each recipient.

       

      (b)           Tax
        Withholding. The Company or any Affiliate is authorized to withhold from
        any Award, from any payment due or transfer made under any Award or from
        any
        compensation or other amount owing to a Participant the amount (in cash,
        Units,
        other securities, Units that would otherwise be issued pursuant to such Award
        or
        other property) of any applicable taxes payable in respect of the grant of
        an
        Award, its exercise, the lapse of restrictions thereon, or any payment or
        transfer under an Award or under the Plan and to take such other action as
        may
        be necessary in the opinion of the Company to satisfy its withholding
        obligations for the payment of such taxes.

       

      (c)           No
        Right to Employment or Services. The grant of an Award shall not be
        construed as giving a Participant the right to be retained in the employ
        of the
        Company or any Affiliate, to continue as a consultant, or to remain on the
        Board, as applicable. Further, the Company or an Affiliate may at any time
        dismiss a Participant from employment or terminate a consulting relationship,
        free from any liability or any claim under the Plan, unless otherwise expressly
        provided in the Plan, any Award agreement or other agreement.

       

      (d)           Governing
        Law. The validity, construction, and effect of the Plan and any rules and
        regulations relating to the Plan shall be determined in accordance with the
        laws
        of the State of Texas without regard to its conflict of laws
        principles.

       

      (e)           Section
        409A of the Code. Notwithstanding anything in this Plan to the contrary,
        any Award granted under the Plan shall contain terms that (i) are designed
        to
        avoid application of Section 409A of the Code to the Award or (ii) are designed
        to avoid adverse tax consequences under Section 409A of the Code should that
        section apply to the Award.  If any Plan provision or Award under the
        Plan would result in the imposition of an applicable tax under Section 409A
        of
        the Code and related regulations and pronouncements, that Plan provision
        or
        Award will be reformed to the extent reformation would avoid imposition of
        the
        applicable tax and no action taken to comply with Section 409A of the Code
        shall
        be deemed to adversely affect the Participant's rights to an Award or to
        require
        the Participant's consent.

       

      In
        addition, to the extent that at any
        time prescribed under Section 409A of the Code and regulations or other
        regulatory guidance issued thereunder, the Participant is a key employee,
        as
        defined in Section 416(i) of the Code without regard to paragraph 5 thereof,
        except to the extent permitted under Section 409A of the Code and regulations
        or
        other regulatory guidance issued thereunder, no distribution or payment that
        is
        subject to Section 409A of the Code shall be made under the Plan on account
        of
        the Participant’s separation from service, as defined in Section 409A of the
        Code and the regulations or other regulatory guidance issued thereunder,
        with
        the Participant’s employer (at any time when the Participant is deemed under
        Section 409A of the Code and regulations or other regulatory guidance issued
        thereunder to be a specified employee, as defined in Section 409A of the
        Code
        and regulations or other regulatory guidance issued thereunder) until the
        date
        that is the first day of the month that occurs six months after the date
        of the
        Participant’s separation from service (or, if earlier, the date of death of the
        Participant or any other date permitted under Section 409A of the Code and
        regulations or other regulatory guidance issued thereunder).  In
        furtherance of the immediately preceding sentence, any such distribution
        or
        payment otherwise payable in cash to the Participant pursuant to the terms
        of
        the Plan within the period described in the immediately preceding sentence
        following the Participant’s separation from service with the Company will accrue
        and will be payable in a lump sum payment, with interest at the short-term
        applicable federal rate compounded semi-annually from the date the payment
        would
        have been made but for application of this Section to the date of payment,
        on
        the payment date set forth in the immediately preceding sentence.

       

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

       

      (f)           Severability.
        If any provision of the Plan or any award is or becomes or is deemed to be
        invalid, illegal, or unenforceable in any jurisdiction or as to any Person
        or
        Award, or would disqualify the Plan or any award under any law deemed applicable
        by the Committee, such provision shall be construed or deemed amended to
        conform
        to the applicable laws, or if it cannot be construed or deemed amended without,
        in the determination of the Committee, materially altering the intent of
        the
        Plan or the Award, such provision shall be stricken as to such jurisdiction,
        person or award and the remainder of the Plan and any such Award shall remain
        in
        full force and effect.

       

      (g)           Other
        Laws. The Committee may refuse to issue or transfer any Units or other
        consideration under an Award if, in its sole discretion, it determines that
        the
        issuance or transfer of such Units or such other consideration might violate
        any
        applicable law or regulation, the rules of the principal securities exchange
        on
        which the Units are then traded, or entitle the Partnership or an Affiliate
        to
        recover the same under Section 16(b) of the Exchange Act, and any payment
        tendered to the Company by a Participant, other holder or beneficiary in
        connection with the exercise of such Award shall be promptly refunded to
        the
        relevant Participant, holder or beneficiary.

       

      (h)           No
        Trust or Fund Created. Neither the Plan nor any award shall create or be
        construed to create a trust or separate fund of any kind or a fiduciary
        relationship between the Company or any participating Affiliate and a
        Participant or any other Person. To the extent that any Person acquires a
        right
        to receive payments from the Company or any participating Affiliate pursuant
        to
        an Award, such right shall be no greater than the right of any general unsecured
        creditor of the Company or any participating Affiliate.

       

      (i)           No
        Fractional Units. No fractional Units shall be issued or delivered pursuant
        to the Plan or any Award, and the Committee shall determine whether cash,
        other
        securities, or other property shall be paid or transferred in lieu of any
        fractional Units or whether such fractional Units or any rights thereto shall
        be
        canceled, terminated, or otherwise eliminated.

       

      (j)           Headings.
        Headings are given to the Sections and subsections of the Plan solely as
        a
        convenience to facilitate reference. Such headings shall not be deemed in
        any
        way material or relevant to the construction or interpretation of the Plan
        or
        any provision thereof.

       

      (k)           Facility
        Payment. Any amounts payable hereunder to any person under legal disability
        or who, in the judgment of the Committee, is unable to properly manage his
        financial affairs, may be paid to the legal representative of such person,
        or
        may be applied for the benefit of such person in any manner which the Committee
        may select, and the Company and its Affiliates shall be relieved of any further
        liability for payment of such amounts.

       

      (l)           Participation
        by Affiliates. In making Awards to Consultants and Employees employed by an
        Affiliate, the Committee shall be acting on behalf of the Affiliate, and
        to the
        extent the Partnership has an obligation to reimburse the Company for
        compensation paid to Consultants and Employees for services rendered for
        the
        benefit of the Partnership, such payments or reimbursement payments may be
        made
        by the Partnership directly to the Affiliate, and, if made to the Company,
        shall
        be received by the Company as agent for the Affiliate.

       

      (m)           Gender
        and Number. Words in the masculine gender shall include the feminine
        gender, the plural shall include the singular and the singular shall include
        the
        plural.

       

      (n)           No
        Guarantee of Tax Consequences.  None of the Board, the Company,
        nor the Committee makes any commitment or guarantee that any federal, state
        or
        local tax treatment will apply or be available to any person participating
        or
        eligible to participate hereunder.

       

      
        	
                9.

              	
                Term
                  of the Plan.

              

      

       

      The
        Plan
        shall be effective on the date of its approval by the Board and shall continue
        until the date terminated by the Board. However, unless otherwise expressly
        provided in the Plan or in an applicable Award Agreement, any Award granted
        prior to such termination, and the authority of the Board 

       

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

       

      or
        the
        Committee to amend, alter, adjust, suspend, discontinue, or terminate any
        such
        Award or to waive any conditions or rights under such Award, shall extend
        beyond
        such termination date.

       

      
        
           

        

        
          -11-

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