Document:

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                                                                    EXHIBIT 10.1

                          $115,000,000 Principal Amount

                          ENCYSIVE PHARMACEUTICALS INC.

                         2-1/2% Convertible Senior Notes

                                    due 2012

                               PURCHASE AGREEMENT

                                 March 11, 2005
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                                                              PURCHASE AGREEMENT

                                                                  March 11, 2005

J.P. MORGAN SECURITIES INC.
277 Park Avenue
New York, NY 10172

UBS SECURITIES LLC
299 Park Avenue
New York, New York 10171

SG COWEN & CO., LLC
1221 Avenue of the Americas
New York, NY 10020

     as Initial Purchasers

Dear Sirs and Mesdames:

          Encysive Pharmaceuticals Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to the initial purchasers named in Schedule A hereto
(the "Initial Purchasers") $115,000,000 aggregate principal amount of its 2-1/2%
Convertible Senior Notes due 2012 (the "Firm Bonds"). In addition, the Company
proposes to grant to the Initial Purchasers the option to purchase from the
Company up to an additional $15,000,000 aggregate principal amount of the
Company's 2-1/2% Convertible Senior Notes due 2012 (the "Additional Bonds"). The
Firm Bonds and the Additional Bonds are hereinafter collectively sometimes
referred to as the "Bonds."

          The Bonds are to be issued pursuant to an indenture (the "Indenture")
to be dated as of March 16, 2005, between the Company and The Bank of New York
Trust Company, N.A., as trustee (the "Trustee"). The Bonds will be convertible
in accordance with their terms and the terms of the Indenture into shares of the
common stock (the "Common Stock") of the Company, par value $.005 per share (the
"Shares").

          The Bonds and the Shares will be offered without being registered
under the Securities Act of 1933, as amended (the "Securities Act"), to
"qualified institutional buyers" in compliance with the exemption from
registration provided by Rule 144A under the Securities Act ("Rule 144A").

          The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of a Registration Rights Agreement to be entered
into at or prior to the time of
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purchase (as defined herein) between the Company and the Initial Purchasers (the
"Registration Rights Agreement").

          In connection with the sale of the Bonds, the Company has prepared a
preliminary offering memorandum (the "Preliminary Memorandum") and will prepare
a final offering memorandum including or incorporating by reference a
description of the terms of the Bonds and the Common Stock, the terms of the
offering and a description of the Company (the "Final Memorandum" and, with the
Preliminary Memorandum, each a "Memorandum"). As used herein, the term
"Memorandum" shall include in each case the documents incorporated by reference
therein, if any. The terms "supplement," "amendment" and "amend" as used herein
with respect to a Memorandum shall include all documents deemed to be
incorporated by reference in such Memorandum, if any, that are filed subsequent
to the date of such Memorandum with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").

          The Company and the Initial Purchasers agree as follows:

          1. Sale and Purchase: Upon the basis of the warranties and
representations and subject to the other terms and conditions herein set forth,
the Company agrees to sell to the Initial Purchasers, and each of the Initial
Purchasers, severally and not jointly, agrees to purchase from the Company, the
aggregate principal amount of Firm Bonds set forth opposite the name of such
Initial Purchaser in Schedule A hereto at a purchase price of 96.75% of the
principal amount thereof.

          In addition, the Company hereby grants to the several Initial
Purchasers the option to purchase from time to time, and upon the basis of the
representations and warranties and subject to the other terms and conditions
herein set forth, each Initial Purchaser shall have the right to purchase from
time to time from the Company, at a purchase price of 96.75% of the principal
amount thereof, plus accrued interest, if any, from the time of purchase (as
hereinafter defined) to the additional time of purchase (as hereinafter
defined), Additional Bonds in an aggregate principal amount proportional to the
aggregate principal amount of Firm Bonds set forth opposite such Initial
Purchaser's name on Schedule A hereto. This option may be exercised by J.P.
Morgan Securities Inc. and UBS Securities LLC, as representatives for the
Initial Purchasers (collectively, the "Representatives") at any time on or
before the thirtieth day following the date the Firm Bonds are issued, by
written notice to the Company. Such notice shall set forth the aggregate initial
principal amount of Additional Bonds as to which the option is being exercised,
and the date and time when the Additional Bonds are to be delivered (such date
and time being herein referred to as the "additional time of purchase");
provided, however, that the additional time of purchase shall not be earlier
than (i) the time of purchase or (ii) the second business day after the date on
which the option shall have been exercised nor later than the tenth business day
after the date on which the option shall have been exercised. As used herein,
"business day" shall mean a day on which the New York Stock Exchange, Inc. is
open for trading.

          2. Payment and Delivery: Payment of the purchase price for the Firm
Bonds shall be made to the Company by Federal (same day) funds, against delivery
of the Firm Bonds

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to the Initial Purchasers, at the offices of Porter & Hedges, L.L.P. in Houston,
Texas or at such other place as may be agreed upon by the parties hereto, for
the respective accounts of the Initial Purchasers. Such payment and delivery
shall be made at 10:00 A.M., New York City time, on March 16, 2005 (unless
another time shall be agreed to by you and the Company). The time at which such
payment and delivery are actually made is herein sometimes called the "time of
purchase."

          Payment of the purchase price for the Additional Bonds shall be made
at the additional time of purchase in the same manner and at the same office and
time of day as the payment for the Firm Bonds.

          One or more global securities representing the Bonds shall be
registered by the Trustee in the name of the nominee of The Depository Trust
Company ("DTC"), Cede & Co., credited to the accounts of such of its
participants as the Initial Purchasers shall request, upon notice to the Company
at least 48 hours prior to the time of purchase, with any transfer taxes payable
in connection with the transfer of the Bonds to the Initial Purchasers duly
paid, and deposited with the Trustee as custodian for DTC at the time of
purchase, against payment by or on behalf of the Initial Purchasers of the
aggregate purchase price therefore.

          3. Representations and Warranties of the Company: The Company
represents and warrants to each of the Initial Purchasers that:

               (a) (i) Each document, if any, filed or to be filed pursuant to
     the Exchange Act and incorporated by reference in any Memorandum complied
     or will comply when so filed in all material respects with the Exchange Act
     and the applicable rules and regulations of the Commission thereunder and
     (ii) the Preliminary Memorandum, as of its date did not and as of the time
     of execution of this Agreement does not, and the Final Memorandum, as
     amended or supplemented, prior to the time of purchase will not, contain
     any untrue statement of a material fact or omit to state a material fact
     necessary to make the statements therein, in the light of the circumstances
     under which they were made, not misleading; provided, however, that any
     representations and warranties set forth in this paragraph do not apply to
     statements or omissions in any Memorandum based upon information relating
     to any Initial Purchaser furnished to the Company in writing by or on
     behalf of such Initial Purchaser expressly for use therein, which
     information the parties hereto agree is limited to the Initial Purchasers'
     Information (as defined in Section 11);

               (b) As of the date of this Agreement, the Company's authorized
     and outstanding capitalization is the same it as was as of December 31,
     2004, as set forth under the column heading entitled "Actual" in the
     section of the Final Memorandum entitled "Capitalization" and, as adjusted
     to give effect to the offering of the Firm Bonds and the application of the
     net proceeds therefrom as described in the "Use of Proceeds" section of the
     Final Memorandum, the Company would, as of December 31, 2004 have had an
     authorized and outstanding capitalization as set forth under the column
     heading entitled "As Adjusted" in the section of the Final Memorandum
     entitled "Capitalization"; all of the issued and outstanding shares of
     capital stock, including the Common Stock, of

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     the Company have been duly authorized and validly issued and are fully paid
     and non-assessable, have been issued in compliance with all federal and
     state securities laws and were not issued in violation of any statutory or
     contractual preemptive rights, resale rights, rights of first refusal or
     similar rights;

               (c) The descriptions of the Company's stock option, stock bonus
     and other stock plans or arrangements, and the options or other rights
     granted thereunder, as described in the Memorandum accurately and fairly
     present, in all material respects, the information required to be shown
     with respect to such plans, arrangements, options and rights;

               (d) The Company has been duly incorporated and is validly
     existing as a corporation in good standing under the laws of the State of
     Delaware, with full corporate power and authority to own, lease and operate
     its properties and to conduct its business as described in the Memorandum,
     except where the failure to have such power and authority would not,
     individually or in the aggregate, have a material adverse effect on the
     business, properties, financial condition, results of operation or
     prospects of the Company and the Subsidiaries (as hereinafter defined)
     taken as a whole (a "Material Adverse Effect");

               (e) The Company is duly qualified to do business as a foreign
     corporation and is in good standing (or the foreign equivalent thereof, if
     any) in each jurisdiction where the ownership or leasing of its properties
     or the conduct of its business requires such qualification, except where
     the failure to be so qualified and in good standing would not, individually
     or in the aggregate, have a Material Adverse Effect and the Company is in
     compliance in all respects with the laws, orders, rules, regulations and
     directives issued or administered by such jurisdictions, except where the
     failure to be in compliance would not have a Material Adverse Effect;

               (f) The subsidiaries of the Company, other than (i)
     ImmunoPharmaceutics, Inc., a California corporation and wholly owned
     subsidiary of the Company, (ii) EP-ET, LLC, a Delaware limited liability
     company and wholly owned subsidiary of the Company, (iii) Encysive, L.P., a
     Delaware limited partnership, of which the Company is the sole limited
     partner and EP-ET, LLC is the sole general partner, (iv) Revotar
     Biopharmaceuticals, AG, a German corporation and majority-owned subsidiary
     of the Company, and (v) Encysive (UK) Limited, a United Kingdom private
     limited company and wholly owned subsidiary of the Company (collectively,
     the "Subsidiaries"), would not, individually, or in the aggregate be a
     "significant subsidiary" of the Company as defined by Rule 1-02 of
     Regulation S-X; each Subsidiary has been duly organized and is validly
     existing as a corporation or other legal entity in good standing (or the
     foreign equivalent thereof, if any) under the laws of the jurisdiction of
     its organization, with full power and authority to own, lease and operate
     its properties and to conduct its business as described in the Memorandum
     except where the failure to have such power and authority would not,
     individually or in the aggregate, have a Material Adverse Effect; each
     Subsidiary is duly qualified to do business as a foreign corporation or
     other legal entity and is in good standing (or the foreign equivalent
     thereof, if any) under the laws of each

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     jurisdiction where the ownership or leasing of its properties or the
     conduct of its business requires such qualification, except where the
     failure to be so qualified and in good standing would not, individually or
     in the aggregate, have a Material Adverse Effect; each of the Subsidiaries
     are in compliance in all respects with the laws, orders, rules, regulations
     and directives issued or administered by such jurisdictions, except where
     the failure to be in compliance would not have a Material Adverse Effect;
     all of the issued and outstanding shares of capital stock of the
     Subsidiaries have been duly and validly authorized and issued, are fully
     paid and non-assessable and, except to the extent set forth in the
     Memorandum, are owned directly or indirectly by the Company, free and clear
     of all liens, encumbrances, equities or claims;

               (g) Neither the Company nor any of the Subsidiaries is in breach
     or violation of, or in default under (nor has any event occurred which with
     notice, lapse of time, or both would result in any breach or violation of,
     constitute a default under or give the holder of any indebtedness (or
     person acting on such holder's behalf), the right to require the
     repurchase, redemption or repayment of all or part of such indebtedness
     under) (i) its respective charter or by-laws (or analogous governing
     instruments, as applicable), (ii) any indenture, mortgage, deed of trust,
     bank loan or credit agreement or other evidence of indebtedness, or any
     license, lease, contract or other agreement or instrument to which the
     Company or any of the Subsidiaries is a party or by which any of them or
     their respective properties may be bound or affected, or (iii) under any
     federal, state, local or foreign law, regulation or rule or any decree,
     judgment or order applicable to the Company or any of the Subsidiaries,
     except, in the cases of clauses (ii) and (iii), any breaches, violations or
     defaults, which, singularly or in the aggregate, would not have a Material
     Adverse Effect; and, the execution, delivery and performance of this
     Agreement, the Registration Rights Agreement, the Indenture and the Bonds
     and consummation of the transactions contemplated hereby and thereby,
     including the issuance of the Bonds and the issuance of the Shares upon
     conversion of the Bonds, will not conflict with, result in any breach or
     violation of, or constitute a default under (nor constitute any event which
     with notice, lapse of time or both would result in any breach or violation
     of or constitute a default under), the charter or by-laws (or analogous
     governing instruments, as applicable) of the Company or any of the
     Subsidiaries or any indenture, mortgage, deed of trust, bank loan or credit
     agreement or other evidence of indebtedness, or any license, lease,
     contract or other agreement or instrument to which the Company or any of
     the Subsidiaries is a party or by which any of them or their respective
     properties may be bound or affected, or any federal, state, local or
     foreign law, regulation or rule or any decree, judgment or order applicable
     to the Company or any of the Subsidiaries;

               (h) The Indenture has been duly authorized by the Company and
     when duly executed and delivered by the Company and duly authorized,
     executed and delivered by the Trustee will be a legal, valid and binding
     agreement of the Company, enforceable in accordance with its terms, except
     as the enforceability thereof may be limited by bankruptcy, insolvency,
     reorganization, moratorium, fraudulent transfer or similar laws affecting
     creditors' rights generally and general principles of equity;

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               (i) The Registration Rights Agreement has been duly authorized by
     the Company and when executed and delivered by the Company and duly
     authorized, executed and delivered by the Initial Purchasers will be a
     legal, valid and binding agreement of the Company, enforceable in
     accordance with its terms, except as the enforceability thereof may be
     limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
     transfer or similar laws affecting creditors' rights generally and general
     principles of equity;

               (j) The Bonds have been duly authorized by all necessary
     corporate action on the part of the Company and when executed and delivered
     by the Company and duly authenticated by the Trustee in accordance with the
     terms of the Indenture and delivered to and paid for by the Initial
     Purchasers in accordance with the terms hereof will constitute legal, valid
     and binding obligations of the Company, enforceable in accordance with
     their terms, except as the enforceability thereof may be limited by
     bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
     similar laws affecting creditors' rights generally and general principles
     of equity, and will be entitled to the benefits of the Indenture and the
     Registration Rights Agreement; the Shares initially issuable upon
     conversion of the Bonds have been duly authorized and validly reserved for
     issuance upon conversion of the Bonds, and upon conversion of the Bonds in
     accordance with their terms and the terms of the Indenture will be issued
     free of statutory and contractual preemptive rights and are sufficient in
     number to meet the current conversion requirements, and such Shares, when
     so issued upon such conversion in accordance with the terms of the
     Indenture, will be duly and validly issued and fully paid and
     non-assessable;

               (k) This Agreement has been duly authorized, executed and
     delivered by the Company;

               (l) The terms of the Bonds, the Registration Rights Agreement,
     the Indenture and the capital stock of the Company, including the Shares,
     conform in all material respects to the description thereof contained or
     incorporated by reference in the Final Memorandum;

               (m) No approval, authorization, consent or order of or filing
     with any federal, state, local or foreign governmental or regulatory
     commission, board, body, authority or agency or Nasdaq National Market
     ("Nasdaq"), or approval of stockholders of the Company, is required in
     connection with the issuance and sale by the Company of the Bonds or the
     issuance of Shares upon conversion of the Bonds or the consummation of the
     transactions as contemplated hereby and by the Indenture, the Registration
     Rights Agreement and the Bonds other than (i) as may be required under the
     securities or blue sky laws of the various jurisdictions in which the Bonds
     and the Shares are being offered by the Initial Purchasers, (ii) as may be
     required by federal and state securities laws with respect to the Company's
     obligations under the Registration Rights Agreement and the listing of the
     Shares on the Nasdaq in connection therewith, (iii) those required in
     connection with the qualification of the Indenture under the Trust
     Indenture Act of 1939, as amended (the "1939 Act"), (iv) those required in
     connection with arranging for the

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     Bonds to be designated eligible for trading in PORTAL or for the Bonds to
     be eligible for clearance and settlement through the DTC and (v) such as
     have already been obtained;

               (n) The Company has obtained for the benefit of the Initial
     Purchasers the agreement (a "Lock-Up Agreement"), substantially in the form
     set forth as Exhibit B hereto, of each of its executive officers and
     directors named in Exhibit B-1 hereto;

               (o) Except as described in the Memorandum, (i) no person has any
     preemptive rights or similar rights to purchase any shares of Common Stock
     or shares of any other capital stock or other equity interests of the
     Company and (ii) no person has the right to act as an initial purchaser or
     as a financial advisor to the Company in connection with the offer and sale
     of the Bonds, in the case of each of the foregoing clauses (i) and (ii),
     whether as a result of the sale of the Bonds as contemplated hereby or
     otherwise; and except as described in the Memorandum, no person has the
     right, contractual or otherwise, to cause the Company to include any shares
     of Common Stock or shares of any other capital stock or other securities of
     the Company in the registration statement to be filed with the Commission
     pursuant to the Registration Rights Agreement, whether as a result of the
     sale of the Bonds as contemplated hereby or otherwise;

               (p) Neither the Company nor any of its Subsidiaries is a party to
     any contract, agreement or understanding with any person that would give
     rise to a valid claim against the Company or the Initial Purchasers for a
     brokerage commission, finder's fee or like payment in connection with the
     offering and sale of the Bonds;

               (q) KPMG LLP, whose reports on the consolidated financial
     statements of the Company and the Subsidiaries are incorporated by
     reference in the Memorandum, are independent public accountants with
     respect to the Company as required by the Securities Act, and the
     applicable published rules and regulations thereunder;

               (r) Each of the Company and the Subsidiaries has all licenses,
     certificates, authorizations, permits, consents and approvals
     (collectively, "Consents") and has made all necessary declarations and
     filings required under any federal, state, local or foreign law, regulation
     or rule and has obtained all Consents from other persons, which are
     necessary or desirable for the ownership of their respective properties or
     the conduct of their respective businesses as described in the Memorandum
     including without limitation all such Consents required by the United
     States Food and Drug Administration (the "FDA") or any other federal, state
     or foreign agencies or bodies engaged in the regulation of pharmaceuticals
     or biohazardous materials, except where any failures to possess or make the
     same, singularly or in the aggregate, would not have a Material Adverse
     Effect; all of such Consents are valid and in full force and effect, except
     where the invalidity of such Consents or the failure of such Consents to be
     in full force and effect would not, singularly or in the aggregate, have a
     Material Adverse Effect; all such Consents are free and clear of any
     restrictions or conditions that are in addition to, or materially different
     from, those normally applicable to similar Consents; and neither the
     Company nor any of the Subsidiaries is in violation of, or in default
     under, nor has the

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     Company nor any of the Subsidiaries received notification of any
     proceedings relating to revocation or modification of any such Consent or
     any federal, state, local or foreign law, regulation or rule or any decree,
     order or judgment applicable to the Company or any of the Subsidiaries and
     has no reason to believe that any such Consent will not be renewed, except
     where such revocation or modification would not, individually or in the
     aggregate, have a Material Adverse Effect;

               (s) Except as described in the Memorandum, there are no actions,
     suits, claims, investigations or proceedings pending, to the knowledge of
     the Company, threatened or contemplated to which the Company or any of the
     Subsidiaries is or would be a party or of which any of their respective
     properties is or would be subject at law or in equity, or before or by any
     federal, state, local or foreign governmental or regulatory commission,
     board, body, authority or agency, except any such action suit, claim,
     investigation or proceeding which would not result in a judgment, decree or
     order either (A) having, individually or in the aggregate, a Material
     Adverse Effect or (B) preventing the consummation of the transactions
     contemplated hereby and by the Indenture, the Registration Rights Agreement
     and the Bonds;

               (t) All tax returns required to be filed by the Company and each
     of the Subsidiaries have been filed, and all taxes and other assessments of
     a similar nature (whether imposed directly or through withholding)
     including any interest, additions to tax or penalties applicable thereto
     due or claimed to be due from such entities have been paid, other than
     those being contested in good faith and for which adequate reserves have
     been provided and those currently payable without penalty or interest or
     the nonpayment of which would not have a Material Adverse Effect;

               (u) The Company and each of the Subsidiaries maintains insurance
     covering its properties, operations, personnel and businesses as the
     Company deems adequate; such insurance insures against such losses and
     risks to an extent which is adequate in accordance with customary industry
     practice to protect the Company and the Subsidiaries and their respective
     businesses; all such insurance is fully in force on the date hereof and
     will be fully in force at the time of purchase and any additional time of
     purchase;

               (v) Neither the Company nor any of the Subsidiaries have
     sustained since the date of the last audited financial statements included
     or incorporated by reference in the Memorandum any loss or interference
     with its respective business from fire, explosion, flood or other calamity,
     whether or not covered by insurance, or from any labor dispute or court or
     governmental action, order or decree;

               (w) The Company has not sent or received any communication
     regarding termination of, or intent not to renew, any of the contracts or
     agreements referred to, described in or incorporated by reference in the
     Memorandum, and no such termination or non-renewal has been threatened by
     the Company or, to the Company's knowledge after due inquiry, any other
     party to any such contract or agreement; the Company is not aware that any
     key employee or significant group of employees of the

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     Company or any Subsidiary plans to terminate employment with the Company or
     any such Subsidiary;

               (x) Neither the Company nor the Subsidiaries are engaged in any
     unfair labor practice; except for matters which would not, individually or
     in the aggregate, have a Material Adverse Effect, (i) there is (A) no
     unfair labor practice complaint pending or, to the Company's knowledge,
     threatened against the Company or any of the Subsidiaries before the
     National Labor Relations Board, and no grievance or arbitration proceeding
     arising out of or under collective bargaining agreements is pending or to
     the Company's knowledge, threatened, (B) no strike, labor dispute, slowdown
     or stoppage pending or, to the Company's knowledge, threatened against the
     Company or any of the Subsidiaries and (C) no union representation dispute
     currently existing concerning the employees of the Company or any of the
     Subsidiaries and (ii) to the Company's knowledge, (A) no union organizing
     activities are currently taking place concerning the employees of the
     Company or any of the Subsidiaries and (B) there has been no violation of
     any federal, state, local or foreign law relating to discrimination in the
     hiring, promotion or pay of employees, any applicable wage or hour laws or
     any provision of the Employee Retirement Income Security Act of 1974
     ("ERISA") or the rules and regulations promulgated thereunder concerning
     the employees of the Company or any of the Subsidiaries;

               (y) No "prohibited transaction" (as defined in Section 406 of the
     ERISA, or Section 4975 of the Internal Revenue Code of 1986, as amended
     from time to time (the "Code")) or "accumulated funding deficiency" (as
     defined in Section 302 of ERISA) or any of the events set forth in Section
     4043(b) of ERISA (other than events with respect to which the 30-day notice
     requirement under Section 4043 of ERISA has been waived) has occurred with
     respect to any employee benefit plan which could, singularly or in the
     aggregate, have a Material Adverse Effect; each employee benefit plan of
     the Company and its Subsidiaries is in compliance in all material respects
     with applicable law, including ERISA and the Code; the Company has not
     incurred and does not expect to incur liability under Title IV of ERISA
     with respect to the termination of, or withdrawal from, any "pension plan";
     and each "pension plan" (as defined in ERISA) for which the Company would
     have any liability that is intended to be qualified under Section 401(a) of
     the Code is so qualified in all material respects and nothing has occurred,
     whether by action or by failure to act, which could cause the loss of such
     qualification;

               (z) Neither the Company nor any of its Subsidiaries own any
     "margin securities" as that term is defined in Regulation U of the Board of
     Governors of the Federal Reserve System (the "Federal Reserve Board"), and
     none of the proceeds of the sale of the Bonds will be used, directly or
     indirectly, for the purpose of purchasing or carrying any margin security,
     for the purpose of reducing or retiring any indebtedness which was
     originally incurred to purchase or carry any margin security or for any
     other purpose which might cause any of the Securities to be considered a
     "purpose credit" within the meanings of Regulation T, U or X of the Federal
     Reserve Board;

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               (aa) Each of the Company and the Subsidiaries own, or have
     obtained valid and enforceable licenses for, or other rights to use, the
     inventions, patent applications, patents, trademarks (both registered and
     unregistered), tradenames, copyrights, trade secrets and other proprietary
     information described or incorporated by reference in the Memorandum as
     being owned or licensed by or to them or that are necessary for the conduct
     of their respective businesses, except where the failure to own, license or
     have such rights would not, individually or in the aggregate, have a
     Material Adverse Effect (collectively, "Intellectual Property"); (i) there
     are no third parties who have or, to the Company's knowledge, will be able
     to establish rights to any Intellectual Property, except for the ownership
     rights of the owners of the Intellectual Property which is licensed to the
     Company; (ii) to the best of the Company's knowledge there is no
     infringement by third parties of any Intellectual Property; (iii) there is
     no pending or, to the best of the Company's knowledge, threatened action,
     suit, proceeding or claim by others challenging the Company's rights in or
     to any Intellectual Property, and the Company is unaware of any facts which
     could form a reasonable basis for any such claim; (iv) there is no pending
     or, to the best of the Company's knowledge, threatened action, suit,
     proceeding or claim by others challenging the validity or scope of any
     Intellectual Property, and the Company is unaware of any facts which could
     form a reasonable basis for any such claim; (v) there is no pending or, to
     the best of the Company's knowledge, threatened action, suit, proceeding or
     claim by others that the Company infringes or otherwise violates any
     patent, trademark, copyright, trade secret or other proprietary rights of
     others, and the Company is unaware of any facts which could form a
     reasonable basis for any such claim; (vi) to the best of the Company's
     knowledge, there is no patent or patent application that contains claims
     that interfere with the issued or pending claims of any of the Intellectual
     Property; and (vii) to the best of the Company's knowledge there is no
     prior art that may render any patent application owned by the Company of
     the Intellectual Property unpatentable that has not been disclosed to the
     U.S. Patent and Trademark Office;

               (bb) The Company and its Subsidiaries are in compliance with all
     applicable federal, state, local and foreign laws, regulations, orders and
     decrees governing their business as prescribed by the FDA, or any other
     federal, state or foreign agencies or bodies, including those bodies and
     agencies engaged in the regulation of pharmaceuticals or biohazardous
     substances or materials, except where noncompliance would not, singly or in
     the aggregate, have a Material Adverse Effect; all preclinical and clinical
     studies undertaken to support approval of products for commercialization
     have been conducted in compliance with all applicable federal, state or
     foreign laws, rules, orders or regulations, including current Good
     Laboratory and Good Clinical Practices in all material respects; no filing
     or submission to the FDA or any other federal, state or foreign regulatory
     body, that is intended to be the basis for any approval, contains any
     material omission or material false information;

               (cc) The audited financial statements included or incorporated by
     reference in the Memorandum, together with the related notes and schedules,
     present fairly the consolidated financial position of the Company and the
     Subsidiaries as of the dates indicated and the consolidated results of
     operations and cash flows of the Company

                                       10
<PAGE>
     and the Subsidiaries for the periods specified and have been prepared in
     compliance in all material respects with the requirements of the Exchange
     Act and in compliance with the requirements of generally accepted
     accounting principles applied on a consistent basis during the periods
     involved; any pro forma financial statement or data included or
     incorporated by reference in the Memorandum comply with the requirements of
     Regulation S-X under the Securities Act, including without limitation
     Article 11 thereof, and the assumptions used in the preparation of such pro
     forma financial statements or data included or incorporated by reference in
     the Memorandum are reasonable, the pro forma adjustments used therein are
     appropriate to give effect to the transactions or circumstances described
     therein and the pro forma adjustments have been properly applied to the
     historical amounts in the compilation of those statements and data; the
     other financial and statistical data set forth or incorporated by reference
     in the Memorandum are accurately presented and prepared on a basis
     consistent with the financial statements and books and records of the
     Company; and neither the Company nor the Subsidiaries have any material
     liabilities or obligations, direct or contingent (including any off-balance
     sheet obligations), and there are no transactions, arrangements or other
     relationships between and/or among the Company, any of its affiliates (as
     such term is defined in Rule 405 of the Securities Act) and any
     unconsolidated entity, including, but not limited to, any structured
     finance, special purpose or limited purpose entity that could reasonably be
     expected to materially affect the Company's liquidity or the availability
     of or requirements for its capital resources that are not disclosed in the
     Memorandum;

               (dd) Subsequent to the respective dates as of which information
     is given in the Memorandum, and except as may be otherwise stated or
     incorporated by reference in the Memorandum, there has not been (A) any
     material adverse change, or any development involving a prospective
     material adverse change, in the business, properties, prospects, regulatory
     environment, management, financial condition or results of operations of
     the Company and the Subsidiaries, taken as a whole, (B) any transaction
     which is material to the Company and the Subsidiaries, taken as a whole,
     (C) any obligation, direct or contingent (including any off-balance sheet
     obligations), incurred by the Company or any of the Subsidiaries, which is
     material to the Company and the Subsidiaries, taken as a whole, (D) any
     change in the capital stock or outstanding indebtedness of the Company or
     the Subsidiaries or (E) any dividend or distribution of any kind declared,
     paid or made on the capital stock of the Company;

               (ee) The Company and the Subsidiaries and their properties,
     assets and operations are in compliance with, and hold all permits,
     authorizations and approvals required under, Environmental Laws (as defined
     below), except to the extent that failure to so comply or to hold such
     permits, authorizations or approvals would not, individually or in the
     aggregate, have a Material Adverse Effect; there are no past, present or,
     to the Company's knowledge after due inquiry, reasonably anticipated future
     events, conditions, circumstances, activities, practices, actions,
     omissions or plans that could reasonably be expected to give rise to any
     material costs or liabilities to the Company or the Subsidiaries under, or
     to interfere with or prevent compliance by the Company or the Subsidiaries
     with, Environmental Laws; except as would not, individually or in the

                                       11
<PAGE>
     aggregate, have a Material Adverse Effect, the Company and each of the
     Subsidiaries (i) to the Company's knowledge, is not the subject of any
     investigation, (ii) has not received any notice or claim, (iii) is not a
     party to or affected by any pending or, to the Company's knowledge,
     threatened action, suit or proceeding, (iv) is not bound by any judgment,
     decree or order or (v) has not entered into any agreement, in each case
     relating to any alleged violation of any Environmental Law or any actual or
     alleged release or threatened release or cleanup at any location of any
     Hazardous Materials (as defined below) (as used herein, "Environmental Law"
     means any federal, state, local or foreign law, statute, ordinance, rule,
     regulation, order, decree, judgment, injunction, permit, license,
     authorization or other binding requirement, or common law, relating to
     health, safety or the protection, cleanup or restoration of the environment
     or natural resources, including those relating to the distribution,
     processing, generation, treatment, storage, disposal, transportation, other
     handling or release or threatened release of Hazardous Materials, and
     "Hazardous Materials" means any material (including, without limitation,
     pollutants, contaminants, hazardous or toxic substances or wastes) that is
     regulated by or may give rise to liability under any Environmental Law);

               (ff) In the ordinary course of its business, the Company and each
     of the Subsidiaries conducts a periodic review of the effect of the
     Environmental Laws on its business, operations and properties, in the
     course of which it identifies and evaluates associated costs and
     liabilities (including, without limitation, any capital or operating
     expenditures required for cleanup, closure of properties or compliance with
     the Environmental Laws or any permit, license or approval, any related
     constraints on operating activities and any potential liabilities to third
     parties);

               (gg) When the Bonds are issued pursuant to this Agreement, the
     Bonds will not be of the same class (within the meaning of Rule 144A) as
     securities that are listed on a national securities exchange registered
     pursuant to Section 6 of the Exchange Act or quoted in a U.S. automated
     inter-dealer quotation system;

               (hh) Neither the Company nor any Affiliate (as defined in Rule
     501(b) of Regulation D under the Securities Act) (i) sold, offered for
     sale, solicited offers to buy or otherwise negotiated in respect of, any
     security (as defined in the Securities Act) which is or would be integrated
     with the sale of the Bonds in a manner that would require the registration
     under the Securities Act of the Bonds or (ii) offered, solicited offers to
     buy or sold the Bonds by any form of general solicitation or general
     advertising (as those terms are used in Regulation D under the Securities
     Act) or in any manner involving a public offering within the meaning of
     Section 4(2) of the Securities Act;

               (ii) Assuming the accuracy of the representations and warranties
     of the Initial Purchasers in Section 4 hereof, it is not necessary in
     connection with the offer, sale and delivery of the Bonds to the Initial
     Purchasers pursuant to this Agreement to register the Bonds or the Shares
     deliverable upon conversion of the Bonds under the Securities Act or to
     qualify the Indenture under the 1939 Act;

                                       12
<PAGE>
               (jj) Neither the Company nor any of the Subsidiaries is, nor
     after giving effect to the offering and sale of the Bonds and the
     application of the proceeds thereof as described in the Final Memorandum
     will any of them be, required to register as an "investment company" as
     defined in the Investment Company Act of 1940, as amended;

               (kk) Except as described in the Memorandum, the Company and each
     of the Subsidiaries has good and marketable title to all property (real and
     personal) described or incorporated by reference in the Memorandum as being
     owned by each of them, free and clear of all liens, claims, security
     interests or other encumbrances; all the property described in the
     Memorandum as being held under lease by the Company or a Subsidiary is held
     thereby under valid, subsisting and enforceable leases;

               (ll) Except for the Registration Rights Agreement, there are no
     contracts, agreements or understandings between the Company and any person
     granting such person the right to require the Company to register any
     securities with the SEC;

               (mm) At the time of purchase there are no securities of or
     guaranteed by the Company or any Subsidiary of the Company that are rated
     by a "nationally recognized statistical rating organization", as that term
     is defined in Rule 436(g)(2) promulgated under the Securities Act;

               (nn) The Company and each of the Subsidiaries maintains a system
     of internal accounting controls sufficient to provide reasonable assurance
     that (i) transactions are executed in accordance with management's general
     or specific authorization; (ii) transactions are recorded as necessary to
     permit preparation of financial statements in conformity with generally
     accepted accounting principles and to maintain accountability for assets;
     (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 existing assets at reasonable intervals and
     appropriate action is taken with respect to any differences;

               (oo) The minute books of the Company and each of its domestic
     subsidiaries have been made available to the Initial Purchaser and counsel
     for the Initial Purchaser, and such books (i) contain minutes (or written
     consents) of all meetings and actions of the board of directors (including
     each board committee) and shareholders (or analogous governing bodies and
     interest holders, as applicable) of the Company and each of its domestic
     subsidiaries since the time of its respective organization through the date
     of the latest meeting and action, and (ii) accurately in all material
     respects reflect all transactions referred to in such minutes;

               (pp) The Company has established and maintains disclosure
     controls and procedures (as such term is defined in Rule 13a-14 and 15d-14
     under the Exchange Act); such disclosure controls and procedures are
     designed to ensure that material information relating to the Company,
     including its consolidated subsidiaries, is made known to the Company's
     Chief Executive Officer and its Vice President, Finance and Administration
     by others within those entities, and as of the period covered by the

                                       13
<PAGE>
     Company's Annual Report on Form 10-K for the fiscal year ended December 31,
     2004, such disclosure controls and procedures were effective to perform the
     functions for which they were established; the Company's auditors and the
     Audit Committee of the Board of Directors have been advised, based on the
     Company's assessment of internal control over financial reporting, as of
     the fiscal year ended December 31, 2004, of: (i) any significant
     deficiencies in the design or operation of internal controls which could
     adversely affect the Company's ability to record, process, summarize, and
     report financial data; and (ii) any fraud, whether or not material, that
     involves management or other employees who have a role in the Company's
     internal controls; any material weaknesses in internal controls as of
     December 31, 2004 have been identified for the Company's auditors; and in
     connection with the Company's assessment of internal control described
     above, there were no significant changes in internal controls or in other
     factors that have materially affected internal control over financial
     reporting;

               (qq) Any statistical and market-related data included or
     incorporated by reference in the Memorandum are based on or derived from
     sources that the Company believes to be reliable and accurate, and the
     Company has obtained the written consent to the use of such data from such
     sources to the extent required;

               (rr) Neither the Company nor any of its Subsidiaries nor, to the
     best of the Company's knowledge, any employee or agent of the Company or
     any subsidiary, has made any contribution or other payment to any official
     of, or candidate for, any federal, state or foreign office in violation of
     any law necessary to be disclosed in the Memorandum in order to make the
     statements therein not misleading.

               (ss) Neither the Company nor any of the Subsidiaries nor any of
     their respective directors, officers, affiliates or controlling persons has
     taken, directly or indirectly, any action designed, or which has
     constituted or might reasonably be expected to cause or result in, under
     the Exchange Act or otherwise, the stabilization or manipulation of the
     price of any security of the Company to facilitate the sale or resale of
     the Bonds or the Shares issued upon conversion thereof;

               (tt) The Company and the Subsidiaries are in compliance in all
     material respects with the applicable provisions of the Sarbanes-Oxley Act
     of 2002 and the rules and regulations in connection therewith, including
     without limitation Section 402 related to loans and Sections 302 and 906
     related to certifications;

               (uu) There are no rulemaking, similar public proceedings or, to
     the Company's knowledge, similar private proceedings, before the FDA or
     comparable federal, state, local or foreign government bodies which involve
     the Company or any of the Subsidiaries, except such proceedings that, if
     the subject of an action unfavorable to the Company or any such Subsidiary,
     would not result in a Material Adverse Effect; and

               (vv) The statements set forth in the Memorandum under the caption
     "Description of Notes," insofar as they purport to constitute a summary of
     the terms of the Notes, and under the captions "Risk Factors" and "Offering
     Memorandum Summary,"

                                       14
<PAGE>
     insofar as they purport to describe the provisions of the laws and
     documents referred to therein, are accurate, complete and fair;

          In addition, any certificate signed by any officer of the Company or
any of the Subsidiaries and delivered to the Initial Purchasers or counsel for
the Initial Purchasers in connection with the offering of the Bonds shall be
deemed to be a representation and warranty by the Company or Subsidiary, as the
case may be, as to matters covered thereby, to each Initial Purchaser.

          4. Representations and Warranties of the Initial Purchasers. The
Initial Purchasers propose to offer the Bonds for sale upon the terms and
conditions set forth in this Agreement and the Final Memorandum, and each
Initial Purchaser hereby represents and warrants to and agrees with the Company
that:

               (a) It will offer and sell the Bonds only to persons whom it
     reasonably believes are "qualified institutional buyers" ("QIBs") within
     the meaning of Rule 144A in transactions meeting the requirements of Rule
     144A in purchasing such Bonds, are deemed to have represented and agreed as
     provided in the Final Memorandum under the caption "Notice to Investors";

               (b) It is a QIB within the meaning of Rule 144A; and

               (c) It has not and will not directly or indirectly, solicit
     offers in the United States for, or offer or sell, the Bonds by any form of
     general solicitation, general advertising (as such terms are used in
     Regulation D) or in any manner involving a public offering within the
     meaning of Section 4(2) of the Securities Act.

          5. Certain Covenants of the Company: The Company hereby agrees that:

               (a) The Company will prepare the Final Memorandum in a form
     approved by the Initial Purchasers and will make no amendment or supplement
     to the Final Memorandum to which any of the Initial Purchasers reasonably
     objects;

               (b) Promptly from time to time, the Company will take such action
     as the Initial Purchasers may reasonably request to qualify the Bonds and
     the Shares for offering and sale under the securities laws of such
     jurisdictions as the Initial Purchasers may reasonably request in writing
     and will make such applications, file such documents, and furnish such
     information as may be reasonably required for that purpose; provided, that
     in connection therewith the Company shall not be required to qualify as a
     foreign corporation, to file a general consent to service of process or
     subject itself to any tax in any such jurisdiction where it is not now so
     qualified or subject;

               (c) The Company will furnish the Initial Purchasers with as many
     copies of the Final Memorandum, any documents incorporated by reference
     therein and any amendment or supplement thereto as the Initial Purchasers
     may from time to time reasonably request, and if, at any time prior to the
     completion of the resale of the Bonds by the Initial Purchasers, any event
     shall have occurred as a result of which the Final

                                       15
<PAGE>
     Memorandum as then amended or supplemented would include an untrue
     statement of a material fact or omit to state any material fact necessary
     in order to make the statements therein, in the light of the circumstances
     under which they were made when such Final Memorandum is delivered, not
     misleading, or, if for any other reason it shall be necessary or desirable
     during such same period to amend or supplement the Final Memorandum, the
     Company will notify the Initial Purchasers and upon the request of the
     Initial Purchasers will prepare and furnish without charge to the Initial
     Purchasers and to any dealer in securities as many copies as the Initial
     Purchasers may from time to time reasonably request of an amended Final
     Memorandum or a supplement to the Final Memorandum which will correct such
     statement or omission or effect such compliance;

               (d) During the period beginning from the date hereof and
     continuing until the date 90 days after the date of the Final Memorandum
     (the "Restricted Period"), the Company will not, without the prior written
     consent of the Representatives, directly or indirectly, issue, offer, sell,
     contract to sell, hypothecate, pledge, grant or sell any option, right or
     warrant to purchase, or otherwise dispose of, or contract to dispose of, or
     announce any offering of or file or cause to be deemed effective any
     registration statement under the Securities Act relating to, any Shares,
     any securities substantially similar to the Bonds or the Common Stock, any
     securities that are convertible into or exchangeable for shares of Common
     Stock and debt securities or any securities that are convertible into or
     exchangeable for the Bonds or such other debt securities (other than (i)
     the issuance of the Bonds; (ii) the issuance of Shares upon conversion of
     the Bonds; (iii) the issuance of shares of Common Stock upon conversion or
     exercise of convertible or exercisable or exchangeable securities
     outstanding as of the date of this Agreement, (iv) the issuance of employee
     stock options or shares of restricted stock that are not exercisable and do
     not vest, as applicable, during the Restricted Period pursuant to the
     Company's stock option plans existing on the date of this Agreement) or (v)
     the issuance of shares of Common Stock or options pursuant to employee
     stock option or employee stock purchase plans existing on, or upon exercise
     of warrants outstanding as of, the date of this Agreement), or enter into
     any swap or other agreement that transfers, in whole or in part, any of the
     economic consequences of ownership of the Common Stock or Bonds
     irrespective of whether any transaction mentioned above is to be settled by
     delivery of the Common Stock, the Bonds or other securities, in cash or
     otherwise;

               (e) At any time when the Company is not subject to Section 13 or
     15(d) of the Exchange Act and so long as any of the Bonds (or Shares issued
     upon conversion thereof) are "restricted securities" within the meaning of
     Rule 144(a)(3) under the Securities Act, for the benefit of holders from
     time to time of the Bonds, the Company will furnish at its expense, upon
     request, to holders and beneficial owners of Bonds and prospective
     purchasers of Bonds information satisfying the requirements of subsection
     (d)(4)(i) of Rule 144A;

               (f) The Company will cooperate with the Initial Purchasers to
     cause the Bonds to be eligible for trading in PORTAL;

                                       16
<PAGE>
               (g) For so long as the Bonds remain outstanding, the Company will
     furnish to the Initial Purchasers copies of all reports or other
     communications (financial or other) furnished to stockholders of the
     Company, and will deliver to the Initial Purchasers (i) as soon as they are
     available, copies of any reports and financial statements furnished to or
     filed by the Company with the Commission or any securities exchange on
     which the Bonds or any class of securities of the Company is listed;
     provided, however, the Company's filing of information specified herein
     with the Commission by EDGAR shall satisfy this provision with respect to
     such information; and (ii) such additional information concerning the
     business and financial condition of the Company as the Initial Purchasers
     may from time to time reasonably request (such financial information to be
     on a consolidated basis to the extent the accounts of the Company and the
     Subsidiaries are consolidated in reports furnished to its stockholders
     generally or to the Commission);

               (h) The Company will use the net proceeds received by it from the
     sale of the Bonds pursuant to this Agreement in the manner specified in the
     Final Memorandum under the caption "Use of Proceeds";

               (i) The Company will reserve and keep available at all times free
     of preemptive rights, Shares for the purpose of enabling the Company to
     satisfy any obligations to issue Shares upon conversion of the Bonds;

               (j) the Company will use its best efforts to list, as promptly as
     practicable but in no event later than the time that the registration
     statement is declared effective in accordance with the Registration Rights
     Agreement, and subject to notice of issuance, the Shares on the Nasdaq;

               (k) Whether or not the transactions contemplated in this
     Agreement are consummated or this Agreement is terminated, the Company will
     pay or cause to be paid all expenses incident to the performance of its
     obligations under this Agreement, including, without limitation, (i) the
     fees, disbursements and out-of-pocket expenses of the Company's counsel and
     the Company's accountants in connection with the issuance and sale of the
     Bonds and all other fees and expenses in connection with the preparation of
     each Memorandum and all amendments and supplements thereto, including all
     printing costs associated therewith, and the furnishing of copies thereof
     to the Initial Purchasers and to dealers (including costs of mailing and
     shipment), (ii) all costs related to the preparation, issuance, execution,
     authentication and delivery of the Bonds and the Shares, (iii) all costs
     related to the transfer and delivery of the Bonds to the Initial
     Purchasers, including any transfer or other taxes payable thereon, (iv) the
     costs of printing, reproducing and distributing this Agreement by mail,
     telex or other means of communication, (v) all expenses in connection with
     the qualification of the Bonds and the Shares for offering and sale under
     state laws and the cost of printing and furnishing of copies of any blue
     sky or legal investment memorandum to the Initial Purchasers and to dealers
     (including filing fees and the fees and disbursements of counsel for the
     Initial Purchasers in connection with such qualification and in connection
     with such blue sky or legal investment memorandum), (vi) any fees payable
     to investment rating agencies, if any, with respect to the rating of the
     Bonds, (vii) the costs and charges of the Trustee and

                                       17
<PAGE>
     any transfer agent, registrar or depositary, (viii) the fees and expenses,
     if any, incurred in connection with the admission of the Bonds for trading
     in PORTAL or any appropriate market system, (ix) the costs and expenses of
     the Company relating to investor presentations on any "road show"
     undertaken in connection with the marketing of the offering of the Bonds,
     including, without limitation, expenses associated with the production of
     road show slides and graphics, fees and expenses of any consultants engaged
     in connection with the road show presentations with the prior approval of
     the Company, travel and lodging expenses of the employees, representatives
     and officers of the Company and any such consultants, and the cost of any
     aircraft chartered in connection with the road show, and (x) all other cost
     and expenses incident to the performance of the Company's obligations
     hereunder for which provision is not otherwise made in this Section 5(k);

               (l) Neither the Company nor any Affiliate will sell, offer for
     sale or solicit offers to buy or otherwise negotiate in respect of any
     security (as defined in the Securities Act) which could be integrated with
     the sale of the Bonds in a manner which would require the registration
     under the Securities Act of the offer and sale of the Bonds pursuant to
     this Agreement;

               (m) The Company will not to solicit any offer to buy or offer or
     sell the Bonds or the Shares by means of any form of general solicitation
     or general advertising (as those terms are used in Regulation D) or in any
     manner involving a public offering within the meaning of Section 4(2) of
     the Securities Act;

               (n) During the period after the time of purchase or the
     additional time of purchase, if later, the Company will not, and will not
     permit Affiliates, to resell any of the Bonds or the Shares which
     constitute "restricted securities" under Rule 144 under the Securities Act
     that have been reacquired by any of them except pursuant to an effective
     registration statement under the Securities Act;

               (o) Neither the Company nor any Affiliate will take any action
     prohibited by Regulation M under the Exchange Act in connection with the
     distribution of the Bonds contemplated hereby; and

               (p) The Company and each Subsidiary will comply in all material
     respects with all applicable securities and other laws, rules and
     regulations, including without limitation, the Sarbanes-Oxley Act, and use
     its reasonable best efforts to cause the officers and directors of the
     Company and each Subsidiary, as the case may be, in their capacities as
     such, to comply with such laws, rules and regulations, including without
     limitation, the provisions of the Sarbanes-Oxley Act.

                                       18
<PAGE>
          6. Reimbursement of Initial Purchasers' Expenses: If the Firm Bonds
are not delivered for any reason other than the default by one or more of the
Initial Purchasers in their obligations hereunder, the Company will reimburse
the Initial Purchasers for all of their out-of-pocket expenses (including the
reasonable fees and disbursements of their counsel) reasonably incurred by the
Initial Purchasers in connection with this Agreement or the offering
contemplated hereunder.

          7. Conditions of Initial Purchasers' Obligations: The several
obligations of the Initial Purchasers hereunder are subject to the accuracy in
all material respects of the representations and warranties on the part of the
Company on the date hereof and at the time of purchase. The several obligations
of the Initial Purchasers at the additional time of purchase are subject to the
accuracy in all material respects of the representations and warranties on the
part of the Company on the date hereof, at the time of purchase (unless
previously waived) and at the additional time of purchase, as the case may be.
Additionally, the several obligations of the Initial Purchasers hereunder are
subject to performance by the Company of its obligations hereunder and to the
following conditions:

               (a) The Company shall furnish to the Initial Purchasers at the
     time of purchase and at the additional time of purchase, as the case may
     be, the following opinions of counsel to the Company addressed to the
     Initial Purchasers and dated the date of the time of purchase or the date
     of the additional time of purchase, as the case may be, and in form
     reasonably satisfactory to counsel for the Initial Purchasers:

                    (i) opinions of Porter & Hedges, L.L.P. and Bryan Cave LLP
          substantially as set forth in Exhibit A-1 hereto;

                    (ii) opinion of Wood, Phillips, Katz, Clark & Mortimer
          substantially as set forth in Exhibit A-2 hereto; and

                    (iii) opinion of Fish & Richardson P.C. substantially as set
          forth in Exhibit A-3 hereto.

               (b) The Initial Purchasers shall have received on the date of
     this Agreement, at the time of purchase and the additional time of
     purchase, as the case may be, from KPMG LLP customary comfort letters dated
     as of the date of this Agreement, the date of the time of purchase and the
     date of the additional time of purchase, as the case may be, and addressed
     to the Initial Purchasers, in form and substance satisfactory to counsel
     for the Initial Purchasers;

               (c) The Initial Purchasers shall have received at the time of
     purchase and at the additional time of purchase, as the case may be, the
     opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
     Initial Purchasers, dated the date of the time of purchase or the date of
     the additional time of purchase, as the case may be, in form and substance
     reasonably satisfactory to the Initial Purchasers;

               (d) No amendment or supplement to the Final Memorandum, or any
     document which upon filing with the Commission would be incorporated by
     reference in

                                       19
<PAGE>
     the Final Memorandum, shall at any time have been made or filed to which
     any of the Initial Purchasers have reasonably objected in writing;

               (e) At the time of purchase or the additional time of purchase,
     as the case may be, the Final Memorandum shall 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 the light of the circumstances
     under which they were made, not misleading;

               (f) Between the time of execution of this Agreement and the time
     of purchase or the additional time of purchase, as the case may be, (i) no
     material adverse change or any development involving a prospective material
     adverse change in the business, properties, management, financial condition
     or results of operations of the Company and the Subsidiaries, taken as a
     whole shall occur or become known and (ii) no transaction which is material
     and unfavorable to the Company (other than as disclosed in the Final
     Memorandum) shall have been entered into by the Company or any of the
     Subsidiaries;

               (g) The Company will, at the time of purchase and, if applicable
     at the additional time of purchase, deliver to the Initial Purchasers a
     certificate of its Chief Executive Officer and its Vice President, Finance
     and Administration in the form attached as Exhibit C hereto;

               (h) The Initial Purchasers shall have received copies, duly
     executed by the Company and the other parties thereto, of the Registration
     Rights Agreement and the Indenture;

               (i) Each executive officer and director of the Company shall have
     entered into Lock-Up Agreements substantially in the form attached as
     Exhibit B hereto on or prior to the date hereof, and each such Lock-Up
     Agreement, or a copy thereof, shall have been delivered to you and shall be
     in full force and effect at the time of purchase and the additional time of
     purchase, as the case may be;

               (j) The Company shall have furnished to the Initial Purchasers
     such other documents and certificates as to the accuracy and completeness
     of any statement in the Final Memorandum as of the time of purchase and the
     additional time of purchase, as the case may be, as the Initial Purchasers
     may reasonably request; and

               (k) The Bonds shall have been designated for trading on PORTAL,
     subject only to notice of issuance at or prior to the time of purchase.

          8. Termination: The several obligations of the Initial Purchasers
hereunder shall be subject to termination in the absolute discretion of the
Representatives if, (x) since the time of execution of this Agreement or the
earlier respective dates as of which information is given in the Final
Memorandum, there has been any material adverse change or any development
involving a prospective material adverse change in the business, properties,
management, financial condition or results of operations of the Company and the
Subsidiaries taken as a whole, which would, in the judgment of the
Representatives, make it impracticable or

                                       20
<PAGE>
inadvisable to proceed with the offering or the delivery of the Bonds on the
terms and in the manner contemplated in the Final Memorandum; (y) at any time
prior to the time of purchase or, with respect to the purchase of any Additional
Bonds, the additional time of purchase, as the case may be, there shall have
occurred: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or Nasdaq;
(ii) a suspension or material limitation in trading in the Company's securities
on Nasdaq; (iii) a general moratorium on commercial banking activities declared
by either federal or New York State authorities or a material disruption in
commercial banking or securities settlement or clearance services in the United
States; (iv) an outbreak or escalation of hostilities or acts of terrorism
involving the United States or a declaration by the United States of a national
emergency or war; or (v) any other calamity or crisis or any change in
financial, political or economic conditions in the United States or elsewhere,
if the effect of any such event specified in clause (iv) or (v) in the
Representatives' judgment or in the judgment of such group of Initial Purchasers
makes it impracticable or inadvisable to proceed with the offering or the
delivery of the Bonds on the terms and in the manner contemplated in the Final
Memorandum.

          If you elect to terminate this Agreement as provided in this Section
8, the Company shall be notified as provided for herein.

          If the sale to the Initial Purchasers of the Bonds, as contemplated by
this Agreement, is not carried out by the Initial Purchasers for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply and does not comply with any of the terms of
this Agreement, the Company shall not be under any obligation or liability under
this Agreement (except to the extent provided in Sections 5(k), 6 and 9 hereof),
and the Initial Purchasers shall be under no obligation or liability to the
Company under this Agreement (except to the extent provided in Section 9 hereof)
or to one another hereunder.

          9.   Indemnity by the Company and the Initial Purchasers:

               (a) The Company agrees to indemnify, defend and hold harmless
     each Initial Purchaser, its directors and officers, and any person who
     controls any Initial Purchaser within the meaning of Section 15 of the
     Securities Act or Section 20 of the Exchange Act (each, an "Initial
     Purchaser Indemnified Party"), and the successors and assigns of all the
     foregoing persons, from and against any loss, damage, expense, liability or
     claim (including the reasonable cost of investigation) which, jointly or
     severally, any such Initial Purchaser Indemnified Party or any such person
     may incur under the Securities Act, the Exchange Act, the common law or
     otherwise, insofar as such loss, damage, expense, liability or claim arises
     out of or is based upon any untrue statement or alleged untrue statement of
     a material fact contained in any Memorandum, as amended or supplemented, if
     applicable, or arises out of or is based upon any omission or alleged
     omission to state a material fact necessary to make the statements made
     therein, in the light of the circumstances under which they were made, not
     misleading, except insofar as any such loss, damage, expense, liability or
     claim arises out of or is based upon any untrue statement or omission or
     alleged untrue statement or omission of a material fact contained in or
     omitted from and in conformity with information furnished in writing by

                                       21
<PAGE>
     or on behalf of any Initial Purchaser to the Company expressly for use
     therein, which information the parties hereto agree is limited to the
     Initial Purchasers' Information (as defined in Section 11).

               (b) Each Initial Purchaser severally agrees to indemnify, defend
     and hold harmless the Company, its directors and officers and any person
     who controls the Company within the meaning of Section 15 of the Securities
     Act or Section 20 of the Exchange Act (each, a "Company Indemnified Party")
     from and against any loss, damage, expense, liability or claim (including
     the reasonable cost of investigation) which such Company Indemnified Party
     may incur under the Securities Act, the Exchange Act or otherwise, insofar
     as such loss, damage, expense, liability or claim arises out of or is based
     upon any untrue statement or alleged untrue statement of a material fact
     contained in information furnished in writing by or on behalf of such
     Initial Purchaser to the Company expressly for use in any Memorandum or
     arises out of or is based upon any omission or alleged omission to state a
     material fact necessary in order to make the statements therein, in the
     light of the circumstances under which they were made, not misleading, in
     connection with such information; provided that the parties hereto hereby
     agree that such written information provided by the Initial Purchasers
     consists solely of the Initial Purchasers' Information.

               (c) If any action, suit or proceeding (each, a "Proceeding") is
     brought against any person in respect of which indemnity may be sought
     pursuant to either subsection (a) or (b) of this Section 9, such person
     (the "Indemnified Party") shall promptly notify the person against whom
     such indemnity may be sought (the "Indemnifying Party") in writing of the
     institution of such Proceeding and such Indemnifying Party shall assume the
     defense of such Proceeding, including the employment of counsel reasonably
     satisfactory to such Indemnified Party and payment of all fees and
     expenses; provided, however, that the omission to so notify such
     Indemnifying Party shall not relieve such Indemnifying Party from any
     liability which it may have to such Indemnified Party or otherwise. Such
     Indemnified Party shall have the right to employ its own counsel in any
     such case, but the fees and expenses of such counsel shall be at the
     expense of such Indemnified Party unless (i) the employment of such counsel
     shall have been authorized in writing by such Indemnifying Party in
     connection with the defense of such Proceeding, (ii) such Indemnifying
     Party shall not have employed counsel to have charge of the defense of such
     Proceeding within 30 days of the receipt of notice thereof or (iii) such
     Indemnified Party shall have reasonably concluded upon written advice of
     counsel that there may be defenses available to it that are different from,
     additional to, or in conflict with those available to such Indemnifying
     Party (in which case such Indemnifying Party shall not have the right to
     direct that portion of the defense of such Proceeding on behalf of such
     Indemnified Party, but such Indemnifying Party may employ counsel and
     participate in the defense thereof but the fees and expenses of such
     counsel shall be at the expense of such Indemnifying Party), in any of
     which events such reasonable fees and expenses shall be borne by such
     Indemnifying Party and paid as incurred (it being understood, however, that
     such Indemnifying Party shall not be liable for the expenses of more than
     one separate counsel in any one Proceeding or series of related Proceedings
     together with reasonably necessary

                                       22
<PAGE>
     local counsel representing the Indemnified Parties who are parties to such
     Proceeding). An Indemnifying Party shall not be liable for any settlement
     of any such Proceeding effected without its written consent, but if settled
     with the written consent of such Indemnifying Party, such Indemnifying
     Party agrees to indemnify and hold harmless an Indemnified Party from and
     against any loss or liability by reason of such settlement. Notwithstanding
     the foregoing sentence, if at any time an Indemnified Party shall have
     requested an Indemnifying Party to reimburse such Indemnified Party for
     fees and expenses of counsel as contemplated by the second sentence of this
     paragraph, then such Indemnifying Party agrees that it shall be liable for
     any settlement of any Proceeding effected without its written consent if
     (i) such settlement is entered into more than 60 business days after
     receipt by such Indemnifying Party of the aforesaid request, (ii) such
     Indemnifying Party shall not have reimbursed such Indemnified Party in
     accordance with such request prior to the date of such settlement and (iii)
     such Indemnified Party shall have given such Indemnifying Party at least 30
     days' prior written notice of its intention to settle. An Indemnifying
     Party shall not, without the prior written consent of any Indemnified
     Party, effect any settlement of any pending or threatened Proceeding in
     respect of which such Indemnified Party is or could have been a party and
     indemnity could have been sought hereunder by such Indemnified Party,
     unless such settlement includes an unconditional release of such
     Indemnified Party from all liability on claims that are the subject matter
     of such Proceeding and does not include an admission of fault, culpability
     or a failure to act, by or on behalf of such Indemnified Party.

               (d) If the indemnification provided for in this Section 9 is
     unavailable to an Indemnified Party under subsections (a) and (b) of this
     Section 9 in respect of any losses, damages, expenses, liabilities or
     claims referred to therein, then each applicable Indemnifying Party, in
     lieu of indemnifying such Indemnified Party, shall contribute to the amount
     paid or payable by such Indemnified Party as a result of such losses,
     damages, expenses, liabilities or claims (i) in such proportion as is
     appropriate to reflect the relative benefits received by the Company on the
     one hand and the Initial Purchasers on the other hand from the offering of
     the Bonds or (ii) if the allocation provided by clause (i) above is not
     permitted by applicable law, in such proportion as is appropriate to
     reflect not only the relative benefits referred to in clause (i) above but
     also the relative fault of the Company on the one hand and of the Initial
     Purchasers on the other in connection with the statements or omissions
     which resulted in such losses, damages, expenses, liabilities or claims, as
     well as any other relevant equitable considerations. The relative benefits
     received by the Company on the one hand and the Initial Purchasers on the
     other shall be deemed to be in the same proportion as the total proceeds
     from the offering (net of Initial Purchasers' discounts and commissions but
     before deducting expenses) received by the Company bear to the discounts
     and commissions received by the Initial Purchasers. The relative fault of
     the Company on the one hand and of the Initial Purchasers on the other
     shall be determined by reference to, among other things, whether the untrue
     statement or alleged untrue statement of a material fact or omission or
     alleged omission relates to information supplied by the Company or by the
     Initial Purchasers and the parties' relative intent, knowledge, access to
     information and opportunity to correct or prevent such statement or
     omission. The amount paid or payable by a party as a result of the losses,
     damages, expenses, liabilities and claims

                                       23
<PAGE>
     referred to above shall be deemed to include any reasonable legal or other
     fees or expenses reasonably incurred by such party in connection with
     investigating or defending any Proceeding.

               (e) The Company and the Initial Purchasers agree that it would
     not be just and equitable if contribution pursuant to this Section 9 were
     determined by pro rata allocation or by any other method of allocation
     which does not take account of the equitable considerations referred to in
     subsection (d) above. Notwithstanding the provisions of this Section 9, no
     Initial Purchaser shall be required to contribute any amount in excess of
     the amount by which the total price at which the Bonds resold by it in the
     initial placement of such Bonds were offered to investors exceeds the
     amount of any damages which such Initial Purchaser has otherwise been
     required to pay by reason of such untrue or alleged untrue statement or
     omission or alleged omission. No person guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the Securities
     Act) shall be entitled to contribution from any person who was not guilty
     of such fraudulent misrepresentation. The Initial Purchasers' respective
     obligations to contribute pursuant to this Section 9 are several in
     proportion to the respective principal amount of Bonds they have purchased
     hereunder, and not joint. The remedies provided for in this Section 9 are
     not exclusive and shall not limit any rights or remedies which may
     otherwise be available to any indemnified party at law or in equity.

               (f) The indemnity and contribution agreements contained in this
     Section 9 and the covenants, warranties and representations of the Company
     and the Initial Purchasers contained in this Agreement shall remain in full
     force and effect (regardless of any investigation made by on behalf of any
     Initial Purchaser, its directors or officers or any person who controls
     such Initial Purchaser within the meaning of Section 15 of the Securities
     Act or Section 20 of the Exchange Act, or by or on behalf of the Company,
     its directors and officers or any person who controls the Company within
     the meaning of Section 15 of the Securities Act or Section 20 of the
     Exchange Act), and shall survive any termination of this Agreement or the
     issuance and delivery of the Bonds. The Company and the Initial Purchasers
     agree promptly to notify the other of the commencement of any litigation or
     proceeding against it and, in the case of the Company, against any of the
     Company's officers and directors, in connection with the issuance and sale
     of the Bonds, or in connection with any Memorandum.

          10. Effectiveness; Increase in Initial Purchasers' Commitments: This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.

          Subject to Sections 8 and 9, if, at the time of purchase, or the
additional time of purchase, as the case may be, any Initial Purchaser shall
default in its obligation to take up and pay for the Bonds to be purchased by it
at such time hereunder (otherwise than for a reason sufficient to justify the
termination of this Agreement under the provisions of Section 9 hereof) and if
the aggregate principal amount of Bonds which all Initial Purchasers so
defaulting shall have agreed but failed to take up and pay for at such time does
not exceed 10% of the total aggregate principal amount of Bonds to be purchased
at such time, the non-defaulting Initial Purchasers shall take up and pay for
(in addition to the aggregate number of Bonds they are

                                       24
<PAGE>
obligated to purchase at such time pursuant to Section 1 hereof) the aggregate
principal amount of Bonds agreed to be purchased by all such defaulting Initial
Purchasers at such time, as hereinafter provided. Such Bonds shall be taken up
and paid for by such non-defaulting Initial Purchaser or Initial Purchasers in
such amount or amounts as you may designate with the consent of each Initial
Purchaser so designated or, in the event no such designation is made, such Bonds
shall be taken up and paid for by all non-defaulting Initial Purchasers pro rata
in proportion to the aggregate principal amount of Firm Bonds set opposite the
names of such non-defaulting Initial Purchasers in Schedule A.

          Without relieving any defaulting Initial Purchaser from its
obligations hereunder, the Company agrees with the non-defaulting Initial
Purchasers that it will not sell any Firm Bonds hereunder unless all of the Firm
Bonds are purchased by the Initial Purchasers (or by substituted Initial
Purchasers selected by you with the approval of the Company or selected by the
Company with your approval).

          If a new Initial Purchaser or Initial Purchasers are substituted by
the Initial Purchasers or by the Company for a defaulting Initial Purchaser or
Initial Purchasers in accordance with the foregoing provision, the Company or
you shall have the right to postpone the time of purchase for a period not
exceeding five business days in order that any necessary changes in the Final
Memorandum and other documents may be effected.

          The term "Initial Purchaser" as used in this Agreement shall refer to
and include any Initial Purchaser substituted under this Section 10 with like
effect as if such substituted Initial Purchaser had originally been named in
Schedule A.

          If, at the time of purchase, the aggregate principal amount of Firm
Bonds which the defaulting Initial Purchaser or Initial Purchasers agreed to
purchase exceeds 10% of the total principal amount of Firm Bonds which all
Initial Purchasers agreed to purchase hereunder, and if neither the
non-defaulting Initial Purchasers nor the Company shall make arrangements within
the five business day period stated above for the purchase of all the Firm Bonds
which the defaulting Initial Purchaser or Initial Purchasers agreed to purchase
hereunder, this Agreement shall be terminated without further act or deed and
without any liability on the part of the Company to any non-defaulting Initial
Purchaser and without any liability on the part of any non-defaulting Initial
Purchaser to the Company. If, at the additional time of purchase, the aggregate
principal amount of Additional Bonds which the defaulting Initial Purchaser or
Initial Purchasers agreed to purchase exceeds 10% of the total principal amount
of Additional Bonds which all Initial Purchasers agreed to purchase hereunder,
the non-defaulting Initial Purchasers shall have the option to (a) terminate
their obligation hereunder to purchase the Additional Bonds or (b) purchase not
less than the principal amount of Additional Bonds that such non-defaulting
Initial Purchasers would have been obligated to purchase in the absence of such
default. Nothing in this paragraph, and no action taken hereunder, shall relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement.

          11. Information Furnished by the Initial Purchasers: The statements
set forth in the last paragraph on the cover page of and the third, fourth and
fifteenth paragraph under the

                                       25
<PAGE>
caption "Plan of Distribution" in the Final Memorandum (the "Initial Purchasers'
Information") constitute the only information furnished by or on behalf of the
Initial Purchasers.

          12. Notices: Except as otherwise herein provided, all statements,
requests, notices and agreements shall be in writing or by facsimile and:

     (a) if to the Initial Purchasers, shall be sufficient in all respects if
delivered or sent to:

          J.P. Morgan Securities Inc.
          277 Park Avenue
          New York, NY 10172
          Attention: Syndicate Desk
          Telecopy No.: 212-622-8358

     and

          UBS Securities LLC
          299 Park Avenue
          New York, New York 10171
          Attention: Syndicate Department
          Telecopy No.: 212-713-3460

          with a copy to (for informational purposes only):

          UBS Securities LLC
          299 Park Avenue
          New York, New York 10171
          Attention: Legal Department
          Telecopy No.: 212-821-4042

     and

          SG Cowen & Co., LLC
          1221 Avenue of the Americas
          New York, NY 10020
          Attention: Michelle Bowe, Esq
          Telecopy No.: 212-279-7995

     (b) if to the Company, shall be sufficient in all respects if delivered or
sent to the Company at the offices of the Company at Encysive Pharmaceuticals
Inc., 4848 Loop Central Drive, Suite 700, Houston, Texas 77081, Attention:
Attention: Bruce D. Given, M.D. facsimile no. (713) 796-8232.

          13. Governing Law and Construction: THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES

                                       26
<PAGE>
THAT WOULD REQUIRE THE APPLICATION OF ANY OTHER LAW. THE SECTION HEADINGS IN
THIS AGREEMENT HAVE BEEN INSERTED AS A MATTER OF CONVENIENCE OF REFERENCE AND
ARE NOT A PART OF THIS AGREEMENT.

          14. Parties at Interest: The Agreement herein set forth has been and
is made solely for the benefit of the Initial Purchasers and the Company and the
controlling persons, directors and officers referred to in Section 9 hereof, and
their respective successors, assigns, executors and administrators. No other
person, partnership, association or corporation (including a purchaser, as such
purchaser, from the Initial Purchasers) shall acquire or have any right under or
by virtue of this Agreement.

          15. Counterparts: This Agreement may be signed by the parties in
counterparts which together shall constitute one and the same agreement among
the parties. Delivery of an executed counterpart by facsimile shall be effective
as delivery of a manually executed counterpart thereof.

          16. Submission to Jurisdiction: Except as set forth below, no
Proceeding may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New York or in
the United States District Court for the Southern District of New York, which
courts shall have jurisdiction over the adjudication of such matters, and the
Company hereby consents to the jurisdiction of such courts and personal service
with respect thereto. The Company hereby consents to personal jurisdiction,
service and venue in any court in which any Proceeding arising out of or in any
way relating to this Agreement is brought by any third party against the Initial
Purchasers. The Company hereby waives all right to trial by jury in any
Proceeding (whether based upon contract, tort or otherwise) in any way arising
out of or relating to this Agreement. The Company agrees that a final judgment
in any such Proceeding brought in any such court shall be conclusive and binding
upon the Company and may be enforced in any other courts in the jurisdiction of
which the Company is or may be subject, by suit upon such judgment.

                                       27
<PAGE>
          If the foregoing correctly sets forth the understanding between the
Company and the Initial Purchasers, please so indicate in the space provided
below for the purpose, whereupon this letter and your acceptance shall
constitute a binding agreement between the Company and the Initial Purchasers.

                                        Very truly yours,

                                        ENCYSIVE PHARMACEUTICALS INC.

                                        By:    /s/ Bruce D. Given
                                            ------------------------------------
                                            Name:  Bruce D. Given
                                            Title: President and CEO

Accepted and agreed to as of the date
first above written:

J.P. MORGAN SECURITIES INC.

By:    /s/ Paul O'Hearn
    ---------------------------------
    Name:  Paul O'Hearn
    Title: Vice President

UBS SECURITIES LLC

By:    /s/ Sage Kelly
    ---------------------------------
    Name:  Sage Kelly
    Title: Managing Director

SG COWEN & CO., LLC

By:    /s/ John Mosler
    ---------------------------------
    Name:  John Mosler
    Title: Managing Director
<PAGE>
                                   SCHEDULE A

<TABLE>
<CAPTION>
                             Principal Amount
Initial Purchasers             of Firm Bonds
------------------           ----------------
<S>                          <C>
J.P. MORGAN SECURITIES INC     $ 50,600,000
UBS SECURITIES LLC             $ 50,600,000
SG COWEN & CO., LLC            $ 13,800,000
   Total                       $115,000,000
                               ============
</TABLE>

                                     Sch A-1
<PAGE>
                                   EXHIBIT A-1
              OPINION OF PORTER & HEDGES, L.L.P AND BRYAN CAVE LLP

1.   The Company has been duly incorporated and is validly existing as a
     corporation under the laws of the State of Delaware with requisite
     corporate power and authority to own lease and operate its properties and
     conduct its business as described in the Final Memorandum except where the
     failure to have such power and authority would not, individually or in the
     aggregate, have a material adverse effect.

2.   Each of the Company's domestic Subsidiaries has been duly organized and is
     validly existing as a corporation or other legal entity in good standing
     under the laws of its respective jurisdiction of organization with
     requisite power and authority to own, lease and operate its respective
     properties and to conduct its respective business; all of the issued shares
     of capital stock (or analogous ownership interests, as applicable) of each
     domestic Subsidiary of the Company have been duly and validly authorized
     and issued, are fully paid and non-assessable and except as set forth in
     the Final Memorandum are owned directly or indirectly by the Company, free
     and clear of all liens, encumbrances, equities or claims.

3.   The Company and each of the domestic Subsidiaries are duly qualified or
     licensed to do business as foreign corporations and are in good standing in
     each jurisdiction identified to us by the Company as those where the
     ownership or leasing of their properties or the conduct of their respective
     businesses requires such qualification or license, except where the
     failure, individually or in the aggregate, to be so qualified or licensed
     or be in good standing would not have a Material Adverse Effect.

4.   The Company has an authorized and outstanding capital stock as set forth in
     the Final Memorandum; the outstanding shares of capital stock of the
     Company have been duly authorized and validly issued and are fully paid and
     non-assessable, have been issued in compliance with all federal securities
     laws and were not issued in violation of any statutory preemptive rights
     or, to such counsel's knowledge, contractual preemptive rights, resale
     rights, rights of first refusal or similar rights.

5.   Each document, if any, filed pursuant to the Exchange Act and incorporated
     by reference in the Final Memorandum (except for the financial statements
     and schedules and other financial and statistical data as to which such
     counsel need not express any opinion) complied when so filed in all
     material respects with the Exchange Act and the applicable rules and
     regulations of the Commission thereunder.

6.   The execution, delivery and performance of the Purchase Agreement, the
     Registration Rights Agreement, the Indenture and the Bonds and consummation
     of the transactions contemplated hereby and thereby including the issuance
     of the Bonds and the issuance of the Shares upon conversion of the Bonds,
     will not conflict with, result in any breach or violation of or constitute
     a default under (nor constitute any event which with notice, lapse of time
     or both would result in any breach or violation of or constitute a default
     under), (i) the charter or by-laws (or analogous governing instruments, as
     applicable) of

                                       A-1
<PAGE>
     the Company or any of the domestic Subsidiaries or (ii) any indenture,
     mortgage, deed of trust, bank loan or credit agreement or other evidence of
     indebtedness, or any license, lease, contract or other agreement or
     instrument known to such counsel after reasonable investigation to which
     the Company or any of the domestic Subsidiaries is a party or by which any
     of them or their respective properties may be bound or affected, or (iii)
     any federal, state, local or foreign law, regulation or rule or any decree,
     judgment or order applicable to the Company or any of the domestic
     Subsidiaries.

7.   Neither the Company nor any of the domestic Subsidiaries is in breach or
     violation of, or in default under (nor has any event occurred which with
     notice, lapse of time, or both would result in any breach or violation of,
     constitute a default under or give the holder of any indebtedness (or
     person acting on such holder's behalf), the right to require the
     repurchase, redemption or repayment of all or part of such indebtedness
     under) (i) its respective charter or by-laws (or analogous governing
     instruments, as applicable) (ii) any indenture, mortgage, deed of trust,
     bank loan or credit agreement or other evidence of indebtedness, or any
     license, lease, contract or other agreement or instrument to which the
     Company or any of the domestic Subsidiaries is a party or by which any of
     them or their respective properties may be bound or affected of which such
     counsel has knowledge, or (iii) under any federal, state, local or foreign
     law, regulation or rule or any decree, judgment or order applicable to the
     Company or any of the domestic Subsidiaries except, in the case of clauses
     (ii) and (iii), for those breaches, violations or defaults that would not
     have a Material Adverse Effect.

8.   Except as described in the Final Memorandum, there are no actions, suits
     claims, investigations or proceedings pending or, to the best of such
     counsel's knowledge, threatened or contemplated to which the Company or any
     of the domestic Subsidiaries is or would be a party or of which any of
     their respective properties is or would subject at law or in equity, or
     before or by any federal, state, local or foreign governmental or
     regulatory commission, board, body, authority or agency, which could result
     in a judgment, decree or order having, individually or in the aggregate, a
     Material Adverse Effect or prevent consummation of the contemplated
     transactions.

9.   The Company and its domestic Subsidiaries possess all licenses,
     certificates, authorizations and permits issued by the appropriate federal,
     state or foreign regulatory authorities necessary to conduct their
     businesses, except for such licenses, certificates, authorizations or
     permits the failure of which to maintain would not have a Material Adverse
     Effect. Neither the Company nor any of its domestic Subsidiaries has
     received any notice of proceedings relating to the revocation or
     modification of any such certificate, authorization or permit which, singly
     or in the aggregate, if the subject of an unfavorable decision, ruling or
     finding, would have a Material Adverse Effect. To the best of such
     counsel's knowledge, the Company and its domestic Subsidiaries are in
     compliance with all applicable federal, state, local and foreign laws,
     regulations, orders and decrees governing their business, except where
     noncompliance would not, singly or in the aggregate, have a Material
     Adverse Effect.

                                       A-2
<PAGE>
10.  The Purchase Agreement has been duly authorized, executed and delivered by
     the Company and constitutes a legal, valid and binding agreement of the
     Company, enforceable in accordance with its terms except (a) as the
     enforceability thereof may be limited by bankruptcy, insolvency,
     reorganization, moratorium, or similar laws affecting creditors' rights
     generally and general principles of equity and (b) the rights to indemnity
     and contribution may be limited by applicable law.

11.  The Registration Rights Agreement has been duly authorized, executed and
     delivered by the Company and constitutes a legal, valid and binding
     agreement of the Company, enforceable in accordance with its terms except
     (a) as the enforceability thereof may be limited by bankruptcy, insolvency,
     reorganization, moratorium, fraudulent transfer or similar laws affecting
     creditors' rights generally and general principles of equity and (b) the
     rights to indemnity and contribution may be limited by applicable law.

12.  The Indenture has been duly authorized, executed and delivered by the
     Company and constitutes a legal, valid and binding agreement of the
     Company, enforceable in accordance with its terms except (a) as the
     enforceability thereof may be limited by bankruptcy, insolvency,
     reorganization, moratorium, fraudulent transfer or similar laws affecting
     creditors' rights generally and general principles of equity and (b) the
     rights to indemnity and contribution may be limited by applicable law. The
     Indenture conforms in all material respects with the requirements of the
     1939 Act and the rules and regulations of the Commission applicable to an
     indenture which is qualified thereunder.

13.  The Bonds have been duly authorized, executed and delivered by the Company
     and when duly authenticated in accordance with the terms of the Indenture
     and delivered to and paid for by the Initial Purchaser in accordance with
     the terms of the Purchase Agreement will constitute legal, valid and
     binding obligations of the Company, enforceable in accordance with their
     terms, except as the enforceability thereof may be limited by bankruptcy,
     insolvency, reorganization, moratorium, fraudulent transfer or similar laws
     affecting creditors' rights generally and general principles of equity, and
     will be entitled to the benefits of the Indenture and the Registration
     Rights Agreement.

14.  The Shares initially issuable upon conversion of the Bonds have been duly
     authorized and reserved for issuance upon conversion of the Bonds, and upon
     conversion of the Bonds in accordance with their terms and the terms of the
     Indenture will be issued free of statutory and contractual preemptive
     rights and are initially sufficient in number to meet the conversion
     requirements of the Bonds, and such Shares, when so issued upon conversion
     of the Bonds in accordance with the terms of the Indenture, will be duly
     and validly issued and fully paid and non-assessable.

15.  No approval, authorization, consent or order of or filing with any
     national, state or local governmental or regulatory commission, board,
     body, authority or agency, or Nasdaq, or approval of stockholders of the
     Company, is required in connection with the issuance and sale by the
     Company of the Bonds or the issuance of Shares upon conversion of the Bonds
     or the consummation of the transactions as contemplated in the Purchase
     Agreement other than (i) as may be required under the securities or blue
     sky laws of the

                                       A-3
<PAGE>
     various jurisdictions in which the Bonds and the Shares are being offered
     by the Initial Purchasers, (ii) as may be required by Federal or state
     securities laws with respect to the Company's obligations under the
     Registration Rights Agreement and the listing of the Shares on Nasdaq in
     connection therewith, (iii) those required in connection with the
     qualification of the Indenture under the 1939 Act, (iv) those required in
     connection with arranging for the Bonds to be designated eligible for
     trading in PORTAL or for the Bonds to be eligible for clearance and
     settlement through the Depository Trust Company and (v) such as have
     already been obtained.

16.  Assuming the accuracy of the representations and warranties of the Initial
     Purchasers, it is not necessary in connection with (i) the offer, sale and
     delivery of the Bonds to the Initial Purchasers pursuant to the Purchase
     Agreement or (ii) the initial resales of the Bonds by the Initial
     Purchasers in the manner contemplated in the Final Memorandum to register
     the Bonds under the Securities Act or to qualify the Indenture in respect
     thereof under the Trust Indenture Act of 1939, as amended, it being
     understood that no opinion is expressed as to any subsequent resale of any
     Bond or Share.

17.  Neither the Company nor any of the domestic Subsidiaries is, nor after
     giving effect to the offering and sale of the Bonds and the application of
     the proceeds thereof as described in the Final Memorandum will any of them
     be, required to register as an "investment company" as defined in the
     Investment Company Act of 1940, as amended.

18.  The terms of the Bonds, the Registration Rights Agreement, the Indenture
     and the capital stock of the Company, including the Shares, conform as to
     legal matters in all material respects to the descriptions thereof
     contained in the Final Memorandum.

19.  The statements in the Final Memorandum under the captions "Description of
     Notes," "Description of Capital Stock," and "Notice to Investors" and in
     "Item 3--Legal Proceedings" of the Company's most recent annual report on
     Form 10-K, incorporated by reference in the Final Memorandum, in so far as
     such statements constitute summaries of legal matters, documents or
     proceedings referred to therein, fairly summarize the matters referred to
     therein.

20.  The statements in the Final Memorandum under the caption "Certain United
     States Federal Income Tax Considerations" in so far as such statements
     constitute a summary of the United States federal tax laws referred to
     therein, are accurate and fairly summarize in all material respects the
     United States federal tax laws referred to therein.

21.  Based upon such counsel's participation in conferences with officers and
     other representatives of the Company, counsel for the Company,
     representatives of the independent public accountants of the Company and
     representatives of the Initial Purchasers at which the contents of the
     Final Memorandum and related matters were discussed, although such counsel
     is not passing upon and does not assume any responsibility for the
     accuracy, completeness or fairness of the statements contained in the Final
     Memorandum (except to the extent stated in paragraphs 4, 18 and 19) no
     facts have come to such counsel's attention which lead such counsel to
     believe that the Final

                                       A-4
<PAGE>
     Memorandum as of its date or as of the date hereof (except for the
     financial statements and schedules and other financial data as to which we
     do not express any belief) contained or contains an untrue statement of a
     material fact or omitted or omits to state a material fact necessary in
     order to make the statements therein, in the light of the circumstances
     under which they were made, not misleading.

                                       A-5
<PAGE>
                                   EXHIBIT A-2
                OPINION OF WOOD, PHILLIPS, KATZ, CLARK & MORTIMER

1.   To the best of such counsel's knowledge, the Company and its domestic
     Subsidiaries are in compliance with all applicable federal, state, local
     and foreign laws, regulations, orders and decrees governing their business
     and relating to Intellectual Property, except where noncompliance would
     not, singly or in the aggregate, have a Material Adverse Effect.

2.   To the best of such counsel's knowledge, each of the Company and the
     domestic Subsidiaries own, or have obtained valid and enforceable licenses
     for, or other rights to use, the inventions, patent applications, patents,
     trademarks (both registered and unregistered), tradenames, copyrights,
     trade secrets and other proprietary information described or incorporated
     by reference in the Final Memorandum as being owned or licensed to them or
     that are necessary for the conduct of their respective businesses
     (collectively, "Intellectual Property"). To the best of such counsel's
     knowledge and other than as described in the Memorandum (i) there are no
     third parties who have or, will be able to establish, rights to any
     Intellectual Property, except for the ownership rights of the owners of the
     Intellectual Property which is licensed to the Company; (ii) there is no
     infringement by third parties of any Intellectual Property; (iii) there is
     no pending or threatened action, suit, proceeding or claim by a third party
     challenging the Company's rights in or to any Intellectual Property, and
     such counsel is unaware of any facts which could form a reasonable basis
     for any such claim; (iv) there is no pending or threatened action, suit,
     proceeding or claim by others (except for ordinary course proceedings
     between the Company and the United States Patent and Trademark Office or
     any foreign equivalent thereof) challenging the validity or scope of any
     Intellectual Property, and such counsel is unaware of any facts which could
     form a reasonable basis for any such claim; (v) there is no pending or
     threatened action, suit, proceeding or claim by others that the Company
     infringes or otherwise violates any patent, trademark, copyright, trade
     secret or other proprietary rights of others, and such counsel is unaware
     of any facts which could form a reasonable basis for any such claim; (vi)
     there is no patent or patent application that contains claims that
     interfere with the issued or pending claims of any of the Intellectual
     Property; and (vii) there is no prior art that may render any patent
     application owned by the Company of the Intellectual Property unpatentable
     that has not been disclosed to the U.S. Patent and Trademark Office.

3.   The description in the Offering Memorandum of statutes, legal or
     governmental proceedings and other documents relating to Intellectual
     Property are accurate in all material respects.

4.   The statements in the Offering Memorandum under the heading "Risk Factors -
     Risks Relating to Intellectual Property," to the extent that they
     constitute summaries of matters of law or regulation or legal conclusions,
     have been reviewed by such counsel and fairly summarize the matters
     described therein in all material respects. The statements set forth in the
     Company's Annual Report on Form 10-K for the year ended December 31, 2004,
     set forth under "Part I - Item 1 - Business - Licenses and Patents," to the
     extent that they constitute summaries of matters of law or regulation or
     legal conclusions, have been

                                       A-1
<PAGE>
     reviewed by us and fairly summarize the matters described therein in all
     material respects.

                                       A-2
<PAGE>
                                   EXHIBIT A-3
                       OPINION OF FISH AND RICHARDSON P.C.

To the best of such counsel's knowledge, each of the Company and the domestic
Subsidiaries own, or have obtained valid and enforceable licenses for the
inventions, patent applications, patents, trademarks (both registered and
unregistered), tradenames, copyrights, trade secrets and other proprietary
information described or incorporated by reference in the Final Memorandum as
being owned or licensed to them or that are necessary for the conduct of their
respective businesses (collectively, "Intellectual Property"). Such counsel has
no knowledge that the Company lacks or will be unable to obtain any rights or
licenses to use the Intellectual Property necessary to conduct the Company's
business as now conducted or proposed to be conducted by the Company as
disclosed in the Final Memorandum. To the best of such counsel's knowledge and
other than as described in the Final Memorandum (i) there are no third parties
who have or, will be able to establish, ownership rights to any of the
Intellectual Property owned by the Company; (ii) there is no infringement by
third parties of any Intellectual Property; (iii) there is no pending or
threatened action, suit, proceeding or claim by a third party challenging the
Company's rights in or to any Intellectual Property, and such counsel is unaware
of any facts which could form a reasonable basis for any such claim; (iv) there
is no pending or threatened action, suit, proceeding or claim by others (except
for ordinary course proceedings between the Company and the United States Patent
and Trademark Office or any foreign equivalent thereof) challenging the validity
or scope of any Intellectual Property, and such counsel is unaware of any facts
which could form a reasonable basis for any such claim; (v) there is no pending
or threatened action, suit, proceeding or claim by others that the Company
infringes or otherwise violates any patent, trademark, copyright, trade secret
or other proprietary rights of others, and such counsel is unaware of any facts
which could form a reasonable basis for any such claim; (vi) there is no patent
or patent application that contains claims that interfere with the issued or
pending claims of any of the Intellectual Property; and (vii) there is no prior
art that may render any patent application owned by the Company of the
Intellectual Property unpatentable that has not been disclosed to the U.S.
Patent and Trademark Office.

                                       A-3
<PAGE>
                                    EXHIBIT B
                            FORM OF LOCK-UP AGREEMENT

                                                                 March [ ], 2005

J.P. MORGAN SECURITIES INC.
277 Park Avenue
New York, NY 10172

UBS SECURITIES LLC
299 Park Avenue
New York, New York 10171

SG COWEN & CO., LLC
1221 Avenue of the Americas
New York, NY 10020

Ladies and Gentlemen:

          This letter is being delivered to you in connection with the
consummation of the transactions contemplated by the Purchase Agreement (the
"Purchase Agreement") dated as of March [ ], 2005 between Encysive
Pharmaceuticals Inc., a Delaware corporation (the "Company"), and you as the
Initial Purchasers named therein, relating to an offering without registration
under the Securities Act of 1933, as amended (the "Act"), in reliance on Rule
144A under the Act, of Convertible Senior Notes due 2012 (the "Bonds"), of the
Company.

          I agree that I will not, for a period from the date hereof until the
end of a period (the "Restricted Period") of 90 days after the date of the Final
Memorandum (as defined in the Purchase Agreement), without the prior written
consent of J.P. Morgan Securities Inc. and UBS Securities LLC, as
representatives for the Initial Purchasers, directly or indirectly, offer, sell,
contract to sell, hypothecate, pledge, sell or grant any option, right or
warrant to purchase, or otherwise dispose of, or contract to dispose of, any
shares of the Company's common stock, par value $.005 per share (the "Common
Stock"), any securities substantially similar to the Bonds or the Common Stock
or any securities that are convertible into or exchangeable for the Bonds or
Common Stock or enter into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of the ownership of the Common
Stock or Bonds irrespective of whether any transaction mentioned above is to be
settled by delivery of the Common Stock, the Bonds or other securities, in cash
or otherwise[; provided, however, that notwithstanding the foregoing, the
undersigned may sell up to [ ] shares of Common Stock within the Restricted
Period (and any extension thereof pursuant to the succeeding paragraph) without
the prior written consent of UBS Securities LLC and J.P. Morgan Securities Inc.
upon prior notice to UBS Securities LLC and J.P. Morgan Securities Inc] [;
provided, however, that notwithstanding the foregoing, the undersigned, during
the Restricted Period (and any extension thereof pursuant to the succeeding
paragraph) may sell up to an aggregate [ ] shares of Common Stock pursuant to a
written trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934
entered into by the undersigned on [November 29, 2004] [January 24, 2005]]. The
foregoing sentence shall not

                                       B-1
<PAGE>
apply to (A) gifts or transfers of shares of Common Stock made by the
undersigned to, or for the benefit of, family members, charitable institutions,
and trusts, limited partnerships or other entities created for estate planning
purposes, the principal beneficiaries of which are family members or charitable
institutions, subject to the condition that any such family member or charitable
institution or other holder shall execute an agreement with the Initial
Purchasers stating that such transferee is receiving and holding the Common
Stock subject to the provisions of this agreement or (B) transfers of Common
Stock by will or intestacy.

          If:

          (1) during the last 18 days of the Restricted Period, the Company
issues an earnings release; or

          (2) prior to the expiration of the Restricted Period, the Company
announces that it will release earnings results during the 16-day period
beginning on the last day of the Restricted Period, the restrictions set forth
herein shall continue to apply until the expiration of the 19-day period
beginning on the issuance of the earnings release.

          If for any reason the Purchase Agreement shall be terminated prior to
the time of purchase (as defined in the Purchase Agreement), the agreement set
forth above shall likewise be terminated.

                                        Very truly yours,

                                        ----------------------------------------
                                        Name:
                                        Title:
<PAGE>
                                   EXHIBIT B-1
                  LIST OF PARTIES TO EXECUTE LOCK-UP AGREEMENTS

<TABLE>
<CAPTION>
NAME                       POSITION(S)
----                       -----------
<S>                        <C>
1.  Ron Anderson           Director

2.  Tommy A. Brock         Vice President, Biological Sciences

3.  J. Kevin Buchi         Director

4.  Frank C. Carlucci      Director

5.  Terrance C. Coyne      Vice President, Clinical Development and Chief
                           Medical Officer

6.  Robert J. Cruikshank   Director

7.  John H. Dillon, II     Director

8.  Richard A. F. Dixon    Senior Vice President, Research and Chief Scientific
                           Officer

9.  Heather Giles          Vice President, Strategic Planning

10. Bruce D. Given         President and Chief Executive Officer

11. Jeffrey Keyser         Vice President, Regulatory Affairs

12. Pamela Mabry           Director, Human Resources

13. Derek Maetzold         Vice President, Marketing and Sales

14. Stephen L. Mueller     Vice President, Finance and Administration

15. Suzanne Oparil         Director

16. John M. Pietruski      Director

17. Ann Tanabe             Director, Investor Relations and Corporate
                           Communications

18. James A. Thomson       Director

19. Patrick Ward           Executive Director, Business Development

20. James T. Willerson     Director
</TABLE>

                                      B-1-1
<PAGE>
                                    EXHIBIT C
                              OFFICERS' CERTIFICATE

1.   I have reviewed the Memorandum.

2.   The representations and warranties of the Company as set forth in the
     Purchase Agreement are true and correct as of the time of purchase [and, if
     applicable, the additional time of purchase].

3.   The Company has performed all of its obligations under the Purchase
     Agreement as are to be performed at or before the time of purchase [and at
     or before the additional time of purchase, as the case may be].

4.   The conditions set forth in paragraphs (e) and (f) of Section 7 of the
     Purchase Agreement have been met.

                                       C-1exv10w1

 

Exhibit 10.1

SENIOR EXECUTIVE

EMPLOYMENT AGREEMENT

     THIS SENIOR EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is to be effective as of
April 11, 2005 by and between DECKERS OUTDOOR CORPORATION, a Delaware corporation (the
“Company”), and ANGEL R. MARTINEZ (the “Executive”).

ARTICLE I

DUTIES AND TERM

          1.1 EMPLOYMENT. In consideration of their mutual covenants, Executive’s continued
employment with the Company and other good and valuable consideration, the receipt, adequacy, and
sufficiency of which is hereby acknowledged, the Company agrees to enter into this Agreement with
the Executive, and the Executive agrees to enter into this Agreement and to be employed by the
Company upon the terms and conditions herein provided and in accordance with all applicable
employment rules of the Company. This Agreement was prepared after a review of information
provided by the Company’s compensation consultant, Frederick W. Cook & Company, Inc.

          1.2 POSITION AND RESPONSIBILITIES. The Executive will serve as Chief Executive
Officer and President and will report to the Board of Directors.

          1.3 TERM. The term of the Executive’s employment under this Agreement will commence
on the effective date of this Agreement as first written above and will continue, unless sooner
terminated, until December 31, 2008. Employment of the Executive is at will and will continue
until such time as written notice of termination is given by the Company or written notice is given
by the Executive.

          1.4 AT-WILL EMPLOYMENT. Executive will continue to be employed as an at-will employee
of the Company. Subject to the provisions of Articles III and IV, as an at-will
employee, Executive is free to terminate his employment with the Company at any time, for any
reason, and the Company has the similar right to terminate Executive’s employment at any time, for
any reason. Although the Company may choose to terminate Executive’s employment for cause,
Executive’s employment is at-will and cause is not required.

          1.5 REVIEW OF AGREEMENT. It is the parties intention that the terms of this Agreement
will be reviewed prior to December 31, 2008 to determine whether any modifications are appropriate.
This review of the Agreement terms may occur at an earlier or later date, is not mandatory and
does not impose any binding obligations on either party.

 

 

ARTICLE II

COMPENSATION

     For all services rendered by the Executive in any capacity during the Executive’s employment
under this Agreement, the Company will compensate the Executive as follows:

          2.1 BASE SALARY. Effective as of April 11, 2005, the Company will pay to the
Executive an annual base salary of THREE HUNDRED AND FORTY-FIVE THOUSAND DOLLARS ($345,000), to be
paid in equal installments in accordance with the Company’s general payment policies in effect
during the term hereof (the “Base Salary”). Effective as of January 1, 2006, the Company
will pay to the Executive an annual Base Salary of FOUR HUNDRED THOUSAND DOLLARS ($400,000). The
Executive’s annual base salary may be reviewed prior to December 31, 2008 and appropriate
adjustments to salary implemented. If Executive’s annual base salary is not revised effective
January 1, 2009, his existing salary will continue on a monthly basis until changed. This
provision does not alter the at-will nature of Executive’s employment or the provisions of
Articles III and IV below.

          2.2 INCENTIVE BONUS. The Executive shall be eligible to receive a targeted annual
bonus based on performance criteria established annually by the Compensation Committee (the
“Incentive Bonus”). The Incentive Bonus criteria for the year ending December 31, 2005 is
set forth on Exhibit A.

          2.3 STOCK OPTIONS AND RESTRICTED STOCK UNITS (RSU’S). Executive may be granted
options to purchase shares of Company Common Stock or RSU’s pursuant to the Company’s 1993 Employee
Stock Incentive Plan. Any stock option or RSU must be approved by the Compensation Committee. The
Common Stock subject to the RSU’s are currently registered with the Securities and Exchange
Commission on Form S-8.

          2.4 SIGNING INCENTIVE. The Executive will be granted FIFTY THOUSAND (50,000) RSU’s as
an employment incentive that will not be subject to performance measures and will vest quarterly
between the third and fourth anniversaries of employment, or upon termination by the Company of the
Executive, without cause or by the Executive for Good Reason, as hereinafter defined, whichever
comes first.

          2.5 ADDITIONAL BENEFITS. The Executive will be entitled to participate in all benefit
and welfare programs, plans, and arrangements that are from time to time made available to the
Company’s like-level executive employees.

          2.6 DIRECTORS AND OFFICERS INSURANCE; INDEMNIFICATION AGREEMENT. The Executive will
be insured under the Company’s Directors and Officers insurance and will be provided the Company’s
standard Indemnification Agreement

ARTICLE III

TERMINATION OF EMPLOYMENT

          3.1 GENERAL. While Executive is an at-will employee as provided at Section
1.3 above, the following conditions for termination of employment are set forth in order to
determine the nature of Executive compensation entitlement upon termination of employment

-2-

 

as discussed in Article IV below. Neither the provisions of Article III or
Article IV of this Agreement shall alter the at-will nature of Executive’s employment with
the Company.

          3.2 DEATH OR RETIREMENT OF EXECUTIVE. The Executive’s employment under this Agreement
will automatically terminate upon the death or Retirement (as defined in Section 6.1) of
the Executive.

          3.3 BY EXECUTIVE. The Executive may terminate the Executive’s employment under this
Agreement by giving Notice of Termination (as defined in Section 6.1 hereof) to the
Company:

          (a) for Good Reason (as defined in Section 6.1 hereof); and

          (b) at any time without Good Reason.

          3.4 BY COMPANY. The Company may terminate the Executive’s employment under this
Agreement by giving Notice of Termination to the Executive:

          (a) in the event of Executive’s Total Disability (as defined in Section 6.1 hereof);

          (b) for Cause (as defined in Section 6.1 hereof); and

          (c) at any time without Cause.

ARTICLE IV

COMPENSATION UPON TERMINATION OF EMPLOYMENT

     If the Executive’s employment hereunder is terminated, in accordance with the provisions of
Article III hereof, and except for any other rights or benefits specifically provided for
herein to be effective following the Executive’s period of employment, the Company will provide
compensation and benefits to the Executive only as follows:

          4.1 UPON TERMINATION FOR DEATH OR DISABILITY. If the Executive’s employment hereunder
is terminated by reason of the Executive’s death or Total Disability, the Company will:

          (a) pay the Executive (or the Executive’s estate) or beneficiaries any Base Salary that
has accrued but was not paid as of the termination date (the “Accrued Base Salary”);

          (b) pay the Executive (or the Executive’s estate) or beneficiaries for unused vacation
days accrued as of the termination date in an amount equal to the Executive’s Base Salary
multiplied by a fraction the numerator of which is the number of accrued unused vacation
days and the denominator of which is 260 (the “Accrued Vacation Payment”);

-3-

 

          (c) reimburse the Executive (or the Executive’s estate) or beneficiaries for expenses
incurred by him prior to the date of termination that are subject to reimbursement pursuant
to this Agreement (the “Accrued Reimbursable Expenses”);

          (d) provide to the Executive (or the Executive’s estate) or beneficiaries any accrued
and vested benefits required to be provided by the terms of any Company-sponsored benefit
plans or programs (the “Accrued Benefits”), together with any benefits required to
be paid or provided in the event of the Executive’s death or Total Disability under
applicable law;

          (e) pay the Executive (or the Executive’s estate) or beneficiaries any Incentive Bonus
with respect to a prior fiscal year that has accrued but has not been paid (the “Accrued
Incentive Bonus”);

          (f) the Executive (or the Executive’s estate) or beneficiaries shall have the right to
exercise all vested unexercised stock options and RSU’s outstanding at the termination date
in accordance with terms of the plans and agreements pursuant to which such options or RSU’s
were issued; and

          (g) the Executive’s FIFTY THOUSAND (50,000) RSU’s for a signing incentive will
immediately vest.

          4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If the
Executive’s employment is terminated by the Company for Cause, or if the Executive terminates the
Executive’s employment with the Company other than (x) upon the Executive’s death or Total
Disability or (y) for Good Reason, the Company will:

          (a) pay the Executive the Accrued Base Salary;

          (b) pay the Executive the Accrued Vacation Payment;

          (c) pay the Executive the Accrued Reimbursable Expenses;

          (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;

          (e) pay the Executive any Accrued Incentive Bonus; and

          (f) the Executive will have the right to exercise vested options and RSU’s in
accordance with Section 4.1(f) hereof.

          4.3 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. If
the Executive’s employment is terminated by the Company without Cause or by the Executive for Good
Reason, the Company will:

          (a) pay the Executive the Accrued Base Salary;

-4-

 

          (b) pay the Executive the Accrued Vacation Payment;

          (c) pay the Executive the Accrued Reimbursable Expenses;

          (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;

          (e) pay the Executive any Accrued Incentive Bonus;

          (f) pay the Executive severance, commencing on the thirtieth (30th) day
following the termination date, of twelve (12) monthly payments equal to one-twelfth
(1/12th) of the Executive’s Annual Base Salary in effect immediately prior to the
time such termination occurs. Severance will be mitigated on a dollar for dollar basis for
any income received by Executive for duties performed for Company or for any like or
comparable employment in terms of pay or position by any third party during the twelve (12)
months following termination. The severance payment required under this subsection shall be
conditioned upon the Executive confirming the release in Section 5.2 hereof; and

          (g) pay the cost of COBRA continuation coverage for the Executive, and maintain in full
force and effect any benefit and welfare programs, plans, and arrangements in which the
Executive participated immediately prior to such termination in accordance with Section
2.5 hereof, which are not otherwise covered under COBRA, for the Executive and the
Executive’s eligible beneficiaries, until the first to occur of (x) the Executive’s
attainment of alternative employment if such employment includes similar benefits or (y) the
twelve (12) month anniversary of termination of employment, subject to the terms and
conditions of participation as provided under the general terms and provisions of such
plans, programs and arrangements, or in the alternate, the Company will arrange to provide
the Executive with continued benefits substantially similar to those which the Executive
would have been titled to receive under such plans, programs and arrangements. This is not
intended to mitigate the Executive’s COBRA benefits.

          (h) the Executive shall have the right to exercise vested options and RSU’s in
accordance with Section 4.1(f); and

          (i) the Executive’s FIFTY THOUSAND (50,000) RSU’s for a signing incentive will
immediately vest.

          4.4 UPON CHANGE OF CONTROL AND TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE
FOR GOOD REASON. If the Executive’s employment is terminated within two (2) years of a Change
of Control by the Company without Cause or by the Executive for Good Reason, the Company will:

          (a) pay the Executive the Accrued Base Salary;

          (b) pay the Executive the Accrued Vacation Payment;

-5-

 

          (c) pay the Executive the Accrued Reimbursable Expenses;

          (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;

          (e) pay the Executive any Accrued Incentive Bonus; plus the pro-rata Incentive Bonus
based on actual performance for the year of termination.

          (f) pay the Executive severance of two (2) times Executive’s Annual Base Salary in
effect immediately prior to the time such termination occurs plus the greater of (x) two (2)
times the targeted Incentive Bonus immediately prior to the time such termination occurs or
(y) two (2) times the average actual Incentive Bonus for the previous three (3) years,
whichever is greater. The severance payment required under this subsection shall be
conditioned upon the Executive confirming the release in Section 5.2 hereof. In the
event that the Company shall default in any payments of the severance, and such default
shall not be cured within five (5) days’ written notice of said default by the Executive,
then all unpaid severance will be immediately due and payable.

          (g) pay the cost of COBRA continuation coverage for the Executive, and maintain in full
force and effect any benefit and welfare programs, plans, and arrangements in which the
Executive participated immediately prior to such termination in accordance with Section
2.5 hereof which are not otherwise covered under COBRA, for the Executive and the
Executive’s eligible beneficiaries, until the first to occur of (x) the Executive’s
attainment of alternative employment if such employment includes similar benefits or (y) the
twenty-four (24) month anniversary of termination of employment, subject to the terms and
conditions of participation as provided under the general terms and provisions of such
plans, programs, and arrangements, or in the alternate, the Company will arrange to provide
the Executive with continued benefits substantially similar to those which the Executive
would have been entitled to receive under such plans, programs, and arrangements. This is
not intended to mitigate the Executive’s COBRA benefits.

          (h) all of the foregoing payments will be grossed up for Internal Revenue Code Section
280G excise tax penalty on “excess parachute payments;”

          (i) the Executive shall have the right to exercise vested options and RSU’s in
accordance with Section 4.1(f); and

          (j) the Executive’s FIFTY THOUSAND (50,000) RSU’s for a signing incentive will
immediately vest.

ARTICLE V

ADDITIONAL AGREEMENTS

          5.1 OTHER AGREEMENTS. As further material consideration for the Company entering into
this Agreement, the Executive will also execute the Company’s standard employee confidentially
agreement, inventions assignment agreement, and any other agreements required to be executed by all
like level executives of the Company.

-6-

 

          5.2 EXECUTIVE’S RESTRICTIVE COVENANTS UPON TERMINATION. If the Executive’s employment
is terminated for any reason, Executive agrees:

          (a) To keep all of the Company’s Confidential Information confidential in perpetuity in
accordance with the Company’s policy;

          (b) To not hire or solicit for hire or consultation employees of the Company for a
period of one and one-half (1 1/2) years after termination of employment; and

          (c) To release the Company from any and all claims, whether known or unknown, except
for those based upon this Agreement. Such release shall include the rights of Section 1542
of the California Civil Code, which provides:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in the Executive’s favor at the time of executing the release,
which if known by him must have materially affected the Executive’s settlement with
the debtor.”

          5.3 Company Release. Except for termination “For Cause,” the Company will release the
Executive from any and all claims, whether known or unknown, and except for those based upon this
Agreement. Such release shall include the rights of Section 1542 of the California Civil Code,
which provides:

“A general release does not extend to claims which the creditor does not know or
suspect to exist in the Executive’s favor at the time of executing the release,
which if known by him must have materially affected the Executive’s settlement with
the debtor.”

ARTICLE VI

MISCELLANEOUS

          6.1 DEFINITIONS. For purposes of this Agreement, the following terms will have the
following meanings:

          (a) “Accrued Base Salary” — as defined in Section 4.1(a) hereof.

          (b) “Accrued Benefits” — as defined in Section 4.1(d) hereof.

          (c) “Accrued Incentive Bonus” — as defined in Section 4.1(e) hereof.

          (d) “Accrued Reimbursable Expenses” — as defined in Section 4.1(c)
hereof.

          (e) “Accrued Vacation Payment” — as defined in Section 4.1(b) hereof.

          (f) “Affiliate” of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common

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control with, the first Person. “Control” (including the terms “controlled by”
and “under common control with”) means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.

          (g) “Incentive Bonus” as defined in Section 2.2 hereof.

          (h) “Base Salary” as defined in Section 2.1 hereof.

          (i) “Cause” will mean any willful breach of duty by the Executive in the course
of the Executive’s employment, continued violation of written Company employment policies
after written notice of such violation, violation of the Company’s Insider Trading Policies,
conviction of a felony or any crime involving fraud, theft, embezzlement, dishonesty or
moral turpitude, engaging in activities which materially defame the Company, engaging in
conduct which is material injurious to the Company or its Affiliates, or any of their
respective customer or supplier relationships, financially or otherwise, or the Executive’s
gross negligence or incapacity to perform duties, excluding the Executive’s Total
Disability.

          (j) “Change of Control” will mean if there is a merger, consolidation, sale of
all or a major portion of the assets of the Company (or a successor organization) or similar
transaction or circumstance where any person or group (other than Douglas B. Otto) acquires
or obtains the right to acquire, in one or more transactions, beneficial ownership of more
than Fifty Percent (50%) of the outstanding shares of any class of voting stock of the
Company (or a successor organization) at any date subsequent to September 30, 2003.

          (k) “Compensation Committee” means the Compensation Committee of the Company’s
Board of Directors.

          (l) “Continued Benefits” as defined in Section 4.3(g) hereof.

          (m) “Good Reason” will mean the occurrence of material breach of this Agreement
by the Company, which breach is not cured within fifteen (15) calendar days after written
notice thereof is received by the Company, or in the event of a Change of Control, a
reduction of total compensation, benefits, and perquisites, relocation greater than 50
miles, or material change in position or duties.

          (n) “Notice of Termination” will mean a notice which shall indicate the
specific termination provision of this Agreement relied upon and shall generally set forth
the basis for termination of the Executive’s employment under the provision so indicated.

          (o) “Person” means any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust, business trust,
governmental authority, or other entity.

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          (p) “Retirement” will mean normal retirement at age 65.

          (q) “Severance” will mean payments after termination of Executive’s employment.

          (r) “Total Disability” will mean the Executive’s failure substantially to
perform the Executive’s duties hereunder on a full-time basis for a period exceeding one
hundred eighty (180) consecutive days or for periods aggregating more than one hundred
eighty (180) days during any twelve (12) month period as a result of incapacity due to
physical or mental illness. If there is a dispute as to whether the Executive is or was
physically or mentally unable to perform the Executive’s duties under this Agreement, such
dispute will be submitted for resolution to a licensed physician agreed upon by the Company
and the Executive, or if an agreement cannot be promptly reached, the Company and the
Executive will promptly each select a physician, and if these physicians cannot agree, the
physicians will promptly select a third physician whose decision will be binding on all
parties. If such a dispute arises, the Executive will submit to such examinations and will
provide such information as such physician(s) may request, and the determination of the
physician(s) as to the Executive’s physical or mental condition will be binding and
conclusive. Notwithstanding the foregoing, if the Executive participates in any group
disability plan provided by the Company, which offers long-term disability benefits,
“Total Disability” will mean total disability as defined therein.

          6.2 KEY MAN INSURANCE. The Company will have the right, in its sole discretion, to
purchase “key man” insurance on the life of the Executive. The Company shall be the owner and
beneficiary of any such policy. If the Company elects to purchase such a policy, the Executive
will take such physical examinations and supply such information as may be reasonably requested by
the insurer. If the Executive dies from other than natural causes and it is established that the
Company caused the Executive’s death, then the proceeds of such policy will be payable to the
Executive’s estate.

          6.3 SUCCESSORS; BINDING AGREEMENT. This Agreement will be binding upon any successor
to the Company and will inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees,
devisees and legatees.

          6.4 MODIFICATION; NO WAIVER. This Agreement may not be modified or amended except by
an instrument in writing signed by the parties hereto. No term or condition of this Agreement will
be deemed to have been waived, nor will there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver will be deemed a continuing waiver unless specifically stated
therein, and each such waiver will operate only as to the specific term or condition waived and
will not constitute a waiver of such term or condition for the future or as to any other term or
condition.

          6.5 SEVERABILITY. The covenants and agreements contained herein are separate and
severable and the invalidity or unenforceability of any one or more of such

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covenants or agreements, if not material to the employment arrangement that is the basis for
this Agreement, will not affect the validity or enforceability of any other covenant or agreement
contained herein.

          6.6 FORM OF NOTICE TO PARTIES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given if (a) delivered personally, (b) mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or (c) sent by next-day or
overnight mail or delivery or (d) sent by telecopy or telegram, to the following address:

	 	 	 
	          If to Executive:
	 	Angel R. Martinez

188 Tiburon Bay Lane

Santa Barbara, CA 93108
	 	 	 
	          If to Company:
	 	Deckers Outdoor Corporation

495-A South Fairview Avenue

Goleta, CA 93117

Attn: Douglas B. Otto

Facsimile #805-967-7862

or, in each case, at such other address as may be specified in writing to the other parties hereto.

     All such notices, requests, demands, waivers and other communications shall be deemed to have
been received (w) if by personal delivery on the day after such delivery, (x) if by certified or
registered mail, on the seventh business day after the mailing thereof, (y) if by next-day or
overnight mail or delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.

          6.7 ASSIGNMENT. This Agreement and any rights hereunder will not be assignable by
either party without the prior written consent of the other party except as otherwise specifically
provided for herein.

          6.8 ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding between
the parties hereto and no agreement, representation, warranty or covenant has been made by either
party except as expressly set forth herein.

          6.9 EXECUTIVE’S REPRESENTATIONS. The Executive represents and warrants that neither
the execution and delivery of this Agreement nor the performance of the Executive’s duties
hereunder violates the provisions of any other agreement to which he is a party or by which he is
bound, and that he will not be required to disclose to the Company any confidential or proprietary
information of any other party.

          6.10 GOVERNING LAW . This Agreement will be construed in accordance with the laws of
the State of California, without regard to the conflict of laws provisions thereof, with venue
proper only in the County of Santa Barbara, California.

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          6.11 ARBITRATION; MEDIATION

          (a) If the Company proposes to terminate the Executive “For Cause,” as defined in
Section 6.1(i) hereof, then within ten (10) days’ receipt of notice of termination,
the Executive may give notice that Executive would like to have a meeting with the Company’s
Board of Directors for the purposes of settlement and compromise and to be off the record to
discuss the issues related to such “for cause” termination, none of which will be admissible
in any subsequent proceeding. this informal mediation will occur not later than thirty (30)
days from the date of the original termination “for cause” and may be done by long distance
telephone conference call or by an in person meeting.

          (b) Except as provided in Section 6.11(c) below, the parties hereto agree that
any dispute or controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance, breach, or
termination thereof, shall be finally settled by binding arbitration, unless otherwise
required by law, to be held in Santa Barbara, California under the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association as then in effect
(the “Rules”). The arbitrator(s) may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator(s) shall be final, conclusive and
binding on the parties to the arbitration, and judgment may be entered on the decision of
the arbitrator(s) in any court having jurisdiction. The arbitrator(s) shall award
attorneys’ fees to the prevailing party.

          (c) The arbitrator(s) shall apply California law to the merits of any dispute or claim,
without reference to rules of conflicts of law.

          (d) The parties may apply to any court of competent jurisdiction for a temporary
restraining order, preliminary injunction, or other interim or conservatory relief, as
necessary, without breach of this arbitration agreement and without abridgement of the
powers of the arbitrator.

          (e) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION.
EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION,
UNLESS OTHERWISE REQUIRED BY LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
EXECUTIVE’S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO
EXECUTIVE’S RELATIONSHIP WITH THE COMPANY, INCLUDING BUT NOT LIMITED TO, CLAIMS OF
HARASSMENT, DISCRIMINATION, WRONGFUL TERMINATION AND ANY STATUTORY CLAIMS.

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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.

	 	 	 	 	 	 	 
	
	 	COMPANY:	 	 
	 	 	 	 	 	 	 
	 
	 	DECKERS OUTDOOR CORPORATION	 	 
	 	 	 	 	 	 	 
	
	 	By:
	 	/s/ Douglas B. Otto
	 	March 14, 2005
	
	 	 	 	 
	
	 	Name:
	 	Douglas B. Otto	 	     Date:
	
	 	Title:
	 	Chief Executive Officer	 	 
	 	 	 	 	 	 	 
	
	 	EXECUTIVE:	 	 
	 	 	 	 	 	 	 
	
	 	/s/ Angel R. Martinez
	 	March 14, 2005
	
	 	 
	
	 	ANGEL R. MARTINEZ
	 	     Date:

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EXHIBIT A

TO

SENIOR EXECUTIVE EMPLOYMENT AGREEMENT

2005 Incentive Bonus Criteria

	 	 	 
	Executive:
	 	ANGEL R. MARTINEZ
	 	 	 
	Target Bonus:
	 	$103,500 @ 100% level
	 	 	 
	Minimum Bonus:
	 	$165,000

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	Good	 	 	Very Good	 	 	Excellent	 
	 
	50% BASED ON TOPLINE PERFORMANCE
	 	 	 	 	 	 	 	 	 	 	 	 
	Sales + Backlog Percentage Increase
	 	 	10	%	 	 	15	%	 	 	20	%
	 
	 
	50% BASED ON EARNINGS PERFORMANCE
	 	 	 	 	 	 	 	 	 	 	 	 
	Earnings Per Share as Calculated to Above Sales
	 	 	*	 	 	 	*	 	 	 	*	 
	Increases
	 	 	_____	 	 	 	_____	 	 	 	_____	 
	 
	 
	BONUS LEVEL
	 	 	100	%	 	 	200	%	 	 	400	%
	 
	 

* To be inserted when confirmed

Bonus to be paid in accordance to method used in 2004.

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