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                                                                   EXHIBIT 10.22

                                LICENSE AGREEMENT

               This License Agreement ("AGREEMENT") is made as of this 2nd day
of January, 2001 (the "EFFECTIVE DATE") by and between ABBOTT LABORATORIES, an
Illinois corporation, with its principal office at 100 Abbott Park Road, Abbott
Park, IL 60064 ("ABBOTT") and DISCOVERY PARTNERS INTERNATIONAL, a Delaware
corporation, with its principal office at 9640 Towne Centre Drive, San Diego, CA
92121 ("DPI").

                                   WITNESSETH

               WHEREAS, Abbott is the owner of certain proprietary rights and
Know-How (as defined below) relating to arrayed compound screening ("ARCS"), a
methodology and technology for continuous format high throughput screening of
chemical compounds, as more fully defined below;

               WHEREAS, DPI wishes to obtain, and Abbott wishes to grant to DPI
and its Affiliates (as defined below), an exclusive license in the Territory (as
defined below) under such proprietary rights and Know-How relating to the ARCS
Technology (as defined below) to provide Services (as defined below) and develop
and commercialize Products (as defined below) in the Field (as defined below)
utilizing ARCS Technology.

               NOW THEREFORE, in consideration of the mutual obligations and
promises as set forth herein, the parties do hereby agree as follows:

1.      DEFINITIONS. As used in this Agreement, the following terms shall have
        the following respective meanings:

        1.1    "AFFILIATE" means any corporation, company, partnership, joint
               venture and/or firm which controls, is controlled by, or is under
               common control of either party hereto. For purposes of this
               definition, control shall mean direct or indirect ownership of
               more than fifty percent (50%) of the stock or participating
               shares entitled to vote for the election of directors (but only
               as long as such ownership exists).

        1.2    "ARCS" means arrayed compound screening which comprises a method
               for screening chemical compounds by depositing compounds onto a
               plastic sheet in an array and contacting a gel containing
               reagents on top of the plastic sheet for testing or screening
               chemical compounds for biological or biochemical activity which
               can be performed in a continuous high throughput screening
               format, together with all equipment and materials utilized in
               performing ARCS, including, but not limited to, gels, reagents,
               compounds on sheets, compound spotting equipment, gel casting
               equipment, read-out mechanisms, and the like materials.

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        1.3    "ARCS TECHNOLOGY" means the Patents and Abbott's Know-How,
               including all Improvements made by Abbott during the Term.

        1.4    "COMMERCIAL SALE" means the sale of a Product or Service in the
               Territory, by DPI or by any Affiliate, sublicensee or customer of
               DPI, or by any contract sales force of any of them to any
               unaffiliated third party, as evidenced by the selling party's
               invoice or other relevant document to such third party.

        1.5    "CONFIDENTIAL INFORMATION" means any and all information or data
               relating to ARCS (including, but not limited to, ARCS Technology,
               DPI Technology and Products) which a party discloses to the other
               party, its employees or representatives, or is conceived or
               reduced to practice during the Term by either party or by a third
               party working with a party in connection with ARCS or in
               connection with this Agreement, whether in writing, orally or by
               observation, including, without limitation, all scientific,
               clinical, technical, commercial, financial and business
               information and Know-How, and other information or data
               considered confidential in nature. Confidential Information shall
               not include information which:

               (a)    is known to the receiving party at the time of disclosure
                      and documented by written records of the receiving party
                      made prior to the date of disclosure;

               (b)    is subsequently disclosed to the receiving party without
                      any obligations of confidence by an unaffiliated third
                      person who has not obtained it directly or indirectly from
                      the other party and who has the right to make such
                      disclosure;

               (c)    becomes patented, published or otherwise part of the
                      public domain;

               (d)    is independently developed by or for the receiving party
                      by person(s) having no knowledge of or access to such
                      information and without breach of any confidentiality
                      obligation, as evidenced by its written records; or

               (e)    is required to be disclosed by legal, regulatory,
                      statutory or governmental process or authorities, provided
                      in each case the party disclosing information promptly
                      informs the other and uses its best efforts to limit the
                      disclosure and to maintain confidentiality to the maximum
                      extent possible and permits the other party to attempt by
                      appropriate legal means to limit such disclosure.

               This Agreement shall constitute Confidential Information.

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        1.6    "DPI TECHNOLOGY" means any Improvements and Know-How developed by
               DPI and any and all patent applications and patents and
               amendments thereto, including foreign equivalents, and any and
               all substitutions, extensions, additions, reissues,
               re-examinations, renewals, divisions, continuations,
               continuations-in-part or supplementary protection certificates
               owned by or licensed to (with the right to sublicense) DPI during
               the Term (other than the Patents).

        1.7    "EFFECTIVE DATE" shall have the meaning ascribed to such term in
               the opening paragraph of this Agreement.

        1.8    "FIELD" means continuous format high throughput screening of
               chemical compounds.

        1.9    "IMPROVEMENTS" means all additions, developments, modifications,
               enhancements and adaptations which (i) directly relate to or are
               used in connection with (A) ARCS Technology in the Field, as
               developed by Abbott; or (B) ARCS, as developed by DPI, and (ii)
               are conceived and reduced to practice during the Term. Ownership
               of Improvements shall be as set forth in Article 13 hereof.

        1.10   "KNOW-HOW" means any proprietary technology, information, methods
               of use, processes, techniques, ideas or inventions (whether
               patentable or not) owned, possessed or used by Abbott or DPI, as
               the case may be, which is directly related to or used in
               connection with ARCS, including all trade secrets and any other
               information relating thereto.

        l.11   "NET SALES" means gross sales of Services by DPI or by any
               Affiliate, sublicensee or customer of DPI; gross sales of any
               Product by DPI, by any Affiliate, sublicensee or customer of DPI;
               or by any contract sales force of any of them to unrelated third
               parties, in arm's length transactions, less any of the following
               charges or expenses that are incurred in connection with such
               gross sales during the Term:

               (a)    discounts, including cash discounts, customary trade
                      allowances or rebates actually taken, and commissions;

               (b)    credits or allowances given or made for rejection, recall
                      or return of previously sold Product actually taken;

               (c)    any tax or government charge, duty or assessment
                      (including any tax such as a value added or similar tax or
                      government charge) levied on the sale, transportation or
                      delivery of a Product when included on the invoice or
                      other written document between the parties as payable by
                      the purchaser and collectable by DPI, its Affiliate or
                      sub-licensee; and

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               (d)    freight, postage, transportation, insurance and duties on
                      shipment of Product when included on the invoice or other
                      written document between the parties as payable by the
                      purchaser and collectable by DPI, its Affiliate or
                      sublicensee.

               The parties acknowledge that Abbott shall be entitled to a direct
               royalty under Section 5.2 hereof on all Net Sales by DPI, any
               Affiliate, sublicensee or customer of DPI, or by any contract
               sales force of any of them. Net Sales shall also include all
               Sublicense Consideration received by DPI pursuant to Section
               4.3(b) hereof.

        1.12   "PATENTS" means the patent applications and patents listed in
               Exhibit A hereto and any and all other patent applications and
               patents and amendments thereto, including foreign equivalents,
               and any and all substitutions, extensions, additions, reissues,
               re-examinations, renewals, divisions, continuations,
               continuations-in-part or supplementary protection certificates
               owned by or licensed to (with the right to sublicense) Abbott
               during the Term relating to ARCS in the Field.

        1.13   "PRODUCT" means any product developed hereunder by DPI, any
               Affiliate, sublicensee or customer utilizing ARCS and/or ARCS
               Technology in the Field.

        1.14   "ROYALTY PERIOD" shall have the meaning ascribed to such term in
               Section 5.2(a) hereof.

        1.15   "SERVICES" means providing continuous format high throughput
               screening of chemical compounds by DPI, any Affiliate,
               sublicensee or customer utilizing ARCS and/or ARCS Technology in
               the Field on behalf of third parties, together with any and all
               associated services provided to third parties, including, but not
               limited to, training services, equipment services, technical
               support services, consulting services, and the like services.

        1.16   "SUBLICENSE CONSIDERATION" shall have the meaning ascribed to
               such term in Section 4.3(b) hereof.

        1.17   "TERM" means the period commencing on the Effective Date and
               terminating as set forth in Article 8 below.

        1.18   "TERRITORY" means the entire world.

        1.19   "TRADEMARK" means any trademark registered, owned and chosen for
               Product by DPI in any country of the Territory.

        1.20   "VALID CLAIM" means any claim issued on an unexpired Patent,
               which claim has not been held unenforceable, unpatentable or
               invalid by a decision of a court or other governmental agency of
               competent jurisdiction following exhaustion of all possible
               appeal processes, and which has not been admitted to be invalid
               or unenforceable through reissue, reexamination or disclaimer.

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2.      LICENSE GRANT.

        2.1    (a)    LICENSE GRANT TO DPI: Abbott hereby grants to DPI and its
                      Affiliates an exclusive right and license in the Territory
                      under ARCS Technology in the Field, with the right to
                      grant sublicenses pursuant to Section 4.3 hereof, to
                      utilize ARCS Technology in the Field: (i) to research,
                      develop, modify, improve, make or have made, Products for
                      Commercial Sale; and (ii) to provide Services utilizing
                      ARCS Technology.

               (b)    LICENSE GRANT TO ABBOTT: DPI hereby grants to Abbott and
                      its Affiliates a non-exclusive right and license in the
                      Territory under DPI Technology and DPI Know-How: (i) to
                      research, develop, modify, improve, make or have made
                      devices, apparatus and equipment relating to ARCS; (ii) to
                      license the ARCS Technology to its collaborative partners
                      for use in collaborative projects to research, develop,
                      make, have made, use, have used, and sell compounds; and
                      (iii) to research, develop, make, have made, use, have
                      used, and sell compounds for whatever use.

               (c)    RESERVATION: Notwithstanding the foregoing exclusive grant
                      to the contrary, nothing contained in this Agreement shall
                      preclude Abbott from further developing and utilizing
                      ARCS, ARCS Technology, DPI Technology and DPI Know-How for
                      its own internal purposes, including, but not limited to,
                      researching, developing, making, having made, using,
                      having used, and selling compounds for whatever purpose,
                      and licensing the ARCS Technology, DPI Technology and DPI
                      Know-How to its collaborative partners for use in
                      collaborative projects to research, develop, make, have
                      made, use, have used, and sell compounds for whatever
                      purpose. No such development and utilization of ARCS
                      Technology, DPI Technology and DPI Know-How by Abbott or
                      its collaborative partners hereunder shall require any
                      payment to DPI and DPI shall have no rights whatsoever to
                      any compounds so developed by Abbott or its collaborative
                      partners using ARCS Technology, DPI Technology and DPI
                      Know-How.

3.      TECHNOLOGY TRANSFER.

        3.1    CONVEYANCE OF INFORMATION: Within forty-five (45) days following
               the Effective Date, Abbott shall convey to DPI the information
               under Abbott's and its Affiliates' control involving ARCS
               Technology in the Field. For purposes of this Section 3.1,
               information shall not be deemed under Abbott's or its Affiliates'
               control if such information was obtained from third parties and
               is protected by confidentiality agreements with third parties.
               With respect to such protected information, Abbott shall use
               reasonable efforts to obtain the consent of such third parties to
               release the protected information to DPI.

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        3.2    Review: Beginning one month following the Effective Date and
               during the Term, unless otherwise agreed by the parties,
               representatives of Abbott and representatives of DPI shall meet
               for informational purposes on a regular basis, at a mutually
               agreeable time and place, to exchange information and Know-How,
               to review the progress of and to coordinate their respective
               development efforts with respect to ARCS. Nothing contained in
               this Agreement shall require or obligate Abbott to further
               develop ARCS Technology, or to restrict Abbott from further
               developing ARCS Technology.

4.      DEVELOPMENT/MANUFACTURING/SUBLICENSING.

        4.1    DEVELOPMENT: DPI shall use the same commercially reasonable
               efforts that it would use for its own technology to further
               develop the ARCS and/or ARCS Technology to enable it to
               manufacture Products for Commercial Sale and provide Services.
               DPI shall have sole responsibility for designing, conducting and
               paying for the cost of the development of Products and Services
               and shall use commercially reasonable efforts to diligently
               conduct such development.

        4.2    MANUFACTURING: DPI and its Affiliates shall have sole
               responsibility for manufacturing Product or having Product
               manufactured for it by a third party manufacturer.

        4.3    SUBLICENSING:

               (a)    DPI may sublicense to unrelated third parties its rights
                      under this Agreement. Each sublicense (any any
                      sub-sublicense by any such third party) shall be in
                      writing and shall include provisions acknowledging that
                      such sublicense is subject to the license granted by
                      Abbott to DPI under this Agreement, including the
                      obligation of each sublicensee to pay direct royalties to
                      Abbott on Net Sales as provided in Section 5.2 below, that
                      each sublicensee shall make reports and keep and maintain
                      records of Commercial Sales to at least the same extent as
                      required under this Agreement, allowing Abbott the same
                      access and audit rights permitted under this Agreement,
                      and that each such sublicense shall be automatically
                      terminated upon expiration or termination of this
                      Agreement. Each sublicense shall also provide for the
                      regular conveyance of information and Know-How developed
                      by sublicensees to Abbott and DPI, as well as a license to
                      Improvements developed by sublicensees to Abbott and DPI
                      as provided in Section 13 hereof. DPI shall remain
                      primarily liable for the performance of all sublicensees.
                      DPI shall provide Abbott with a copy of each sublicense
                      agreement within thirty (30) days of the execution
                      thereof.

               (b)    All consideration received by DPI as a result of each
                      sublicense of its rights under this Agreement and any
                      sub-sublicense agreement (including, but not limited to,
                      fees, payments, milestones, royalties, etc.)
                      (collectively,

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                      the "SUBLICENSE CONSIDERATION") shall be considered Net
                      Sales under this Agreement and subject to royalty under
                      Section 5.2 hereof.

5.      ROYALTIES.

        5.1    PRE-PAID, NON-REFUNDABLE ROYALTY. DPI shall pay to Abbott *** ***
               as a pre-paid and non-refundable royalty. ***.

        5.2    ROYALTY PAYMENTS:

               (a)    ROYALTY RATE AND ROYALTY PERIOD: Beginning on the
                      Effective Date, DPI shall pay to Abbott a royalty on
                      annual aggregate worldwide Net Sales in accordance with
                      the following schedule:

<TABLE>
<CAPTION>
               ANNUAL NET SALES                                  ROYALTY
               ----------------                                  -------
<S>                                                              <C>
               Effective Date through Third (3rd) Anniversary      ***
               Fourth (4th) Year                                   ***
               Fifth (5th) Year                                    ***
               Sixth (6th) Year and Thereafter                     ***
</TABLE>

                      All royalties earned by Abbott up to *** shall be credited
                      against the pre-paid royalty made by DPI under Section 5.1
                      hereof.

                      The obligation of DPI, any Affiliate, sublicensee or
                      customer to pay a royalty to Abbott shall continue until
                      such time as U.S. Patent #5,976,813 containing a Valid
                      Claim, identified in Exhibit A, has expired ("ROYALTY
                      PERIOD"). Upon the end of the Royalty Period, DPI shall
                      have an exclusive, perpetual and irrevocable license under
                      ARCS Technology, with all of the rights granted under
                      Article 2 hereof, and without any further obligation to
                      Abbott, except for the payment obligations accruing prior
                      to such date.

               (b)    ROYALTY REPORTS AND PAYMENTS: Within forty-five (45) days
                      after the end of each calendar quarter, DPI shall prepare
                      and deliver to Abbott a

***  Portions of this page have been omitted pursuant to a request for
     Confidential Treatment and filed separately with the Commission

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                      report detailing the calculation of Net Sales in the
                      Territory, for such just ended quarter along with the
                      calculation of royalties due thereon pursuant to Section
                      5.2 (a) above. Each report shall be accompanied by full
                      payment in U.S. dollars of the royalties shown thereon to
                      be due, less any credits against such royalties under
                      Section 5.2(a) above. In the event that conversion from
                      foreign currency is required in calculating a royalty
                      payment hereunder, the exchange rate used shall be the
                      ratio in effect at the end of the last business day of the
                      applicable quarter for which royalties are calculated, as
                      reported by The Wall Street Journal, or a substantially
                      similar global publication if The Wall Street Journal is
                      no longer published.

               (c)    BOOKS AND RECORDS/AUDIT RIGHTS: DPI shall keep books and
                      records accurately showing all Products manufactured, used
                      or sold, and Services provided, under the terms of this
                      Agreement. The relevant portions of such books and records
                      shall be open to inspection by representatives of Abbott,
                      at Abbott's cost, solely for the purposes of determining
                      the correctness of the royalties payable under this
                      Agreement. Such audit, conducted no more than one time per
                      calendar year, shall be during normal business hours after
                      reasonable advance notice and subject to suitable
                      confidentiality provisions. In the event an audit shows a
                      deficiency to be due, DPI shall immediately pay such
                      deficiency along with the reasonable costs and expenses of
                      the audit if the deficiency is more than five percent (5%)
                      of the amount due during such audited period. If the audit
                      shows that an excess was paid, DPI shall be entitled to
                      deduct the amount of such excess from the payment due for
                      the next calendar quarter. Such books and records shall be
                      preserved for a period of at least three (3) years after
                      the date of the royalty payment to which they pertain, and
                      no audit may be conducted with respect to royalties due in
                      any calendar year that is more than two (2) years
                      preceding the calendar year in which the audit is being
                      conducted. Books and records for a given calendar year may
                      only be audited once.

               (d)    WITHHOLDING TAXES ON ROYALTIES: Where any sum due to be
                      paid to Abbott hereunder is subject to any withholding or
                      similar tax, the parties shall use all reasonable efforts
                      to do all such acts and to sign all such documents as will
                      enable them to take advantage of any applicable double
                      taxation agreement or treaty. In the event there is no
                      applicable double taxation agreement or treaty, or if an
                      applicable double taxation agreement or treaty reduces but
                      does not eliminate such withholding or similar tax, DPI
                      shall pay such withholding or similar tax to the
                      appropriate government authority, deduct the amount paid
                      from the amount due Abbott, and secure and send to Abbott
                      the best available evidence of such payment sufficient to
                      enable Abbott to obtain a deduction for such withheld
                      taxes or obtain a refund thereof.

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6.      REPRESENTATIONS/WARRANTIES.

        6.1    REPRESENTATIONS AND WARRANTIES OF ABBOTT: Abbott represents and
               warrants: (a) that it is duly organized, validly existing and in
               good standing under the laws of Illinois, (b) that it has full
               corporate power and authority to enter into this Agreement and to
               carry out its provisions, (c) that there are no outstanding
               agreements or assignments in existence that are inconsistent with
               the provisions of this Agreement, (d) that it is duly authorized
               to execute and deliver this Agreement and to perform its
               obligations hereunder, (e) that the execution, delivery and
               performance of this Agreement by it does not require the consent,
               approval or authorization of, or notice, filing or registration
               with, any governmental or regulatory authority, (f) that, to the
               best of its knowledge, it has delivered (or will deliver to DPI
               within forty-five (45) days as required under Section 3.1
               hereof), all Abbott Know-How necessary to practice ARCS
               Technology, (g) that it is the owner of or has sufficient rights
               to ARCS Technology to grant the license granted herein free of
               any lien or encumbrance that would materially impair DPI's rights
               and obligations hereunder, (h) that, to the best of its
               knowledge, there is no suit, action or claim instituted or
               threatened by a third party against the ARCS Technology, (i) that
               it has not assigned or conveyed any interest in the intellectual
               property rights inconsistent with the rights granted hereunder,
               (j) that, to the best of its knowledge, it is not aware that any
               third party infringes Patents as of the Effective Date, and (k)
               that to the extent it has prosecuted any patent applications for
               Patents, it has prosecuted such applications in good faith.

        6.2    REPRESENTATIONS AND WARRANTIES OF DPI: DPI represents and
               warrants: (a) that it is duly organized, validly existing and in
               good standing under the laws of Delaware, (b) that it has full
               corporate power and authority to enter into this Agreement and to
               carry out its provisions, (c) that there are no outstanding
               agreements or assignments in existence that are inconsistent with
               the provisions of this Agreement, (d) that it is duly authorized
               to execute and deliver this Agreement and to perform its
               obligations hereunder, (e) that the execution, delivery and
               performance of this Agreement by it does not require the consent,
               approval or authorization of, or notice, filing or registration
               with, any governmental agency or regulatory authority, (f) that
               it is the owner or has sufficient rights in DPI Know-How or any
               other intellectual property rights licensed to Abbott hereunder
               to grant the license granted herein free of any lien or
               encumbrance that would materially impair Abbott's rights and
               obligations hereunder, and (g) that it has not assigned or
               conveyed any interest in DPI Know-How or any other intellectual
               property rights inconsistent with the rights granted hereunder.

        6.3    INDEMNIFICATION BY DPI: DPI shall indemnify, defend, save and
               hold Abbott, and each of its Affiliates, directors, officers,
               employees and agents harmless from and against any and all
               liabilities, actions, suits, claims, demands, prosecutions,
               damages, costs, expenses or money judgments finally awarded
               (including

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               reasonable legal fees) (collectively, "LIABILITIES") incurred by
               or instituted or rendered against Abbott to the extent such
               Liabilities result from a third party claim arising from the
               willful misconduct or the negligent acts or omissions of DPI or
               its Affiliates or DPI's material breach of this Agreement, and
               provided that Abbott gives DPI prompt notice in writing of any
               such claim or lawsuit and permits DPI to undertake sole control
               of the defense and settlement thereof at DPI's expense. In any
               such claim or lawsuit:

               (a)  Abbott will cooperate in the defense by providing access to
                    witnesses and evidence available to it. Abbott shall have
                    the right to participate, at its expense, in any defense to
                    the extent that in its reasonable judgment Abbott may be
                    prejudiced by DPI"s sole defense thereof.

               (b)  With respect to this Agreement, Abbott shall not settle,
                    offer to settle or admit liability in any claim or suit in
                    which Abbott intends to seek indemnification by DPI without
                    the written consent of a duly authorized officer of DPI.

        6.4    INDEMNIFICATION BY ABBOTT: Abbott shall indemnify, defend, save
               and hold DPI and each of its Affiliates, officers, directors,
               employees and agents harmless from and against any Liabilities
               incurred by or instituted or rendered against DPI to the extent
               such Liabilities result from or arise out of any breach of any
               express warranty hereunder or non-fulfillment or non-performance
               by Abbott of any written or express agreement, covenant or
               obligation of Abbott under this Agreement, provided that DPI
               gives Abbott prompt notice in writing of any such claim or
               lawsuit and permits Abbott to undertake sole control of the
               defense and settlement thereof at Abbott's expense. In any such
               claim or lawsuit:

               (a)  DPI will cooperate in the defense by providing access to
                    witnesses and evidence available to it. DPI shall have the
                    right to participate, at its expense, in any defense to the
                    extent that in its reasonable judgment DPI may be prejudiced
                    by Abbott's sole defense thereof.

               (b)  With respect to this Agreement, DPI shall not settle, offer
                    to settle or admit liability in any claim or suit in which
                    DPI intends to seek indemnification by Abbott without the
                    written consent of a duly authorized officer of Abbott.

        6.5    REPORTING: Each party warrants that it shall advise the other
               promptly of any suspected defect in the ARCS Technology or in any
               Products.

        6.6    LIMITATION: EXCEPT FOR THE EXPRESS WARRANTIES IN THIS ARTICLE 6,
               NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, IN FACT
               OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE. EACH PARTY
               SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
               FITNESS FOR A PARTICULAR

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               PURPOSE. EXCEPT FOR VIOLATIONS OF ARTICLE 7 AND AMOUNTS FINALLY
               AWARDED FOR INDEMNIFICATION FOR THIRD PARTY LIABILITIES UNDER
               SECTIONS 6.3 AND 6.4, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
               PARTY HERETO OR TO ANY THIRD PARTY FOR ANY SPECIAL,
               CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR
               ANTICIPATED PROFITS RELATING TO THE SAME) ARISING FROM ANY CLAIM
               RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON
               CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF AN
               AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE
               POSSIBILITY OR LIKELIHOOD OF SAME.

7.      CONFIDENTIALITY AND NONDISCLOSURE.

        7.1    NONDISCLOSURE: Neither party shall use or disclose any
               Confidential Information received by it from the other party
               pursuant to this Agreement without the prior written consent of
               the other, except that selected disclosures to potential or
               actual sublicensees, partners, contractors, customers and agents
               shall be permitted so long as the disclosing party shall ensure
               that the recipient of such information is under a duty of
               confidentiality to the disclosing party. This obligation will
               continue for a period of seven (7) years after termination or
               expiration of the Term, whichever is earlier.

        7.2    RESTRICTION: Each party shall restrict dissemination of
               Confidential Information to those of its employees, contractors,
               customers, partners, agents and sublicensees (if any) who have an
               actual need to know and have a legal obligation to protect the
               confidentiality of such Confidential Information. All
               Confidential Information disclosed by one party to the other
               shall remain the sole property of the disclosing party and
               neither party shall obtain any right of any kind to the
               Confidential Information disclosed, except as granted under this
               Agreement.

        7.3    RESTRICTION EXEMPTIONS: Nothing contained in this Article 7 shall
               be construed to restrict the parties from using or disclosing
               Confidential Information solely to the extent and solely as
               required:

               (a)    for regulatory, tax or customs reasons;

               (b)    for audit purposes;

               (c)    by court order or other governmental order or request; or

               (d)    to perform acts permitted by this Agreement.

               If such a disclosure is required, the party required to make the
               disclosure shall provide the other party with prompt notice of
               the required disclosure in order to provide such party the
               opportunity to review the proposed disclosure and, if

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               deemed necessary by such party, to obtain a protective order
               covering all or part of such information.

8.      TERM AND TERMINATION.

        8.1    This Agreement shall continue in effect until the end of the
               Royalty Period unless and until terminated as provided in this
               Section 8.

        8.2    If DPI determines in its reasonable scientific and commercial
               judgment that the ARCS Technology does not have a reasonable
               likelihood of commercial success, or that it is economically or
               technically impractical for DPI to continue developing and
               marketing Products and Services utilizing the ARCS Technology,
               DPI shall have the right to terminate this Agreement upon ninety
               (90) days written notice, at the end of which the termination
               shall be effective. Upon such termination DPI shall pay all
               payments or royalties which may have become due prior to the
               effective date of such termination, and DPI shall assign and
               Abbott shall be entitled to retain for its own use, all studies
               and information relating to the ARCS Technology and shall be
               granted a license to all Improvements and Know-How as set forth
               in Section 13 hereof. In no event shall any installment of the
               pre-paid royalty already paid under Section 5.1 be refundable
               under any circumstances.

        8.3    Either party may terminate this Agreement by giving to the other
               party prior written notice of not less than thirty (30) days in
               the case of a monetary breach and of not less than ninety (90)
               days in the event the other party shall commit a non-monetary
               material breach of this Agreement, and such breaching party shall
               fail to cure, or commence action to cure, such breach during such
               thirty (30) or ninety (90) day period, as applicable. In the case
               of a non-monetary breach, the cure period may be extended for
               such longer period as may reasonably be necessary if cure is not
               reasonably possible within the initial ninety (90) day period,
               provided the breaching party continues its diligent efforts to
               cure. No such cancellation and termination shall release the
               breaching party from any obligations hereunder incurred prior
               thereto. In the event of a dispute whether a material breach has
               occurred, the existence of material breach shall be determined
               using the ADR procedure set forth in Exhibit B. A party's right
               to terminate this Agreement shall only apply if the breaching
               party fails to cure such breach in the manner required by the
               final judgment of the ADR hearing. In the event that this
               Agreement is terminated for DPI's material breach, Abbott shall
               be entitled to retain for its own use all funds previously paid
               by DPI, together with all Confidential Information, Know-How and
               Improvements generated by DPI hereunder, together with a fully
               paid-up license under Section 2.1(b) hereof. In the event that
               this Agreement is terminated for Abbott's material breach, DPI
               shall be entitled to retain for its own use all Confidential
               Information, Know-How and Improvements generated by Abbott
               hereunder together with a fully paid-up license under Section
               2.1(a) hereof.

                                       12
<PAGE>   13

        8.4    Either party may terminate this Agreement on thirty (30) days
               written notice if the other party passes a resolution or the
               court makes an order for its winding up; or has a receiver or
               administrator appointed over its business or all of its assets;
               or is or becomes bankrupt; or ceases its business operations. In
               the event that this Agreement is terminated under this Section
               8.4 subject to the other terms of this Agreement, the terminating
               party shall be entitled to retain for its own use all
               Confidential Information, Know-How and Improvements generated
               hereunder, together with a fully paid-up license to it under
               Section 2.1 (a) or (b), as applicable. Notwithstanding the
               bankruptcy or insolvency of Abbott or DPI or the impairment of
               performance by Abbott or DPI of its obligations under this
               Agreement as a result of bankruptcy or insolvency of Abbott or
               DPI, the non-bankrupt/non-insolvent party shall be entitled to
               retain the licenses granted herein, without any further
               obligation to the other party other than the payment obligations
               under Article 5.

        8.5    Termination of this Agreement shall be without prejudice to any
               rights of either party against the other which may have accrued
               up to the date such termination becomes effective.

        8.6    All causes of action accruing to either party under this
               Agreement shall survive expiration or termination of this
               Agreement for any reason.

        8.7    Upon any termination or expiration of this Agreement, each party
               shall promptly return to the other party all written Confidential
               Information, and all copies thereof (retaining one copy of the
               Confidential Information of the other in its confidential files
               for archival purposes only), which is not covered by a paid-up
               license or other rights specified herein surviving such
               termination or expiration.

9.      INFRINGEMENT OF PATENTS BY THIRD PARTY. In the event of an actual or
        suspected infringement of a Patent by a third party, the following shall
        apply:

        9.1    NOTICE: Each party shall promptly give the other written notice
               if one of them becomes aware of any infringement by a third party
               of any Patent.

        9.2    RIGHTS TO BRING INFRINGEMENT ACTION: If a third party infringes
               any Patent, and DPI can demonstrate to Abbott's reasonable
               satisfaction that such infringement has caused a twenty percent
               (20%) or greater reduction in Net Sales, then Abbott shall have
               the first right but not the obligation to institute and prosecute
               an action or proceeding to abate such infringement and to resolve
               such matter by settlement or otherwise. If the parties do not
               agree that an infringement caused a twenty percent (20%) or
               greater reduction in Net Sales, then the dispute shall be
               resolved according to the ADR procedure attached hereto as
               Exhibit B.

               (a)    ABBOTT ACTION: If Abbott elects to institute and prosecute
                      an action or proceeding, Abbott shall notify DPI of its
                      intention to bring an action or proceeding. Abbott shall
                      keep DPI timely informed of material

                                       13
<PAGE>   14

                      developments in the prosecution or settlement of such
                      action or proceeding. Abbott shall be responsible for all
                      fees and expenses of any action or proceeding against
                      infringers which Abbott initiates. DPI shall cooperate
                      fully by joining as a party plaintiff if reasonably
                      requested to do so by Abbott or if required to do so by
                      law to maintain such action or proceeding and by executing
                      and making available such documents as Abbott may
                      reasonably request. DPI may be represented by counsel in
                      any such legal proceedings. Abbott shall pay all third
                      party expenses incurred by DPI in any such legal
                      proceeding.

               (b)    In the event that the prepaid royalty provided for in
                      Section 5.1 of this Agreement has been completely
                      exhausted and DPI is able to demonstrate to Abbott's
                      reasonable satisfaction that the third party infringement
                      has caused a twenty percent (20%) or greater reduction in
                      Net Sales, then during the pendency of any patent
                      infringement action for the enforcement of any Patent by
                      Abbott, DPI's royalty obligation shall be modified such
                      that DPI shall pay directly to Abbott only one-half of the
                      royalty otherwise payable under Section 5.2 of this
                      Agreement, and the remaining one-half of such royalty
                      shall be deposited into an interest-bearing joint escrow
                      account with a mutually acceptable third party escrow
                      holder.

               (c)    If Abbott is successful in such patent infringement action
                      such that the defendant in such action is found to
                      infringe Patents which is/are the subject of such action,
                      then the amount of royalties held in escrow, together with
                      all accrued interest thereon, shall be paid to Abbott and
                      DPI's royalty obligation shall resume as provided for in
                      Section 5.2 hereof. One-half of the proceeds awarded to
                      Abbott in the infringement action shall belong to Abbott
                      and the remainder shall be used first to pay Abbott for
                      its documented and actual costs of enforcement, including
                      attorneys' fees, expert fees and all other related
                      expenses of the infringement action, and the balance shall
                      be paid to DPI.

               (d)    If Abbott is unsuccessful in such patent infringement
                      action such that the defendant in such action is found not
                      to infringe such Patents, then the escrowed amount, less a
                      sum sufficient to compensate Abbott for its documented and
                      actual costs of enforcement, including attorneys' fees,
                      expert fees, and all other related expenses of the
                      infringement action, shall be paid to DPI and no
                      additional royalties under Section 5.2 hereof shall be
                      payable to Abbott.

               (e)    DPI ACTION: If Abbott elects not to exercise such first
                      right to institute and enforce an action or proceeding,
                      DPI shall have the right, at its discretion, to institute
                      and enforce an action or proceeding to abate such
                      infringement and to resolve such matter by settlement or
                      otherwise. Abbott shall cooperate fully by joining as a
                      party plaintiff if reasonably requested to do so by DPI or
                      if required to do so by law to maintain such

                                       14
<PAGE>   15

                      action and by executing and making available such
                      documents as DPI may reasonably request. Abbott may be
                      represented by counsel in any such action, at its own
                      expense.

                      (i)    All amounts of every kind and nature recovered from
                             an action or proceeding of infringement brought by
                             DPI shall belong to DPI, and shall first be used to
                             reimburse DPI for its documented and actual costs
                             of prosecution, second to reimburse Abbott for its
                             documented and actual costs if it is represented by
                             counsel in the proceedings, and the balance shall
                             thereafter be considered Net Sales under this
                             Agreement and subject to royalty payments under
                             Section 5.2 hereof.

                      (ii)   If DPI is unsuccessful in such patent infringement
                             action such that the defendant in such action is
                             allowed to continue the practice which DPI claimed
                             was infringing the Patents, then no additional
                             royalties under Section 5.2 hereof shall be payable
                             to Abbott.

10.     INFRINGEMENT OF THIRD PARTY RIGHTS; ABBOTT DEFENSE OF SUIT: If Abbott,
        DPI, or any of their Affiliates, sublicensees, distributors or other
        customers are sued or threatened with suit by a third party alleging
        infringement of patents or other intellectual property rights that are
        alleged to cover the manufacture, use, sale or distribution of one or
        more Products utilizing ARCS Technology, which suit is based upon
        alleged infringement by ARCS Technology, then Abbott or DPI, whichever
        is relevant, will promptly notify the other in writing and provide a
        copy of the lawsuit or claim. In the event (i) DPI chooses to control
        the defense of any such action, any settlement amounts or court-awarded
        damages, costs and fees (including reasonable attorneys' fees and
        professional fees) incurred in connection with such action shall be paid
        by DPI; or (ii) if DPI chooses not to control the defense of any such
        action, Abbott shall control the defense in such action and DPI shall
        fully cooperate with Abbott in the defense of any such action DPI's
        expenses will be paid by DPI. Nothing contained in this Section 10 shall
        be construed to impose liability on Abbott for ---------- damages
        awarded against DPI or for settlement amounts made by or on behalf of
        DPI in lieu of such damages. Abbott shall not settle any such action
        where DPI would be liable for settlement amounts without first obtaining
        DPI's prior written consent to such settlement.

11.     PATENT PROSECUTION AND MAINTENANCE; PATENT COSTS.

        11.1   DISCLOSURE OF PATENTS/APPLICATIONS TO DPI: Prior to the Effective
               Date, the parties acknowledge that Abbott has disclosed to DPI
               the complete text of, and all other information in its possession
               or control directly related to (a) all patent applications
               included in the Patents; and (b) all patents included in the
               Patents as well as all information in Abbott's, its Affiliates
               and its patent counsel's possession concerning the institution or
               possible institution of any interference, opposition,
               reexamination, reissue, revocation, nullification or any official
               proceeding involving an issued or granted patent included in the
               Patents.

                                       15
<PAGE>   16

        11.2   PROSECUTION AND MAINTENANCE OF PATENTS BY ABBOTT: Abbott shall be
               solely responsible for the preparation, filing, prosecution and
               maintenance of the Patents owned by or assigned to Abbott,
               including oppositions and interferences. Abbott shall keep DPI
               reasonably informed with respect to the prosecution and
               maintenance of the Patents. If Abbott determines that it would
               otherwise terminate either the prosecution or maintenance of the
               Patents prior to the completion of normal prosecution thereof
               before the patent examiner or prior to the end of the term for
               maintenance therefor, as the case may be, then Abbott shall give
               DPI written notice of such determination (a "DETERMINATION
               NOTICE") that, under the circumstances, is reasonably in advance
               of any deadline for any material action due in connection with
               such prosecution or maintenance. Following receipt of such
               notice, DPI may continue such prosecution or maintenance,
               provided, however, that if the Royalty Period is still
               continuing, Abbott shall reimburse DPI for all reasonable costs
               and expenses associated with such prosecution or maintenance
               incurred from the date of the Determination Notice. If the
               Royalty Period is no longer continuing, then Abbott shall no
               longer have reimbursement responsibilities to DPI.

        11.3   DISCLOSURE OF PATENTS/APPLICATIONS TO ABBOTT: During the Term,
               DPI shall disclose to Abbott the complete text of, and all other
               information in its possession or control directly related to (a)
               all patent applications applied for by DPI related to ARCS; and
               (b) all patents issued from such patent applications, as well as
               all information in DPI's, its Affiliates and its patent counsel's
               possession concerning the institution or possible institution of
               any interference, opposition, reexamination, reissue, revocation,
               nullification or any official proceeding involving an issued
               patent.

        11.4   PROSECUTION AND MAINTENANCE OF PATENTS BY DPI: DPI shall be
               solely responsible for the preparation, filing, prosecution and
               maintenance of patents owned by or assigned to DPI (other than
               Patents), including oppositions and interferences. DPI shall keep
               Abbott reasonably informed with respect to the prosecution and
               maintenance of such patents.

        11.5   PATENT MARKING: DPI shall ensure that all Products and associated
               Product and Services literature contains appropriate references
               to Abbott's Patents.

12.     TRADEMARK: DPI may select any Trademark or Trademarks for the Product in
        the Territory. All costs related to the selection and maintenance of the
        Trademark(s) shall be borne by DPI. The Trademark(s) shall be owned by
        DPI, and Abbott shall have no claims or rights in or to the
        Trademark(s).

13.     IMPROVEMENTS: All Improvements and any patents which relate to ARCS
        which are made solely by DPI and/or its Affiliates and/or sublicensees
        hereunder and which are conceived or reduced to practice during the
        Term, shall be the sole and exclusive property of DPI, its Affiliates
        and/or sublicensees, as applicable, provided, however, that

                                       16
<PAGE>   17

        all such Improvements and patents shall be non-exclusively licensed to
        Abbott solely for its own use and for use with third party
        collaborations as permitted under Sections 2.1 (b) and (c) hereof on a
        worldwide, royalty-free, paid-up basis. All Improvements and any Patents
        which are made solely by Abbott and/or its Affiliates and which are
        conceived or reduced to practice during the Term, shall become part of
        ARCS Technology, licensed exclusively to DPI with all of the rights set
        forth in Section 2.1(a) hereof. All Improvements made jointly by Abbott
        and DPI (or by their Affiliates) hereunder shall become jointly owned,
        provided that to the extent that such Improvements are owned by Abbott,
        they shall be included in the license granted to DPI under Section
        2.1(a) hereof, and to the extent such Improvements are owned by DPI,
        they shall be included in the license granted to Abbott under Section
        2.1(b) hereof. The provisions of this Article 13 are subject to the
        rights of the terminating party under Article 8 hereof. Upon termination
        of this Agreement under Article 8 hereof, except as provided in this
        Article 8 neither party shall be obligated to license any of its future
        improvements and/or patents to the other.

14.     PATENTABLE INVENTIONS. If a patentable invention relating to ARCS is
        conceived or reduced to practice during the course of this Agreement
        and/or within six (6) months of expiration or termination of this
        Agreement, Abbott and DPI shall discuss such invention and the
        desirability of filing a United States patent application covering such
        invention as well as any foreign counterparts. The party owning the
        invention (or both parties if the invention is a joint invention) shall
        make the final decision with respect to any such filings. All patent
        applications and patents on inventions made in the course of this
        Agreement solely by employees of Abbott shall be owned by Abbott. All
        patent applications and patents on inventions made in the course of this
        Agreement solely by employees of DPI shall be owned by DPI. All patent
        applications and patents on inventions made jointly by employees of
        Abbott and employees of DPI during the course of this Agreement shall be
        jointly owned by Abbott and DPI. Each party shall be responsible for
        preparing, filing, prosecuting and maintaining patent applications and
        patents relating to sole inventions, as set forth in this Article 14, at
        its sole expense. DPI shall also be responsible for preparing, filing,
        prosecuting and maintaining, using counsel mutually acceptable to Abbott
        and DPI, patent applications and patents relating to inventions jointly
        owned by Abbott and DPI and the parties shall equally share all
        out-of-pocket costs (including attorney's fees) associated with such
        activities. The parties shall cooperate with each other in connection
        with any activities described herein and shall keep the other informed
        of all material developments regarding patent matters relating to any
        patent applications and patents filed hereunder. Each party shall,
        further, provide to the other a copy of any patent application which
        discloses Confidential Information prior to filing in the United States
        or elsewhere if reasonably possible, for review and comment by the other
        party. Any such patent application shall be maintained in confidence by
        the receiving party pursuant to Article 7 hereof. If a patent
        application on a joint invention encompassed by this Article 14 and
        either party, later, decides that it no longer wishes to continue to pay
        for its share of costs associated with prosecution and/or maintenance of
        such application (or any patent resulting therefrom), the party
        declining to pay for any further costs shall inform the other party of
        its decision to discontinue payment, in writing. Such non-declining
        party may then elect to continue prosecution and/or

                                       17
<PAGE>   18

        maintenance of such application or patent at its sole expense. The party
        declining to pay for any further costs shall provide all reasonable
        assistance (including preparing any papers required to allow the other
        party to prosecute and/or maintain such application) required by the
        non-declining party in prosecuting and/or maintaining such application
        or patent. Further, if one party declines to pay for any further costs
        associated with prosecuting and/or maintaining such application or
        patent, and the other party elects to continue to pay for such costs,
        the party declining to pay for such costs shall lose all ownership
        rights to such application or patent and such rights shall vest totally
        in the party continuing to pay for such costs.

15.     MISCELLANEOUS.

        15.1   FORCE MAJEURE: If the performance by either party of any of its
               obligations under this Agreement shall be prevented by
               circumstances beyond its reasonable control which could not have
               been avoided by the exercise of reasonable diligence, then such
               party shall be excused from the performance of that obligation
               for the duration of the event. The affected party shall promptly
               notify the other party in writing should such circumstances
               arise, give an indication of the likely extent and duration
               thereof, and shall use commercially reasonable efforts to resume
               performance of its obligations as soon as practicable.

        15.2   NOTICES: Any notice required to be given or made under this
               Agreement by one of the parties hereto to the other shall be in
               writing, by personal delivery, registered U.S. mail or overnight
               courier, addressed to such other party at its address indicated
               below, or to such other address as the addressee shall have last
               furnished in writing to the addressor and shall be effective upon
               the date of receipt.

               If to DPI:       Discovery Partners International
                                9640 Towne Centre Drive
                                San Diego, CA 92121
                                Attn: President

               With a copy to:  Brobeck, Phleger & Harrison LLP
                                12390 El Camino Real
                                San Diego, CA 92130
                                Attn: Pamela Hiatt, Esq.

               If to Abbott:    Abbott Laboratories
                                100 Abbott Park Road
                                Dept. 467; Bldg. AP10
                                Abbott Park, IL  60064-
                                Attn: Divisional Vice President,
                                      Advanced Technology

                                       18
<PAGE>   19

               With a copy to:  Abbott Laboratories
                                100 Abbott Park Road
                                Dept. 364; Bldg. AP6D
                                Abbott Park, IL  60064-6032
                                Attn: Senior Vice President,
                                      General Counsel and Secretary

        15.3   APPLICABLE LAW/COMPLIANCE: This Agreement shall be governed by
               and construed in accordance with the laws of the State of New
               York, excluding its conflict of laws provisions. Each party
               hereto shall comply with all applicable laws, rules, ordinances,
               guidelines, consent decrees and regulations of any federal, state
               or other governmental authority. The location of any ADR
               proceeding shall be in the metropolitan area of the party who did
               not initiate the ADR proceeding.

        15.4   ENTIRE AGREEMENT: This Agreement and the Exhibits attached hereto
               contain the entire understanding of the parties with respect to
               the subject matter hereof. All express or implied agreements and
               understandings, either oral or written, heretofore made are
               expressly merged in and made a part of this Agreement. This
               Agreement may be amended, or any term hereof modified, only by a
               written instrument duly executed by both parties hereto.

        15.5   COUNTERPARTS: This Agreement may be executed in two or more
               counterparts, each of which shall be deemed an original, but all
               of which together shall constitute one and the same instrument.

        15.6   SEVERABILITY/HEADINGS: If any provision of this Agreement is
               deemed unenforceable, the remainder of the Agreement will not be
               affected and, if appropriate, the parties will attempt to replace
               the unenforceable provision with a new provision that, to the
               extent possible, reflects the parties' original intent. The
               captions and headings used in this Agreement are for reference
               only and are not to be construed in any way as terms or used to
               interpret the provisions of this Agreement.

        15.7   ASSIGNMENT: Neither party may without written approval of the
               other assign this Agreement or transfer its interest or any part
               thereof under this Agreement to any third party except that
               either party may assign this Agreement without consent to a third
               party that acquires all or substantially all of the business to
               which this Agreement pertains.

        15.8   DISPUTE RESOLUTION: The parties hereto shall attempt to settle
               any dispute arising out of or relating to this Agreement in an
               amicable way. Except for claims for injunctive or other equitable
               relief, which may be brought in any court of competent
               jurisdiction, any controversy, claim or right of termination for
               cause which may arise under, out of, in connection with, or
               relating to this Agreement, or any breach thereof, shall be
               settled according to the Alternative Dispute Resolution
               provisions attached hereto as Exhibit B.

                                       19
<PAGE>   20

        15.9   INDEPENDENT CONTRACTOR: It is understood that both parties hereto
               are independent contractors and engage in the operation of their
               own respective businesses and neither party hereto is to be
               considered the agent of the other party for any purpose
               whatsoever and neither party has any authority to enter into any
               contract or assume any obligation for the other party or to make
               any warranty or representation on behalf of the other party. Each
               party shall be fully responsible for its own employees, servants
               and agents, and the employees, servants and agents of one party
               shall not be deemed to be employees, servants and agents of the
               other party for any purpose whatsoever.

        15.10  PUBLICITY: No press release or other public announcement shall be
               made by either party concerning the execution of this Agreement
               or the fact that DPI has licensed ARCS Technology from Abbott
               without the other party's prior written approval. Neither party
               shall use the name of the other party, its officers, the other
               party's employees and agents for purposes of any public
               commercial activity without the other party's prior written
               approval, except where the name of the other party must be
               disclosed as a matter of law. Should either party be required by
               law to make a disclosure, the disclosing party shall submit a
               copy of the proposed disclosure to the other party for review.
               The non-disclosing party shall have three (3) weeks to review and
               comment on the content of such disclosure. The disclosing party,
               subject to legal requirements, shall use all reasonable efforts
               to accommodate the non-disclosing party's comments.

        15.11  SURVIVAL: The following provisions of this Agreement shall
               survive its expiration or termination: 6.3, 6.4, 6.5, 6.6, 7, 14,
               15.3, 15.8, 15.9, 15.10 and 15.11.

               IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Effective Date.

ABBOTT LABORATORIES          DISCOVERY PARTNERS INTERNATIONAL

By: /s/ Daniel W. Norbeck               By: /s/ Riccardo Pigliucci
    -------------------------------         --------------------------------

Name: Daniel W. Norbeck                 Name: Riccardo Pigliucci
      -----------------------------           ------------------------------

Its: V.P. Pharmaceutical Discovery      Its: C.E.O.
     ------------------------------          -------------------------------

Date: 1/15/01                           Date: 1/2/2001
      -----------------------------           ------------------------------

                                       20
<PAGE>   21

                                    EXHIBIT A

                                       TO
                           EXCLUSIVE LICENSE AGREEMENT
                                     BETWEEN
                               ABBOTT LABORATORIES
                                       AND
                        DISCOVERY PARTNERS INTERNATIONAL
                              DATED JANUARY 2, 2001

                         PATENTS AND PATENT APPLICATIONS

U.S. Patent No. 5,976,813

<TABLE>
<CAPTION>
        Country        Serial #      Filing Date     Patent #      Issue Date
        -------        --------      -----------     --------      ----------
<S>                   <C>            <C>             <C>           <C>
        U.S.          08/990,168     12/12/1997      5,976,813     11/02/1999
</TABLE>

Corresponding Pending Foreign Patent Applications:

<TABLE>
<CAPTION>
        Country              Application #         Filing Date
        -------              -------------         -----------
<S>                          <C>                   <C>
        Australia            18216/99              12/11/1998
        Brazil               PI9815059-6           12/11/1998
        Bulgaria             104564                12/11/1998
        China                98812079.8            12/11/1998
        Canada               2,310,684             12/11/1998
        Czechoslovakia       PV 2000-2078          12/11/1998
        European             98963130.4            12/11/1998
        Hungary                                    12/11/1998
        Israel               135,793               12/11/1998
        Japan                2000-524662           12/11/1998
        Korea                10-2000-7006          12/11/1998
        Mexico               0005800               12/11/1998
        Norway               20002079              12/11/1998
        New Zealand          504112                12/11/1998
        PCT                  PCT/US98/264          12/11/1998
        Poland               P-341655              12/11/1998
        Slovak Republic      PV 0836-2000          12/11/1998
        Turkey               2000/01647            12/11/1998
        Taiwan               87120533              12/01/1998
        U.S.                 990,168               12/12/1997
</TABLE>

<PAGE>   22

                                    EXHIBIT B

                                       TO
                           EXCLUSIVE LICENSE AGREEMENT
                                     BETWEEN
                               ABBOTT LABORATORIES
                                       AND
                        DISCOVERY PARTNERS INTERNATIONAL
                              DATED JANUARY 2, 2001

                         ALTERNATIVE DISPUTE RESOLUTION

The parties recognize that a bona fide dispute as to certain matters may arise
from time to time during the term of this Agreement which relates to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution (ADR) provision, a party must send written notice
of the dispute to the other party for attempted resolution by good faith
negotiations between their respective presidents (or their equivalents) of the
affected subsidiaries, divisions, or business units within twenty-eight (28)
days after such notice is received (all references to "days" in this ADR
provision are to calendar days). If the matter has not been resolved within
twenty-eight (28) days of the notice of the dispute, or if the parties fail to
meet within such twenty-eight (28) days, either party may initiate an ADR
proceeding as provided herein. The parties shall have the right to be
represented by counsel in such a proceeding.

1.      To begin an ADR proceeding, a party shall provide written notice to the
other party of the issues to be resolved by ADR. Within fourteen (14) days after
receipt of such notice, the other party may, by written notice to the party
initiating the ADR, add additional issues to be resolved within the same ADR.

2.      Within twenty-one (21) days following receipt of the original ADR
notice, the parties shall select a mutually acceptable neutral to preside in the
resolution of any disputes in this ADR proceeding. If the parties are unable to
agree on a mutually acceptable neutral within such period, either party may
request the President of the CPR Institute for Dispute Resolution (CPR), 366
Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral
pursuant to the following procedures:

               (a)    The CPR shall submit to the parties a list of not less
than five (5) candidates within fourteen (14) days after receipt of the request,
along with a Curriculum Vitae for each candidate. No candidate shall be an
employee, director, or shareholder of either party or any of their subsidiaries
or affiliates.

               (b)    Such list shall include a statement of disclosure by each
candidate of any circumstance likely to affect his or her impartiality.

                                       i
<PAGE>   23

               (c)    Each party shall number the candidates in order of
preference (with the number one (1) signifying the greatest preference) and
shall deliver the list to the CPR within seven (7) days following receipt of the
list of candidates. If a party believes a conflict of interest exists regarding
any of the candidates, the party shall provide a written explanation of the
conflict to the CPR along with its list showing its order of preference for the
candidates. Any party failing to return a list of preferences on time shall be
deemed to have no order of preference.

               (d)    If the parties collectively have identified fewer than
three (3) candidates deemed to have conflicts, the CPR shall designate as
neutral the candidate for whom the parties collectively have indicated the
greatest preference. If a tie shall result between two candidates, the CPR may
designate either candidate. If the parties collectively have identified three
(3) or more candidates deemed to have conflicts, the CPR shall review the
explanations regarding conflicts, and, in its sole discretion, may either (i)
immediately designate as the neutral the candidate for whom the parties
collectively have indicated the greatest preference, or (ii) issue a new list of
not less than five (5) candidates, in which case the procedures set forth in
subparagraphs 2(a) - 2(d) shall be repeated.

3.      No earlier than twenty-eight (28) days or later than fifty-six (56) days
after the selection, the neutral shall hold a hearing to resolve each of the
issues identified by the parties. The ADR proceeding shall take place at a
location agreed upon by the parties. If the parties cannot agree, the neutral
shall designate a location other than the principle place of business of either
party or any of their subsidiaries or affiliates.

4.      At least seven (7) days prior to the hearing, each party shall submit
the following to the other party and the neutral:

               (a)    a copy of all exhibits on which such party intends to rely
in any oral or written presentation to the neutral;

               (b)    a list of any witnesses such party intends to call at the
hearing, and a short summary of the anticipated testimony of each witness;

               (c)    a proposed ruling on each issue to be resolved, together
with a request for a specific damage award or other remedy for each issue. The
proposed rulings and remedies shall not contain any recitation of the facts or
any legal arguments and shall not exceed one (1) page per issue.

               (d)    a brief in support of each party's proposed rulings and
remedies provided that the brief shall not exceed twenty (20) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.

Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery shall
be required or permitted by any means, including depositions, interrogatories,
requests for admissions, or production of documents.

                                       ii
<PAGE>   24

5.      The hearing shall be conducted on two (2) consecutive days and shall
be governed by the following rules:

               (a)    Each party shall be entitled to five (5) hours of hearing
time to present its case. The neutral shall determine whether each party has had
the five (5) hours to which it is entitled.

               (b)    Each party shall be entitled, but not required, to make an
opening statement, to present regular and rebuttal testimony, documents or other
evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross examination shall be charged against the party conducting
the cross-examination.

               (c)    The party initiating the ADR shall begin the hearing and,
if it chooses to make an opening statement, shall address not only issues it
raised but also any issues raised by the responding party. The responding party,
if it chooses to make an opening statement, also shall address all issues raised
in the ADR. Thereafter, the presentation of regular and rebuttal testimony and
documents, other evidence, and closing arguments shall proceed in the same
sequence.

               (d)    Except when testifying, witnesses shall be excluded from
the hearing until closing arguments.

               (e)    Settlement negotiations, including any statements made
therein, shall not be admissible under any circumstances. Affidavits prepared
for purposes of the ADR hearing also shall not be admissible. As to all other
matters, the neutral shall have sole discretion regarding the admissibility of
any evidence.

6.      Within seven (7) days following completion of the hearing, each party
may submit to the other party and the neutral a post-hearing brief in support of
its proposed rulings and remedies, provided that such brief shall not contain or
discuss any new evidence and shall not exceed ten (10) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.

7.      The neutral shall rule on each disputed issue within fourteen (14) days
following completion of the hearing. Such ruling shall adopt in its entirety the
proposed ruling and remedy of one of the parties on each disputed issue but may
adopt one party's proposed rulings and remedies on some issues and the other
party's proposed rulings and remedies on other issues. The neutral shall not
issue any written opinion or otherwise explain the basis of the ruling.

                                      iii
<PAGE>   25

8.      The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the prevailing
party (including all expert witness fees and expenses), the fees and expenses of
a court recorder, and any expenses for a hearing room, shall be paid as follows:

               (a)    If the neutral rules in favor of one party on all disputed
issues in the ADR, the losing party shall pay 100% of such fees and expenses.

               (b)    If the neutral rules in favor of one party on some issues,
and the other party on other issues, the neutral shall issue with the rulings a
written determination as to how such fees and expenses shall be allocated
between the parties. The neutral shall allocate the fees and expenses in a way
that bears a reasonable relationship to the outcome of the ADR, with the party
prevailing on more issues, or on issues of greater value or gravity, recovering
a relatively larger share of its legal fees and expenses.

9.      The rulings of the neutral and the allocation of fees and expenses shall
be binding, non-reviewable, and non-appealable, and may be entered as a final
judgment in any court having jurisdiction.

10.     Except as provided in paragraph 9 or as required by law, the existence
of the dispute, any settlement negotiations, the ADR hearing, any submissions
(including exhibits, testimony, proposed rulings, and briefs), and the rulings
shall be deemed Confidential Information. The neutral shall have the authority
to impose sanctions for unauthorized disclosure of Confidential Information.<PAGE>   1
                                                                   EXHIBIT 10.44

                     DISCOVERY PARTNERS INTERNATIONAL, INC.

                         NOTICE OF GRANT OF STOCK OPTION

               Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Discovery Partners
International, Inc. (the "Corporation"):

               Optionee: _______________________________________________________

               Grant Date: _____________________________________________________

               Vesting Commencement Date: ______________________________________

               Exercise Price:  $_____________________________________ per share

               Number of Option Shares: _________________________________ shares

               Expiration Date: ________________________________________________

               Type of Option:   _________  Incentive Stock Option
                                 _________  Non-Statutory Stock Option

               Exercise Schedule: The Option shall become exercisable for
               twenty-five percent (25%) of the Option Shares upon Optionee's
               completion of one (1) year of Service measured from the Vesting
               Commencement Date and shall become exercisable for the balance of
               the Option Shares in a series of thirty-six (36) successive equal
               monthly installments upon Optionee's completion of each
               additional month of Service over the thirty-six (36) month period
               measured from the first anniversary of the Vesting Commencement
               Date. In no event shall the Option become exercisable for any
               additional Option Shares after Optionee's cessation of Service.

               Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the Discovery Partners
International, Inc. 2000 Stock Incentive Plan (the "Plan"). Optionee further
agrees to be bound by the terms of the Plan and the terms of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee
hereby acknowledges the receipt of a copy of the official prospectus for the
Plan in the form attached hereto as Exhibit B. A copy of the Plan is available
upon request made to the Corporate Secretary at the Corporation's principal
offices.

<PAGE>   2

               Employment at Will. Nothing in this Notice or in the attached
Stock Option Agreement or in the Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.

               Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.

DATED: _____________________________

                                       DISCOVERY PARTNERS INTERNATIONAL, INC.

                                       By: _____________________________________

                                       Title:___________________________________

                                        ________________________________________
                                                        OPTIONEE

                                       Address: ________________________________

                                        ________________________________________

ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS

                                       2

<PAGE>   3

                                    EXHIBIT A

                             STOCK OPTION AGREEMENT

            Filed as Exhibit 10.45 to this Annual Report on Form 10-K

<PAGE>   4

                                    EXHIBIT B

                           PLAN SUMMARY AND PROSPECTUS

<PAGE>   5

                                                         EMPLOYEES & CONSULTANTS

                     DISCOVERY PARTNERS INTERNATIONAL, INC.

                     ---------------------------------------

                            2000 STOCK INCENTIVE PLAN

                       DISCRETIONARY OPTION GRANT PROGRAM

                           PLAN SUMMARY AND PROSPECTUS

                     ---------------------------------------

                                  The date of this Prospectus is August 22, 2000

<PAGE>   6

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>
INFORMATION ON THE 2000 STOCK INCENTIVE PLAN DISCRETIONARY OPTION GRANT PROGRAM.............1

QUESTIONS AND ANSWERS ABOUT THE PLAN........................................................1

        GENERAL PLAN PROVISIONS.............................................................1
               1.     What is the basic structure of the Discretionary Option Grant
                      Program?..............................................................1
               2.     When did the Plan become effective?...................................1
               3.     Who administers the Plan?.............................................1
               4.     Who is eligible to participate in the Discretionary Option
                      Grant Program?........................................................2
               5.     How many shares of Common Stock may be issued under the Plan?.........2
               6.     What happens if there is a change in the Corporation's capital
                      structure?............................................................3
               7.     Can the Plan be amended or terminated?................................3

        GRANT OF OPTIONS....................................................................3
               8.     How are options granted under the Discretionary Option Grant
                      Program?..............................................................3
               9.     What type of options may be granted under the Discretionary
                      Option Grant Program?.................................................3
               10.    How is the exercise price determined?.................................4
               11.    How is the fair market value of the Common Stock determined?..........4
               12.    Can the Corporation cancel my option and grant me a new option?.......4
               13.    Can I assign or transfer my option?...................................4
               14.    When do I acquire the rights of a stockholder?........................4

        EXERCISE OF OPTIONS.................................................................4
               15.    When may I exercise my option?........................................4
               16.    When will my option terminate?........................................5
               17.    How do I exercise my option?..........................................5
               18.    How do I pay the exercise price?......................................5

        INCENTIVE OPTIONS...................................................................5
               19.    Who is eligible to receive an Incentive Option?.......................5
               20.    Is there a limitation on the number of shares for which an Incentive
                      Option may become exercisable in any one calendar year?...............5
               21.    Can an Incentive Option lose its qualified status?....................6
               22.    What limitations apply to Incentive Options granted to a 10%
                      stockholder?..........................................................6

        EARLY TERMINATION OF OPTIONS........................................................6
               23.    What happens to my options if my service terminates?..................6
               24.    What happens to my options if I am discharged from service for
                      Misconduct?...........................................................7
               25.    What happens to my options if I die or become disabled?...............7
               26.    What happens to my options if the Corporation is acquired or
                      merged?...............................................................7
               27.    What happens to my options that are assumed upon a Corporate
                      Transaction?..........................................................8
               28.    What happens to my options if there is a change in control of
                      the Corporation?......................................................9

        DISPOSITION OF OPTION SHARES........................................................9
               29.    When can I sell my shares?............................................9

        MISCELLANEOUS.......................................................................9
               30.    Is financing available under the Plan?................................9
               31.    Do I have the right to remain employed until my options  under
                      the Discretionary Option Grant Program vest?.........................10
</TABLE>

                                       i

<PAGE>   7

<TABLE>
<S>                                                                                       <C>
               32.    Are there any circumstances which would cause me to lose my
                      rights with respect to an option or a stock issuance?................10
               33.    Does the Plan restrict the authority of the Corporation to
                      grant or assume options outside of the Plan?.........................10
               34.    Does the grant of an option or the  issuance of shares  under the
                      Plan affect my eligibility to participate in other plans of the
                      Corporation?.........................................................10
               35.    What is a parent corporation?........................................10
               36.    What is a subsidiary corporation?....................................10
               37.    Is the Plan subject to ERISA?........................................10

QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES..........................................11

        INCENTIVE OPTIONS..................................................................11
               T1.    Will the grant of an Incentive Option result in Federal income
                      tax liability to me?.................................................11
               T2.    Will the  exercise of an Incentive Option result in Federal
                      income tax liability to me?..........................................11
               T3.    When will I be subject to Federal income tax on shares acquired
                      under an Incentive Option?...........................................11
               T4.    What constitutes a disposition of Incentive Option shares?...........11
               T5.    How is my Federal income tax liability determined when  I
                      dispose of my shares?................................................11
               T6.    What if I make a qualifying disposition?.............................12
               T7.    What are the normal tax rules for a disqualifying disposition?.......12
               T8.    What are the Federal tax consequences to the Corporation?............13
               T9.    What are the consequences of paying the exercise price of
                      an Incentive Option in the form of shares of Common Stock
                      acquired upon the exercise of an earlier-granted Incentive
                      Option if the delivery of the shares results in a
                      disqualifying disposition?...........................................13
               T10.   What are the consequences of paying the exercise price of
                      an Incentive Option in the form of shares of Common Stock
                      (i) acquired under an Incentive Option and held for the
                      requisite holding periods, (ii) acquired under a
                      Non-Statutory Option or (iii) acquired through open-market
                      purchases?...........................................................13
               T11.   What are the consequences of a subsequent disposition of
                      shares purchased under an Incentive Option with shares of
                      Common Stock?........................................................14

        NON-STATUTORY OPTIONS..............................................................14

               T12.   Will the grant of a Non-Statutory Option result in Federal
                      income tax liability to me?..........................................14
               T13.   Will the exercise of a Non-Statutory Option result in
                      Federal income tax liability to me?..................................14
               T14.   Will I recognize additional income when I sell shares
                      acquired under a Non-Statutory Option?...............................14
               T15.   What are the consequences of paying the exercise price of
                      a Non-Statutory Option in the form of shares of Common
                      Stock previously acquired upon the exercise of employee
                      options or through open-market purchases?............................14
               T16.   What are the Federal tax consequences to the Corporation?............15

        FEDERAL TAX RATES..................................................................15
               T17.   What are the applicable Federal tax rates?...........................15

        ALTERNATIVE MINIMUM TAX............................................................16
               T18.   What is the alternative minimum tax ?................................16
               T19.   What is the allowable exemption amount?..............................16
               T20.   How is the alternative minimum taxable income calculated?............16
</TABLE>

                                       ii

<PAGE>   8

<TABLE>
<S>                                                                                       <C>
               T21.   Is the spread on an Incentive Option at the time of
                      exercise normally includible in alternative minimum
                      taxable income?......................................................16
               T22.   How will the payment of alternative minimum taxes in one
                      year affect the calculation of my tax liability in a later
                      year?................................................................16

CORPORATION INFORMATION AND ANNUAL PLAN INFORMATION........................................17
</TABLE>

                                      iii

<PAGE>   9

THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

                               INFORMATION ON THE
                            2000 STOCK INCENTIVE PLAN
                       DISCRETIONARY OPTION GRANT PROGRAM

               Discovery Partners International, Inc., a Delaware corporation
(the "Corporation"), is offering shares of its common stock (the "Common Stock")
to eligible individuals in the Corporation's service pursuant to option grants
and direct stock issuances made under the Corporation's 2000 Stock Incentive
Plan (the "Plan"). The purpose of the Plan is to offer the Corporation's
employees, the non-employee members of the Board of Directors (the "Board"), and
consultants and other independent advisors who provide services to the
Corporation the opportunity to acquire an ownership interest in the Corporation
as an incentive for such persons to continue in the Corporation's service.
Unless the context indicates otherwise, all references to the Corporation in
this Plan Summary and Prospectus include Discovery Partners International, Inc.
and its parent and subsidiary corporations, whether now existing or subsequently
established.

                      QUESTIONS AND ANSWERS ABOUT THE PLAN

               This Plan Summary and Prospectus sets forth in question and
answer format the principal terms of the option grants which may be made from
time to time under the Discretionary Option Grant Program in effect under the
Plan to individuals who are NOT officers or directors of the Corporation subject
to the short-swing profit restrictions of the Federal securities laws.

                             GENERAL PLAN PROVISIONS

        1.     WHAT IS THE BASIC STRUCTURE OF THE DISCRETIONARY OPTION GRANT
               PROGRAM?

               The Discretionary Option Grant Program is one of several equity
incentive programs in effect under the Plan. Under the Discretionary Option
Grant Program, options may be granted to eligible persons which will provide
them with the right to purchase shares of Common Stock during their period of
service with the Corporation at a fixed price per share equal to the fair market
value of the Common Stock on the grant date.

        2.     WHEN DID THE PLAN BECOME EFFECTIVE?

               The Plan became effective on July 27, 2000 in connection with the
initial public offering of the Common Stock and serves as the successor to the
Corporation's 1995 Stock Option/Stock Issuance Plan (the "Predecessor Plan").

               All options outstanding under the Predecessor Plan have been
transferred to the new Plan, and no further option grants or stock issuances
will be made under the Predecessor Plan. Each option so transferred will
continue to be governed by the terms of the agreement evidencing that option,
and no provision of the new Plan will adversely affect or otherwise modify the
rights of the holders of such transferred options with respect to their
acquisition of shares of Common Stock thereunder.

        3.     WHO ADMINISTERS THE PLAN?

               The Plan will be administered by the Compensation Committee. This
committee is comprised of two (2) or more non-employee Board members appointed
by the Board, and each member will serve for so long as the Board deems
appropriate and may be removed by the Board at any time. A secondary committee
of one or more Board members may be delegated separate but concurrent
jurisdiction with the Compensation Committee to

<PAGE>   10

administer the Discretionary Option Grant Program with respect to all employees
and consultants not subject to the short-swing profit restrictions of the
federal securities laws. The Compensation Committee and any secondary Board
committee with administrative jurisdiction under the Plan will each be referred
to in this document as the "Plan Administrator."

               The Plan Administrator will have full authority, with respect to
the option grants made under the Discretionary Option Grant Program, to
determine the persons who are to be granted options, the time or times when such
option grants are to be made, the number of shares to be subject to each such
grant, the time or times when each option is to become exercisable, the vesting
schedule applicable to the option shares and the maximum period for which the
option is to remain outstanding.

        4.     WHO IS ELIGIBLE TO PARTICIPATE IN THE DISCRETIONARY OPTION GRANT
               PROGRAM?

               Employees, non-employee Board members, consultants and other
independent advisors in the Corporation's service will be eligible to
participate in the Discretionary Option Grant Program.

        5.     HOW MANY SHARES OF COMMON STOCK MAY BE ISSUED UNDER THE PLAN?

               The maximum number of shares of Common Stock issuable over the
term of the Plan will initially be limited to three million three hundred
thousand (3,300,000) shares (subject to adjustment for certain changes in the
Corporation's capital structure). Such share reserve consists of (i) the number
of shares which remained available for issuance under the Predecessor Plan at
the time of the initial public offering of the Common Stock, including the
shares subject to outstanding options under the Predecessor Plan transferred to
the new Plan and the shares subject to outstanding options assumed under the AAT
Plan, plus (ii) an additional increase of approximately one million one hundred
thirty-four thousand three hundred forty-two (1,134,342) shares of Common Stock.

               The number of shares of Common Stock available for issuance under
the Plan will automatically increase on the first trading day in January each
calendar year, beginning with calendar year 2001, by an amount equal to two
percent (2%) of the total number of shares of Common Stock outstanding on the
last trading day in December in the immediately preceding calendar year, but in
no event will any such annual increase exceed two million (2,000,000) shares.

               No individual participating in the Plan may receive stock
options, separately exercisable stock appreciation rights and direct share
issuances for more than five hundred thousand (500,000) shares of Common Stock
under the Plan per calendar year. Except for such restriction and certain other
restrictions in connection with incentive stock option grants (see the
"Incentive Options" section below), there are no limitations on the number of
shares of Common Stock for which an eligible individual may be granted options
under the Discretionary Option Grant Program.

               Should one or more outstanding options under the Plan expire or
terminate for any reason prior to exercise in full, the shares of Common Stock
subject to the portion of each such option not so exercised will be available
for subsequent issuance under the Plan. Unvested shares issued under the Plan
and subsequently repurchased by the Corporation, at the original exercise price
or issue price paid per share, pursuant to the Corporation's repurchase rights
under the Plan will be added back to the number of shares of Common Stock
available for issuance under the Plan and may accordingly be reissued through
one or more subsequent option grants or direct stock issuances under the Plan.
Should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the connection with the exercise of an option or the vesting
of a stock issuance under the Plan, then the number of shares of Common Stock
available for issuance under the Plan will be reduced by the gross number of
shares for which the option is exercised or which vest under the stock issuance,
and not by the net number of shares of Common Stock issued to the holder of such
option or stock issuance. Shares subject to options which are surrendered
pursuant to any stock appreciation rights exercised under the Plan will not be
available for subsequent issuance.

                                       2
<PAGE>   11

               The Common Stock will be made available either from authorized
but unissued shares of Common Stock or from shares of Common Stock reacquired by
the Corporation, including shares repurchased on the open market.

        6.     WHAT HAPPENS IF THERE IS A CHANGE IN THE CORPORATION'S CAPITAL
               STRUCTURE?

               In the event of a Recapitalization (as defined below),
appropriate adjustments will automatically be made to (i) the maximum number
and/or class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the automatic share increase
provisions of the Plan, (iii) the maximum number and/or class of securities for
which any one person may be granted stock options and direct stock issuances per
calendar year and (iv) the number and/or class of securities and the exercise
price per share in effect under each outstanding option. The adjustments to such
outstanding options will preclude the dilution or enlargement of the rights and
benefits available under those options.

               For purposes of the Plan, a Recapitalization is any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration.

        7.     CAN THE PLAN BE AMENDED OR TERMINATED?

               Yes. The Board has exclusive authority to amend or modify the
Plan in any and all respects. However, no amendment or modification may, without
the holder's consent, adversely affect such individual's rights and obligations
under his or her outstanding options or direct stock issuances under the Plan.
In addition, certain amendments to the Plan may require approval of the
Corporation's stockholders.

               The Plan will terminate upon the earliest to occur of (i) May 31,
2010, (ii) the date on which all shares available for issuance under the Plan
are issued as fully-vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction (see the "Early Termination
of Options" section below). Should the Plan terminate on May 31, 2010, then any
option grants outstanding at that time under the Discretionary Option Grant
Program will continue to have force and effect in accordance with the provisions
of the agreements evidencing those grants.

                                GRANT OF OPTIONS

        8.     HOW ARE OPTIONS GRANTED UNDER THE DISCRETIONARY OPTION GRANT
               PROGRAM?

               The Plan Administrator will have complete discretion (subject to
the limitations of the Plan) to determine when and to whom options will be
granted under the Discretionary Option Grant Program and the terms of each such
grant. Each option grant will be evidenced by one or more options documents
(collectively, the "Option Agreement") executed by the Corporation and the
optionee.

        9.     WHAT TYPE OF OPTIONS MAY BE GRANTED UNDER THE DISCRETIONARY
               OPTION GRANT PROGRAM?

               The Plan Administrator may grant incentive stock options
("Incentive Options") designed to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options which do not
satisfy such requirements ("Non-Statutory Options"). For a discussion of the
difference in tax treatment under the Code between Incentive Options and
Non-Statutory Options, see the "Questions and Answers on Federal Tax
Consequences" section below.

                                       3
<PAGE>   12

       10.     HOW IS THE EXERCISE PRICE DETERMINED?

               The exercise price of an option will be determined by the Plan
Administrator. However, the exercise price of an option will not be less than
one hundred percent (100%) of the fair market value of the Common Stock on the
grant date.

       11.     HOW IS THE FAIR MARKET VALUE OF THE COMMON STOCK DETERMINED?

               The fair market value per share of Common Stock on any relevant
date under the Plan will be the closing selling price per share on that date, as
reported on the Nasdaq National Market and published in The Wall Street Journal.
If the Common Stock is not traded on that day, the fair market value will be the
closing selling price per share on the last preceding date for which such
quotation exists.

       12.     CAN THE CORPORATION CANCEL MY OPTION AND GRANT ME A NEW OPTION?

               Yes. The Plan Administrator has the authority to cancel
outstanding options and to issue new options in replacement, but your consent
will be required in connection with your participation in any such
cancellation/regrant program. The new options can cover the same or a different
number of shares of Common Stock and will have an exercise price per share not
less than the fair market value of the Common Stock on the new grant date. In
addition, it is likely that the new options will have a vesting schedule based
on the new grant date, without any credit provided for the period the cancelled
options were outstanding.

       13.     CAN I ASSIGN OR TRANSFER MY OPTION?

               No. Your options generally cannot be assigned or transferred,
except by the provisions of your will or the laws of inheritance following your
death or pursuant to any beneficiary designation you have in effect for the
options at the time of your death. However, one or more Non-Statutory Options
may be structured so that those options will be assignable in whole or in part
during your lifetime to one or more members of your immediate family or to a
trust established exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. No such assignment will be
permitted, however, unless in connection with your estate plan.

       14.     WHEN DO I ACQUIRE THE RIGHTS OF A STOCKHOLDER?

               You will not have any stockholder rights with respect to the
option shares. You will not acquire stockholder rights until you exercise the
option, pay the exercise price and become a holder of record of the purchased
shares.

                               EXERCISE OF OPTIONS

       15.     WHEN MAY I EXERCISE MY OPTION?

               Your option will generally become exercisable for the option
shares in a series of installments over the period that you remain in the
Corporation's service. The exercise schedule applicable to your option will be
determined by the Plan Administrator at the time of grant and will be set forth
in the Option Agreement. You may exercise your option at any time for the shares
for which your option is exercisable, provided you do so before the option
terminates.

                                       4
<PAGE>   13

       16.     WHEN WILL MY OPTION TERMINATE?

               No option granted under the Discretionary Option Grant Program
may have a term in excess of ten (10) years. The actual expiration date of your
option will be set forth in the Option Agreement. Your option may, however,
terminate prior to its designated expiration date in the event of your
termination of service or upon the occurrence of certain other events. See the
"Early Termination of Options" section below.

       17.     HOW DO I EXERCISE MY OPTION?

               To exercise your option, you must provide the Corporation with
written notice of the exercise in which you indicate the number of shares to be
purchased under your option. The notice must be accompanied by payment of the
exercise price for the purchased shares, together with appropriate proof that
the person exercising the option (if other than yourself) has the right to
effect such exercise. You will be required to satisfy all applicable income and
employment tax withholding requirements at that time. For information about such
tax withholding, see the "Questions and Answers on Federal Tax Consequences"
section below.

       18.     HOW DO I PAY THE EXERCISE PRICE?

               The exercise price may be paid in cash or check payable to the
Corporation or in shares of Common Stock. Any shares delivered in payment of the
exercise price will be valued at fair market value on the exercise date and must
have been held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes (generally a six
(6)-month period).

               Cashless exercises are also permitted. To use this procedure, you
must provide irrevocable instructions to a Corporation-designated brokerage firm
to effect the immediate sale of the shares of Common Stock purchased under your
option and to pay over to the Corporation, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable withholding taxes.
Concurrently with such instructions, you must also direct the Corporation to
deliver the certificates for the purchased shares to the brokerage firm in order
to complete the sale.

                                INCENTIVE OPTIONS

               This section applies only to Incentive Options. Non-Statutory
Options are not subject to these provisions.

       19.     WHO IS ELIGIBLE TO RECEIVE AN INCENTIVE OPTION?

               Incentive Options may only be granted to individuals who are
employees of the Corporation.

        20.    IS THERE A LIMITATION ON THE NUMBER OF SHARES FOR WHICH AN
               INCENTIVE OPTION MAY BECOME EXERCISABLE IN ANY ONE CALENDAR YEAR?

               Yes. The aggregate fair market value of the shares of Common
Stock (determined at the date of grant) for which an option may for the first
time become exercisable in any calendar year as an Incentive Option under the
Federal tax laws may not exceed $100,000. To the extent you hold two (2) or more
Incentive Options which become exercisable for the first time in the same
calendar year, the $100,000 limitation will be applied on the basis of the order
in which those options were granted. Options which do not qualify for Incentive
Option treatment under the Federal tax laws by reason of this dollar limitation
may nevertheless be exercised as Non-Statutory Options in the calendar year in
which they become exercisable for the excess number of shares.

                      EXAMPLE: On September 1, 2000, Sam Smith is granted an
        Incentive Option to purchase 20,000 shares of Common Stock at an
        exercise price of $15.00 per share, the fair market value of the Common
        Stock on that date. The option will become exercisable for the option

                                       5
<PAGE>   14

        shares in a series of four successive equal annual installments,
        beginning September 1, 2001. When the option becomes exercisable for the
        second annual installment on September 1, 2002, the fair market value of
        the Common Stock is assumed to be $25.00 per share. On October 25, 2001,
        Sam is granted a second Incentive Option to purchase 10,000 shares of
        Common Stock at an exercise price of $20.00 per share, the fair market
        value of the Common Stock on that date. This option will also become
        exercisable for the option shares in a series of four successive equal
        annual installments beginning on October 25, 2002. When the option
        becomes exercisable for the first annual installment on that date, the
        fair market value of the Common Stock is assumed to be $25.00 per share.

                      The aggregate fair market value of the 5,000 shares of
        Common Stock (measured as of the grant date) which become exercisable
        under the first option in calendar year 2002 is $75,000. The aggregate
        fair market value of the 2,500 shares of Common Stock (measured as of
        the grant date) which become exercisable under the second option in
        calendar year 2002 is $50,000. Accordingly, 1,250 of the shares which
        first become purchasable in calendar year 2002 under the calendar year
        2001 option will not qualify for favorable tax treatment as Incentive
        Options because the aggregate value (as measured as of the grant date)
        of the shares of Common Stock for which the two options first become
        exercisable in calendar year 2002 exceeds $100,000 ($75,000 + $50,000 =
        $125,000). The 1,250 shares which do not qualify for Incentive Option
        treatment under the calendar year 2001 option may be exercised as
        Non-Statutory Options.

        21.    CAN AN INCENTIVE OPTION LOSE ITS QUALIFIED STATUS?

               Yes. An option granted as an Incentive Option will generally be
taxed as a Non-Statutory Option if exercised more than three (3) months after
you terminate employee status. Certain amendments or modifications to the option
may also cause the loss of Incentive Option status, but no such amendment or
modification may be made without your consent.

        22.    WHAT LIMITATIONS APPLY TO INCENTIVE OPTIONS GRANTED TO A 10%
               STOCKHOLDER?

               If an Incentive Option is granted to an individual who is at the
time the owner of stock possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Corporation or any parent
or subsidiary corporation, then the exercise price per share cannot be less than
one hundred ten percent (110%) of the fair market value of the Common Stock on
the grant date, and the option term may not exceed five (5) years from the grant
date.

                          EARLY TERMINATION OF OPTIONS

        23.    WHAT HAPPENS TO MY OPTIONS IF MY SERVICE TERMINATES?

               After your termination of service for any reason other than
death, disability or Misconduct (as defined below in Question 24), you will have
a limited period of time in which to exercise your outstanding options for any
shares of Common Stock for which those options are exercisable on the date your
service terminates. The length of this period will be set forth in your Option
Agreement and will generally not be in excess of three (3) months. However, your
option will in all events terminate on the specified expiration date of the
option term. To the extent your options are not exercisable for one or more
shares at the time of your termination of service, your options will immediately
terminate and cease to be outstanding with respect to those unexercisable
shares.

               Unless your Option Agreement specifically provides otherwise, you
will be deemed to continue in service for so long as you render services on a
periodic basis to the Corporation, whether as (i) an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, (ii) a non-employee Board member or
(iii) a consultant or other independent advisor.

                                       6
<PAGE>   15

               The Plan Administrator has the discretion to extend the period
during which you may exercise one or more of your options following your
termination of service and/or to permit such options to be exercised not only
with respect to the number of shares of Common Stock for which your options are
at the time exercisable but also with respect to one or more additional
installments for which your options would have become exercisable had you
continued in service. You will be notified in writing in the event the Plan
Administrator decides to provide you with any of those additional benefits.

        24.    WHAT HAPPENS TO MY OPTIONS IF I AM DISCHARGED FROM SERVICE FOR
               MISCONDUCT?

               Should you be discharged from service for Misconduct or otherwise
engage in Misconduct while your options are outstanding, then all of your
outstanding options will immediately terminate. For purposes of the Plan,
MISCONDUCT includes (i) any act of fraud, embezzlement or dishonesty, (ii) any
unauthorized use or disclosure of confidential information or trade secrets of
the Corporation or (iii) any other intentional misconduct adversely affecting
the business or affairs of the Corporation in a material manner. However, the
foregoing list is not inclusive of all the acts or omissions which may be
considered as grounds for dismissal or discharge of any individual in the
Corporation's service.

        25.    WHAT HAPPENS TO MY OPTIONS IF I DIE OR BECOME DISABLED?

               If you die while any of your options are outstanding, the
personal representative of your estate or the person or persons to whom the
options are transferred by the provisions of your will or the laws of
inheritance or pursuant to the beneficiary designation you have in effect for
those options may exercise each of those options for any or all of the shares of
Common Stock for which the option was exercisable on the date your service with
the Corporation terminated, less any shares you may have subsequently purchased
prior to your death. The right to exercise each such option will lapse upon the
earlier to occur of (i) the expiration of the option term or (ii) the first
anniversary of the date of your death.

               If you terminate your service with the Corporation because you
become permanently disabled, you will normally have a period of twelve (12)
months from the date of such termination of service during which to exercise
your options for any or all of the shares for which those options were
exercisable at the time of such termination. In no event, however, may you
exercise any option after the specified expiration of the option term. For
purposes of the Plan, you will be deemed to be PERMANENTLY DISABLED if you are
unable to perform any substantial gainful activity by reason of any
medically-determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) consecutive months or more.

               NOTE: FOR OPTIONS TRANSFERRED FROM THE PREDECESSOR PLAN, YOU WILL
        HAVE UNTIL THE EARLIER OF (i) THE EXPIRATION DATE OF THE OPTION TERM OR
        (ii) THE LIMITED PERIOD PROVIDED IN THE OPTION AGREEMENT FOR THE
        EXERCISE OF THAT OPTION FOLLOWING YOUR TERMINATION OF SERVICE.

        26.    WHAT HAPPENS TO MY OPTIONS IF THE CORPORATION IS ACQUIRED OR
               MERGED?

               In the event of a Corporate Transaction (as defined below), all
options outstanding under the Discretionary Option Grant Program will
automatically accelerate so that each such option will, immediately prior to the
effective date of the Corporate Transaction, become exercisable for all the
shares of Common Stock at the time subject to that option and may be exercised
for any or all of those shares as fully vested shares. However, an outstanding
option will NOT become exercisable on such an accelerated basis if and to the
extent: (i) the option is assumed by the successor corporation, (ii) such option
is replaced with a cash incentive program which preserves the option spread
existing at the time of the Corporate Transaction on any shares for which the
option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of the option is subject to other
limitations imposed by the Plan Administrator in the Option Agreement.

                                       7
<PAGE>   16

               All outstanding options under the Discretionary Option Grant
Program will, to the extent not assumed by the successor corporation, terminate
and cease to be outstanding immediately following the completion of the
Corporate Transaction.

               Any Incentive Options accelerated upon the Corporate Transaction
will remain exercisable as Incentive Options under the Federal tax laws only to
the extent the applicable $100,000 limitation is not exceeded. If such
limitation is exceeded, the option will be exercisable for the excess number of
shares as a Non-Statutory Option.

               A CORPORATE TRANSACTION will be deemed to occur upon (i) a merger
or consolidation in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction or (ii) a sale, transfer or
other disposition of all or substantially all the assets of the Corporation in
liquidation or dissolution of the Corporation.

               NOTE: THE OPTIONS TRANSFERRED FROM THE PREDECESSOR PLAN WILL VEST
        UPON AN ACQUISITION OF THE CORPORATION BY MERGER OR ASSET SALE AND
        BECOME IMMEDIATELY EXERCISABLE FOR ALL THE OPTION SHARES AS FULLY-VESTED
        SHARES, UNLESS THE REPURCHASE RIGHTS APPLICABLE TO THE OPTION SHARES ARE
        TRANSFERRED TO THE ACQUIRING COMPANY. THE OPTIONS WILL TERMINATE
        IMMEDIATELY AFTER THE ACQUISITION, UNLESS ASSUMED BY THE SUCCESSOR
        ENTITY.

        27.    WHAT HAPPENS TO MY OPTIONS THAT ARE ASSUMED UPON A CORPORATE
               TRANSACTION?

               Each option under the Discretionary Option Grant Program which is
assumed by the successor corporation will, immediately after the Corporate
Transaction, be appropriately adjusted to apply to the number and class of
securities which would have been issued to the optionee in consummation of the
Corporate Transaction had the option been exercised immediately prior to the
Corporate Transaction. Appropriate adjustments will also be made to the exercise
price payable per share, provided the aggregate exercise price for the option
shares will remain the same. To the extent the actual holders of the
Corporation's outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Corporate Transaction, the successor
corporation may, in connection with the assumption of the option, substitute one
or more shares of its own common stock with a fair market value equivalent to
the cash consideration paid per share of Common Stock in such Corporate
Transaction.

               The Plan Administrator may structure one or more options granted
under the Discretionary Option Grant Program so that those options will
immediately vest and become exercisable for all the option shares upon an
Involuntary Termination of the optionee's service within a designated period
(not to exceed eighteen (18) months) following the effective date of a Corporate
Transaction in which the options are assumed and do not otherwise vest. Any
option so accelerated will remain exercisable for the vested shares until the
expiration or sooner termination of the option term. In addition, the Plan
Administrator may structure one or more of the Corporation's outstanding
repurchase rights so that those rights will automatically terminate, and the
shares subject those terminated rights will immediately vest, upon such an
Involuntary Termination. You should review your Option Agreement to determine
whether the options you hold will in fact accelerate upon such an Involuntary
Termination.

               An INVOLUNTARY TERMINATION will be deemed to occur upon (i) the
optionee's involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct or (ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which materially
reduces his or her duties and level of responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and target bonus under any
corporate performance- based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the optionee's consent.

                                       8
<PAGE>   17

               NOTE: A NUMBER OF OUTSTANDING OPTIONS TRANSFERRED FROM THE
        PREDECESSOR PLAN INCLUDE A SPECIAL VESTING ACCELERATION PROVISION
        PURSUANT TO WHICH THOSE OPTIONS WILL VEST AND BECOME IMMEDIATELY
        EXERCISABLE FOR ALL THE OPTION SHARES AS FULLY-VESTED SHARES UPON AN
        INVOLUNTARY TERMINATION OF THE OPTIONEE'S SERVICE WITHIN EIGHTEEN (18)
        MONTHS FOLLOWING AN ACQUISITION OF THE CORPORATION BY A MERGER OR ASSET
        SALE.

        28.    WHAT HAPPENS TO MY OPTIONS IF THERE IS A CHANGE IN CONTROL OF
               THE CORPORATION?

               The Plan Administrator may structure one or more options granted
under the Discretionary Option Grant Program so that those options will
immediately vest and become exercisable for all the option shares either upon
the occurrence of a Change in Control or upon an Involuntary Termination of the
optionee's service within a designated period (not to exceed eighteen (18)
months) following the effective date of that Change in Control. You should
review your Option Agreement to determine whether the options you hold will in
fact accelerate upon such a Change in Control or subsequent Involuntary
Termination.

               Any option accelerated in connection with a Change in Control or
subsequent Involuntary Termination will remain exercisable for fully-vested
shares until the expiration or sooner termination of the option term. However,
any Incentive Option so accelerated will remain exercisable as an Incentive
Option under the Federal tax laws only to the extent the applicable $100,000
dollar limitation is not exceeded. If such limitation is exceeded, the option
may be exercised for the excess number of shares as a Non-Statutory Option.

               A CHANGE IN CONTROL will be deemed to occur in the event (i) any
person directly or indirectly acquires securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders or (ii) there is a change in the composition of
the Board over a period of thirty-six (36) consecutive months or less such that
a majority of the Board ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board.

               NOTE: NONE OF THE OPTIONS TRANSFERRED FROM THE PREDECESSOR PLAN
        CONTAIN ANY CHANGE IN CONTROL ACCELERATION PROVISIONS.

                          DISPOSITION OF OPTION SHARES

        29.    WHEN CAN I SELL MY SHARES?

               You may sell the shares you purchase under the Plan at any time
without restriction, subject to any market black-out period imposed by the
Corporation, provided you are NOT an officer or director of the Corporation
subject to the short-swing profit limitations of the Federal securities laws.

                                  MISCELLANEOUS

        30.    IS FINANCING AVAILABLE UNDER THE PLAN?

               The Plan Administrator may assist you in the acquisition of
shares of Common Stock under the Discretionary Option Grant Program by
permitting you to pay the purchase price for the shares through a promissory
note payable in one or more installments. The terms of any such promissory note,
including the interest rate and terms of repayment, will be established in the
sole discretion of the Plan Administrator. Promissory notes will be

                                       9
<PAGE>   18

made on a full-recourse basis, and the maximum credit available to you may not
exceed the purchase price payable for the acquired shares plus any withholding
tax liability incurred by you in connection with such acquisition. In addition,
the Corporation will comply with all applicable requirements of Regulation U of
the Board of Governors of the Federal Reserve System in connection with any
financing extended under the Plan.

        31.    DO I HAVE THE RIGHT TO REMAIN EMPLOYED UNTIL MY OPTIONS UNDER
               THE DISCRETIONARY OPTION GRANT PROGRAM VEST?

               No. Nothing in the Plan or in any option grant under the
Discretionary Option Grant Program is intended to provide any person with the
right to remain in the Corporation's service for any specific period, and both
you and the Corporation will each have the right to terminate your service at
any time and for any reason, with or without cause.

        32.    ARE THERE ANY CIRCUMSTANCES WHICH WOULD CAUSE ME TO LOSE MY
               RIGHTS WITH RESPECT TO AN OPTION OR A STOCK ISSUANCE?

               Yes. The grant of options under the Discretionary Option Grant
Program and the issuance of Common Stock under those options are subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan and the securities issuable
thereunder. It is possible that the Corporation could be prevented from granting
options or from issuing shares of Common Stock under the Discretionary Option
Grant Program in the event one or more required approvals or permits were not
obtained.

        33.    DOES THE PLAN RESTRICT THE AUTHORITY OF THE CORPORATION TO GRANT
               OR ASSUME OPTIONS OUTSIDE OF THE PLAN?

               No. The Plan does not limit the authority of the Corporation to
grant options outside of the Plan or to grant options to, or assume the options
of, any person in connection with the acquisition of the business and assets of
any firm, corporation or other business entity.

        34.    DOES THE GRANT OF AN OPTION OR THE ISSUANCE OF SHARES UNDER THE
               PLAN AFFECT MY ELIGIBILITY TO PARTICIPATE IN OTHER PLANS OF THE
               CORPORATION?

               No. Option grants made under the Discretionary Option Grant
Program do not in any way affect, limit or restrict your eligibility to
participate in any other stock plan or other compensation or benefit plan or
program maintained by the Corporation.

        35.    WHAT IS A PARENT CORPORATION?

               A corporation is a parent corporation if such corporation owns,
directly or indirectly, securities representing fifty percent (50%) or more of
the total combined voting power of the Corporation's outstanding securities.

        36.    WHAT IS A SUBSIDIARY CORPORATION?

               A corporation is a subsidiary corporation if the Corporation
owns, directly or indirectly, securities representing fifty percent (50%) or
more of the total combined voting power of the outstanding securities of that
corporation.

        37.    IS THE PLAN SUBJECT TO ERISA?

               The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) or Section 401(a) of the Code.

                                       10
<PAGE>   19

                QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES

               The following is a general description of the Federal income tax
consequences of option grants made under the Discretionary Option Grant Program.
State and local tax treatment, which is not discussed below, may vary from such
Federal income tax treatment. You should consult with your own tax advisor as to
the tax consequences of your particular transactions under the Plan.

               The tax consequences of Incentive Options and Non-Statutory
Options differ as described below.

                                INCENTIVE OPTIONS

        T1.    WILL THE GRANT OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME
               TAX LIABILITY TO ME?

               No.

        T2.    WILL THE EXERCISE OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME
               TAX LIABILITY TO ME?

               No. You will not recognize taxable income at the time the
Incentive Option is exercised. However, the amount by which the fair market
value (at the time of exercise) of the purchased shares exceeds the exercise
price paid for those shares will constitute an adjustment to your income for
purposes of the alternative minimum tax (see the "Alternative Minimum Tax"
section below). On or before January 31 of the calendar year following the
calendar year in which you exercise your Incentive Option, you will receive an
information statement from the Corporation indicating, among other items, the
number of shares of Common Stock you purchased in connection with such exercise,
the market price of the Common Stock on the exercise date and the price you paid
for the purchased shares.

        T3.    WHEN WILL I BE SUBJECT TO FEDERAL INCOME TAX ON SHARES ACQUIRED
               UNDER AN INCENTIVE OPTION?

               Generally, you will recognize income in the year in which you
make a disposition of the shares purchased under your Incentive Option.

        T4.    WHAT CONSTITUTES A DISPOSITION OF INCENTIVE OPTION SHARES?

               A disposition of shares purchased under an Incentive Option will
occur in the event you transfer legal title to those shares, whether by sale,
exchange or gift, or you deliver such shares in payment of the exercise price of
any other Incentive Option you hold. However, a disposition will not occur if
you engage in any of the following transactions: a transfer of the shares to
your spouse, a transfer into joint ownership with right of survivorship provided
you remain one of the joint owners, a pledge of the shares as collateral for a
loan, a transfer by bequest or inheritance upon your death or certain tax-free
exchanges of the shares permitted under the Code.

        T5.    HOW IS MY FEDERAL INCOME TAX LIABILITY DETERMINED WHEN I DISPOSE
               OF MY SHARES?

               Your Federal income tax liability will depend upon whether you
make a qualifying or disqualifying disposition of the shares purchased under
your Incentive Option. A qualifying disposition will occur if the sale or other
disposition of the shares takes place more than two (2) years after the date the
Incentive Option was granted and more than one (1) year after the date that
option was exercised for the particular shares involved in the disposition. A
disqualifying disposition is any sale or other disposition made before both of
these requirements are satisfied.

                                       11
<PAGE>   20

        T6.    WHAT IF I MAKE A QUALIFYING DISPOSITION?

               You will recognize a long-term capital gain equal to the excess
of (i) the amount realized upon the sale or other disposition over (ii) the
exercise price paid for the shares. You will recognize a long-term capital loss
if the amount realized is lower than the exercise price paid for the shares.
(For the tax rates applicable to capital gain, please see Question T17.)

                      EXAMPLE: On September 1, 2000, you are granted an
        Incentive Option for 1,000 shares with an exercise price of $15.00 per
        share. On September 1, 2002, you exercise the option for 500 vested
        shares when the market price is $25.00 per share. The purchased shares
        are held until January 1, 2004, when you sell them for $30.00 per share.

                      Because the disposition of the shares is made more than
        two (2) years after the grant date of the Incentive Option and more than
        one (1) year after the option was exercised for the shares sold on
        January 1, 2004, the sale represents a qualifying disposition of such
        shares, and for Federal income tax purposes, there will be a long-term
        capital gain of $15.00 per share.

        T7.    WHAT ARE THE NORMAL TAX RULES FOR A DISQUALIFYING DISPOSITION?

               Normally, when you make a disqualifying disposition of shares
purchased under an Incentive Option, you will recognize ordinary income at the
time of the disposition in an amount equal to the excess of (i) the fair market
value of the shares on the option exercise date over (ii) the exercise price
paid for those shares. If the disqualifying disposition is effected by means of
an arm's length sale or exchange with an unrelated party, the ordinary income
will be limited to the amount by which (i) the amount realized upon the
disposition of the shares or (ii) their fair market value on the exercise date,
whichever is less, exceeds the exercise price paid for the shares. The amount of
your disqualifying disposition income will be reported by the Corporation on
your W-2 wage statement for the year of disposition, and any applicable
withholding taxes which arise in connection with the disqualifying disposition
will be deducted from your wages or otherwise collected from you.

               Any additional gain recognized upon the disqualifying disposition
will be capital gain, which will be long-term if the shares have been held for
more than one (1) year following the exercise date of the option. (See Question
T17 below for the tax rates applicable to capital gain.)

                      EXAMPLE: On September 1, 2000, you are granted an
        Incentive Option for 1,000 shares with an exercise price of $15.00 per
        share. On September 1, 2002, you exercise this option for 500 vested
        shares when the market price is $25.00 per share. The purchased shares
        are held until June 15, 2003, when you sell them for $30.00 per share.

                      Because the disposition of the shares is made less than
        one (1) year after the Incentive Option was exercised for the shares
        sold on June 15, 2003, the sale represents a disqualifying disposition
        of the shares, and for Federal income tax purposes, the gain upon the
        sale will be divided into two (2) components:

                             Ordinary Income: You will recognize ordinary income
               in the amount of $10.00 per share, the excess of the $25.00 per
               share market price of the shares on the date the option was
               exercised over the $15.00 per share exercise price.

                             Capital Gain: You will also recognize a short-term
               capital gain of $5.00 per share with respect to each share sold.

                                       12
<PAGE>   21

               In the event the shares purchased under an Incentive Option are
sold in a disqualifying disposition for less than the exercise price paid for
those shares, you will not recognize any income but will recognize a capital
loss equal to the excess of (i) the exercise price paid for the shares over (ii)
the amount realized upon the disposition of those shares. For example, if the
shares in the above Example are sold for $12.00 per share in the disqualifying
disposition, you would simply recognize a short-term capital loss of $3.00 per
share.

        T8.    WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

               If you make a qualifying disposition of shares acquired upon the
exercise of an Incentive Option, then no income tax deduction may be taken by
the Corporation with respect to such shares. Should you make a disqualifying
disposition of such shares, then the Corporation will be entitled to an income
tax deduction equal to the amount of ordinary income you recognize in connection
with the disposition. The deduction will, in general, be allowed to the
Corporation in the taxable year in which the disposition occurs.

        T9.    WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN
               INCENTIVE OPTION IN THE FORM OF SHARES OF COMMON STOCK ACQUIRED
               UPON THE EXERCISE OF AN EARLIER-GRANTED INCENTIVE OPTION IF THE
               DELIVERY OF THE SHARES RESULTS IN A DISQUALIFYING DISPOSITION?

               If the delivery of the shares acquired under an earlier granted
Incentive Option results in a disqualifying disposition, then you will be
subject to ordinary income taxation on the excess of (i) the fair market value
of the delivered shares at the time of their original purchase (or at the time
any forfeiture restrictions applicable to those shares lapsed) over (ii) the
exercise price paid for the delivered shares.

               The tax basis and capital gain holding periods for the shares of
Common Stock purchased upon exercise of the Incentive Option will be determined
as follows:

                      (i) To the extent the purchased shares equal in number the
        delivered shares as to which there is a disqualifying disposition, the
        basis for the new shares will be equal to the fair market value of the
        delivered shares at the time they were originally purchased, (or at the
        time any forfeiture restrictions applicable to those share lapsed), and
        the capital gain holding period for these shares will include the period
        for which the delivered shares were held (measured from their original
        purchase date or (if later) from the lapse date of any forfeiture
        restriction applicable to those shares).

                      (ii) To the extent the number of purchased shares exceeds
        the number of delivered shares, the additional shares will have a zero
        basis and a capital gain holding period measured (in general) from the
        exercise date.

        T10.   WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN
               INCENTIVE OPTION IN THE FORM OF SHARES OF COMMON STOCK (i)
               ACQUIRED UNDER AN INCENTIVE OPTION AND HELD FOR THE REQUISITE
               HOLDING PERIODS, (ii) ACQUIRED UNDER A NON-STATUTORY OPTION OR
               (iii) ACQUIRED THROUGH OPEN-MARKET PURCHASES?

               If the exercise price for the Incentive Option is paid with
shares of Common Stock (i) acquired under an Incentive Option and held for the
requisite minimum holding periods for a qualifying disposition, (ii) acquired
under a Non-Statutory Option or (iii) acquired through open-market purchases,
you will not recognize any taxable income (other than as described in the
"Alternative Minimum Tax" section below) with respect to the shares of Common
Stock purchased upon exercise of the Incentive Option. To the extent the
purchased shares equal in number the shares of Common Stock delivered in payment
of the exercise price, the new shares will have the same basis and holding
period for capital gain purposes as the delivered shares. To the extent the
number of purchased shares exceeds the number of delivered shares, the
additional shares will have a zero basis and a capital gain holding period
measured (in general) from the exercise date.

                                       13
<PAGE>   22

        T11.   WHAT ARE THE CONSEQUENCES OF A SUBSEQUENT DISPOSITION OF SHARES
               PURCHASED UNDER AN INCENTIVE OPTION WITH SHARES OF COMMON STOCK?

               If the Incentive Option is exercised with shares of Common Stock,
then those shares purchased under the Incentive Option which have a zero basis
will be treated as the first shares sold or otherwise transferred in a
disqualifying disposition. Accordingly, upon such a disqualifying disposition,
you will recognize ordinary income with respect to the zero basis shares in an
amount equal to their fair market value on the date the option was exercised for
those shares. Any additional gain upon such disqualifying disposition will in
most instances be taxed as short-term capital gain.

                              NON-STATUTORY OPTIONS

        T12.   WILL THE GRANT OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME
               TAX LIABILITY TO ME?

               No.

        T13.   WILL THE EXERCISE OF A NON-STATUTORY OPTION RESULT IN FEDERAL
               INCOME TAX LIABILITY TO ME?

               Normally, you will recognize ordinary income in the year in which
the Non-Statutory Option is exercised in an amount equal to the excess of (i)
the fair market value of the purchased shares on the exercise date over (ii) the
exercise price paid for those shares. This income will be reported by the
Corporation on your W-2 wage statement for the year of exercise (or on a Form
1099 if you are not an employee), and you will be required to satisfy the tax
withholding requirements applicable to this income.

        T14.   WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED
               UNDER A NON-STATUTORY OPTION?

               Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time you recognized the ordinary income with respect to their acquisition. A
capital loss will result to the extent the amount realized upon the sale is less
than such fair market value. The gain or loss will be long-term if the shares
are held for more than one (1) year prior to the disposition. (Please see
Question T17 below for tax rates applicable to capital gain.) The holding period
will normally start at the time the Non-Statutory Option is exercised.

        T15.   WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF A
               NON-STATUTORY OPTION IN THE FORM OF SHARES OF COMMON STOCK
               PREVIOUSLY ACQUIRED UPON THE EXERCISE OF EMPLOYEE OPTIONS OR
               THROUGH OPEN-MARKET PURCHASES?

               You will not recognize any taxable income to the extent the
shares of Common Stock received upon the exercise of the Non-Statutory Option
equal in number the shares of Common Stock delivered in payment of the exercise
price. For Federal income tax purposes, these newly-acquired shares will have
the same basis and capital gain holding period as the delivered shares. To the
extent the delivered shares were acquired under an Incentive Option, the new
shares received upon the exercise of the Non-Statutory Option will continue to
be subject to taxation as Incentive Option shares in accordance with the
Incentive Option principles discussed above.

               The additional shares of Common Stock received upon the exercise
of the Non-Statutory Option will, in general, have to be reported as ordinary
income for the year of exercise in an amount equal to their fair market value on
the exercise date. These additional shares will have a tax basis equal to such
fair market value and a capital gain holding period measured (in general) from
the exercise date.

                                       14
<PAGE>   23

        T16.   WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

               The Corporation will be entitled to an income tax deduction equal
to the amount of ordinary income you recognize in connection with the exercise
of the Non-Statutory Option. The deduction will, in general, be allowed for the
taxable year of the Corporation in which you recognize such ordinary income.

                                FEDERAL TAX RATES

        T17.   WHAT ARE THE APPLICABLE FEDERAL TAX RATES?

               REGULAR TAX RATES. Effective for the 2000 calendar year, ordinary
income in excess of $288,350 ($144,175 for a married taxpayer filing a separate
return) will be subject to the maximum federal income tax rate of 39.6%. The
applicable $288,350 or $144,175 threshold is subject to cost-of-living
adjustments in taxable years beginning after December 31, 2000. Certain
limitations are imposed upon a taxpayer's itemized deductions, and the personal
exemptions claimed by the taxpayer are subject to phase-out. These limitations
may result in the taxation of ordinary income at an effective top marginal rate
in excess of 39.6%.

               CAPITAL GAIN TAX RATES. Short-term capital gains are subject to
the same tax rates as ordinary income. Long-term capital gain is subject to a
maximum federal income tax rate of 20%, provided the capital asset is held for
more than one (1) year prior to sale or other taxable disposition.

               Beginning in 2001, capital gain recognized on the sale or
disposition of capital assets held for more than five (5) years by individuals
whose tax rate on ordinary income for the year of such sale or disposition is
below 28% will be subject to tax at a rate of 8%.

               Beginning in 2006, capital gain recognized on the sale or
disposition of capital assets held for more than five (5) years by individuals
whose tax rate on ordinary income for the year of such sale or disposition is
28% or more will be taxed at a rate of 18%, provided the holding period for such
property begins after December 31, 2000. However, any capital gain recognized on
the sale or disposition of shares of the Corporation's common stock acquired
pursuant to options granted under the Discretionary Option Grant Program will
not be eligible for the 18% tax rate unless those options are granted after
December 31, 2000.

               ITEMIZED DEDUCTIONS. For the tax year ending December 31, 2000,
itemized deductions are reduced by 3% of the amount by which the taxpayer's
adjusted gross income for the year exceeds $128,950 ($64,475 for a married
taxpayer filing a separate return). However, the reduction may not exceed 80% of
the total itemized deductions (excluding medical expenses, casualty and theft
losses, and certain investment interest expense) claimed by the taxpayer. The
applicable $128,950 or $64,475 threshold is subject to cost-of-living
adjustments in taxable years beginning after December 31, 2000.

               PERSONAL EXEMPTIONS. In addition, the deduction for personal
exemptions claimed by the taxpayer is reduced by 2% for each $2,500 ($1,250 for
a married taxpayer filing a separate return) or fraction thereof by which the
taxpayer's adjusted gross income for the year exceeds a specified threshold
amount. The applicable thresholds for 2000 are $193,400 for married taxpayers
filing joint returns (and in certain instances, surviving spouses), $161,150 for
heads of households, $128,950 for single taxpayers and $96,700 for married
taxpayers filing separate returns. Accordingly, the deduction is completely
eliminated for any taxpayer whose adjusted gross income for the year exceeds the
applicable threshold amount by more than $122,500. The threshold amounts will be
subject to cost-of-living adjustments in taxable years beginning after December
31, 2000.

                                       15
<PAGE>   24

                             ALTERNATIVE MINIMUM TAX

        T18.   WHAT IS THE ALTERNATIVE MINIMUM TAX ?

               The alternative minimum tax is an alternative method of
calculating the income tax you must pay each year in order to assure that a
minimum amount of tax is paid for the year. The first $175,000 ($87,500 for a
married taxpayer filing a separate return) of your alternative minimum taxable
income for the year over the allowable exemption amount is subject to
alternative minimum taxation at the rate of 26%. The balance of your alternative
minimum taxable income is subject to alternative minimum taxation at the rate of
28%. However, the portion of your alternative minimum taxable income
attributable to capital gain recognized upon the sale or disposition of capital
assets held for more than one (1) year will be subject to a reduced alternative
minimum tax rate of 20% (10% for individuals whose tax rate on ordinary income
is below 28%). Beginning in 2001, the alternative minimum tax rate applicable to
capital gain recognized upon the sale or disposition of capital assets held for
more than five (5) years will be equal to the capital gain tax rate in effect
for such gain for regular tax purposes (see Question T17 above). The alternative
minimum tax will, however, be payable only to the extent that it exceeds your
regular federal income tax for the year (computed without regard to certain
credits and special taxes).

        T19.   WHAT IS THE ALLOWABLE EXEMPTION AMOUNT?

               The allowable exemption amount is $45,000 for a married taxpayer
filing a joint return, $33,750 for an unmarried taxpayer and $22,500 for a
married taxpayer filing a separate return. The allowable exemption amount is,
however, to be reduced by $0.25 for each $1.00 by which the individual's
alternative minimum taxable income for the year exceeds $150,000 for a married
taxpayer filing a joint return, $112,500 for an unmarried taxpayer, and $75,000
for a married taxpayer filing a separate return.

        T20.   HOW IS THE ALTERNATIVE MINIMUM TAXABLE INCOME CALCULATED?

               Your alternative minimum taxable income is based upon your
regular taxable income for the year, adjusted to (i) include certain additional
items of income and tax preference and (ii) disallow or limit certain deductions
otherwise allowable for regular tax purposes.

        T21.   IS THE SPREAD ON AN INCENTIVE OPTION AT THE TIME OF EXERCISE
               NORMALLY INCLUDIBLE IN ALTERNATIVE MINIMUM TAXABLE INCOME?

               Yes. The spread on the shares purchased under an Incentive Option
(the excess of the fair market value of the purchased shares at the time of
exercise over the aggregate exercise price paid for those shares) is normally
included in the optionee's alternative minimum taxable income at the time of
exercise, whether or not the shares are subsequently made the subject of a
disqualifying disposition.

        T22.   HOW WILL THE PAYMENT OF ALTERNATIVE MINIMUM TAXES IN ONE YEAR
               AFFECT THE CALCULATION OF MY TAX LIABILITY IN A LATER YEAR?

               If alternative minimum taxes are paid for one or more taxable
years, a portion of those taxes (subject to certain adjustments and reductions)
will be applied as a partial credit against your regular tax liability (but not
alternative minimum tax liability) for subsequent taxable years. In addition,
upon the sale or other disposition of the purchased shares, whether in the year
of exercise or in any subsequent taxable year, your basis for computing the gain
for purposes of alternative minimum taxable income (but not regular taxable
income) will include the amount of the Incentive Option spread previously
included in your alternative minimum taxable income.

                                       16
<PAGE>   25

               CORPORATION INFORMATION AND ANNUAL PLAN INFORMATION

               Discovery Partners International, Inc. is a Delaware corporation
which maintains its principal executive offices at 9640 Towne Centre Drive, San
Diego, California 92121. The telephone number at the executive offices is (858)
455-8600. You may contact the Corporation at this address or telephone number
for further information concerning the Plan and its administration.

               A copy of the Corporation's Annual Report to Stockholders for
each fiscal year will be furnished to each participant in the Plan, and
additional copies will be furnished without charge to each participant upon
written or oral request to the Corporate Secretary of the Corporation at its
principal executive office or upon telephoning the Corporation at its principal
executive office. In addition, any person receiving a copy of this Prospectus
may obtain without charge, upon written or oral request to the Corporate
Secretary, a copy of any of the documents listed below, which are hereby
incorporated by reference into this Prospectus, other than certain exhibits to
such documents.

        (a)    The Corporation's Registration Statement No. 333-36638 on Form
               S-1 filed with the SEC on May 9, 2000, together with the
               amendments filed thereto on Form S-1/A on June 23, 2000, July 21,
               2000, July 26, 2000 and July 27, 2000 (upon which date two
               amendments were filed), respectively.

        (b)    The Corporation's Prospectus filed with the SEC on July 28, 2000
               pursuant to Rule 424(b) of the Securities Act of 1933, as
               amended, in connection with the Corporation's Registration
               Statement No. 333-36638, in which there is set forth the audited
               financial statements for the Corporation's fiscal year ended
               December 31, 1999.

        (c)    The Corporation's Registration Statement on Form 8-A12G filed
               with the SEC on July 25, 2000, in which are described the terms,
               rights and provisions applicable to the Corporation's outstanding
               Common Stock.

               The Corporation will also deliver to each participant in the Plan
who does not otherwise receive such materials a copy of all reports, proxy
statements and other communications distributed to the Corporation's
stockholders.

                                       17

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