Document:

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                                                                   EXHIBIT 10.30

                                LICENSE AGREEMENT

        This License Agreement ("Agreement") is made and entered into as of the
31st day of March, 2000, by and between Martek Biosciences Corporation, a
Delaware corporation ("Licensor"), and Abbott Laboratories, an Illinois
corporation, ("Licensee").

                                   WITNESSETH:

        WHEREAS, Licensor has developed certain technology relating to the use
of Omega-3 and Omega-6 long-chain polyunsaturated fatty acid-containing
triglycerides for incorporation into infant formula;

        WHEREAS, Licensee and its affiliates are in the business of developing,
manufacturing and marketing infant nutritional products; and

        WHEREAS, Licensee desires to obtain a non-exclusive license from
Licensor to use the Technology and Licensor is willing to grant such license
subject to the conditions and pursuant to the terms set forth in this Agreement.

        NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, each party hereby agrees with the other as
follows:

                                    ARTICLE I

                                   DEFINITIONS

        Section 1.1. "Affiliate" shall mean any person, corporation, firm,
partnership or other entity which directly or indirectly owns Licensee, is owned
by Licensee or is owned by a party which owns Licensee to the extent that the
owning entity has in excess of 50% of the equity having the power to vote on or
direct the affairs of the owned entity.

        Section 1.2. "Infant Formula Product" shall mean a breast milk
substitute formulated industrially in accordance with applicable Codex
Alimentarius and United States Food and Drug Administration standards (i) to
satisfy the total normal nutritional requirements of infants from birth up to
between four and six months of age and adapted to their physiological
characteristics or fed in addition to

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* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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other foods to infants up to approximately one year of age and older or (ii) to
satisfy the normal nutritional requirements of infants born prematurely.

        Section 1.3. "Licensed Patents" shall mean the patents and patent
applications attached hereto as Exhibit 1 and all other patents and patent
applications in the Territory owned by Licensor or licensed to Licensor (with
the right to sublicense) which cover the Technology, including all patents and
patent applications covering inventions, improvements or modifications conceived
or developed and owned by or licensed to Licensor (with the right to sublicense)
during the term of this Agreement and included in the Technology, and all
divisionals, continuations, continuations-in-part, reexaminations and extensions
thereof.

        Section 1.4. "Licensee Product" shall mean any product (i) which is an
Infant Formula Product, (ii) which is developed by or for Licensee or its
Affiliates, and (iii) which would infringe one or more Licensed Patents if sold
in any country in the Territory where such Licensed Patent(s) has issued, but
for the license granted in Article II hereof.

        Section 1.5. "Martek Products" shall mean triglycerides containing
Omega-3 and/or Omega-6 long-chain polyunsaturated fatty acids produced by or for
Martek, by microbial fermentation according to the Technology and Licensed
Patents.

        Section 1.6 "Supply Agreement" shall mean a definitive agreement between
Licensor and Licensee, which shall set forth the terms and conditions under
which Licensor shall sell and Licensee shall purchase Martek Products. Such
Supply Agreement may pertain only to Martek Products containing arachidonic acid
("ARA Supply Agreement"), or only to Martek Products containing docosahexaenoic
acid ("DHA Supply Agreement"), or to both types of Martek Products.

        Section 1.7. "Technology" shall mean the organisms, microorganisms,
specifications, biological materials, designs, formulae, processes, standards,
data, trade secrets, know-how and technology relating to the development and
production of the Martek Product, Martek's proprietary practice of incorporating
triglycerides containing Omega-3 and/or Omega-6 long-chain polyunsaturated fatty
acids, and Licensor's proprietary process by which triglycerides containing
Omega-3 and/or Omega-6 long-chain polyunsaturated fatty acids are manufactured,
purified and incorporated, into Infant Formula Products, and any modifications,
improvements, and enhancements to any of the foregoing made by Licensor, which
are proprietary

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* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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to Licensor and which, in Licensor's and Licensee's mutual opinion expressed in
writing, is or are necessary or useful in the production and development of the
Martek Product.

        Section 1.8. "Territory" shall mean all the countries in the world,
individually, collectively or in any combinations.

        Section 1.9. "Third Party" shall mean any party other than Licensor,
Licensee and Affiliates.

        Section 1.10 "Trademark(s)" shall mean the Licensor trademarks
FORMULAID, NEUROMINS, DHASCO and ARASCO. Exhibit 2 attached hereto sets forth
the Trademarks as of the date of this Agreement.

        Section 1.11 "Unit of Martek Product" shall mean that quantity of Martek
Product containing one (1) kilogram of docosahexaenoic acid or one kilogram of
arachidonic acid.

                                   ARTICLE II

                        GRANT OF LICENSE AND OTHER RIGHTS

        Section 2.1. License. Licensor hereby grants to Licensee, under the
Licensed Patents, the Technology, and Licensor's other proprietary rights, for
the term of this Agreement and subject to the conditions of this Agreement, a
non-exclusive right and license, in the Territory, (i) to use, make *
triglycerides containing Omega-3 and/ or Omega-6 long-chain polyunsaturated
fatty acids for the production of the Licensee Product, (ii) to use the Martek
Products for purposes of producing the Licensee Product; and (iii) the right to
use, market, import, export, distribute, offer for sale and sell the Licensee
Product.

        Section 2.2 Sublicense. Licensor hereby grants to Licensee, under the
Licensed Patents, the Technology, and Licensor's other proprietary rights, for
the term of this Agreement and subject to the conditions of this Agreement, a
non-exclusive right, in the Territory, to grant non-exclusive, non-transferable
sublicenses to:

        (i)    Affiliates to enjoy the rights set forth in Section 2.1(i)-(iii);

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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       (ii)   * approved by Licensor (such approval not unreasonably withheld)
              to enjoy the rights set forth in * and to * triglycerides
              containing Omega-3 and/ or Omega-6 long-chain polyunsaturated
              fatty acids by microbial fermentation according to the Technology
              and/ or the Licensed Patents and/ or Licensee Product exclusively
              to Licensee and/ or its Affiliates; and

       (iii)  * to enjoy the rights set forth * excluding the use of * used by
              Licensor in the Martek Products, or any * contained within
              Licensor's documented production process for the production of the
              Martek Products, to * triglycerides containing Omega-3 and/ or
              Omega-6 long-chain polyunsaturated fatty acids and/or Licensee
              Product exclusively for Licensee and/ or its Affiliates;

provided that each such Affiliate * shall be subject to confidentiality
obligations at least as stringent as those set forth in Article XI of this
Agreement.

        Section 2.3 Limitation of License. The right *, as granted to Abbott
within the license and rights granted under Section * and Licensee * from
Licensor for purposes of * which contains *, upon and subject to the following:

       (i)    Licensor shall demonstrate, to Licensee's reasonable satisfaction,
              that Licensor * in compliance with Licensee's * (as provided to
              Licensor prior to the date of this Agreement, and as may be
              amended in good faith by Licensee from time to time);

       (ii)   The use by Licensee of Licensor's * of Licensee Product * shall
              enable Licensee to obtain and/or maintain * for marketing Licensee
              Product containing *, with no delay or added cost or obligation to
              Licensee, and with the *, in comparison with Licensee's ability to
              obtain and/or maintain such * for * Licensee Product * by Licensee
              from a Third Party other than a * (excluding such delays, costs,
              or labeling changes necessary to qualify Licensor *); and

       (iii)  Licensor and Licensee shall enter into an ARA Supply Agreement, in
              accordance with Section * below.

Licensee shall use due diligence in working with Licensor in good faith to
satisfy the conditions set forth in Section 2.3(i), (ii), and (iii) above. The
parties agree that nothing in this Section 2.3 shall limit the right and license
granted in Section 2.1 and 2.2 above as it relates *, use or sell arachidonic
acid, or to *, use or sell

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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docosahexaenoic acid, and nothing in this Section 2.3 shall obligate Licensee to
enter into any DHA Supply Agreement, nor to purchase any Martek Products from
Licensor or any Third-Party licensee of Licensor, which contain docosahexaenoic
acid.

        Section 2.4.    Licenses to Third Parties

        (i) Licenses to Third Parties Generally *. Licensor shall be entitled to
grant any license to any Third Party relating to the Technology, the Martek
Products or the Licensed Patents upon any terms whatsoever; provided, however,
that Licensor shall not grant any license to any Third Party after the effective
date of this Agreement, or otherwise agree to any terms and/ or conditions with
a Third Party, for the incorporation of the Martek Products into, or for the use
of the Technology or the Licensed Patents for the production of, an Infant
Formula Product * without the prior written consent of Licensee or *.
Notwithstanding the provisions of this Section 2.4(i), Licensor shall be *
(similar to those provided in subsections * of this Agreement) without the prior
consent of Licensee and without being obligated concurrently *, if the license
to such a Third Party is territory-restricted and if the * Third Party licensee
due to the territorial restrictions applicable to use of the Technology and the
Martek Product. In the event Licensor enters into a contract or otherwise agrees
after the effective date of this Agreement to sell the Martek Products to a
Third Party *. Licensor further represents to Licensee that Licensor has not,
prior to the effective date of this Agreement, granted a license to any Third
Party for the incorporation of the Martek Products into, or for the use of the
Technology or the Licensed Patents for the production of, an Infant Formula
Product *.

        (ii) Production of the Martek Products. If the conditions set forth in
Section 2.3(i), (ii), and (iii) above are satisfied, the parties shall negotiate
in good faith to enter into the ARA Supply Agreement. In addition, if Licensee
elects, at Licensee's sole discretion, to obtain Martek Products containing
docosahexaenoic acid from Licensor, the parties shall negotiate in good faith to
enter into the DHA Supply Agreement. Such Supply Agreement(s) shall govern in
case of any conflict between this Agreement and such Supply Agreement(s)
relating to the supply of the relevant Martek Product(s) to Abbott, and shall
include a provision that Licensor shall use reasonable efforts to produce the
Martek Products itself, or through a Third Party whether or not pursuant to
another licensing agreement, for the purpose of creating a sufficient supply of
the Martek Products to satisfy Licensee's and its Affiliates' requirements with
respect to their marketing and sale of the

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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Licensee Product; provided, however, that such requirements and any increases
and decreases thereof, shall be communicated in writing by Licensee and its
Affiliates not less than twelve (12) months prior to Licensor's obligation to
satisfy such requirements or increases or decreases thereof.

        (iii) Supply Payments in Lieu of Royalty. In the event Licensor and
Licensee enter into a Supply Agreement (whether an ARA Supply Agreement, a DHA
Supply Agreement, or both) and decide to use a purchase price per Unit of Martek
Product that is in lieu of the Royalty (as defined in Section 4.1(iii) below),
such purchase price shall not exceed * per Unit of Martek Product, but such
purchase price shall be subject to annual adjustments, in accordance with
increases or decreases in the most recently-available twelve (12) month
Producers Price Index published by the Bureau of Labor Statistics of the U.S.
Department of Labor, commencing on the first anniversary of the first delivery
of Martek Product to Licensee.

        (iv) Transfer of Martek Products. Nothing in this Section 2.4 or in this
Agreement shall be construed to permit Licensee or its Affiliates to sub-license
the Martek Products or the Technology, except as expressly set forth in Section
2.2 above, or otherwise unilaterally to transfer to any Third Party the Martek
Products or the Technology except as the same are incorporated into or used in
the manufacture of the Licensee Product.

        Section 2.5 Sublicensing. The grants to Licensee under this Article II
shall not include the right to grant sublicenses, except as expressly set forth
in Section 2.2 above.

        Section 2.6. Trademarks. In addition to the license granted hereunder
relating to the Martek Products and the Technology, Licensor hereby grants to
Licensee the non-exclusive, right and license to use the Trademarks solely on
and in connection with the sale of any Licensee Product that contains a Martek
Product, with the further agreement that Licensee may elect to so use the
Trademarks at Licensee's sole discretion. If Licensee so uses the Trademarks,
the rights granted in this Section 2.6 shall be subject to the following terms
and conditions:

        (i) Licensee shall not use the Trademarks as or part of its corporate or
business name or the name of any business entity which is controlled by it,
whether an Affiliate or otherwise.

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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        (ii) Licensee and its Affiliates shall have no right to sublicense to
Third Parties any of the rights in the Trademarks conveyed hereunder.

        (iii) Licensee and its Affiliates shall not affix or use the Trademarks
on any product other than a Licensee Product that contains a Martek Product.

        (iv) Licensee recognizes and acknowledges Licensor's ownership of the
Trademarks and Licensor's intent to protect the Trademarks in the Territory. *
All use by Licensee or its Affiliates of the Trademarks in the Territory shall
inure to the benefit of Licensor, and Licensee and its Affiliates shall make no
use or apply for any registration thereof except as permitted by this Agreement.
Upon reasonable request by Licensor and at Licensor's expense, Licensee shall
assist Licensor, including execution of appropriate documents, in effectuating,
registering, and otherwise maintaining Licensor's rights in the Trademarks.
Nothing in this Agreement shall be construed so as to require Licensor to take
any actions or measures to protect or secure any rights in or obtain or apply
for registration of the Trademarks.

        (v) Licensee covenants that to the extent that any Trademark is, or
Licensor notifies Licensee that any Trademark has been registered in any
jurisdiction in the Territory, Licensee will use the trademark registration
symbol (R) at least one time per label, labeling or packaging of the Licensee
Product that contains a Martek Product or on the labels, labeling or packaging
thereof and on all material originating with Licensee or its Affiliates and used
to promote the sale of any Licensee Product that contains a Martek Product in
the applicable jurisdiction, and the following legend prominently shall appear
at least once in each such Licensee Product or material in each such
jurisdiction: [Trademark](R) is a registered trademark of Martek Biosciences
Corporation. Until such time as Licensor obtains a Registration on any Trademark
in a particular jurisdiction, Licensee shall substitute the symbol "(TM)" in
place of the symbol (R) as specified herein in such jurisdiction.

        (vi) Licensee covenants that Licensee Products that contain any Martek
Product manufactured for and by it and sold by it under the Trademarks shall be
of as high a quality as like other products sold by Licensee. *

        (vii) Licensee shall advise Licensor of any infringement of any
Trademark of which it or its Affiliates becomes aware, but Licensee and its
Affiliates shall not

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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bring any action with respect to any such infringement without Licensor's prior
written consent. *

        (viii) Nothing in this Section 2.6 or in this Agreement shall be
construed to require Licensee or its Affiliates to use any of the Trademarks on
the Licensee Product or on the labels, labeling or packaging thereof or on
materials used to promote the sale of the Licensee Product.

        Section 2.7. Services. During the first * of this Agreement, at * to
Licensee, Licensor shall provide up to * of services of its officers and other
employees at such reasonable times as requested by Licensee to provide technical
and other consultation services relating to the delivery and use of the
Technology as contemplated under this Agreement. If greater * of such technical
or other consultation services in the aggregate are required and requested by
Licensee or its Affiliates, Licensor and Licensee hereby agree that, prior to
the provision of additional technical or other consultation services, they shall
enter into good faith negotiations relating to compensation and other terms for
such additional technical or other consultation services, which compensation and
other terms shall be commensurate with industry standards.

                                   ARTICLE III

                              TERM AND CANCELLATION

        Section 3.1. Term. This Agreement shall commence on the date first
written above and, unless earlier terminated pursuant to another Section of this
Article III, shall terminate as to each country in the Territory in which a
Licensee Product is sold, on the twenty-fifth anniversary of the date of first
commercial sale of any Licensee Product in such country and, as to each country
in the Territory in which a Licensee Product has not been sold prior to the
twenty-fifth anniversary of the date first written above, upon such twenty-fifth
anniversary. Upon expiration of this Agreement as to each country, Licensee
shall have a fully paid, royalty free license to continue to utilize the Martek
Products and the Technology in such country as provided for in Section 2.1 and
2.2. Upon expiration of this Agreement as to each country, Licensee shall have a
fully paid, royalty free license to continue to utilize the Trademarks in such
country in accordance with in Section 2.6.

        Section 3.2. Material Breach; Opportunity to Cure. Either party to this
Agreement may terminate this Agreement upon forty-five (45) days written notice
if

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* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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the other party shall commit a material breach of this Agreement and shall not
cure such breach within such forty-five (45) day period, provided that if the
allegedly breaching party in good faith initiates an Alternative Dispute
Resolution ("ADR") procedure pursuant to Section 12.1 below and Exhibit 3
attached to this Agreement, relating to such alleged breach or cure, during such
forty-five (45) day period, and if the ADR procedure results in a finding that
such breach was committed and that such breach was not cured, then termination
shall be effective forty-five (45) days after the date of the ADR finding,
unless such breach is cured within such second forty-five (45) day period.

        Section 3.3. Termination in Case of Infringement. Licensee shall have
the right to terminate this Agreement in a particular country within the
Territory if a court or other tribunal of competent jurisdiction determines by
final order that the Technology or any of the Martek Products infringes upon the
patent or other proprietary rights of any Third Party in such country; provided,
however, that if, prior to any such termination, Licensor develops a
non-infringing alternative or obtains a license from such Third Party, such that
Licensee could lawfully use the Technology and/ or Martek Products (as the case
may be) in connection with the Licensee Products at no additional cost or
expense to Licensee beyond that expressly provided in this Agreement, Licensee
shall not terminate this Agreement.

        Section 3.4 Termination by Licensee. Licensee shall have the right to
terminate this Agreement of its own volition upon ninety (90) days prior written
notice to Licensor, provided that such termination shall be effective no earlier
than the first anniversary of the date upon which Licensee made the payments to
Licensor as required under Section 4.1(i) below.

        Section 3.5. Sale of Inventory upon Termination. Effective upon the date
of termination of this Agreement (country-by-country or in whole, as the case
may be), Licensee and its Affiliates shall cease manufacturing the Licensee
Product; provided, however, that, Licensee and its Affiliates may continue to
distribute the Licensee Products manufactured by or for Licensee prior to such
date if, to the extent lawful, Licensee continues to pay the Royalty under
Section 4.1(iii) with respect to such Licensee Products and otherwise continues
to comply with the terms and conditions of this Agreement. Notwithstanding the
preceding sentence, upon the earlier to occur of (i) the sale by Licensee and
its Affiliates of all of their inventory of Licensee Products manufactured prior
to the date of the termination of this Agreement or (ii) the date which is six
months after the date of the termination of this Agreement, Licensee and its
Affiliates shall cease all use of the Technology,

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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sale of the Licensee Product and use of the Trademark. This Section 3.5 shall
not apply in the event this Agreement expires pursuant to Section 3.1 of this
Agreement.

        Section 3.6.    Other Rights and Remedies.
        (i) Unless another provision of this Agreement specifically provides to
the contrary, the rights of termination as herein provided shall be in addition
to all other rights and remedies which either party may have to enforce this
Agreement or to secure damages for the breach hereof, and the exercise of any
right of termination as herein provided by either party shall not relieve the
other of any of its obligations under this Agreement accruing prior to the
effective date of termination, including, but not limited to, the obligation to
pay fees and Royalties pursuant to Section 4.1 or to render reports with respect
thereto.

        (ii) In no event shall either party be liable to the other for any
indirect or consequential damages, including but not limited to loss of profits
or business opportunity, whether in connection with the termination of this
Agreement or any Supply Agreement, the breach hereof or thereof, or any other
basis upon which one party may seek remedies against the other.

                                   ARTICLE IV

                              PAYMENTS BY LICENSEE

        Section 4.1. Fees and Royalties. Licensee shall compensate Licensor for
the license and other rights granted hereby and services provided hereunder, in
United States Dollars, as follows:

                      (i) A one time payment (non-refundable, but creditable
        pursuant to the provisions of this Section 4.1(1)) of three million
        dollars ($3,000,000), two million dollars ($2,000,000) of which is
        payable within five (5) business days of the execution of this Agreement
        and one million dollars ($1,000,000) of which is payable within five (5)
        business days of the first anniversary date of this Agreement. Upon
        Licensee's satisfaction of premarket requirements of the U.S. Food and
        Drug Administration necessary to allow Licensee to sell any Licensee
        Product in the United States, a portion of this one time payment equal
        to Five Hundred Thousand Dollars ($500,000) shall be creditable by
        Licensee against on going Royalties that are due hereunder or against
        the purchase of the Martek Products pursuant to the Supply Agreement (as
        the case may be);

                      (ii) A pre-payment (non-refundable, but creditable
        pursuant to the provisions of this Section 4.1(ii)) of one million, five
        hundred thousand dollars ($1,500,000) payable within five (5) business
        days

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* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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        of execution of this Agreement, which payment shall be creditable by
        Licensee against on going Royalties that are due hereunder or against
        the purchase of the Martek Products pursuant to the Supply Agreement(s)
        (as the case may be);

                        (iii) During the term described in Section 4.1(v)(A)
        below, a royalty payment (the "Royalty") in an amount equal to * of the
        greater of (A) the cost of goods sold applicable to the Licensee
        Product, as determined using generally accepted accounting principals
        and methodologies reflected on Licensee's audited annual financial
        statements (the "Cost of Goods Sold"), or (B) the amount received by
        Licensee or its Affiliates from the sale for value of the Licensee
        Product to Third Parties, which amount received by Licensee or its
        Affiliates shall not be reduced by taxes assessed on income from such
        sales but shall not include: returns and allowances actually paid or
        allowed by Licensee or its Affiliates; discounts, whether cash or trade;
        rebates; and sales, use, excise, value added and other taxes based on
        the sales price of the Licensee Products, whether or not absorbed by
        Licensee or its Affiliates (the "Sales Price").

                        (iv) During the term described in Section 4.1(v)(B)
        below, a Royalty for Licensee Product provided for use by a customer in
        an amount equal to * of the greater of (A) the Cost of Goods Sold
        applicable to the Licensee Product, or (B) the Sales Price of the
        Licensee Product to Third Parties.

                        (v) (A)  As to each country in the Territory in which
        the Licensee Product is sold or otherwise distributed for consumer
        use, until the expiration of any Licensed Patents in such country,
        regardless of when such Licensed Patents may issue; provided; however,
        that royalties shall be paid in every country in which any Licensee
        Product is sold or otherwise distributed for consumer use, whether or
        not Licensor obtains a patent in such country, for a period of not less
        than ten (10) years after the date of the first commercial sale of such
        Licensee Product in that country, and provided, further, that no royalty
        shall be payable upon sales of a Licensee Product in a country after the
        twenty-fifth (25th) anniversary of the date of the first commercial sale
        of such Licensee Product in that country.

                      (v) (B) As to each country in the Territory in which the
        Licensee Product is sold or otherwise distributed for consumer use, for
        such additional period of time, if any, between the expiration of the
        royalty obligation

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

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        described in Section 4.1(v)(A) above and the twenty-fifth (25th)
        anniversary of the date of the first commercial sale of the Licensee
        Product in such country.

                      (vi)  *

        Section 4.2. Manner of Royalty Payment. All Royalty payments with
respect to each Licensee Product sold shall be made quarterly, within sixty days
of the close of each of Licensee's three month and annual accounting periods,
based on Licensee's fiscal year, with respect to Licensee's and its Affiliates'
sales occurring during such quarters, at Licensor's office as set forth below.
Quarterly royalty payments shall be made in U.S. Dollars at the sales price
applicable thereto if in U.S. Dollars or, if in another currency, such quarterly
royalty payments shall be the sum of royalties due for the three (3) months of
the applicable quarter calculated for each such month using the beginning and
ending month's published exchange rate, set one business day prior to month end,
by Reuters divided by two (if a Reuters exchange rate is not available for
certain countries, an exchange rate established by a recognized third party will
be used).

        Section 4.3. Reimbursement of Expenses. Licensee agrees to pay to
Licensor, in addition to the amounts specified in Section 4.1 above, all
reasonable, verifiable traveling, living and out-of-pocket expenses, approved in
advance in writing by Licensee, for services rendered by Licensor outside of the
states of Maryland and Kentucky and requested by Licensee pursuant to Section
2.7 of this Agreement.

        Section 4.4.    Commercialization and Other Expenses.  Licensee and its
Affiliates shall pay all expenses for the commercialization of the Licensee
Product. Licensee shall compensate Licensor for samples of the Martek Products
that are to be used for research and development purposes, and not for inclusion
in a Licensee Product for sale to consumers*

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

        Section 5.1.    Licensor's Representations and Warranties.  Licensor
represents and warrants to the Licensee as follows:

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 12 -

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       (i)    Exhibit 1 sets forth a complete and accurate list of the Licensed
              Patents as of the date of this Agreement.

       (ii)   Licensor has all necessary corporate power and authority to enter
              into this Agreement, perform its obligations hereunder and license
              the Technology, the Licensed Patents and the Martek Products
              pursuant to the terms of this Agreement. Licensor's performance
              under this Agreement does not conflict with any other contract to
              which Licensor is bound.

       (iii)  Licensor has, prior to the date of this Agreement, provided
              Licensee with a list of all Third Party patents and/ or patent
              applications related to the Technology which are known to
              Licensor.

       (iv)   It is Licensor's belief as of the date of this Agreement, that no
              Third Party patents are infringed by manufacture or sale, in the
              Territory, of the Martek Products.

        Section 5.2. DISCLAIMERS. (i) LICENSOR HEREBY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE RELATING TO THE MARTEK
PRODUCTS OR THE TECHNOLOGY AND ANY OTHER WARRANTY OR WARRANTIES RELATING THERETO
AND NOT EXPRESSLY SET FORTH IN THIS AGREEMENT. LICENSOR MAKES NO REPRESENTATIONS
OR WARRANTIES AND HAS NO DUTY TO ENSURE THAT THE TECHNOLOGY OR THE MARTEK
PRODUCTS ARE USABLE WITH THE LICENSEE PRODUCT OR THAT THE TECHNOLOGY OR THE
MARTEK PRODUCTS ARE SAFE OR CAN BE INCORPORATED SAFELY INTO THE LICENSEE
PRODUCT. IT IS HEREBY ACKNOWLEDGED AND AGREED THAT IT SHALL BE LICENSEE'S RIGHT
AND OBLIGATION TO DETERMINE THE SAFETY AND UTILITY OF EACH MARTEK PRODUCT AS IT
RELATES TO LICENSEE PRODUCTS.

        (ii) LICENSOR DISCLAIMS AND SHALL NOT BE LIABLE FOR ANY DAMAGES OF ANY
NATURE RESULTING OR ARISING FROM OR RELATING TO (A) THE USE, MANUFACTURE,
DISTRIBUTION, MARKETING, OR SALE BY LICENSEE, ITS AFFILIATES OR ANY THIRD PARTY
OF THE TECHNOLOGY, THE MARTEK PRODUCTS OR THE LICENSEE PRODUCT, OR (B) ANY
IMPROVEMENTS OR MODIFICATIONS TO THE TECHNOLOGY, THE

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 13 -

<PAGE>   14

MARTEK PRODUCTS OR THE LICENSEE PRODUCT WHICH ARE NOT MADE BY AND PROPRIETARY TO
LICENSOR, UNLESS THE LIABILITY RESULTS FROM (X) LICENSOR'S FAILURE TO PERFORM
ITS OBLIGATIONS UNDER THIS AGREEMENT OR (Y) IF LICENSEE ELECTS TO OBTAIN ANY
MARTEK PRODUCT FROM LICENSOR, LICENSOR'S FAILURE TO MANUFACTURE THE MARTEK
PRODUCT IN ACCORDANCE WITH SPECIFICATIONS MUTUALLY AGREED TO BETWEEN LICENSOR
AND LICENSEE UNDER THE SUPPLY AGREEMENT.

        (iii) LICENSOR HEREBY DISCLAIMS ANY WARRANTY THAT THE TECHNOLOGY OR THE
LICENSED PATENTS ARE FREE FROM INFRINGEMENT BY THIRD PARTIES, EXCEPT AS SET
FORTH IN SUBSECTION 5.1. LICENSOR FURTHER DISCLAIMS ANY WARRANTY RELATING TO THE
PATENTABILITY OF, OR THE VALIDITY OF ANY PATENTS RELATING TO, THE TECHNOLOGY OR
THE MARTEK PRODUCTS AND MAKES NO REPRESENTATIONS WHATSOEVER WITH REGARD TO THE
SCOPE OF ANY SUCH PATENTS OR, EXCEPT AS SET FORTH IN SUBSECTION 5.1, THAT SUCH
PATENTS MAY BE COMMERCIALLY EXPLOITED WITHOUT INFRINGING OTHER PATENTS. LICENSOR
HEREBY DISCLAIMS ANY WARRANTIES WITH REGARD TO THE VALIDITY OR USE OF THE
TRADEMARKS AND MAKES NO REPRESENTATIONS WHATSOEVER WITH REGARD TO THE SCOPE OF
ANY OF THE TRADEMARKS.

        Section 5.3     Licensee's Representations and Warranties.  Licensee
represents and warrants to the Licensor as follows:

       (i)    The execution and delivery of this Agreement and the performance
              by Licensee of the transactions contemplated hereby have been duly
              authorized by all necessary corporate actions.

       (ii)   The performance by Licensee of any of the terms and conditions of
              this Agreement will not constitute a breach or violation of any
              other agreement or understanding, written or oral, to which it or
              its Affiliates is a party.

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 14 -
<PAGE>   15

                                   ARTICLE VI

                              LICENSEE'S COVENANTS

        Section 6.1. Compliance with Law; Regulatory Approval. Licensee
covenants and agrees that it and its Affiliates shall conduct all of their
operations dealing with the Technology, the Martek Products and the Licensee
Product in material compliance with all applicable laws, regulations and other
requirements which may be in effect from time to time, of all national
governmental authorities, and of all states, municipalities and other political
subdivisions and agencies thereof, including, without limiting the generality of
the foregoing, the Infant Formula Act of 1980, the Federal Food, Drug, and
Cosmetic Act, the regulations and other requirements of the United States Food
and Drug Administration, similar state laws and regulations and similar laws and
other requirements, including any and all amendments, as may be applicable in
any jurisdiction in which any Licensee Product is sold. * The parties recognize
and acknowledge Licensee's intent to diligently pursue the commercialization of
a Licensee Product; provided, however, that nothing in this Agreement shall be
construed so as to obligate Licensee to take any specific action or measure to
seek regulatory approval for or to market Licensee Product.

        Section 6.2. Performance and Product Quality. Licensee covenants and
agrees that it and its Affiliates shall exercise a reasonable standard of care
in the testing, manufacturing, marketing, packaging, distribution and sale of
each Licensee Product. Licensee further covenants and agrees that it and its
Affiliates shall maintain quality control, provide adequate tests of materials,
provide quality workmanship, and do such other things as are reasonably required
to assure high quality production of such Licensee Products. In this regard, and
without limiting the applicability of the general indemnification provisions
applicable to the representations, warranties and covenants made by the parties
to this Agreement as provided in Article X of this Agreement, Licensee hereby
covenants and agrees to indemnify, defend and hold harmless Licensor and
Licensor's directors, officers, employees and agents from and against all
claims, actions or causes of action (whether sounding in contract, negligence or
strict liability), suits and proceedings ("Claim") and all loss, assessments,
liability, damages, and expenses incurred in connection therewith (including
reasonable attorneys' fees) ("Loss") for which Licensor or its directors,
officers, employees or agents may become liable or incur with respect to any
product liability claim asserted against Licensee, its Affiliates, Third Parties
or Licensor relating to the manufacturing, marketing, storage,

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 15 -
<PAGE>   16

packaging, distribution, sale or use of the Licensee Product, unless such Claim
or Loss results from (i) a defect in the Martek Products purchased by Licensee
from Licensor under the Supply Agreement (excluding the determination of a
defect in the safety and utility of the Martek Product relating to its use in a
Licensee Product); (ii) the failure of Licensor to manufacture the Martek
Products purchased by Licensee from Licensor in accordance with specifications
mutually agreed to by Licensor and Licensee in the Supply Agreement; (iii) any
negligence or intentional wrongdoing of Licensor; or (iv) the breach by Licensor
of this Agreement or the Supply Agreement.

        Section 6.3. Licensee's Records. Licensee covenants and agrees that
Licensee will keep true and accurate records adequate to permit Royalties due to
Licensor to be computed and verified pursuant to this Section 6.3, which records
shall be made available upon prior written request by Licensor, during business
hours, for inspection by an independent accountant who is not the auditor of
record for Licensor and who is reasonably acceptable to Licensee and who shall
be bound by a confidentiality agreement with the Licensee, to the extent
necessary for the determination of the accuracy of the reports made hereunder.
For the purposes of this Section 6.3, any of the five largest accounting firms
in the United States (as of the date of the audit) shall be deemed acceptable to
Licensee, provided that the firm selected by Licensor is not Licensor's auditor
of record. The accountant shall provide Licensor with a report containing his/
her conclusions, but not the inspected records nor the information contained
therein, and shall concurrently provide Licensee with such report. Each such
inspection shall cover no more than the * calendar years prior to the date of
the request for inspection, and Licensor shall be entitled to no more than *
such inspection per calendar year, provided that, if an inspection reveals an
underpayment by Licensee of * or greater, then the accountant shall also be
permitted to inspect such records covering a * calendar year period preceding
the * year period of such inspection. Licensor shall bear the full cost of such
inspection unless an underpayment by Licensee of * or greater of Royalties due
hereunder is discovered by the accountant, in which case Licensee shall bear the
full cost of the inspection.

        Section 6.4. Protection of Licensor's Proprietary Interest. Licensee
acknowledges and agrees that the Licensed Patents and the Martek Products are
proprietary to Licensor, and Licensee hereby covenants and agrees that (i)
Licensee and its Affiliates shall not use the Technology or the Martek Products
for any purpose not provided for hereunder, and (ii) shall not challenge or
cause any Affiliate or Third Party to challenge Licensor's rights to the
Technology, the

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 16 -
<PAGE>   17

Licensed Patents or the Martek Products. The provisions of this Section 6.4
shall survive the termination (but not the expiration) of this Agreement.
Notwithstanding the foregoing provisions in this Section 6.4, Licensee's
obligations as set forth in Section 6.4(ii) above shall not apply, and shall not
survive the termination of this Agreement, in any country of the Territory in
which such obligations are not enforceable in accordance with applicable law or
regulation.

        Section 6.5 Product Use. Licensor covenants and agrees that it and its
Affiliates shall, throughout the term of this Agreement, use their diligent
efforts to use the Martek Products and/or the Technology with respect to the
Licensee Product in a way which is consistent with Licensee's nutritional
objectives in producing Infant Formula Products.

                                   ARTICLE VII

                       PATENT PROSECUTION AND ENFORCEMENT

        Section 7.1. Patent Applications. The responsibility for the prosecution
of, and the exclusive right to apply for, prosecute, maintain and enforce the
Licensed Patents shall be and remain with Licensor except as provided below.
Licensor shall exercise all reasonable efforts in this regard. Licensor shall
keep Licensee informed of the course of such patent prosecution.

        Section 7.2. Infringement Notice. Licensee shall notify Licensor
promptly in writing of any infringement of any issued Licensed Patent or other
interference with Licensor's proprietary interests relating to the Technology or
the Martek Products which becomes known to Licensee. If Licensor determines that
a material infringement exists, Licensor shall communicate such determination to
Licensee in writing and take prompt action to attempt to eliminate that
infringement.

        Section 7.3. Infringement Actions. If Licensor receives Licensee's
infringement notice under Section 7.2 of this Agreement and within a reasonable
time thereafter Licensor is unsuccessful in eliminating the infringement,
Licensor shall have the first right to bring, at its own expense, an
infringement action against any Third Party within a reasonable time *. If
Licensor waives its right to bring such an infringement action in writing to
Licensee or has not eliminated such infringement or initiated an infringement
suit * Licensee, after notifying Licensor in writing, shall be entitled to
bring such infringement action at its own expense. The party not bringing such
infringement action shall provide assistance, at the

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 17 -
<PAGE>   18
requesting party's expense, as may be reasonably requested by the party
bringing such action, including without limitation joining an infringement suit
as a party. * provided, however, that for purposes of Section * of this
Agreement, after Licensee has * and * (including but not limited to *) of such
infringement action, any remaining * attributable to the * of the Licensee
Product shall be considered * by Licensee or an Affiliate from the sale for
value of the Licensee Product in the period(s) to which such * relate, and *
thereon shall be deemed * by Licensee to Licensor hereunder if * Licensor
within sixty (60) days of the date on which such * are received by Licensee,
and, in the *, Licensee shall reasonably and in good faith determine the * that
represents * of the Licensee Product and such portion shall be treated as if
such portion were * attributable to * of the Licensee Product. The party
conducting such action shall have full control over its conduct, including
settlement thereof, provided that no offer of settlement, settlement or
compromise shall be binding on a party without its prior written consent (which
consent shall not be unreasonably withheld) unless such settlement fully
releases such party without any liability, loss, cost or obligation to such
party.

        Section 7.4. Defense of Infringement Actions. Licensor and Licensee
hereby acknowledge and agree that each party shall be responsible for defending,
at its own expense, any infringement action brought against such party by any
Third Party, and Licensor and Licensee agree reasonably to cooperate with the
other in any such defense and in responding to any threatened infringement
action, and to provide assistance, at its own (respective) expense, as may be
reasonably requested by the defending party. In the event that Licensee is
required to defend any infringement action relating to the Technology or the
Martek Products, the Royalty owed to Licensor shall be reduced by the amount
of costs and expenses reasonably and in good faith incurred by Licensee in
defending such action. In the event that Licensee becomes obligated to pay any
amounts to any Third Party in connection with such infringement claim or
action, whether in the form of damages, royalties, other otherwise, the Royalty
owed to Licensor shall be reduced by such amounts.

                                  ARTICLE VIII

                                   ASSIGNMENT

        Section 8.1. Assignment. This Agreement and the rights granted hereunder
shall not be assignable, in whole or in part, by either party, nor shall its
obligations hereunder be delegated, without the prior written consent of the
other party, which shall not be unreasonably withheld; provided, however, that
this prohibition against assignment shall not apply to: (i) an assignment to an
Affiliate of Licensee, (ii) an assignment in connection with the transfer of a
substantial portion of either party's business or its merger or consolidation
with another company if such party promptly notifies the other party of any such
assignment,

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 18 -
<PAGE>   19

merger or consolidation; or (iii) an assignment by Licensor of its rights, but
not its obligations under this Agreement, to a Third Party *

                                   ARTICLE IX

                              PARTIES' RELATIONSHIP

        Section 9.1. Relationship between Parties. Neither party to this
Agreement shall have the power to bind the other by any guarantee or
representation that either party may give, or in any other respect whatsoever,
or to incur any debts or liabilities in the name of or on behalf of the other
party, and for purposes of this Agreement, the parties hereto hereby acknowledge
and agree that they shall not be deemed partners, joint venturers, or to have
created the relationship of agency or of employer and employee between the
parties.

                                    ARTICLE X

                                    INDEMNITY

        Section 10.1. Indemnity by Licensee. Licensee shall indemnify, defend
and hold harmless Licensor and Licensor's directors, officers, employees and
agents from and against all Claims and all Loss for which Licensor or its
directors, officers, employees or agents may become liable or incur or be
compelled to pay and resulting from of a breach of any of the Licensee's
covenants, representations and warranties or other material terms and conditions
contained herein, unless such Claim and/ or Loss results from: (i) a defect in
the Martek Products purchased by Licensee from Licensor under the Supply
Agreement (excluding the determination of a defect in the safety and utility of
the Martek Product relating to its use in a Licensee Product); (ii) the failure
of Licensor to manufacture the Martek Products purchased by Licensee from
Licensor in accordance with specifications mutually agreed to by Licensor and
Licensee in the Supply Agreement; (iii) any negligence or intentional wrongdoing
of Licensor; or (iv) the breach by Licensor of this Agreement or the Supply
Agreement.

        Section 10.2 Indemnity by Licensor. Licensor shall indemnify, defend and
hold harmless Licensee, its Affiliates, and Licensee's and its Affiliates'
directors, officers, employees and agents from and against all Claims and all
Loss for which Licensee, its Affiliates or the directors, officers, employees or
agents of either of them may become liable or incur or be compelled to pay and
resulting from: (i) a

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 19 -
<PAGE>   20

defect in the Martek Products purchased by Licensee from Licensor under the
Supply Agreement (excluding the determination of a defect in the safety and
utility of the Martek Product relating to its use in a Licensee Product); (ii)
the failure of Licensor to manufacture the Martek Products purchased by Licensee
from Licensor in accordance with specifications mutually agreed to by Licensor
and Licensee in the Supply Agreement; (iii) any negligence or intentional
wrongdoing of Licensor; and (iv) the breach by Licensor of this Agreement or the
Supply Agreement, unless any of the foregoing Claims and/ or Loss results from
of a breach of any of the Licensee's covenants, representations and warranties
or other material terms and conditions contained herein.

        Section 10.3 Condition to Indemnification. If either party expects to
seek indemnification under this Article X, it shall promptly give notice to the
indemnifying party of the basis for such claim of indemnification. If
indemnification is sought as a result of any third party claim or suit, such
notice to the indemnifying party shall be within fifteen (15) days after receipt
by the other party of such claim or suit (if to Abbott, notice to Abbott
Laboratories, Risk Management, D-317, 100 Abbott Park Road, Abbott Park, IL
60064-3500, with copy to the Abbott persons identified in Section 12.5 below; if
to Licensor, notice as set forth in Section 12.5 below); provided, however, that
the failure to give notice within such time period shall not relieve the
indemnifying party of its obligation to indemnify unless it shall be materially
prejudiced by the failure. Each party shall fully cooperate with the other party
in the defense of all such claims or suits. No offer of settlement, settlement
or compromise shall be binding on a party hereto without its prior written
consent (which consent shall not be unreasonably withheld) unless such
settlement fully releases such party without any liability, loss, cost or
obligation to such party.

        Section 10.4 Survival of Indemnity Obligation. The indemnification
obligations provided in this Agreement, including that provided in this Article
and in Section 6.2 of this Agreement, shall survive the expiration or
termination of this Agreement, whether occasioned by the Agreement's expiration
pursuant to Section 3.1 of this Agreement or earlier termination pursuant to
the other Sections of Article III of this Agreement, for the longer of: (i) a
period of five (5) years from the date of such expiration or termination, and
(ii) a period of five (5) years from the date upon which Licensee ceases to
sell Licensee Product.

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 20 -
<PAGE>   21

                                   ARTICLE XI

                                 CONFIDENTIALITY

        Section 11.1. Disclosure of Information. All the Technology and all
other information exchanged by the parties pursuant to, and in execution of
their obligations and in exercise of their rights under, this Agreement shall be
deemed confidential. Licensor and Licensee acknowledge and agree that the value
of the Technology, the Martek Products, and the Licensee Products is based, to a
large extent, on maintaining the confidentiality of the Technology, the Martek
Products and the Licensee Products and preventing any unauthorized dissemination
to or use by Third Parties of information relating to the Technology or the
Martek Products. Disclosure of confidential and proprietary information
hereunder, whether orally or in written form, shall be safeguarded by the
recipient and shall not be disclosed to Third Parties and shall be made
available only to the receiving party's employees or other agents who have a
need to know such information for purposes of performing the party's
obligations, or for purposes of exercising the party's rights, under this
Agreement and such employees or other agents shall have a legal obligation to
the employer or principal, as applicable, not to disclose such information to
Third Parties. Each party shall treat any and all such confidential information
in the same manner and with the same protection as such party maintains its own
confidential information. These mutual obligations of confidentiality shall not
apply to any information to the extent that such information: (i) is or later
becomes generally available to the public, such as by publication or otherwise,
through no fault of the receiving party; (ii) is obtained from a Third Party
having the legal right to make such a disclosure; or (iii) is independently
developed by a party without access to the confidential information. Licensor,
Licensee or Licensee's Affiliates shall not remove from any communications or
other documents delivered by a disclosing party any proprietary notices affixed
thereto by the disclosing party.

        Without the prior written approval of the other party hereto, Licensor
and Licensee shall not be permitted to disclose (including but not limited to
disclosure in response to questions), announce, or issue a press release
concerning the fact, the nature and the terms of this Agreement and the
transactions to be performed pursuant hereto to any Third Person; provided,
however, that (i) Licensor and Licensee may disclose any otherwise confidential
or proprietary information as and to the extent required by applicable law or
government agency, including, but not limited to, any applicable disclosure
requirements under the federal securities laws or regulations thereunder,
provided that the disclosing party gives no less than five

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 21 -
<PAGE>   22

(5) business days prior written notice to the other party and gives the other
party such assistance as the other party may reasonably request, in accordance
with applicable law, in order to prevent, challenge, modify or protect such
disclosure ; (ii) Licensor and Licensee may disclose the fact and the terms of
this Agreement to its attorneys and accountants; and (iii) promptly after the
date of this Agreement, Licensor and Licensee shall agree in writing upon, and
issue together, a joint press release.

        Section 11.2. Post-Termination Obligations. * Licensee promptly shall
return to Licensor all the Technology, Martek Product samples, documents,
records, and all other property or documentation disclosed or delivered to
Licensee or its Affiliates pursuant to this Agreement and then in existence,
subject to the retention by Licensee of one (1) copy thereof for archival
purposes.

                                   ARTICLE XII

                                  MISCELLANEOUS

        Section 12.1. Dispute Resolution. Licensor and Licensee covenant and
agree to use their diligent efforts to resolve any disputes that arise between
them in the future and are related to this Agreement through negotiation and
mutual agreement and, if good faith efforts to so negotiate and mutually agree
are unavailing, through binding ADR under the procedures set forth in Exhibit 3
attached to this Agreement. The results of such ADR shall be final and binding
on the parties and enforceable in any court of competent jurisdiction.

        Section 12.2 Information Exchange. During the term of this agreement,
the parties shall promptly notify each other of any report of an adverse event
associated with the use of a Martek Product in any infant formula product.
Licensee shall have sole discretion in determining what action, if any, is to be
taken in connection with any such adverse event report relating to an Infant
Formula Product.

        Section 12.3. Force Majeure. Neither party to this Agreement shall be
liable for damages due to delay or failure to perform any obligation under this
Agreement if such delay or failure results directly or indirectly from
circumstances beyond the control of such party. Such circumstances shall
include, but shall not be limited to, acts of God, acts of war, civil
commotions, riots, strikes, lockouts, acts of the government in either its
sovereign or contractual capacity, perturbation in telecommunications
transmissions, inability to obtain suitable equipment or

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 22 -
<PAGE>   23

components, accident, fire, water damages, flood, earthquake, or other natural
catastrophes.

        Section 12.4. Construction of Agreement. This Agreement shall be
construed and the respective rights of the parties shall be determined under and
pursuant to the laws of the State of Delaware, without regard to the principles
of conflict of laws thereof. The parties expressly exclude the applicability of
the Convention on Contracts for the International Sale of Goods.

        Section 12.5. Notices. Notices required under this Agreement shall be in
writing and sent by registered mail, by facsimile transmission, by nationally
recognized overnight courier service, or by hand delivery, with written
verification of receipt and date of receipt, to the respective parties at the
following addresses:

        Notices to Licensor:

               Martek Biosciences Corporation
               6480 Dobbin Road
               Columbia, Maryland 21045
               Facsimile:  (410) 740-2985
               Attn:  General Counsel

        Notices to Licensee:

               Ross Products Division
               625 Cleveland Ave.
               Columbus, OH  43215
               Attn:  Vice President, Business Development
               and Strategic Planning
               Facsimile:  (614) 624-7030

        With a copy to:

               Senior Counsel
               Ross Products Division
               [same address]
               Facsimile:  (614) 624-3074

               Abbott Laboratories
               200 Abbott Park Road

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 23 -
<PAGE>   24

               Abbott Park, IL 60064
               Attn: President, Abbott International Division
               Facsimile:  (847) 935-3260

        With a copy to:

               Vice President, International Legal Operations
               Abbott Laboratories
               [same address]
               Facsimile:  (847) 938-1342

or to such other address as either party may designate by a notice given in
compliance with this paragraph, and shall be deemed effective when received.

        Section 12.6. Entire Agreement. This Agreement, including the Exhibits
hereto, constitutes the entire agreement between the parties hereto and there
are no representations, warranties or covenants relative hereto, which shall
survive the execution of this Agreement unless fully set forth herein.

        Section 12.7. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No person, firm or corporation other than the parties hereto
and their successors and permitted assigns shall derive rights or benefits under
this Agreement.

        Section 12.8. Counterparts.  This Agreement may be executed in
counterparts.

        Section 12.9. Severability. If any provision of this Agreement is
declared void or unenforceable by any relevant judicial or administrative
authority, such declaration shall not of itself nullify the remaining provisions
of this Agreement. Consequently, the parties shall meet to determine the effect
of any such declaration and any variations to this agreement which are mutually
desirable.

        Section 12.10. Waiver. No waiver by either party of any breach of any of
the terms or conditions herein provided to be performed by the other party shall
be construed as a waiver of any subsequent breach, whether of the same or of any
other term or condition hereof.

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 24 -
<PAGE>   25

        Section 12.11 Headings. Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.

        THEREFORE, the parties hereto have caused this Agreement to be duly
executed in their respective behalves as of the day and year first written
above.

MARTEK BIOSCIENCES CORPORATION

By:
   -----------------------------------------

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

Print Title:
            --------------------------------

Date:
     ---------------------------------------

ABBOTT LABORATORIES

By:
   -----------------------------------------

Print Name:  Joy A. Amundson

Print Title:  President, Ross Products Division

Date:
     ---------------------------------------

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 25 -
<PAGE>   26

               EXHIBIT 1 - MARTEK PATENTS AND PATENT APPLICATIONS (4 PGS)

"ARACHIDONIC ACID AND METHODS FOR THE PRODUCTION AND USE THEREOF"

PATENTS GRANTED

<TABLE>
<CAPTION>
------------------- -------------------
COUNTRY             PATENT NO.
------------------- -------------------
<S>                 <C>
Australia           661674
------------------- -------------------
French Africa       09909
------------------- -------------------
Indonesia           ID 0000393
------------------- -------------------
Israel              100732
------------------- -------------------
New Zealand         241,358
------------------- -------------------
South Africa        92/0454
------------------- -------------------
Sri Lanka           10527
------------------ -------------------
Russia              2120998
------------------- -------------------
</TABLE>

*

PCT APPLICATION THAT HAS ENTERED NATIONAL PHASE
<TABLE>
<CAPTION>
--------------------- ------------------- ------------
SERIAL NO.            PUBLICATION NO.     PBL. DATE
--------------------- ------------------- ------------
<S>                   <C>              <C>
PCT/US92/00517        WO 92/13086         8/6/92
--------------------- ------------------- ------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 26 -

<PAGE>   27

"ARACHIDONIC ACID AND METHODS FOR THE PRODUCTION AND USE THEREOF" (CIP)

PATENTS GRANTED
<TABLE>
<CAPTION>
------------------- -------------------
COUNTRY             PATENT NO.
------------------- -------------------
<S>                 <C>
United States       5,658,767
------------------- -------------------
Singapore           42669
------------------- -------------------
</TABLE>

*

PCT APPLICATION THAT HAS ENTERED NATIONAL PHASE
<TABLE>
<CAPTION>
--------------------- ------------------ -------------
SERIAL NO.            PUBLICATION NO.    PBL. DATE
--------------------- ------------------ -------------
<S>                   <C>               <C>
PCT/US96/00182        WO 96/21037        7/11/96
--------------------- ------------------ -------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 27 -
<PAGE>   28

"DOCOSAHEXAENOIC ACID, METHODS FOR ITS PRODUCTION AND COMPOUNDS CONTAINING THE
SAME"

PATENTS GRANTED
<TABLE>
<CAPTION>
------------------- -----------------
COUNTRY             PATENT NO.
------------------- -----------------
<S>                 <C>
Australia           660,162
------------------- -----------------
Europe*             0515460
------------------- -----------------
Israel              97126
------------------- -----------------
Israel              111174
------------------- -----------------
Japan               2830951
------------------- -----------------
Philippines         31568
------------------- -----------------
United States       5,397,591
------------------- -----------------
United States       5,407,957
------------------- -----------------
United States       5,492,938
------------------- -----------------
United States       5,711,983
------------------- -----------------
</TABLE>

* Individual national applications based on this application were filed in
United Kingdom, Germany, France, Austria, Denmark, Greece, Luxembourg, Sweden,
Switzerland, Belgium, Italy, Netherlands, Spain, and Romania.

*

PCT APPLICATION THAT HAS ENTERED NATIONAL PHASE
<TABLE>
<CAPTION>
---------------------- ------------------ ------------
SERIAL NO.             PUBLICATION NO.    PBL. DATE
---------------------- ------------------ ------------
<S>                    <C>               <C>
PCT/US91/00733         WO 91/11918        8/22/91
---------------------- ------------------ ------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 28 -
<PAGE>   29

"MICROBIAL OIL MIXTURES AND USES THEREOF"

PATENTS GRANTED
<TABLE>
<CAPTION>
------------------- -----------------
COUNTRY             PATENT NO.
------------------- -----------------
<S>                 <C>
Australia           661,297
------------------- -----------------
Canada              2,101,274
------------------- -----------------
French Africa       10348
------------------- -----------------
Indonesia           ID 0000174
------------------- -----------------
Israel              100733
------------------- -----------------
Israel              114253
------------------- -----------------
Japan               2731035
------------------- -----------------
Mexico              183638
------------------- -----------------
New Zealand         241,359
------------------- -----------------
Russia              2093996
------------------- -----------------
South Africa        92/0452
------------------- -----------------
Sri Lanka           10526
------------------- -----------------
United States       5,374,657
------------------- -----------------
United States       5,550,156
------------------- -----------------
</TABLE>

*

PCT APPLICATION THAT HAS ENTERED NATIONAL PHASE
<TABLE>
<CAPTION>
---------------------- ----------------- ------------
SERIAL NO.             PUBLICATION NO.   PBL.  DATE
---------------------- ----------------- ------------
<S>                   <C>               <C>
PCT/US92/00522         WO 92/12711       8/6/92
---------------------- ----------------- ------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 29 -
<PAGE>   30

                                EXHIBIT 2 (3 pp.)

                                   TRADEMARKS

<TABLE>
<CAPTION>
--------------------- ------------------ ------------------ ------------------ ------------------
                                                                               REGISTRATION
MARK                  COUNTRY            CLASSES            STATUS             OR SERIAL NO.
--------------------- ------------------ ------------------ ------------------ ------------------
<S>                  <C>                 <C>                <C>                <C>
NEUROMINS             United States      1,5,29             Reg. 12/8/98       2,209,435
--------------------- ------------------ ------------------ ------------------ ------------------
                      Argentina          1                  Pending            2,216,944
--------------------- ------------------ ------------------ ------------------ ------------------
                      Argentina          5                  Pending            2,216,945
--------------------- ------------------ ------------------ ------------------ ------------------
                      Argentina          29                 Pending            2,216,946
--------------------- ------------------ ------------------ ------------------ ------------------
                      Brazil             1.90               Pending            821,683,080
--------------------- ------------------ ------------------ ------------------ ------------------
                      Brazil             5.50               Pending            821,683,098
--------------------- ------------------ ------------------ ------------------ ------------------
                      Brazil             29.40              Pending            821,683,101
--------------------- ------------------ ------------------ ------------------ ------------------
                      Canada             N/A                Reg. 3/26/99       510,042
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              1                  Reg. 8/14/99       1302546
--------------------- ------------------ ------------------ ------------------ ------------------
[in Chinese
characters]           China              1                  Reg. 8/14/99       1302547
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              5                  Reg. 8/14/99       1302800
--------------------- ------------------ ------------------ ------------------ ------------------
[in Chinese
characters]           China              5                  Reg. 7/28/99       1297757
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              29                 Reg. 7/14/99       1293972
--------------------- ------------------ ------------------ ------------------ ------------------
[in Chinese
characters]           China              29                 Reg. 7/14/99       1293973
--------------------- ------------------ ------------------ ------------------ ------------------
                      European
                      Community          1, 5, 30           Reg. 11/6/98       371,583
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              1                  Pending            34764/1997
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              5                  Pending            34765/1997
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              29                 Reg. 1/14/99       4,229,698
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              30                 Reg. 1/14/99       4,229,699
--------------------- ------------------ ------------------ ------------------ ------------------
                      Malaysia           1                  Pending            99/03415
--------------------- ------------------ ------------------ ------------------ ------------------
                      Malaysia           5                  Pending            99/03414
--------------------- ------------------ ------------------ ------------------ ------------------
                      Malaysia           29                 Pending            99/03416
--------------------- ------------------ ------------------ ------------------ ------------------
                      Mexico             1                  Reg. 7/30/97       554,719
--------------------- ------------------ ------------------ ------------------ ------------------
                      Mexico             5                  Reg. 7/30/97       554.720
--------------------- ------------------ ------------------ ------------------ ------------------
                      Mexico             29                 Reg. 7/30/97       554.721
--------------------- ------------------ ------------------ ------------------ ------------------
                      Mexico             30                 Reg. 7/30/97       554.722
--------------------- ------------------ ------------------ ------------------ ------------------
                      Philippines        1, 5, 29           Pending            4-99-02756
--------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 30 -
<PAGE>   31

<TABLE>
<S>                  <C>                 <C>                <C>                <C>
--------------------- ------------------ ------------------ ------------------ ------------------
                      Singapore          1                  Pending            99/03166H
--------------------- ------------------ ------------------ ------------------ ------------------
                      Singapore          5                  Pending            99/03167F
--------------------- ------------------ ------------------ ------------------ ------------------
                      Singapore          29                 Pending            99/03168D
--------------------- ------------------ ------------------ ------------------ ------------------
                      South Korea        1, 5, 29           Pending            99-9995
--------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 31 -
<PAGE>   32

<TABLE>
<CAPTION>
--------------------- ------------------ ------------------ ------------------ ------------------
                                                                               REGISTRATION
MARK                  COUNTRY            CLASSES            STATUS             OR SERIAL NO.
--------------------- ------------------ ------------------ ------------------ ------------------
<S>                   <C>               <C>                <C>               <C>
NEUROMINS (cont'd)    Taiwan             1                  Pending            88-14203
--------------------- ------------------ ------------------ ------------------ ------------------
                      Taiwan             5                  Pending            88-14212
--------------------- ------------------ ------------------ ------------------ ------------------
                      Taiwan             29                 Pending            88-14211
--------------------- ------------------ ------------------ ------------------ ------------------
                      Venezuela          1                  Pending            7566-1999
--------------------- ------------------ ------------------ ------------------ ------------------
                      Venezuela          5                  Pending            7567-1999
--------------------- ------------------ ------------------ ------------------ ------------------
                      Venezuela          29                 Pending            7568-1999
--------------------- ------------------ ------------------ ------------------ ------------------
ARASCO                United States      1, 5               Reg. 5/23/95       1,894,738
--------------------- ------------------ ------------------ ------------------ ------------------
                      Benelux            1, 5               Reg. 9/22/94       558,581
--------------------- ------------------ ------------------ ------------------ ------------------
                      Canada             N/A                Reg. 4/22/97       475,074
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              1                  Reg. 2/28/97       952085
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              5                  Reg. 4/14/97       978613
--------------------- ------------------ ------------------ ------------------ ------------------
                      France             1, 5               Reg. 10/6/94       94/539.090
--------------------- ------------------ ------------------ ------------------ ------------------
                      France             5                  Reg. 7/27/95       95/582.463
--------------------- ------------------ ------------------ ------------------ ------------------
                      Germany            1, 5               Reg. 6/22/95       2 908 191
--------------------- ------------------ ------------------ ------------------ ------------------
                      Germany            5                  Reg. 10/20/97      395 30 455
--------------------- ------------------ ------------------ ------------------ ------------------
                      Israel             1                  Reg. 7/1/96        94940
--------------------- ------------------ ------------------ ------------------ ------------------
                      Israel             5                  Reg. 7.1.96        94941
--------------------- ------------------ ------------------ ------------------ ------------------
                      Italy              1, 5               Reg. 7/26/96       685002
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              5                  Reg. 8/29/97       3343313
--------------------- ------------------ ------------------ ------------------ ------------------
[in Korean
characters            South Korea        10                 Reg. 9/27/97       3672277
--------------------- ------------------ ------------------ ------------------ ------------------
                      Spain              1                  Reg. 5/5/95        1 923 229/2
--------------------- ------------------ ------------------ ------------------ ------------------
                      Spain              5                  Reg. 5/5/95        1 923 231/4
--------------------- ------------------ ------------------ ------------------ ------------------
                      United Kingdom     1                  Reg. 9/26/94       1,586,321
--------------------- ------------------ ------------------ ------------------ ------------------
                      United Kingdom     5                  Reg. 9/26/94       1,586,322
--------------------- ------------------ ------------------ ------------------ ------------------
DHASCO                United States      1                  Reg. 5/23/95       1,894,739
--------------------- ------------------ ------------------ ------------------ ------------------
                      Benelux            1, 5               Reg. 9/22./94      558,580
--------------------- ------------------ ------------------ ------------------ ------------------
                      Canada             N/A                Reg. 4/23/97       475.803
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              1                  Reg. 2/28/97       952084
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              5                  Reg. 4/14/97       978614
--------------------- ------------------ ------------------ ------------------ ------------------
                      France             1, 5               Reg. 10/6/94       94/539.089
--------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 32 -
<PAGE>   33

<TABLE>
<S>                   <C>               <C>                <C>               <C>
                      France             5                  Reg. 7/27/95       95/582.461
--------------------- ------------------ ------------------ ------------------ ------------------
                      Germany            5                  Reg. 7/25/95       395 30 456
--------------------- ------------------ ------------------ ------------------ ------------------
                      Indonesia          1, 5               Reg. 5/19/95       367,623
--------------------- ------------------ ------------------ ------------------ ------------------
                      Israel             1                  Reg. 7/1/96        94942
--------------------- ------------------ ------------------ ------------------ ------------------
                      Israel             5                  Reg. 7/1/96        94943
--------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 33 -
<PAGE>   34

<TABLE>
<CAPTION>
--------------------- ------------------ ------------------ ------------------ ------------------
                                                                               REGISTRATION
MARK                  COUNTRY            CLASSES            STATUS             OR SERIAL NO.
--------------------- ------------------ ------------------ ------------------ ------------------
<S>                  <C>                <C>                 <C>                <C>
DHASCO (cont'd)       Italy              1, 5               Reg. 7/25/96       685003
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              1                  Reg. 12/25/96      3236317
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              5                  Reg. 8/29/97       3343314
--------------------- ------------------ ------------------ ------------------ ------------------
[in Korean
characters]           South Korea        10                 Reg. 4/23/96       337927
--------------------- ------------------ ------------------ ------------------ ------------------
                      United Kingdom     1                  Reg. 9/26/94       1,586,323
--------------------- ------------------ ------------------ ------------------ ------------------
                      United Kingdom     5                  Reg. 9/26/94       1,586,324
--------------------- ------------------ ------------------ ------------------ ------------------
FORMULAID             United States      5                  Reg. 12/21/93      1,812,662
--------------------- ------------------ ------------------ ------------------ ------------------
                      Benelux            5                  Reg. 8/4/94        561,563
--------------------- ------------------ ------------------ ------------------ ------------------
                      Canada             N/A                Reg. 12/22/95      452,191
--------------------- ------------------ ------------------ ------------------ ------------------
                      China              5                  Pending            950107524
--------------------- ------------------ ------------------ ------------------ ------------------
                      France             5                  Reg. 8/22/94       94/533.500
--------------------- ------------------ ------------------ ------------------ ------------------
                      Germany            5                  Reg. 5/15/95       2 096 416
--------------------- ------------------ ------------------ ------------------ ------------------
                      Indonesia          5                  Reg. 5/19/95       371734
--------------------- ------------------ ------------------ ------------------ ------------------
                      Israel             5                  Reg. 2/4/96        94166
--------------------- ------------------ ------------------ ------------------ ------------------
                      Italy              5                  Reg. 7/25/96       684464
--------------------- ------------------ ------------------ ------------------ ------------------
                      Japan              5                  Reg. 4/25/97       3294461
--------------------- ------------------ ------------------ ------------------ ------------------
[in Korean
characters]           South Korea        10                 Reg. 11/13/97      382069
--------------------- ------------------ ------------------ ------------------ ------------------
                      Spain              5                  Reg. 10/5/95       1.918.547/2
--------------------- ------------------ ------------------ ------------------ ------------------
                      United Kingdom     5                  Reg. 8/8/94        1581072
--------------------- ------------------ ------------------ ------------------ ------------------
</TABLE>

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 34 -
<PAGE>   35

                                    EXHIBIT 3

                         Alternative Dispute Resolution

               The parties recognize that bona fide disputes as to certain
               matters may arise from time to time during the term of this
               Agreement which relate to either party's rights and/or
               obligations. To have such a dispute resolved by this Alternative
               Dispute Resolution ("ADR") provision, a party first must send
               written notice of the dispute to the other party for attempted
               resolution by good faith negotiations between their respective
               presidents (or their designees) 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 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 its 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:

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 35 -
<PAGE>   36

                      (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 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 circumstances likely to affect his or her
               impartiality.

                      (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, that 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 immediately
               shall designate as the neutral the candidate for whom the parties
               collectively have indicated the greatest preference. If a tie
               should 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 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

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 36 -
<PAGE>   37
               by the parties. If the parties cannot agree, the neutral shall
               designate a location other than the principal 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 such 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.

               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.

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 37 -
<PAGE>   38

                      (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 time 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

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 38 -
<PAGE>   39

               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.

               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 reporter,
               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 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.

---------------
* The asterisk denotes that confidential portions of this exhibit have been
omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The
confidential portions have been submitted separately to the Securities and
Exchange Commission.

                                     - 39 -<PAGE>   1

                                                                     EXHIBIT 4.2

                           SECOND AMENDED AND RESTATED
                             STOCKHOLDERS' AGREEMENT

         THIS SECOND AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this
"AGREEMENT") made and entered into as of the date last below written, by and
among ODYSSEY HEALTHCARE, INC. a Delaware corporation (the "COMPANY"), those
persons whose names are set forth on Schedule I hereto (hereinafter sometimes
referred to collectively as the "FOUNDERS" and singularly as a "FOUNDER"), those
persons whose names are set forth on Schedule II hereto (hereinafter sometimes
referred to collectively as the "INVESTORS" and singularly as an "Investor") and
those persons whose names are set forth on Schedule III hereto and who agree in
writing pursuant to Section 28 of this Agreement to become parties hereto
(herein sometimes referred to collectively as "HOLDERS" and singularly as a
"HOLDER") (the Investors, the Founders and the Holders being sometimes referred
to herein collectively as the "PARTIES" and singularly as a "PARTY"). This
Agreement amends, restates and supersedes the Amended and Restated Stockholders'
Agreement dated as of February 12, 1997 by and among the Company, the Founders
and certain of the Investors.

         WHEREAS, the Founders are the holders of an aggregate of 3,643,000
shares of common stock, $0.001 par value, of the Company (the "COMMON STOCK");

         WHEREAS, the Company has previously issued and sold to certain of the
Investors (i) 7,091,091 shares (the "SERIES A PREFERRED SHARES") of Series A
Convertible Preferred Stock, $.001 par value per share, of the Company (the
"SERIES A CONVERTIBLE PREFERRED STOCK") pursuant to that certain Series A
Convertible Preferred Stock Purchase Agreement dated as of January 26, 1996 (the
"SERIES A PURCHASE AGREEMENT") by and among the Company and certain of the
Investors and (ii) 6,400,000 shares (the "SERIES B PREFERRED SHARES") of Series
B Convertible Preferred Stock, $.001 par value per share, of the Company (the
"SERIES B CONVERTIBLE PREFERRED STOCK") pursuant to that certain Series B
Convertible Preferred Stock Purchase Agreement dated as of February 12, 1997
(the "SERIES B PURCHASE AGREEMENT") by and among the Company and certain of the
Investors;

         WHEREAS, the Company has previously issued and sold to certain of the
Investors (i) its convertible promissory notes in the aggregate principal amount
of $1,500,000 and (ii) warrants (the "PREFERRED WARRANTS") for the purchase
(subject to adjustment as provided therein) of an aggregate of 119,993 shares
(the "PREFERRED WARRANT SHARES") of Series B Preferred Stock, in each case
pursuant to that certain Promissory Note and Warrant Purchase Agreement dated as
of May 22, 1998 (the "BRIDGE NOTE PURCHASE AGREEMENT") by and among the Company,
the Founders and certain of the Investors;

         WHEREAS, certain of the Investors propose to purchase an aggregate of
2,857,137 shares (the "SERIES C PREFERRED SHARES" and together with the Series A
Preferred Shares, the Series B Preferred Shares and the Preferred Warrant
Shares, the "PREFERRED SHARES") of Series C Convertible Preferred Stock, $.001
par value per share, of the Company (the "SERIES C CONVERTIBLE PREFERRED STOCK"
and together with the Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock, the "PREFERRED STOCK") pursuant to a certain Series
C

<PAGE>   2

Convertible Preferred Stock Purchase Agreement dated as of the date hereof
(the "SERIES C PURCHASE AGREEMENT") by and among the Company and certain of the
Investors;

         WHEREAS, Capital Resource Lenders III, L.P., a Delaware limited
partnership and CRP Investment Partners III, L.L.C., a Delaware limited
liability company (collectively, the "NOTE PURCHASERS"), propose to purchase (i)
12.0% Senior Subordinated Notes due 2005 (the "NOTES") in the aggregate
principal amount of $12,000,000 from the Company and certain of its subsidiaries
and (ii) Common Stock Purchase Warrants (the "NOTE WARRANTS") for the purchase
(subject to adjustment as provided therein) of an aggregate of 1,943,520 shares
(the "NOTE WARRANT SHARES") of Common Stock, $.001 par value per share, of the
Company, in each case pursuant to that certain Senior Subordinated Note and
Warrant Purchase Agreement dated as of the date hereof (the "NOTE PURCHASE
AGREEMENT") among the Company and the Note Purchasers; and

         WHEREAS, it is a condition to the obligations of the Investors under
the Series C Agreement and the obligations of the Note Purchasers under the Note
Purchase Agreement that this Agreement be executed by the parties hereto, and
the parties are willing to execute this Agreement and to be bound by the
provisions hereof.

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Parties hereby agree with each other
as follows:

         1. PROHIBITED TRANSFERS. None of the Parties shall sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares (as hereinafter defined)
owned by him or it except in compliance with the terms of this Agreement and, in
the case of Richard R. Burnham ("BURNHAM") and David C. Gasmire ("GASMIRE"), a
Stock Repurchase Agreement by and between the Company and each of Burnham and
Gasmire, dated January 26, 1996. For purposes of this Agreement, the term
"SHARES" shall mean and include all shares of capital stock of the Company
(including any options, warrants or other securities exercisable or convertible
into any shares of capital stock of the Company), whether now owned or hereafter
acquired and whether or not owned by a Party.

         2. RIGHT OF FIRST REFUSAL. The Company shall, prior to any issuance by
the Company of any of its securities (other than debt securities with no equity
feature), offer to each Party by written notice the right for a period of
fifteen (15) days, to purchase for cash at an amount equal to the price or other
consideration and on the material terms for which such securities are to be
issued, a number of such securities so that, after giving effect to such
issuance (and the conversion, exercise and exchange into or for (whether
directly or indirectly) shares of Common Stock of all such securities that are
so convertible, exercisable or exchangeable), such Party will continue to
maintain its same proportionate equity ownership in the Company as of the date
of such notice (treating each Party, for the purpose of such computation, as the
holder of the number of shares of Common Stock which would be issuable to such
Party on the date such offer is made, upon conversion, exercise or exchange of
other securities of the Company held by such Party into or for (whether directly
or indirectly) shares of Common Stock and assuming the like conversion, exercise
and exchange of all such other securities held by other persons); provided,
however, that the first refusal rights of the Parties pursuant to this Section 2
shall not apply to securities issued (A) upon conversion of any of the Preferred
Shares, (B) upon exercise of the

                                       2
<PAGE>   3

Note Warrants, (C) upon exercise of the Preferred Warrants and upon conversion
of the Preferred Warrant Shares, (D) as a stock dividend or upon any subdivision
of shares of Common Stock, provided that the securities issued pursuant to such
stock dividend or subdivision are limited to additional shares of Common Stock,
(E) pursuant to subscriptions, warrants, options, convertible securities, or
other rights which are listed in Schedule II, Section 2.04 to the Series C
Agreement as being outstanding on the Closing Date (as that term is defined in
the Series C Agreement), (F) solely in consideration for the acquisition
(whether by merger or otherwise) by the Company or any of its subsidiaries of
all or substantially all of the stock or assets of any other entity, (G)
pursuant to a firm commitment public offering, (H) pursuant to the exercise of
options to purchase Common Stock granted to directors, officers, employees or
consultants of the Company pursuant to a plan approved by a majority of the
members of the Board of Directors, not to exceed in the aggregate 2,278,000
shares (in each case appropriately adjusted to reflect stock splits, stock
dividends, combinations of shares and the like with respect to the Common Stock)
less the number of shares (as so adjusted) issued pursuant to options
outstanding on the Closing Date and listed on Schedule II, Section 2.04 to the
Series C Agreement pursuant to clause (E) above (the shares exempted by this
clause (H) being hereinafter referred to as the "RESERVED EMPLOYEE SHARES"), (I)
options, warrants, convertible securities or other rights to purchase Common
Stock issued with the approval of a majority of the Board of Directors and the
approval of the Company's Chief Executive Officer in transactions with
directors, officers, employees, vendors, suppliers, customers, lessors, or
consultants, the primary purpose of which is not to raise additional equity
capital for the Company, and (J) upon the exercise of any right which was not
itself in violation of the terms of this Section 2. The amount of securities to
be issued by the Company that each Party is entitled to purchase under this
Section 2 shall be referred to as that Party's "PRO RATA PORTION." The Company's
written notice to the Parties shall describe the securities proposed to be
issued by the Company and specify the number, price and payment terms. The
Parties shall have a right of oversubscription such that if any Party fails to
accept the offer as to its Pro Rata Portion, the other Parties shall, among
them, have the right to purchase up to the balance of the offered securities not
so purchased. Such right of oversubscription may be exercised by a Party by
accepting the offer as to more than its Pro Rata Portion. If, as a result
thereof, such oversubscriptions exceed the total number of offered securities
available in respect of such oversubscription privilege, the oversubscribing
Parties shall be cut back with respect to their oversubscriptions on a pro rata
basis in accordance with their respective Pro Rata Portions or as they may
otherwise agree among themselves. Each Party may accept the Company's offer as
to the full number of securities offered to all the Parties or any lesser
number, by written notice thereof given by it to the Company prior to the
expiration of the aforesaid fifteen (15) day period, in which event the Company
shall sell within thirty (30) days and such Party shall buy, upon the terms
specified, the number of securities agreed to be purchased by such Party. The
Company shall be free at any time prior to ninety (90) days after the date of
its notice of the offer to the Parties, to offer and sell to any third party or
parties the number of such securities not agreed by the Parties to be purchased
by them, at a price and on payment terms no less favorable to the Company than
those specified in such notice of offer to the Parties. However, if such third
party sale or sales are not consummated within such ninety (90) day period, the
Company shall not sell such securities as shall not have been purchased within
such period without again complying with this Section 2.

                                       3
<PAGE>   4

         3.       RIGHT OF FIRST OFFER ON DISPOSITIONS.

                  (a) If at any time any Party desires to sell all or any part
of his or its Shares, such Party (the "OFFEROR") shall promptly deliver to the
Company and each other Party a written notice (the "NOTICE") of such Offeror's
intention to sell and such Notice shall contain a written offer (the "OFFER") to
sell such Shares (the "OFFERED SHARES") to the Company. The Offer shall disclose
the Offered Shares proposed to be sold, the total number of Shares owned by the
Offeror, the terms and conditions, including price, of the proposed sale, and
any other material facts relating to the proposed sale. The Offer shall further
state that the Company may acquire, in accordance with the provisions of this
Agreement, all of the Offered Shares for the price and upon the other terms and
conditions, including deferred payment (if applicable), set forth therein.

                  (b) The Company shall have the absolute right to purchase all
but not less than all of the Offered Shares. If the Company elects to exercise
its right of purchase, the Company shall give notice of such exercise to the
Offeror no later than fifteen (15) days after receipt of the Offer.

                  (c) Sales of the Offered Shares to be sold to the Company
pursuant to this Section 3 shall be made at the offices of the Company unless
otherwise arranged by the respective parties, on the 45th day following the date
the Offer is made (or if such 45th day is not a business day, then on the next
succeeding business day) (the "PURCHASE DATE"). Such sales shall be effected by
the Offeror's delivery to the Company of a certificate or certificates
evidencing the Offered Shares to be purchased by the Company, duly endorsed for
transfer to the Company, against payment to the Offeror of the purchase price
therefor.

                  (d) If, for any reason whatever, the Company shall not
exercise its right to purchase the Offered Shares pursuant to this Section 3,
then the Company shall provide written notice (the "PARTICIPATION NOTICE") of
its intent not to purchase the Offered Shares to all Parties no later than
fifteen (15) days after its receipt of the Offer and each such Party (other than
the Offeror) (individually, an "OFFEREE PARTY" and collectively, the "OFFEREE
PARTIES") shall have the right to purchase, on the same terms and conditions set
forth in the Offer, that portion of the Offered Shares to be determined in the
manner set forth herein. Each such Offeree Party shall have the right to
purchase that number of Offered Shares as shall be equal to the aggregate
Offered Shares multiplied by a fraction, the numerator of which is the number of
shares of Common Stock then held by, and which would be issuable to, such
Offeree Party, upon conversion, exercise or exchange of all other securities of
the Company then held by such Offeree Party into or for (whether directly or
indirectly) shares of Common Stock and the denominator of which is the aggregate
number of shares of Common Stock then issued and outstanding and held by all
Offeree Parties, including all shares of Common Stock which would be issuable to
such Offeree Parties, upon conversion, exercise or exchange of all other
securities of the Company then held by such Offeree Parties into or for (whether
directly or indirectly) shares of Common Stock. The amount of Offered Shares
each Offeree Party is entitled to purchase under this paragraph (d) shall be
referred to as such Offeree Party's "PRO RATA FRACTION." Each Offeree Party may
elect to purchase all but not less all of its Pro Rata Fraction of the Offered
Shares. Each Offeree Party shall exercise its right to purchase its Pro Rata
Fraction of the Offered Shares under this paragraph (d) as soon as practicable
after receipt from the Company of the Participation Notice, and in all events
within ten (10) days after receipt thereof. In the event that an Offeree Party
shall elect to purchase its Pro Rata Fraction of the Offered Shares, such
Offeree Party shall individually communicate in writing (the "ELECTION NOTICE")
such election to purchase to the Offeror and the closing of the purchase of such
Offered

                                       4
<PAGE>   5

Shares by the Offeree Parties shall take place at the same time and in the same
manner contemplated by paragraph (c) of this Section 3.

                  (e) Each Offeree Party that has elected to purchase any
Offered Shares pursuant to paragraph (d) of this Section 3 (each such Offeree
Party, for purposes of this paragraph (e), an "ELECTING PARTY") shall have a
right of oversubscription. If any Offeree Party fails to exercise its right to
purchase its Pro Rata Fraction of the Offered Shares under paragraph (d) of this
Section 3, the Offeror shall, within five (5) days after receipt of all Election
Notices, deliver to the Company and to each Electing Party a written notice (the
"OVERSUBSCRIPTION NOTICE") as to the amount (the "OVERSUBSCRIPTION OFFERED
SHARES") of the Offered Shares with respect to which each such nonpurchasing
Offeree Party has failed to exercise its right under paragraph (d) of this
Section 3. Each Electing Party shall have the right to purchase that number of
Oversubscription Offered Shares as shall be equal to the aggregate
Oversubscription Offered Shares multiplied by a fraction, the numerator of which
is the number of shares of Common Stock then held by, and which would be
issuable to, such Electing Party, upon conversion, exercise or exchange of all
other securities of the Company then held by such Electing Party into or for
(whether directly or indirectly) shares of Common Stock and the denominator of
which is the aggregate number of shares of Common Stock then issued and
outstanding and held by all Electing Parties, including all shares of Common
Stock which would be issuable to such Electing Parties, upon conversion,
exercise or exchange of all other securities of the Company then held by such
Electing Parties into or for (whether directly or indirectly) shares of Common
Stock. The amount of Oversubscription Offered Shares each Electing Party is
entitled to purchase under this paragraph (e) shall be referred to as such
Electing Party's "Pro Rata Oversubscription Fraction." Each such Electing Party
that may purchase such Oversubscription Offered Shares in accordance with this
paragraph (e) may elect to purchase all but not less than all of its Pro Rata
Oversubscription Fraction of the Oversubscription Offered Shares. Each Electing
Party shall exercise its right to purchase its Pro Rata Oversubscription
Fraction of the Oversubscription Offered Shares as soon as practicable after
receipt from the Offeror of the Oversubscription Notice, and in all events
within five (5) day after receipt thereof. In the event that an Electing Party
shall elect to purchase its Pro Rata Oversubscription Fraction of the
Oversubscription Offered Shares, such Electing Party shall individually
communicate in writing such election to purchase to the Offeror and the closing
of the purchase of such Oversubscription Offered Shares by the Electing Parties
shall take place at the same time and in the same manner contemplated by
paragraph (c) of this Section 3.

                  (f) In the event that the Company or the Offeree Parties do
not purchase all of the Offered Shares by the Purchase Date, the Offered Shares
may be sold by the Offeror at any time within 180 days after the date the Offer
is made, subject to the provisions of paragraph (g) of this Section 3 and
Section 5. Any such sale shall be to any one or more of the Proposed Offerees
(as defined below), at not less than ninety percent (90%) of the price and upon
other terms and conditions, if any, not more favorable to the Proposed Offerees
than those specified in the Offer. Any such Offered Shares not sold within such
180-day period shall continue to be subject to the provisions of this Section 3.

                  (g) The Offeror must give written notice (the "PROPOSED
OFFEREE NOTICE") to the Company and each of the Offeree Parties of the
identities of the proposed purchaser(s) ("PROPOSED OFFEREE(s)") of the Offered
Shares. The Company may withhold its consent to the sale of the Offered Shares
to the Proposed Offeree(s) within five (5) business days after receipt

                                       5
<PAGE>   6

of Offeror's notice respecting such Proposed Offerees, provided that the Board
of Directors of the Company, in good faith, articulates reasons why the proposed
sale of any or all of the Offered Shares to the Proposed Offeree(s) would
materially adversely affect the Company. Any such withholding of consent shall
be based upon written documentation, which documentation shall be furnished to
the Offeror concurrently with the Company's notice of withholding consent. If
the Company does not withhold its consent to the sale of the Offered Shares to
the Proposed Offeree(s) within said five (5) business days, the Offeror may sell
the Offered Shares to the Proposed Offerees pursuant to the terms and conditions
of paragraph (f) of this Section 3.

         4. LIMITED WAIVER OF PRE-EMPTIVE RIGHTS. Each of the Founders and the
Investors waives any rights of first refusal or other pre-emptive rights, and
waives any notice which may be required in connection with such rights, arising
out of this Agreement or out of any other source which such Founder and/or
Investor may have to purchase any equity securities arising out of or in
connection with the issuance by the Company of (i) the 2,857,143 shares of
Series C Convertible Preferred Stock pursuant to the Series C Agreement and (ii)
the Notes and the Note Warrants pursuant to the Note Purchase Agreement. Said
waiver is limited to the original issuance of the aforementioned shares.

         5. PERMITTED TRANSFERS. Anything herein to the contrary
notwithstanding, the provisions of Sections 1 and 3 shall not apply to: (i) any
transfer of Shares by a Party by gift or bequest or through inheritance to, or
for the benefit of, any member or members of such Party's immediate family; (ii)
any transfer of Shares by a Party to a trust in respect of which such Party
serves as trustee, provided that the trust instrument governing said trust shall
provide that such Party, as trustee, shall retain sole and exclusive control
over the voting and disposition of said Shares until the termination of this
Agreement; (iii) any sale or transfer of Shares to the Company (including the
repurchase by the Company of the Note Warrants or Note Warrant Shares pursuant
to Section 3.03 of the Note Purchase Agreement); (iv) any sale of Shares
pursuant to the Company's initial underwritten public offering; and (v) any sale
or transfer of Shares by a Party to an affiliate, partner or shareholder of such
Party. In the event of any such transfer, other than pursuant to clauses (iii)
or (iv) of this Section 5, or a transfer pursuant to clause (v) of this Section
5 where such affiliate, partner, or shareholder acquires less than twenty-five
percent (25%) of such Party's total number of Shares, the transferee of the
Shares shall hold the Shares so acquired with all the rights conferred by, and
subject to all the restrictions imposed by, this Agreement and shall be deemed a
Party for all purposes hereof.

         6. ELECTION OF DIRECTORS. Each Party agrees to vote all of his or its
Shares at all elections of directors of the Company so that the Board of
Directors of the Company shall consist of nine (9) members. Pursuant to the
foregoing, each Party agrees to vote his or its Shares to cause and maintain the
election to the Board of Directors of the Company of three (3) persons
designated by the Founders and four (4) persons designated by the Investors. On
the date hereof, the three (3) persons initially designated by the Founders
shall be David L. Steffy, David W. Cross and Richard R. Burnham and the four (4)
persons initially designated by the Investors shall be Mark A. Wan, Ellen M.
Feeney, Wycliffe E. Grousbeck and Alexander S. McGrath. Thereafter, each of (i)
Three Arch Partners, L.P. and Three Arch Associates, L.P.; (ii) Weiss, Peck &
Greer Venture Associates III, L.P. and WPG Enterprise Found II, L.P.; (iii)
Highland Capital Partners III Limited Partnership and Highland Entrepreneurs'
Fund III Limited Partnership; and (iv) Capital Resource Lenders III, L.P. and
CRP Investment Partners III, L.L.C. shall designate one (1) of the persons to
serve as the members of the Board of Directors

                                       6
<PAGE>   7

designated by the Investors. The Founders and the Investors shall agree upon a
person knowledgeable in the Company's industry to nominate as the eighth
director and they shall vote their shares to elect said person as a director. So
long as Richard R. Burnham is the President of the Company, he shall be one of
the three persons designated by the Founders to sit on the Board of Directors.
Each Party further agrees to vote his or its shares to remove any director whose
removal is requested by the Parties who designated the election of such
director. Upon such removal a replacement director shall be designated by the
Party or Parties requesting the removal of the removed director. Any action
required to be taken by the Founders under this Section 6 shall be by vote of
the Founders holding at least two-thirds of the shares then held by all
Founders. Any action required to be taken by the Investors under this Section 6
shall be by vote of the Investors holding at least two-thirds of the Preferred
Shares then held by all Investors, and for the purpose of such computation, the
number of shares deemed to be held by each holder of the Preferred Shares shall
be calculated by determining the number of shares of Common Stock the Preferred
Shares would be converted into, assuming conversion of such Preferred Shares as
of the date such action is to be taken.

         7. FINANCIAL STATEMENTS, REPORTS, ETC. The Company shall furnish to
each Investor:

                  (a) as soon as available and in any event within thirty (30)
days after the end of each month, consolidated and consolidating balance sheets
of the Company and its subsidiaries as of the end of such month and consolidated
and consolidating statements of income and of cash flows of the Company and its
subsidiaries for such month and for the periods commencing at the end of the
previous fiscal year and ending with the end of such month, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year (except that the Company will not be
required to commence providing such comparative financial data for the
corresponding period of the preceding fiscal year until January 31, 1999) and
the Budget (as defined herein) for the current year, all in reasonable detail,
in a format reasonably satisfactory to the Investors, and duly certified
(subject to normal year-end adjustments) by the chief financial officer or
principal accounting officer of the Company as having been prepared in
accordance with generally accepted accounting principals recognized as such by
the American Institute of Certified Public Accountants (except for the absence
of footnotes) and including a discussion by the Company's management of any
material variance from the Budget for such fiscal year;

                  (b) as soon as available and in any event within one hundred
five (105) days after the end of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company and its subsidiaries,
including therein consolidated and consolidating balance sheets of the Company
and its subsidiaries (or its operating divisions) as of the end of such fiscal
year and consolidated and consolidating statements of income and retained
earnings and of cash flows of the Company and its subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, all duly certified by independent public
accountants of recognized national standing acceptable to the Investors;

                  (c) prior to the end of each fiscal year of the Company, (x)
an operating budget (the "BUDGET") of the Company and its subsidiaries for the
next fiscal year in the form customarily prepared by management for internal
use, which Budget shall be reasonably

                                       7
<PAGE>   8

satisfactory in form to the Investors but which shall in any case include a
detailed consolidated balance sheet and detailed consolidated monthly statements
of income and cash flows;

                  (d) at the time of delivery of each monthly and annual
statement, a certificate, executed by the chief financial officer or principal
accounting officer of the Company, stating that such officer has caused this
Agreement, the Note Purchase Agreement, the Notes, the terms of the Preferred
Shares, the Warrants and the Preferred Warrants to be reviewed and has no
knowledge of any default by the Company or any of its subsidiaries in the
performance or observance of any of the provisions of this Agreement, the Note
Purchase Agreement, the Notes, the terms of the Preferred Shares, the Warrants
or the Preferred Warrants or, if such officer has such knowledge, specifying
such default and the nature thereof;

                  (e) promptly upon receipt thereof, any written report
submitted to the Company or any of its subsidiaries by independent public
accountants in connection with an annual or interim audit of the books of the
Company and its subsidiaries made by such accountants;

                  (f) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign that
could materially adversely affect the Company or any of its subsidiaries;

                  (g) promptly after sending, making available, or filing the
same, such reports and financial statements as the Company or any of its
subsidiaries shall send or make available to the stockholders of the Company or
the Securities and Exchange Commission; and

                  (h) such other information respecting the business, assets,
liabilities, financial condition, results of operations or prospects of the
Company or any of its subsidiaries as the Investors may from time to time
reasonably request, and to make available to the Investors and their
representatives, members of management and employees with significant
responsibilities (such as department heads) for the purposes of updating the
Investors as to the condition of the Company and its subsidiaries.

         Notwithstanding the foregoing, the Company shall be obligated to
provide the financial statements, reports, etc. described in this Section 7 to a
transferee of an Investor only if (i) there is transferred to such transferee at
least 100% of the total number of Preferred Shares originally issued pursuant to
the Series C Agreement, the Series B Agreement and the Series A Agreement to the
direct or indirect transferor of such transferee, (ii) there is transferred at
least 100% of the Note Warrants or Preferred Warrants originally issued pursuant
to the Note Purchase Agreement and Bridge Note Purchase Agreement, as the case
may be, to the direct or indirect transferor or such transferee or (iii) such
transferee is a partner, shareholder, or affiliate of a Party hereto; provided
however, that in the event the number of transferees becomes excessive, as
reasonably determined by the Company, the Company may request that the
transferees appoint a single representative to act on their behalf and to
receive all notices which any or all of them are entitled to receive pursuant to
this Agreement.

         8. PROPERTIES, BUSINESS, INSURANCE. The Company shall, within thirty
(30) days after the Closing (as such term is defined in the Series C Purchase
Agreement), maintain and

                                       8
<PAGE>   9

cause each of its subsidiaries to maintain as to their respective properties and
business, with financial sound and reputable insurers, insurance against such
causalities and contingencies and of such types and in such amounts as is
customary for companies similarly situated, which insurance shall be deemed by
the Company to be sufficient. The Company shall, within ninety (90) days after
the Closing, also maintain in effect "key person" life insurance policies,
payable to the Company, on the lives of Richard R. Burnham, David C. Gasmire and
Bradley J. Velie (so long as they remain employees of the Company), each in the
face amount of at least $1,000,000, $1,000,000 and $500,000, respectively. The
Company shall not cause or permit any assignment or change in beneficiary and
shall not borrow against any such policy. If requested by Investors holding at
least two-thirds of the outstanding Preferred Shares and Preferred Warrant
Shares assuming exercise of the Preferred Warrants) (for the purpose of such
computation, the number of shares deemed to be held by each holder of Preferred
Shares shall be calculated by determining the number of shares of Common Stock
the Preferred Shares would be converted into, assuming conversion of such
Preferred Shares as of the date of such request), the Company will add one
designee of such Investors as a notice party for each such policy and shall
request that the issuer of each policy provide such designee with ten (10) days'
notice before such policy is terminated (for failure to pay premiums or
otherwise) or assigned or before any change is made in the beneficiary thereof.

         9. INSPECTION. CONSULTATION, AND ADVICE. The Company shall permit and
cause each of its subsidiaries to permit each Investor and such persons as it
may designate, at such Investor's expense, to visit and inspect any of the
properties of the Company and its subsidiaries, examine their books, discuss the
affairs, finances, and accounts of the Company and its subsidiaries with their
officers, employees, and public accountants (and the Company hereby authorizes
said accountants to discuss with such Investor and such designees such affairs,
finances, and accounts), and consult with and advise the management of the
Company and its subsidiaries as to their affairs, finances, and accounts, all at
reasonable times and upon reasonable notice; provided, however, that inspection
and other rights conferred herein on the Investor shall inure to the benefit of
a transferee of Preferred Shares, Note Warrants, Preferred Warrants, as the case
may be, only if (i) there is transferred to such transferee at least 100% of the
total number of Preferred Shares issued pursuant to the Series C Agreement, the
Series B Agreement and the Series A Agreement to the direct or indirect
transferor of such transferee, (ii) there is transferred to such transferee at
least 100% of the Note Warrants or Preferred Warrants, as the case may be,
issued pursuant to the Note Purchase Agreement or the Bridge Note Agreement to
the direct or indirect transferor of such transferee or (iii) such transferee is
a partner, shareholder or affiliate of a Party hereto; and, further provided,
however, that in the event the number of transferees becomes excessive, as
reasonably determined by the Company, the Company may request that the
transferees appoint a single representative to act on their behalf and to
receive all notices which any or all of them are entitled to receive pursuant to
this Agreement.

         10. RESTRICTIVE AGREEMENTS PROHIBITED. Neither the Company nor any of
its subsidiaries shall become a party to any agreement which by its terms
restricts the Company's performance of the Series C Agreement, the Note Purchase
Agreement, the Bridge Note Purchase Agreement, the Second Amended and Restated
Registration Rights Agreement of even date herewith between the Company and the
Parties hereto, this Agreement, or the Company's Third Amended and Restated
Certificate of Incorporation (the "CHARTER"), as all such may be amended from
time to time in accordance with their terms and applicable law.

                                       9
<PAGE>   10

         11. TRANSACTIONS WITH AFFILIATES. Except for transactions contemplated
by this Agreement or as otherwise approved by the Board of Directors, neither
the Company nor any of its subsidiaries shall enter into any transaction with
any director, officer, employee or holder of more than five percent (5%) of the
outstanding capital stock of any class or series of capital stock of the Company
or any of its subsidiaries, member of the family of any such person, or any
corporation, partnership, trust, or other entity in which any such person, or
member of the family of any such person, is a director, officer, trustee,
partner, or holder of more than five percent (5%) of the outstanding capital
stock thereof, except for transactions on customary terms related to such
person's employment.

         12. BOARD OF DIRECTORS MEETINGS. The Company shall use its best efforts
to ensure that meetings of its Board of Directors are held at least four times
each year and at least once each quarter.

         13. COMPENSATION. The Company shall not pay to its management
compensation in excess of that compensation customarily paid to management in
companies of similar size, of similar maturity, and in similar businesses and
shall not, in any event, exceed the compensation levels established by the
Compensation Committee of the Board of Directors without the approval of a
majority of the members of such Compensation Committee.

         14. AMENDED AND RESTATED BY-LAWS. The Company shall at all times cause
its Amended and Restated By-laws to provide that, (a) unless otherwise required
by the laws of the State of Delaware, (i) the Chairman of the Board of
Directors, (ii) the President of the Company, (iii) a majority of the directors,
or (iv) the holders of not more than a majority of the issued and outstanding
shares of the Company entitled to vote for the election of directors shall have
the right to call a meeting of the stockholders, (b) (i) the Chairman of the
Board of Directors, (ii) the President of the Company, or (iii) one-third of the
directors (rounded up to the nearest whole number) shall have the right to call
a meeting of the Board of Directors, and (c) the number of directors fixed in
accordance therewith shall in no event conflict with any of the terms or
provisions of the Charter. The Company shall at all times maintain provisions in
its By-laws and/or Charter indemnifying all directors against liability and
absolving all directors from liability to the Company and its stockholders to
the maximum extent permitted under the laws of the State of Delaware.

         15. PERFORMANCE OF CONTRACTS. The Company shall not amend, modify,
terminate, waive, or otherwise alter, in whole or in part, any of the employee
nondisclosure agreements with any of the Company's employees or the employment
agreements with the Company's executive employees without the approval of a
majority of the Company's Board of Directors.

         16. VESTING OF RESERVED EMPLOYEE SHARES. Except as set forth on
schedules to the Series C Agreement, the Company shall not grant to any of its
employees options to purchase shares of Common Stock pursuant to a stock option
plan which will become exercisable at a rate in excess of twenty percent (20%)
per annum from the date of such grant with the first vesting occurring after the
first year of employment (except in the case of merger, consolidation, sale of
all (or substantially all) of the assets of the Company, or other business
combination involving the sale or transfer of all (or substantially all) of the
capital stock of the Company in which the Company is not the surviving entity,
or, if it is the surviving entity, either (i) does not survive as

                                       10
<PAGE>   11

an operating ongoing concern in substantially the same line of business, or (ii)
is controlled by persons or entities previously unaffiliated with the Company,
in which case such shares may vest immediately), without the approval of a
majority of the Company's Board of Directors. The Company shall reserve a right
of first refusal to purchase any shares of Common Stock issued to an optionee
under a stock option plan if such person wishes to transfer any of such shares
at any time before the closing of an underwritten public offering under the
Securities Act of 1933, as amended, with respect to the Company's Common Stock.

         17. EMPLOYEE NONDISCLOSURE AND DEVELOPMENTS AGREEMENTS. The Company
shall obtain, and shall use its best efforts to cause its subsidiaries to
obtain, appropriate employee nondisclosure agreements or equivalent agreements
from all future officers, key employees and other employees, who will have
access to confidential information of the Company or any of its subsidiaries,
upon their employment by the Company or any of its subsidiaries.

         18. PURCHASES, DISTRIBUTIONS AND DIVIDENDS. The Company shall not,
without the consent of the Note Purchasers and the holders of at least
two-thirds of the then outstanding Preferred Shares, purchase or set aside any
sums for the purchase of, or pay any dividend or make any distribution on, any
shares of stock other than the Preferred Shares, except for dividends or other
distributions payable on the Common Stock solely in the form of additional
shares of Common Stock and except for (i) the purchase by the Company of the
Note Warrants and/or the Note Warrant Shares pursuant to Section 3.03 of the
Note Purchase Agreement and (ii) the purchase of shares of Common Stock or
Preferred Shares from former employees of the Company who acquired such shares
directly from the Company, if each such purchase is made pursuant to contractual
rights held by the Company relating to the termination of employment of such
former employee and the purchase price does not exceed the original issue price
paid by such former employee to the Company for such shares.

         19. U.S. REAL PROPERTY INTEREST STATEMENT. Upon a written request by
any Investor, the Company shall provide such Investor with a written statement
informing the Investor whether such Investor's interest in the Company
constitutes a U.S. real property interest. The Company's determination shall
comply with the requirements of Treasury Regulation section 1.897-2(h)(1) or any
successor regulation, and the Company shall provide timely notice to the
Internal Revenue Service, in accordance with and to the extent required by
Treasury Regulation section 1.897-2(h)(2) or any successor regulation, that such
statement has been made. The Company's written statement to any Investor shall
be delivered to such Investor within ten (10) days of such Investor's written
request therefor. The Company's obligation to furnish a written statement
pursuant to this Section 19 shall continue notwithstanding the fact that a class
of the Company's stock may be regularly traded on an established securities
market.

         20. TERMINATION. This Agreement, and the respective rights and
obligations of the Parties, shall terminate on the closing of a firm commitment
underwritten public offering, pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale by the
Company of Common Stock approved by the Company's Board of Directors. In
addition, the rights of a Party to purchase securities pursuant to Section 2
shall terminate on the date such Party shall own less than 20% of the shares of
Common Stock owned by such Party on the date hereof (treating such Party, for
the purposes of such computation, as the holder of the number of shares of
Common Stock which would be issuable to such Party, upon the conversion,
exercise or exchange of securities that are convertible,

                                       11
<PAGE>   12

exercisable or exchangeable into or for (whether directly or indirectly) shares
of Common Stock and assuming the like conversion, exercise and exchange of all
such securities held by other persons).

         21. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered, telecopied or
mailed by first class, registered or certified mail, postage prepaid, to each
Party at its respective address set forth on Schedules I and II hereof, or to
such other address as the addressee shall have furnished to the other Parties
hereto in the manner prescribed by this Section 21.

         22. SPECIFIC PERFORMANCE. The rights of the Parties under this
agreement are unique and, accordingly, the Parties shall, in addition to such
other remedies as may be available to any of them at law or in equity, have the
right to enforce their rights hereunder by actions for specific performance to
the extent permitted by law.

         23. LEGEND. The certificates representing the Shares subject to this
Agreement shall bear on their face a legend substantially as follows:

         "The shares represented by this certificate are subject to all the
         terms and conditions of a certain Second Amended and Restated
         Stockholders' Agreement dated as of July __, 1998, as may be amended, a
         copy of which the Company will furnish to the holder of this
         certificate upon request and without charge."

         24. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the Parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings between them or any of them as to such
subject matter.

         25. WAIVERS AND FURTHER AGREEMENTS. Any of the provisions of this
Agreement may be waived with the written consent of (a) Founders owning a
majority of the Shares then owned by all Founders, and for the purpose of such
computation, the number of shares deemed to be held by each holder of Preferred
Shares shall be calculated by determining the number of shares of Common Stock
the Preferred Shares would be converted into, assuming conversion of such
Preferred Shares as of the date such action is to be taken, which waiver shall
bind all of the Founders and (b) Investors owning two-thirds of the Shares then
owned by all Investors, and for the purpose of such computation, the number of
shares deemed to be held by each such Investor shall be calculated by
determining the number of shares of Common Stock which would be issuable to such
Investor upon the conversion, exercise or exchange of securities that are
convertible, exercisable or exchangeable into, or for (whether directly or
indirectly) shares of Common Stock assuming the like conversion, exercise, and
exchange of such securities as of the date such action is to be taken, which
waiver shall bind all of the Investors. The foregoing sentence shall not apply
to Sections 2 and 3. Any waiver by any Party of a breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach of that provision or of any other provision hereof. Each of the Parties
hereto agrees to execute all such further instruments and documents and to take
all such further action as any other Party may reasonably require in order to
effectuate the terms and purposes of this Agreement.

         26. AMENDMENTS. Except as otherwise expressly provided herein, this
Agreement may not be amended except by an instrument in writing executed by (a)
Founders owning a

                                       12
<PAGE>   13

majority of the Shares then owned by all Founders, and for the purpose of such
computation, the number of shares deemed to be held by each holder of Preferred
Shares shall be calculated by determining the number of shares of Common Stock
the Preferred Shares would be converted into, assuming conversion of such
Preferred Shares as of the date such action is to be taken, which amendment
shall bind all of the Founders and (b) Investors owning two-thirds of the Shares
then owned by all Investors, and for the purpose of such computation, the number
of shares deemed to be held by each such Investor shall be calculated by
determining the number of shares of Common Stock which would be issuable to such
Investor upon the conversion, exercise or exchange of securities that are
convertible, exercisable or exchangeable into, or for (whether directly or
indirectly) shares of Common Stock assuming the like conversion, exercise, and
exchange of such securities as of the date such action is to be taken.

         27. ASSIGNMENT; SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the Parties hereto and their respective
heirs, executors, legal representatives, successors and permitted transferees,
except as may be expressly provided otherwise herein.

         28. ADDITIONAL SHARES OF STOCK. The Company shall not issue any equity
securities or subscriptions, warrants, options, convertible securities or other
rights (contingent or otherwise) to purchase or otherwise acquire equity
securities to any person who is not a Party unless the person to whom such
equity securities or subscriptions, warrants, options, convertible securities or
other rights (contingent or otherwise) to purchase or otherwise acquire equity
securities are issued agrees, in a writing delivered simultaneously with such
issuance, to become bound by the transfer restrictions and rights of first
refusal to the Company similar to those set forth herein.

         29. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance is held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.

         30. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in two or more counterparts, and by the parties hereto in separate counterparts
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument. A facsimile
transmission of a signature hereto shall be deemed for all purposes to be an
original signature.

         31. SECTION HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

         32. CONTINUATION OF EMPLOYMENT. Nothing in this Agreement shall create
an obligation on the Company or the Parties to continue any person's employment
with the Company.

         33. [RESERVED]

         34. LIABILITY. None of the Founders or Investors shall be personally
liable to any party for a breach by the Company or its obligations hereunder.

                                       13
<PAGE>   14

         35. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Texas, without
reference to conflicts of law principles.

         36. ADDITIONAL PARTIES. The parties hereto acknowledge that certain
Investors as of the date of this amendment and restatement of the Agreement were
not parties to the original form of this Agreement, and hereby consent to the
making of such persons and entities parties to this Agreement.

         IN WITNESS WHEREOF, the parties hereto have set their hand as of this
1st day of July, 1998.

         COMPANY                       ODYSSEY HEALTHCARE, INC.

                                       By /s/ Richard R. Burnham
                                         -----------------------------
                                         Richard R. Burnham, President

         FOUNDERS:                        /s/ Richard R. Burnham
                                       -------------------------------
                                       Richard R. Burnham

                                          /s/ David C. Gasmire
                                       -------------------------------
                                       David C. Gasmire

                                          /s/ David W. Cross
                                       -------------------------------
                                       David W. Cross

                                          /s/ David L. Steffy
                                       -------------------------------
                                       David L. Steffy

                                          /s/ Robert H. Calland
                                       -------------------------------
                                       Robert H. Calland

                                       14
<PAGE>   15

                                       THREE ARCH PARTNERS, L.P.

                                          /s/ Mark Wan
                                       ----------------------------------
                                       By Three Arch Management, L.P.,
                                       Its General Partner

                                       THREE ARCH ASSOCIATES, L.P.

                                          /s/ Mark Wan
                                       ----------------------------------
                                       By Three Arch Management, L.P.,
                                       Its General Partner

         INVESTORS:                    THREE ARCH PARTNERS, L.P.

                                          /s/ Mark Wan
                                       ----------------------------------
                                       By Three Arch Management, L.P.,
                                       Its General Partner

                                       THREE ARCH ASSOCIATES, L.P.

                                          /s/ Mark Wan
                                       ----------------------------------
                                       By Three Arch Management, L.P.,
                                       Its General Partner

                                       WEISS, PECK & GREER VENTURE
                                       ASSOCIATES III, L.P.
                                       By WPG Venture Partners III, L.P.,
                                       General Partner

                                       By /s/ Ellen M. Feeney
                                         --------------------------------
                                         Ellen M. Feeney, General Partner

                                       15
<PAGE>   16

                                       WPG ENTERPRISE FUND II, L.P.
                                       By WPG Venture Partners III, L.P.,
                                       General Partner

                                       By /s/ Ellen M. Feeney
                                         ---------------------------------------
                                         Ellen M. Feeney, General Partner

                                       OAK INVESTMENT PARTNERS VI,
                                       LIMITED PARTNERSHIP

                                       By /s/ Ann Lamont
                                         ---------------------------------------
                                         Ann Lamont, Managing Member of Oak
                                         Associates VI, LLC, the General Partner
                                         of Oak Investment Partners VI, Limited
                                         Partnership

                                       OAK VI AFFILIATES FUND, LIMITED
                                       PARTNERSHIP

                                       By /s/ Ann Lamont
                                         ---------------------------------------
                                         Ann Lamont, Managing Member of Oak
                                         VI Affiliates, LLC, the General Partner
                                         of Oak VI Affiliates Fund, Limited
                                         Partnership

                                       COLLINSON HOWE VENTURE
                                       PARTNERS, INC.

                                       By /s/ Jeffrey J. Collinson
                                         ---------------------------------------
                                         Jeffrey J. Collinson, President

                                       16
<PAGE>   17

                                       HIGHLAND CAPITAL PARTNERS III
                                       LIMITED PARTNERSHIP

                                       By Highland Management Partners III
                                       Limited Partnership, its General Partner

                                       By /s/ Wycliffe K. Grousbeck
                                         ---------------------------------------
                                         General Partner

                                       HIGHLAND ENTREPRENEURS' FUND
                                       III LIMITED PARTNERSHIP

                                       By HEF III, LLC, its General Partner

                                       By /s/ Wycliffe K. Grousbeck
                                         ---------------------------------------
                                         Wycliffe K. Grousbeck, Member

                                       LIFE SCIENCE ENTREPRENEUR FUND

                                       By /s/ Brian C. Cunningham
                                         ---------------------------------------
                                         Brian C. Cunningham, Administrative
                                         Partner

                                       CAPITAL RESOURCE LENDERS III, L.P.

                                       By: Capital Resource Partners III, L.L.C.
                                           its General Partner

                                       By: /s/ Alexander McGrath
                                         ---------------------------------------

                                       17
<PAGE>   18

                                       CRP INVESTMENT PARTNERS III,
                                       L.L.C.

                                       By: /s/ Alexander McGrath
                                          ----------------------------------

                                           /s/ Bradley J. Velie
                                       -------------------------------------
                                       Bradley J. Velie

         HOLDERS
                                       -------------------------------------
                                       Joseph D. Lingenfelter

                                       18

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