Document:

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                                                                     EXHIBIT 4.3

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                     SERIES C CONVERTIBLE PREFERRED STOCK
                              PURCHASE AGREEMENT

                                     among

                              ADOLOR CORPORATION

                                      and

                      THE PURCHASERS NAMED IN SCHEDULE I

                            Dated as of May 1, 1997

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                               Table of Contents
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<S>                                                                         <C>
ARTICLE I  THE PREFERRED SHARES                                               1

     Section 1.01.    Issuance, Sale and Delivery of the Preferred Shares.    1
     Section 1.02.    Initial Closing.....................................    1
     Section 1.03.    Additional Closing..................................    1

ARTICLE II  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................    2

     Section 2.01.    Organization, Qualifications and Corporate Power....    2
     Section 2.02.    Authorization of Agreements.........................    3
     Section 2.03.    Validity............................................    3
     Section 2.04.    Authorized Capital Stock............................    4
     Section 2.05.    Financial Statements................................    4
     Section 2.06.    Events Subsequent to the Date of the Balance Sheet..    5
     Section 2.07.    Litigation: Compliance with Law.....................    5
     Section 2.08.    Proprietary Information of Third Parties............    6
     Section 2.09.    Patents, Trademarks, Etc............................    6
     Section 2.10.    Title to Properties.................................    7
     Section 2.11.    Leasehold Interests.................................    7
     Section 2.12.    Insurance...........................................    8
     Section 2.13.    Taxes...............................................    8
     Section 2.14.    Other Agreements....................................    8
     Section 2.15.    Significant Customers and Suppliers.................   10
     Section 2.16.    Governmental Approvals..............................   10
     Section 2.17.    Disclosure..........................................   10
     Section 2.18.    Offering of the Preferred Shares....................   10
     Section 2.19.    Brokers.............................................   11
     Section 2.20.    Officers............................................   11
     Section 2.21.    Transactions With Affiliates........................   11
     Section 2.22.    Employees...........................................   11
     Section 2.23.    Environmental Protection............................   11
     Section 2.24.    ERISA...............................................   12

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............   14

ARTICLE IV   CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS..............   14

ARTICLE V    COVENANTS OF THE COMPANY.....................................   16

     Section 5.01.    Financial Statements, Reports, Etc..................   16
     Section 5.02.    Right of First refusal..............................   17
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     <S>                                                                     <C>
     Section 5.03.    Reserve for Conversion Shares.......................   18
     Section 5.04.    Corporate Existence.................................   19
     Section 5.05.    Properties, Business, Insurance.....................   19
     Section 5.06.    Inspection, Consultation and Advice.................   19
     Section 5.07.    Restrictive Agreements Prohibited...................   19
     Section 5.08.    Transactions with Affiliates........................   19
     Section 5.09.    Use of Proceeds.....................................   19
     Section 5.10.    By-laws.............................................   20
     Section 5.11.    Performance of Contracts............................   20
     Section 5.12.    Vesting of Reserved Employee Shares.................   20
     Section 5.13.    Employee Nondisclosure and Developments Agreements..   20
     Section 5.14.    Compliance with Laws................................   20
     Section 5.15.    Keeping of Records and Books of Account.............   20
     Section 5.16.    Rule 144A Information...............................   20
     Section 5.17.    Future Subsidiaries.................................   21

ARTICLE VI  MISCELLANEOUS.................................................   21

     Section 6.01.    Expenses............................................   21
     Section 6.02.    Survival of Agreements..............................   21
     Section 6.03.    Brokerage...........................................   21
     Section 6.04.    Parties in Interest.................................   21
     Section 6.05.    Notices.............................................   22
     Section 6.06.    Governing Law.......................................   22
     Section 6.07.    Entire Agreement....................................   22
     Section 6.08.    Counterparts........................................   22
     Section 6.09.    Amendments..........................................   22
     Section 6.10.    Severability........................................   22
     Section 6.11.    Titles and Subtitles................................   22
     Section 6.12.    Certain Defined Term................................   23
     Section 6.13.    Prior Agreements....................................   23
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          SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of
May 1, 1997 among Adolor Corporation, a Delaware corporation (the "Company"),
and the several purchasers named in the attached Schedule I (individually a
                                                 ----------
"Purchaser" and collectively the "Purchasers").

          WHEREAS, the Company wishes to issue and sell to the Purchasers up to
an aggregate of 14,285,714 shares (the "Preferred Shares") of the authorized but
unissued Series C Convertible Preferred Stock, $.01 par value, of the Company
(the "Series C Convertible Preferred Stock"); and

          WHEREAS, the Purchasers, severally, wish to purchase the Preferred
Shares on the terms and subject to the conditions set forth in this Agreement;

          NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:

                                   ARTICLE I

                             THE PREFERRED SHARES

     Section 1.01.  Issuance, Sale and Delivery of the Preferred Shares.  The
                    ---------------------------------------------------
Company agrees to issue and sell to each Purchaser, and each Purchaser hereby
agrees to purchase from the Company, the number of Preferred Shares set forth
opposite the name of such Purchaser under the heading "Number of Preferred
Shares to be Purchased" on Schedule I, at the aggregate purchase price set forth
opposite the name of such Purchaser under the heading "Aggregate Purchase Price
for Preferred Shares" on Schedule I.

     Section 1.02.  Initial Closing.  The initial closing shall take place at
                    ---------------
the offices of Dechert Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch
Street, Philadelphia, PA 19103, at 10:00 a.m., Philadelphia time, on May 1,
1997, or at such other location, date and time as may be agreed upon between the
Purchasers and the Company (such closing being called the "Closing" and such
date and time being called the "Closing Date"). At the Closing, the Company
shall issue and deliver to each Purchaser a stock certificate or certificates in
definitive form, registered in the name of such Purchaser, representing the
Preferred Shares being purchased by it at the Closing. As payment in fill for
the Preferred Shares being purchased by it under this Agreement, and against
delivery of the stock certificate or certificates therefor as aforesaid, on the
Closing Date each Purchaser shah (i) deliver to the Company a check payable to
the order of the Company, in the amount set forth opposite the name of such
Purchaser under, the heading "Aggregate Purchase Price for Preferred Shares" on
Schedule I, (ii) transfer such sum to the account of the Company by wire
----------
transfer, or (iii) deliver or transfer such sum to the Company by any
combination of such methods of payments.

     Section 1.03.  Additional Closing.  After the Closing Date and on or
                    ------------------
prior to July 1, 1997 the Company may hold one or more additional closings (each
an "Additional Closing; and
<PAGE>

collectively the "Additional Closings") at which the Company may issue and sell
up to the number of Preferred Shares equal to the difference between 14,285,714
and the aggregate number of Preferred Shares previously sold on the Closing Date
and, as applicable, on the date of any prior Additional Closing. The sale of
Preferred Shares pursuant to this Section 1.03 shall be on the same terms and
conditions (including price) as the sale of the Preferred Shares pursuant to
Section 1.02 hereof and shall be effected by the execution by any investor of a
counterpart signature page to this Agreement. Upon such execution: (i) each such
investor shall be deemed to be a Purchaser for all purposes of this Agreement
and Schedule I shall be amended to include such Purchaser; and (ii) each such
    ----------
Additional Closing shall be deemed to be a Closing hereunder and the date of
each such Additional Closing shall be a "Closing Date" hereunder. If necessary,
the Company wilt provide an updated Disclosure Schedule to Purchasers purchasing
in any Additional Closing.

                                  ARTICLE II

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants to each Purchaser that, as of each
Closing Date on which such Purchaser purchases Preferred Shares hereunder,
except as set forth in the Disclosure Schedule attached as Schedule II, as may
                                                           -----------
be updated in writing prior to any Additional Closing hereunder, (which
Disclosure Schedule, (as updated, if applicable), makes explicit reference to
the particular representation or warranty as to which exception is taken, which
in each case shall constitute the sole representation and warranty as to which
such exception shall apply):

     Section 2.01.  Organization, Qualifications and Corporate Power.
                    ------------------------------------------------

                    (a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate power
and corporate authority to own and hold its properties and to carry on its
business as now conducted and as proposed to be conducted, to execute, deliver
and perform this Agreement, Amendment No. 2 to that certain Registration Rights
Agreement by and among the Company and the purchasers named therein dated as of
November 7, 1994, and as amended by Amendment No. 1 to Registration Rights
Agreement dated as of February 27, 1996 (as amended, the "Original Registration
Rights Agreement") in the form attached as Exhibit A (the "Registration Rights
                                           ---------
Agreement Amendment"), and the Management Rights letter agreement(s) between the
Company and certain of the Purchasers, if any, in the form attached as Exhibit B
                                                                       ---------
(the "Management Rights Agreements"), to issue, sell and deliver the Preferred
Shares and to issue and deliver the shares of Common Stock, $0001 par value, of
the Company ("Common Stock") issuable upon conversion of the Preferred Shares
(the "Conversion Shares"). The Original

                                      -2-
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Registration Rights Agreement as amended by the Registration Rights Agreement
Amendment is sometimes referred to herein as the "Registration Rights
Agreement."

                    (b) The Company does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any other corporation or (B) any participating
interest in any partnership, joint venture or other non-corporate business
enterprise or (ii) control, directly or indirectly, any other entity.

     Section 2.02.  Authorization of Agreements. Etc.
                    ---------------------------------

                    (a) The execution and delivery by the Company of this
Agreement, the Registration Rights Agreement Amendment and the Management Rights
Agreements, the performance by the Company of its obligations hereunder and
thereunder, the issuance, sale and delivery of the Preferred Shares and the
issuance and delivery of the Conversion Shares have been duly authorized by all
requisite corporate action and will not violate any provision of law, any order
of any court or other agency of government, the Certificate of Incorporation of
the Company, as amended (the "Charter") or the By-laws of the Company, as
amended, or any provision of any indenture, agreement or other instrument to
which the Company or any of its respective properties or assets is bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any such indenture, agreement or other instrument,
or result in the creation or imposition of any lien, charge, restriction, claim
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.

                    (b) The Preferred Shares have been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, filly paid and
nonassessable shares of Series C Convertible Preferred Stock with no personal
liability attaching to the ownership thereof and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or through the
Company except as set forth in the Registration Rights Agreement. The Conversion
Shares have been duly reserved for issuance upon conversion of the Preferred
Shares and, when so issued, will be duly authorized, validly issued, filly paid
and nonassessable shares of Common Stock with no personal liability attaching to
the ownership thereof and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through the Company except
as set forth in the Registration Rights Agreement. Neither the issuance, sale or
delivery of the Preferred Shares nor the issuance or delivery of the Conversion
Shares is subject to any preemptive right of stockholders of the Company or to
any right of first refusal or other right in favor of any person.

     Section 2.03.  Validity.  This Agreement has been duly executed and
                    --------
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The Registration
Rights Agreement Amendment and the Management Rights Agreements, when executed
and delivered in accordance with this Agreement, will constitute the legal,
valid and binding obligations of the Company, enforceable in accordance with
their respective terms.

                                      -3-
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     Section 2.04.  Authorized Capital Stock.  The authorized capital stock of
                    ------------------------
the Company consists of(i) 43,392,859 shares of Preferred Stock, $01 par value
(the "Preferred Stock"), of which 6,000,000 shares have been designated Series A
Convertible Preferred Stock, 23,107,145 have been designated Series B
Convertible Preferred Stock and 14,285,714 shares have been designated as Series
C Convertible Preferred Stock, and (ii) 52,000,000 shares of Common Stock.
Immediately prior to the Closing, 4,454,089 shares of Common Stock, 6,000,000
shares of Series A Convertible Preferred Stock and 23,107,145 shares of Series B
Convertible Preferred Stock will be validly issued and outstanding, filly paid
and nonassessable with no personal liability attaching to the ownership thereof
and no shares of Series C Convertible Preferred Stock will have been issued. The
stockholders of record and holders of subscriptions, warrants, options,
convertible securities, and other rights (contingent or other) to purchase or
otherwise acquire equity securities of the Company, and the number of shares of
Common Stock and the number of such subscriptions, warrants, options,
convertible securities, and other such rights held by each, are as set forth in
the attached Schedule III. The designations, powers, preferences, rights,
             ------------
qualifications, limitations and restrictions in respect of each class and series
of authorized capital stock of the Company are as set forth in the Charter, a
copy of which is attached as Exhibit C, and all such designations, powers,
                             ---------
preferences, rights, qualifications, limitations and restrictions are 'valid,
binding and enforceable and in accordance with all applicable laws. Except as
set forth in the attached Schedule III, (i) no person owns of record or is known
                          ------------
to the Company to own beneficially any share of Common Stock, (ii) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company is
authorized or outstanding that has been issued by the Company, and (iii) there
is no commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or asset.
Except as provided for in the Charter or as set forth in the attached Schedule
                                                                      --------
III, the Company has no obligation (contingent or otherwise) to purchase, redeem
---
or otherwise acquire any of its equity securities or any interest therein or to
pay any dividend or make any other distribution in respect thereof. Except for
those certain Stock Restriction Agreements by and among the Company, the
purchasers named therein and each of Dr. John Farrar, Dr. Michael Lewis and ARCH
Development Corporation dated as of November 7, 1994 (the "1994 Stock
Restriction Agreements") and the Restricted Stock Agreement dated May 31, 1996
by and between the Company and Frank Baldino, and the Management Rights
Agreements, to the best of the Company's knowledge there are no voting trusts or
agreements, stockholders' agreements, pledge agreements, buy-sell agreements,
rights of first refusal, preemptive rights or proxies relating to any securities
of the Company (whether or not the Company is a party thereto). All of the
outstanding securities of the Company were issued in compliance with all
applicable Federal and state securities laws.

     Section 2.05.  Financial Statements.  The Company has furnished to the
                    --------------------
Purchasers the unaudited consolidated balance sheet of the Company as of
December 31, 1996, (the "Balance Sheet") and the related unaudited consolidated
statements of income and cash flows of the Company for the year ended December
31, 1996. All such financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except that such
unaudited financial statements do not contain all of the required footnotes) and

                                      -4-
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fairly present in all material respects the consolidated financial position of
the Company as of December 31, 1996, and the consolidated results of their
operations and cash flows for the year ended December 31, 1996. Since the date
of the Balance Sheet, (i) there has been no change in the assets, liabilities or
financial condition of the Company (on a consolidated basis) from that reflected
in the Balance Sheet except for changes in the ordinary course of business which
in the aggregate have not been materially adverse and (ii) none of the business,
prospects, financial condition, operations, property or affairs of the Company
(on a consolidated basis) has been materially adversely affected by any
occurrence or development, individually or in the aggregate, whether or not
insured against.

     Section 2.06.  Events Subsequent to the Date of the Balance Sheet.  Since
                    --------------------------------------------------
the date of the Balance Sheet, the Company has not (i) issued any stock, bond or
other corporate security, except pursuant to the exercise of stock options
outstanding as of the date of the Balance Sheet (ii) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts entered into
in the ordinary course of business, (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Balance Sheet and
current liabilities incurred since the date of the Balance Sheet in the ordinary
course of business, (iv) declared or made any payment or distribution to
stockholders or purchased or redeemed any share of its capital stock or other
security, (v) mortgaged, pledged, encumbered or subjected to lien any of its
assets, tangible or intangible, other than liens of current real property taxes
not yet due and payable, (vi) sold, assigned or transferred any of its tangible
assets except in the ordinary course of business, or canceled any debt or claim,
(vii) sold, assigned, transferred or granted any exclusive license with respect
to any patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset, (viii) suffered any loss of property or waived any right
of substantial value whether or not in the ordinary course of business, (ix)
made any change in officer compensation except in the ordinary course of
business and consistent with past practice, (x) made any material change in the
manner of business or operations of the Company, (xi) entered into any
transaction except in the ordinary course of business or as otherwise
contemplated hereby or (xii) entered into any commitment (contingent or
otherwise) to do any of the foregoing.

     Section 2.07.  Litigation; Compliance with Law.  There is no (1) action,
                    -------------------------------
suit, claim, proceeding or investigation pending or, to the best of the
Company's knowledge, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise or (iii) governmental inquiry
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company (including without limitation any inquiry as to the
qualification of the Company to hold or receive any license or permit). The
Company is not in default with respect to any order, writ, injunction or decree
known to or served upon the Company of any court or of any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign. There is no action or suit by the Company
pending or threatened against others. The

                                      -5-
<PAGE>

Company has complied with all laws, rules, regulations and orders applicable to
its business, operations, properties, assets, products and services, the Company
has all necessary permits, licenses and other authorizations required to conduct
its business as conducted and as proposed to be conducted, and the Company has
been operating its business pursuant to and in compliance with the terms of all
such permits, licenses and other authorizations except where any instance of
instances of noncompliance do not, individually or in the aggregate, have a
material adverse effect on the Company's business, prospects, financial
condition, operations, property or affairs. There is no existing law, rule,
regulation or order, and the Company after due inquiry is not aware of any
proposed law, rule, regulation or order, whether Federal, state, county or
local, which would prohibit or restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its business in any
jurisdiction in which it is now conducting business or in which it proposes to
conduct business.

     Section 2.08.  Proprietary Information of Third Parties.  To the best of
                    ----------------------------------------
the Company's knowledge, no third party has claimed or has reason to claim that
any person employed by or affiliated with the Company has (a) violated or may be
violating any of the terms or conditions of his employment, non-competition or
non-disclosure agreement with such third party, (b) disclosed or may be
disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. No third party has requested information from
the Company which suggests that such a claim might be contemplated. To the best
of the Company's knowledge, no person employed by or affiliated with the Company
has employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the best of the
Company's knowledge, no person employed by or affiliated with the Company has
violated any confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe there
will be any such employment or violation. To the best of the Company's
knowledge, none of the execution or delivery of this Agreement, or the carrying
on of the business of the Company as officers, employees or agents by any
officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will conflict with or result in a breach
of the terms, conditions or provisions of or constitute a default under any
contract, covenant or instrument under which any such person is obligated.

     Section 2.09.  Patents, Trademarks, Etc..  Set forth in Schedule II is a
                    -------------------------                -----------
list and brief description of all domestic and foreign patents, patent rights,
patent applications, trademarks, trademark applications, service marks, service
mark applications, trade names and copyrights, and all applications for such
which are in the process of being prepared, owned by or registered in the name
of the Company, or of which the Company is a licensor or licensee or in which
the Company has any right, and in each case a brief description of the nature of
such right. The Company owns or possesses adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets, customer lists and know

                                      -6-
<PAGE>

how (collectively, "Intellectual Property") necessary to the conduct of its
business as conducted and as proposed to be conducted, and no claim is pending
or, to the best of the Company's knowledge, threatened to the effect that the
operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property, and the Company reasonably
believes that there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or threatened to the effect that any such
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company, and
there is no basis for any such claim (whether or not pending or threatened). All
prior art known to the Company which may be or may have been pertinent to the
examination of any United States patent or patent application listed in Schedule
                                                                        --------
II has been cited to the United States Patent and Trademark Office. To the best
--
of the Company's knowledge, all technical information developed by and belonging
to the Company which has not been patented has been kept confidential. The
Company has not granted or assigned to any other person or entity any right to
manufacture, have manufactured, assemble or sell the products or proposed
products or to provide the services or proposed services of the Company.

     Section 2.10.  Title to Properties.  The Company has good, clear and
                    -------------------
marketable title to its properties and assets reflected on the Balance Sheet or
acquired by it since the date of the Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since the date \\9\\f the
Balance Sheet), and all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances (including without limitation, easements and licenses),
except for liens for or current taxes not yet due and payable and minor
imperfections of title, if any, not material in nature or amount and not
materially detracting from the value or impairing the use of the property
subject thereto or impairing the operations or proposed operations of the
Company, including without limitation, the ability of the Company to secure
financing using such properties and assets as collateral. To the best of the
Company's knowledge after due inquiry, there are no condemnation, environmental,
zoning or other land use regulation proceedings, either instituted or planned to
be instituted, which would adversely affect the use or operation of the
Company's and its subsidiaries' properties and assets for their respective
intended uses and purposes, or the value of such properties, and the Company has
not received notice of any special assessment proceedings which would affect
such properties and assets.

     Section 2.11.  Leasehold Interests.  Each lease or agreement to which the
                    -------------------
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement, duly authorized and entered into, without
any default of the Company thereunder and, to the best of the Company's
knowledge, without any default thereunder of any other party thereto. No event
has occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the best of the Company's knowledge, by any other
party thereto. The Company's possession of such property has not been disturbed
and, to the best of the Company's knowledge after due inquiry, no claim has been
asserted against the Company adverse to its rights in such leasehold interests.

                                      -7-
<PAGE>

     Section 2.12.  Insurance.  The Company holds valid policies covering all
                    ---------
of the insurance required to be maintained by it under Section 5.05.

     Section 2.13.  Taxes.  The Company has filed all tax returns, Federal,
                    -----
state, county and local, required to be filed by it, and the Company has paid
all taxes shown to be due by such returns as well as all other taxes,
assessments and governmental charges which have become due or payable, including
without limitation all taxes which the Company is obligated to withhold from
amounts owing to employees, creditors and third parties. The Company has
established adequate reserves for all taxes accrued but not yet payable. The
Federal income tax returns of the Company have never been audited by the
Internal Revenue Service. No deficiency assessment with respect to or proposed
adjustment of the Company's Federal, state, county or local taxes is pending or,
to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any Federal, state, county or local taxing authority,
outstanding against the assets, properties or business of the Company. Neither
the Company nor any of its present or former stockholders has ever filed an
election pursuant to Section 1362 of the Internal Revenue Code of 1986, as
amended (the "Code"), that the Company be taxed as an S corporation.

     Section 2.14.  Other Agreements.  Except as set forth in the attached
                    ----------------
Schedule IV(A~. (which Schedule IV(A) may be updated in writing prior to any
--------------         -------- ----
Additional Closing hereunder) as of each Closing Date hereunder, the Company
reasonably believes after due investigation that it is not a party to or
otherwise bound by any written or oral agreement, instrument, commitment or
restriction which individually or in the aggregate could materially adversely
affect the business, prospects, financial condition, operations, property or
affairs of the Company. Except as set forth in the attached Schedule W(B~, the
                                                            -------------
Company is not a party to or otherwise bound by any written or oral:

                    (a) distributor, dealer, manufacturer's representative or
sales agency agreement which is not terminable on less than ninety (90) days'
notice without cost or other liability to the Company (except for agreements
which, in the aggregate, are not material to the business of the Company);

                    (b) sales agreement which entitles any customer to a rebate
or right of set-off, to return any product to the Company after acceptance
thereof or to delay the acceptance thereof, or which varies in any material
respect from the Company's standard form agreements;

                    (c) agreement with any labor union (and, to the knowledge of
the Company, no organizational effort is being made with respect to any of its
employees);

                    (d) agreement with any supplier containing any provision
permitting any party other than the Company to renegotiate the price or other
terms, or containing any pay-back or other similar provision, upon the
occurrence of a failure by the Company to meet its obligations under the
agreement when due or the occurrence of any other event;

                    (e) agreement for the fixture purchase of fixed assets or
for the fixture purchase of materials, supplies or equipment in excess of its
normal operating requirements;

                                      -8-
<PAGE>

                    (f) agreement for the employment of any officer, employee or
other person on a fill-time or consulting basis which is not terminable by the
Company at will without liability to the Company, except pursuant to severance
and accrued vacation pay policies applicable to all employees of the Company;

                    (g) bonus, pension, profit-sharing, retirement,
hospitalization, insurance, stock purchase, stock option or other plan,
agreement or understanding pursuant to which benefits are provided to any
employee of the Company (other than group insurance plans applicable to
employees generally);

                    (h) agreement relating to the borrowing of money or to the
mortgaging or pledging of, or otherwise placing a lien or security interest on,
any asset of the Company;

                    (i) guaranty of any obligation for borrowed money or
otherwise;

                    (j) voting trust or agreement, stockholders' agreement,
pledge agreement, buy-sell agreement or first refusal or preemptive rights
agreement relating to any securities of the Company (other than this Agreement,
the Registration Rights Agreement Amendment, the 1994 Stock Restriction
Agreements and the Management Rights Agreements);

                    (k) agreement, or group of related agreements with the same
party or any group of affiliated parties, under which the Company has advanced
or agreed to advance money or has agreed to lease any property as lessee or
lessor;

                    (l) agreement or obligation (contingent or otherwise) to
issue, sell or otherwise distribute or to repurchase or otherwise acquire or
retire any share of its capital stock or any of its other equity securities
other than pursuant to its Charter as in effect on any Closing Date hereunder;

                    (m) assignment, license or other agreement with respect to
any form of intangible property;

                    (n) agreement under which it has granted any person any
registration rights, other than the Registration Rights Agreement;

                    (o) agreement under which it has limited or restricted its
right to compete with any person in any respect; and

                    (p) other agreement or group of related agreements with the
same party involving more than $10,000 or continuing over a period of more than
six months from the date or dates thereof (including renewals or extensions
optional with another party), which agreement or group of agreements is not
terminable by the Company without penalty upon notice of thirty (30) days or
less, but excluding any agreement or group of agreements with a customer of the
Company for the sale, lease or rental of the Company's products or services if
such

                                      -9-
<PAGE>

agreement or group of agreements was entered into by the Company in the ordinary
course of business.

The Company, and to the best of the Company's knowledge after due inquiry, each
other party thereto have in all material respects performed all the obligations
required to be performed by them to date (or each non-performing party has
received a valid, enforceable and irrevocable written waiver with respect to its
non-performance), have received no notice of default and are not in default
(with due notice or lapse of time or both) under any agreement, instrument,
commitment, plan or arrangement to which the Company is a party or by which it
or its property may be bound. The Company has no present expectation or
intention of not fully performing all its obligations under each such agreement,
instrument, commitment, plan or arrangement, and the Company has no knowledge of
any breach or anticipated breach by the other party to any agreement,
instrument, commitment, plan or arrangement to which the Company is a party. The
Company is in full compliance with all of the terms and provisions of its
Charter and By-laws, as amended.

     Section 2.15.  Significant Customers and Suppliers.  No customer or
                    -----------------------------------
supplier, or group of two or more thereof (whether or not affiliated) which was
material to the Company, individually or in the aggregate, during the period
covered by the financial statements referred to in Section 2.05 or which has
been material to the Company thereafter, has terminated, materially reduced or
threatened to terminate or materially reduce its or their purchases from or
provision of products or services to the Company, as the case may be.

     Section 2.16.  Governmental Approvals.  Subject to the accuracy of the
                    ----------------------
representations and warranties of the Purchasers set forth in Article UI, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
this Agreement, the Registration Rights Agreement Amendment or the Management
Rights Agreements, the issuance, sale and delivery of the Preferred Shares or,
upon conversion thereof, the issuance and delivery of the Conversion Shares,
other than (i) filings pursuant to state securities laws (all of which filings
have been made by the Company, other than those which are required to be made
after the Closing and which will be duly made on a timely basis) in connection
with the sale of the Preferred Shares and (ii) with respect to the Registration
Rights Agreement, the registration of the shares covered thereby with the
Commission and filings pursuant to state securities laws.

     Section 2.17.  Disclosure.  Neither this Agreement, nor any Schedule or
                    ----------
Exhibit to this Agreement, contains an untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein not misleading. None of the statements, documents, certificates or other
items prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.

     Section 2.18.  Offering of the Preferred Shares.  Neither the Company nor
                    --------------------------------
any person authorized or employed by the Company as agent, broker, dealer or
otherwise in connection with

                                      -10-
<PAGE>

the offering or sale of the Preferred Shares or any security of the Company
similar to the Preferred Shares has offered the Preferred Shares or any such
similar security for sale to, or solicited any offer to buy the Preferred Shares
or any such similar security from, or otherwise approached or negotiated with
respect thereto with, any person or persons, and neither the Company nor any
person acting on its behalf has taken or will take any other action (including,
without limitation, any offer, issuance or sale of any security of the Company
under circumstances which might require the integration of such security with
Preferred Shares under the Securities Act or the rules and regulations of the
Commission thereunder), in either case so as to subject the offering, issuance
or sale of the Preferred Shares to the registration provisions of the Securities
Act.

     Section 2.19.  Brokers.  The Company has no contract, arrangement or
                    -------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.

     Section 2.20.  Officers. Set forth in Schedule U is a list of the names of
                    --------
the officers of the Company, together with the title or job classification of
each such person and the total compensation anticipated to be paid to each such
person by the Company in 1997.

     Section 2.21.  Transactions With Affiliates.  Other than purchases of
                    ----------------------------
Preferred Shares hereunder, no director, officer, employee or stockholder of the
Company, or member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof; is a party to any transaction with the Company, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm, other than employment-at-will
arrangements in the ordinary course of business.

     Section 2.22.  Employees.  Each of the officers of the Company, each key
                    ---------
employee and each other employee now employed by the Company who has access to
confidential information of the Company has executed an Employee Nondisclosure
and Developments Agreement substantially in the form of Exhibit D and such
                                                        ------- -
agreements are in fill force and effect. No officer or key employee of the
Company has advised the Company (orally or in writing) that he intends to
terminate employment with the Company. The Company has complied in all material
respects with all applicable laws relating to the employment of labor, including
provisions relating to wages, hours, equal opportunity, collective bargaining
and the payment of Social Security and other taxes, and with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").

     Section 2.23.  Environmental Protection.  The Company has not caused or
                    ------------------------
allowed, or contracted with any party for, the generation, use, transportation,
treatment, storage or disposal of any Hazardous Substances (as defined below) in
connection with the operation of its business or otherwise. The Company, the
operation of its business, and to the Company's knowledge, any real property
that the Company owns, leases or otherwise occupies or uses (the "Premises") are

                                      -11-
<PAGE>

in material compliance with all applicable Environmental Laws (as defined below)
and orders or directives of any governmental authorities having jurisdiction
under such Environmental Laws, including, without limitation, any Environmental
Laws or orders or directives with respect to any cleanup or remediation of any
release or threat of release of Hazardous Substances. The Company has not
received any citation, directive, letter or other communication, written or
oral, or any notice of any proceeding, claim or lawsuit, from any person arising
out of the ownership or occupation of the Premises, or the conduct of its
operations, and the Company is not aware of any basis therefor. The Company has
obtained and is maintaining in fill force and effect all necessary permits,
licenses and approvals required by all Environmental Laws applicable to the
Premises and the Company's business operations conducted thereon, and is in
compliance with all such permits, licenses and approvals. The Company has not
caused or allowed a release, or a threat of release, of any Hazardous Substance
unto, at or near the Premises, and, to the best of the Company's knowledge,
neither the Premises nor any property at or near the Premises has ever been
subject to a release, or a threat of release, of any Hazardous Substance. For
the purposes of this Agreement, the term "Environmental Laws" shall mean any
Federal, state or local law or ordinance or regulation pertaining to the
protection of human health or the environment, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Sections 9601, et seq., the Emergency Planning and Community Right-to -
Know Act, 42 U.S.C. Sections 11001, et seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. Sections 6901, et seq. For purposes of this Agreement,
the term "Hazardous Substances" shall include oil and petroleum products,
asbestos, polychlorinated biphenyls, urea formaldehyde and any other materials
classified as hazardous or toxic under any Environmental Laws.

     Section 2.24.  ERISA.
                    -----

                    (a) Schedule II lists each Employee Plan that covers any
                        -----------
employee of the Company, copies or descriptions of all of which have previously
been made available or furnished to the Purchasers. With respect to each
Employee Plan, the Company has provided the most recently filed Form 5500 and an
accurate summary description of such plan.

                    (b) Schedule 11 also includes a list of each Benefit
                        -----------
Arrangement of the Company, copies or descriptions of all of which have been
made available or furnished previously to the Purchasers.

                    (c) No Employee Plan is a Multiemployer Plan and no Employee
Plan is subject to Title IV of ERISA. The Company and its Affiliates have not
incurred any liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title W of ERISA.

                    (d) None of the Employee Plans or other arrangements listed
on Schedule II covers any non-United States employee or former employee of the
   -----------
Company.

                    (e) No "prohibited transaction," as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan.

                                      -12-
<PAGE>

          (f) Each Employee Plan which is intended to be qualified under Section
40 1(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. The Company has furnished to the
Purchasers copies of the most recent Internal Revenue Service determination
letters with respect to each such plan. Each Employee Plan has been maintained
in compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such plan.

          (g) Each Employee Plan and each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Employee Plan and Benefit Arrangement.

          (h) All contributions and payments accrued under each Employee Plan
and Benefit Arrangement, determined in accordance with prior finding and accrual
practices, as adjusted to include proportional accruals for the period ending on
the Closing Date, will be discharged and paid on or prior to the Closing Date
except to the extent reflected on the Balance Sheet. Except as disclosed in
writing to the Purchasers prior to the date hereof, there has been no amendment
to, written interpretation of or announcement (whether or not written) by the
Company or any of its ERISA Affiliates relating to, or change in employee
participation or coverage under, any Employee Plan or Benefit Arrangement that
would increase materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year ended prior to the date hereof

          (i) There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.

          (j) No tax under Section 4980B of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in Section
5000(b)(l) of the Code.

          (k) With respect to the employees and former employees of the Company,
there are no employee post-retirement medical or health plans in effect, except
as required by Section 4980B of the Code.

          (l) No employee of the Company will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.

          (m) The Company does not have, nor is it reasonably expected to have,
any liability under Title IV of ERISA.

                                      -13-
<PAGE>

                                  ARTICLE III

               REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

      Each Purchaser severally represents and warrants to the Company that:

          (a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose of
acquiring the Preferred Shares;

          (b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in the
Company and it is able financially to bear the risks thereof

          (c) it has had an opportunity to discuss the Company's proposed
business, management and financial affairs with the Company's management;

          (d) the Preferred Shares being purchased by it are being acquired for
its own account for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof;

          (e) it understands that (i) the Preferred Shares and the Conversion
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the Preferred Shares and, upon conversion
thereof, the Conversion Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration, (iii) the Preferred Shares and the Conversion Shares will
bear a legend to such effect and (iv) the Company will make a notation on its
transfer books to such effect; and

          (f) if it sells any Conversion Shares pursuant to Rule 1 44A
promulgated under the Securities Act, it will take all necessary steps in order
to perfect the exemption from registration provided thereby, including (i)
obtaining on behalf of the Company information to enable the Company to
establish a reasonable belief that the purchaser is a qualified institutional
buyer and (ii) advising such purchaser that Rule 1 44A is being relied upon with
respect to such resale.

                                  ARTICLE IV

                CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS

      The obligation of each Purchaser to purchase and pay for the Preferred
Shares being purchased by it on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:

                                      -14-
<PAGE>

          (a) Representations and Warranties to be True and Correct.  The
              -----------------------------------------------------
representations and warranties contained in Article II shall be true, complete
and correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the President and Treasurer of the Company shall have certified
to such effect to the Purchasers in writing.

          (b) Performance.  The Company shall have performed and complied in all
              -----------
material respects with all agreements contained herein required to be performed
or complied with by it prior to or at the Closing Date.

          (c) All Proceedings to be Satisfactory.  All corporate and other
              ----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such counterpart originals or certified or
other copies of such documents as they reasonably may request.

          (d) Supporting Documents.  The Purchasers and their counsel shall
              --------------------
have received copies of the following documents:

              (i)  the Charter, certified as of a recent date by the Secretary
of State of the State of Delaware; and

              (ii) (A) a complete copy of the By-laws of the Company as in
effect on the Closing Date; and (B) a complete copy of all resolutions adopted
by the Board of Directors and the stockholders of the Company authorizing the
execution, delivery and performance of this Agreement, the Registration Rights
Agreement Amendment and the Management Rights Agreements, the issuance, sale and
delivery of the Preferred Shares and the reservation, issuance and delivery of
the Conversion Shares, and a secretary's certificate to the effect that all such
resolutions are in fill force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement, the
Registration Rights Agreement Amendment and the Management Rights Agreements.

          (e) Registration Rights Agreement Amendment.  The Company shall have
              ---------------------------------------
executed and delivered the Registration Rights Agreement Amendment.

          (f) Management Rights Agreements.  The Company shall have executed and
              ----------------------------
delivered the Management Rights Agreements to those Purchasers who have made a
request to the Company therefor and are subject in any manner with respect to
their investment in the Company to ERISA.

          (g) Charter. The Charter shall read in its entirety as set forth in
              -------
Exhibit C.
---------

                                      -15-
<PAGE>

          (h) Opinion of Counsel.  Purchasers participating in such Additional
              ------------------
Closing shall have received an opinion of Dechert, Price & Rhoads, dated the
date of such Additional Closing, satisfactory in form and substance to such
Purchasers and Purchasers' counsel.

          (i) Fees of Purchasers' Counsel.  The Company shall have paid in
              ---------------------------
accordance with Section 6.01 the fees and disbursements of Purchasers' counsel
invoiced at the Closing or any Additional Closing.

All such documents shall be satisfactory in form and substance to the Purchasers
and their counsel.

                                   ARTICLE V

                           COVENANTS OF THE COMPANY

          The Company covenants and agrees with each of the Purchasers that:

     Section 5.01.    Financial Statements, Reports. Etc. The Company shall
                      ----------------------------------
furnish to each Purchaser:

                      (a) within ninety (90) days after the end of each fiscal
year of the Company a consolidated balance sheet of the Company as of the end of
such fiscal year and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year then ended, prepared in
accordance with generally accepted accounting principles and certified by a firm
of independent public accountants of recognized national standing selected by
the Board of Directors of the Company;

                      (b) within thirty (30) days after the end of each month in
each fiscal year (other than the last month in each fiscal year) a consolidated
balance sheet of the Company and the related consolidated statements of income,
stockholders' equity and cash flows, unaudited but prepared in accordance with
generally accepted accounting principles and certified by the Chief Financial
Officer of the Company, such consolidated balance sheet to be as of the end of
such month and such consolidated statements of income, stockholders' equity and
cash flows to be for such month and for the period from the beginning of the
fiscal year to the end of such month, in each case with comparative statements
for the prior fiscal year, provided that the Company's obligations under this
Section 5.01(b) shall terminate upon the completion of a firm commitment
underwritten public offering of the Company's securities;

                      (c) at the time of delivery of each monthly statement
pursuant to Section 5.01(b), a management narrative report explaining all
significant variances from forecasts and all significant current developments in
staffing, marketing, sales and operations;

                      (d) no later than sixty (60) days prior to the start of
each fiscal year, consolidated capital and operating expense budgets, cash flow
projections and income and loss

                                      -16-
<PAGE>

projections for the Company in respect of such fiscal year, all itemized in
reasonable detail and prepared on a monthly basis, and, promptly after
preparation, any revisions to any of the foregoing;

          (e) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company;

          (f) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations and inquiries of the type described
in Section 2.07 that could materially adversely affect the Company,

          (g) promptly upon sending, making available or filing the same, all
press releases, reports and financial statements that the Company sends or makes
available to its stockholders or directors or files with the Commission; and

          (h) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs of the
Company as such Purchaser reasonably may request.

     Section 5.02.    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 Purchaser by written notice the right,
for a period of twenty (20) days, to purchase all of such securities for cash at
an amount equal to the price or other consideration for which such securities
are to be issued; provided, however, that the first refusal rights of the
Purchasers pursuant to this Section 5.02 shall not apply to securities issued
(A) upon conversion of any of the Preferred Shares, (B) 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, (C) pursuant to subscriptions, warrants, options,
convertible securities, or other rights which are listed in Schedule III as
                                                            ------------
being outstanding on the date of this Agreement, but not including those
described in (F) below, (D) solely in consideration for the acquisition (whether
by merger or otherwise) by the Company of all or substantially all of the stock
or assets of any other entity, (B) pursuant to a firm commitment underwritten
public offering, (F) pursuant to the exercise of options to purchase Common
Stock granted to directors, officers, employees or consultants of the Company in
connection with their service to the Company or pursuant to the exercise of
options to purchase Common Stock granted to or Common Stock issued to licensors
or transferors of technology to the Company, not to exceed in the aggregate
5,000,000 shares (appropriately adjusted to reflect stock splits, stock
dividends, combinations of shares and the like with respect to the Common Stock)
(the shares exempted by this clause (F) being hereinafter referred to as the
"Reserved Employee and Technology Shares"), and (G) upon the exercise of any
right which was not itself in violation of the terms of this Section 5.02. The
Company's written notice to the Purchasers shall describe the securities
proposed to be issued by the Company and specify the number, price and payment
terms. Each Purchaser may accept the Company's offer as to the fill number of
securities offered

                                      -17-
<PAGE>

to it or any lesser number, by written notice thereof given by it to the Company
prior to the expiration of the aforesaid twenty (20) day period, in which event
the Company shall promptly sell and such Purchaser shall buy, upon the terms
specified, the number of securities agreed to be purchased by such Purchaser.
Notwithstanding the foregoing, if the Purchasers agree, in the aggregate, to
purchase more than the fill number of securities offered by the Company, then
each Purchaser accepting the Company's offer shall first be allocated the lesser
of(i) the number of securities which such Purchaser agreed to purchase and (ii)
the number of securities as is equal to the fill number of securities offered by
the Company multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock held by such Purchaser as of the date of the Company's
notice of offer (treating such Purchaser, for the purpose of such calculation,
as the holder of the number of shares of Common Stock which would be issuable to
such Purchaser upon conversion, exercise or exchange of all securities
(including but not limited to the Preferred Shares) held by such Purchaser on
the date such offer is made, that are convertible, exercisable or exchangeable
into or for (whether directly or indirectly) shares of Common Stock) and the
denominator of which shall be the aggregate number of shares of Common Stock
(calculated as aforesaid) held on such date by all Purchasers who accepted the
Company's offer, and the balance of the securities (if any) offered by the
Company shall be allocated among the Purchasers accepting the Company's offer in
proportion to their relative equity ownership interests in the Company
(calculated as aforesaid), provided that no Purchaser shall be allocated more
than the number of securities which such Purchaser agreed to purchase and
provided further that in cases covered by this sentence all Purchasers shall be
allocated among them the fill number of securities offered by the Company. The
Company shall be free at any time prior to ninety (90) days after the date of
its notice of offer to the Purchasers, to offer and sell to any third party or
parties the number of such securities not agreed by the Purchasers 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 Purchasers. 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 5.02. For
purposes of this Section 5.02, (x) the term "Purchasers" shall include the
Series A Purchasers and Series B Purchasers (as such terms are defined in
Section 6.13 hereof) and (y) the term "Preferred Shares" shall include the
shares of Series A Convertible Preferred Stock and the shares of Series B
Convertible Preferred Stock purchased pursuant to the Series A Agreement and the
Series B Agreement (as such terms are defined in Section 6.13).

     Section 5.03.    Reserve for Conversion Shares.  The Company shall at all
                      -----------------------------
times reserve and keep available out of its authorized but unissued shares of
Common Stock, for the purpose of effecting the conversion of the Preferred
Shares and otherwise complying with the terms of this Agreement, such number of
its duly authorized shares of Common Stock as shall be sufficient to effect the
conversion of the Preferred Shares from time to time outstanding or otherwise to
comply with the terms of this Agreement. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of the Preferred Shares or otherwise to comply with the terms of this
Agreement, the Company will forthwith take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. The Company will

                                      -18-
<PAGE>

obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Preferred Shares.

     Section 5.04.    Corporate Existence.  The Company shall maintain corporate
                      -------------------
existence, rights and franchises in fill force and effect.

     Section 5.05.    Properties, Business Insurance.  The Company shall
                      ------------------------------
maintain its properties and business, with financially sound and reputable
insurers, insurance against such casualties 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 not
cause or permit any assignment or change in beneficiary and shall not borrow
against any such policy. If requested by Purchasers holding at least sixty
percent (60%) of the outstanding Preferred Shares, the Company will add one
designee of such Purchasers 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

     Section 5.06.    Inspection, Consultation and Advice.  The Company shall
                      -----------------------------------
permit each Purchaser holding in excess of 10% of the Series C Convertible
Preferred Stock and such persons as it may designate, at such Purchaser's
expense, and subject to the execution of an appropriate confidentiality
agreement, to visit and inspect any of the properties of the Company, examine
their books and take copies and extracts therefrom, discuss the affairs,
finances and accounts of the Company with its officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Purchaser and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company as to its affairs,
finances and accounts, all at reasonable times and upon reasonable notice.

     Section 5.07.    Restrictive Agreements Prohibited.  The Company shall not
                      ---------------------------------
become a party to any agreement which by its terms restricts the Company's
performance of this Agreement, the Registration Rights Agreement, the Management
Rights Agreements or the Charter.

     Section 5.08.    Transactions with Affiliates.  Except for transactions
                      ----------------------------
contemplated by this Agreement or as otherwise approved by the Board of
Directors, the Company shall not enter into any material transaction with any
director, officer, employee or holder of more than 5% of the outstanding capital
stock of any class or series of capital stock of the Company, 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 5% of the
outstanding capital stock thereof, except for transactions on customary terms
related to such person's employment.

     Section 5.09.    Use of Proceeds.  The Company shall use the cash proceeds
                      ---------------
from the sale of the Preferred Shares solely for working capital and other
general corporate purposes.

                                      -19-
<PAGE>

     Section 5.10.    By-laws.  The Company shall at all times cause its By-laws
                      -------
to provide that, (a) unless otherwise required by the laws of the State of
Delaware, (i) any two directors and (ii) any holder or holders of at least 25%
of the outstanding shares of Series C Convertible Preferred Stock, shall have
the right to call a meeting of the Board of Directors or stockholders and (b)
the number of directors fixed in accordance therewith shall in no event conflict
with any of the terms or provisions of the Series C Convertible Preferred Stock
as set forth in 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.

     Section 5.11.    Performance of Contracts.  The Company shall not
                      ------------------------
materially amend, modify, terminate, waive or otherwise alter, in whole or in
part, any of the Employee Nondisclosure and Developments Agreements without the
consent of the Company's Board of Directors.

     Section 5.12.    Vesting of Reserved Employee Shares.  The Company shall
                      -----------------------------------
not grant to any of its employees options to purchase Reserved Employee Shares
which will become exercisable at a rate in excess of 25% per annum from the date
of such grant without the approval of the Company's Board of Directors.

     Section 5.13.    Employee Nondisclosure and Developments Agreements.  The
                      --------------------------------------------------
Company shall use its best efforts to obtain an Employee Nondisclosure and
Developments Agreement in substantially the form of Exhibit D. or in such other
                                                    ---------
form as is approved by the Board of Directors, from all future officers, key
employees and other employees who will have access to confidential information
of the Company, upon their employment by the Company.

     Section 5.14.    Compliance with Laws.  The Company shall comply with all
                      --------------------
applicable laws, rules, regulations and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.

     Section 5.15.    Keeping of Records and Books of Account.  The Company
                      ---------------------------------------
shall keep adequate records and books of account, in which complete entries will
be made in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions of the Company, and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.

     Section 5.16.    Rule 144A Information.  The Company shall, at all times
                      ---------------------
during which it is neither subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), nor exempt from reporting pursuant to Rule 1 2g3 -2(b) under the Exchange
Act, provide in writing, upon the written request of any Purchaser or a
prospective buyer of Preferred Shares or Conversion Shares from any Purchaser,
all information required by Rule I 44A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A Information).
The Company also shall, upon the written request of any Purchaser, cooperate
with and assist such Purchaser or any member of

                                      -20-
<PAGE>

the National Association of Securities Dealers, Inc. PORTAL system in applying
to designate and thereafter maintain the eligibility of the Preferred Shares or
Conversion Shares, as the case may be, for trading through PORTAL. The Company's
obligations under this Section 5.16 shall at all times be contingent upon the
relevant Purchaser's obtaining from the prospective buyer of Preferred Shares or
Conversion Shares a written agreement to take all reasonable precautions to
safeguard the Rule l44A Information from disclosure to anyone other than a
person who will assist such buyer in evaluating the purchase of any Preferred
Shares or Conversion Shares.

     Section 5.17.    Future Subsidiaries.  In the event the Company shall
                      -------------------
acquire or create a subsidiary or subsidiaries, the Company agrees that the
covenants contained in this Article V shall apply to the Company and such
subsidiaries on a consolidated basis.

                                  ARTICLE VI

                                 MISCELLANEOUS

     Section 6.01.    Expenses.  Each party hereto will pay its own expenses in
                      --------
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the reasonable fees and disbursements, not to exceed $10,000, of the Purchasers'
special counsel, Testa, Hurwitz & Thibeault, in connection with such
transactions and any subsequent amendment, waiver, consent or enforcement
thereof.

     Section 6.02.    Survival of Agreements.  All covenants, agreements,
                      ----------------------
representations and warranties made herein or in the Registration Rights
Agreement Amendment, the Management Rights Agreements, or any certificate or
instrument delivered to the Purchasers pursuant to or in connection with this
Agreement, the Registration Rights Agreement Amendment or the Management Rights
Agreements, shall survive the execution and delivery of this Agreement, the
Registration Rights Agreement Amendment and the Management Rights Agreements,
the issuance, sale and delivery of the Preferred Shares, and the issuance and
delivery of the Conversion Shares, and all statements contained in any
certificate or other instrument delivered by the Company hereunder or thereunder
or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company; provided that all such
representations and warranties shall terminate two years from the date they are
made.

     Section 6.03.    Brokerage.  Each party hereto will indemnify and hold
                      ---------
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.

     Section 6.04.    Parties in Interest.  All representations, covenants and
                      -------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and

                                      -21-
<PAGE>

agreements benefiting the Purchasers shall inure to the benefit of any and all
subsequent holders from time to time of Preferred Shares or Conversion Shares.

     Section 6.05.    Notices.  All notices, requests, consents and other
                      -------
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:

                      (a) if to the Company, at 371 Phoenixville Pike, Malvern,
PA 19355, Attention: President, with a copy to Henry N. Nassau, Esq., Dechert,
Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA
19103; and

                      (b) if to any Purchaser, at the address of such Purchaser
set forth in Schedule I, with a copy to Robin A. Painter, Esq., Testa, Hurwitz &
             ----------
Thibeault, High Street Tower, 125 High Street, Boston, Massachusetts 02110; or,
in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.

     Section 6.06.    Governing Law.  This Agreement shall be governed by and
                      -------------
construed in accordance with the laws of the State of Delaware.

     Section 6.07.    Entire Agreement.  This Agreement, including the Schedules
                      ----------------
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.

     Section 6.08.    Counterparts.  This Agreement may be executed in two or
                      ------------
more counterparts, each of which shall be deemed an original, but all of which
together shill constitute one and the same instrument.

     Section 6.09.    Amendments.  This Agreement may be amended or modified,
                      ----------
and provisions hereof may be waived, with the written consent of the Company and
the holders of at least two-thirds (2/3) of the outstanding shares of Common
Stock issued or issuable upon conversion of the Preferred Shares. Otherwise this
Agreement may not be amended or waived or any provision hereof waived.

     Section 6.10.    Severability.  If any provision of this Agreement shall be
                      ------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.

     Section 6.11.    Titles and Subtitles.  The titles and subtitles used in
                      --------------------
this Agreement are for convenience only and are not to be considered in
construing or interpreting any term or provision of this Agreement.

                                      -22-
<PAGE>

     Section 6.12.    Certain Defined Term.  As used in this Agreement, the
                      --------------------
following term shall have the following meaning (such meaning to be equally
applicable to both the singular and plural forms of the term defined):

               "person" shall mean an individual, corporation, trust,
               partnership, joint venture, unincorporated
               organization, government agency or any agency or
               political subdivision thereof, or other entity.

     Section 6.13.    Prior Agreements.  By their signature below, each of the
                      ----------------
Purchasers who are also parties to that certain Series A Convertible Preferred
Stock Purchase Agreement (the "Series A Agreement") between the Company and the
purchasers named therein dated as of November 7, 1994, (each, a "Series A
Purchaser") and that certain Series B Convertible Preferred Stock Purchase
Agreement (the "Series B Agreement") between the Company and the purchasers
named therein dated as of March 1, 1996, (each, a "Series B Purchaser") hereby
(i) waives, except to the extent set forth on Schedule I hereto, the right to
                                              ----------
purchase shares of Series C Convertible Preferred Stock sold pursuant to this
Agreement. The signature of each Series A Purchaser and Series B Purchaser below
shall also constitute such party's agreement to the right of first refusal
granted in Section 5.02 hereof and the termination of Sections 5.02 of the
Series A Agreement and the Series B Agreement; provided, however, the Company
acknowledges that upon any transfer of the Series B Preferred Stock owned by
Sonz Partners L.P. to Sonz Adolor, L.P., Sonz Adolor, L.P. shall have the rights
afforded Purchasers under Section 5.02 hereof.

                     [Signature pages follow immediately.]

                                      -23-<PAGE>

                                                                     EXHIBIT 4.4

                           STOCK PURCHASE AGREEMENT
                            ------------------------

     THIS AGREEMENT is made as of November 5, 1997, between ADOLOR CORPORATION,
a Delaware corporation, having its principal office at 371 Phoenixville Pike,
Malvern, PA 19355 USA (the "Company"), and KWANG DONG PHARMACEUTICAL COMPANY, a
Korean corporation having its principal office at 212-13 Kuro-dong, Kuro-Ku,
Seoul, South Korea (the "Purchaser").

                                  BACKGROUND
                                  ----------

     Purchaser and the Company have entered into a certain license agreement
dated November 5, 1997 (the "License Agreement").  In connection with entering
into the License Agreement, the Company has agreed to issue to Purchaser 960,000
shares of the Company's Series D Convertible Preferred Stock, $.001 par value
per share, on the terms and conditions herein set forth.

     NOW THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound, the parties hereto agree as follows:

     1.   Sale of Stock.
          -------------

          (a)  The Company hereby agrees to issue and deliver to Purchaser, and
Purchaser hereby agrees to purchase, 960,000 shares of the Company's Series D
Convertible Preferred Stock, par value $.001 per share (the "Purchased Shares")
with the terms set forth on Schedule 1 hereto, for the aggregate purchase price
of One Million Two Hundred Thousand United States dollars (U.S. $1,200,000) as
set forth below.

          (b)  Purchaser shall deliver to the Company the sum of Six Hundred
Thousand United States dollars (U.S. $600,000) by wire transfer on or before the
twentieth (20th) day following the Effective Date of the License Agreement to an
account specified by the Company.

          (c)  Purchaser shall deliver to the Company the sum of Six Hundred
Thousand United States dollars (U.S. $600,000) by wire transfer on or before the
fiftieth (50th) day following the Effective Date of the License Agreement (the
"Delivery Date") to an account specified by the Company.

          (d)  Upon receipt of the sums set forth in Sections 1(b) and 1(c)
above, the Company shall deliver to the Purchaser on the Delivery Date a stock
certificate in the name of Purchaser representing the Purchased Shares.

     2.   Investment Representations.
          --------------------------

          (a)  In connection with the acquisition of the Purchased Shares,
Purchaser represents to the Company the following:
<PAGE>

               (i)    Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of Korea and has all requisite
corporate power and authority to carry on its business as now conducted;

               (ii)   all corporate action on the part of the Purchaser,
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of the Purchaser hereunder and the authorization,
issuance and delivery of the Purchased Shares being purchased hereunder has been
taken; and this Agreement constitutes a valid and legally binding obligation of
the Purchaser, enforceable in accordance with its terms except as enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including Specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought;

               (iii)  Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the company to
reach an informed and knowledgeable decision to acquire the securities;

               (iv)   the Purchased Shares being purchased by Purchaser are
being acquired for its own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof;

               (v)    Purchaser understands that (i) the Purchased Shares have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"); (ii) the Purchased Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration; (iii) the Purchased Shares will bear a legend to
such effect; and (iv) the Company will make a notation on its transfer books to
such effect;

               (vi)   Purchaser is aware of the adoption of Rule 144 by the
Securities and Exchange Commission (the "Commission"), promulgated under the
Securities Act, which permits limited public resale of securities acquired in a
non-public offering subject to the satisfaction of certain conditions; and
Purchaser further represents that it has obtained all necessary governmental
approval with regard to purchase of shares in the Company; and

               (vii)  Purchaser further acknowledges that in the event all of
the requirements of Rule 144 are not met, compliance with Regulation A or some
other registration exemption under the Securities Act will be required; and that
although Rule 144 is not exclusive, the staff of the Commission has expressed
its opinion that persons proposing to sell private placement securities other
than in a registered offering and other than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales and that such persons and the brokers who
participate in the transactions do so at their own risk.

          (b)  Representations and Warranties of the Company. The Company hereby
               ---------------------------------------------
represents and warrants as follows.

                                      -2-
<PAGE>

               (i)    Organization, Good Standing and Qualification. The Company
                      ---------------------------------------------
is corporation, duly organized, validly existing and in good standing under the
laws of the state of Delaware.

               (ii)   Authorization.  All corporate action on the part of the
                      -------------
Company necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder and the
authorization, issuance and delivery of the Purchased Shares being sold
hereunder has been taken, and this Agreement constitutes a valid and legally
binding obligation of the Company, enforceable in accordance with its terms
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally. and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the Court before which any proceeding therefor may
be brought.

               (iii)  Valid Issuance of Shares.  The Purchased Shares, when
                      ------------------------
issued, sold and delivered in accordance with the term hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable.

     3.   Lockup Agreement.  Purchaser agrees that if, in connection with the
          ----------------
Company's initial public offering of the Company's securities, the Company or
the underwriters managing the offering so request, Purchaser shall not sell,
make short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Purchased Shares, shares of the Company's Common Stock issued
upon conversion of the Purchased Shares or any subsequent equity securities of
the Company acquired by Purchaser (together, the "Shares") (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days from the effective date of such registration) as may be requested by
the Company or the underwriters.  This Section 3 shall be binding on all
transferees or assignees of any Shares.

     4.   Legends.  The share certificate evidencing any of the Purchased Shares
          -------
issued hereunder shall be endorsed with the following legends:

          (a)  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
          FOR INVESTMENT. AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
          SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
          EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
          OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
          REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED."

          (b)  "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
          RESTRICTIONS ON TRANSFER AND MAY NOT BE SOLD, EXCHANGED, TRANSFERRED,
          PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
          WITH AND SUBJECT TO ALL THE TERMS AND CONDITIONS OF A CERTAIN

                                      -3-
<PAGE>

          STOCK PURCHASE AGREEMENT DATED AS OF AUGUST, 1997, A COPY OF WHICH THE
          COMPANY WILL FURNISH TO THE HOLDER OF THIS CERTIFICATE UPON REQUEST
          AND WITHOUT CHARGE."

     5.   Adjustment for Stock Split. All references to the number of Shares and
          --------------------------
the consideration therefor in this Agreement shall be appropriately adjusted to
reflect any stock split, stock dividend or other change in the Shares which may
be made by the Company after the date of this Agreement.

     6.   Prohibited Transfers. Purchaser shall not sell, assign, transfer,
          --------------------
pledge, hypothecate, mortgage, encumber or dispose of all or any of its Shares
except as expressly provided in this Agreement. Notwithstanding the foregoing,
Purchaser may transfer all or any of its Shares subject to the terms of this
Agreement to any wholly owned subsidiary of Purchaser or to any corporate parent
of Purchaser so long as such parent owns all of the outstanding voting
securities of Purchaser.

     7.   Right of First Refusal on Dispositions.
          --------------------------------------

          (a)  If at any time Purchaser desires to sell for cash or cash
equivalents all or any part of its Shares, pursuant to a bona fide offer from a
third party (the "Proposed Transferee"), Purchaser shall submit a written offer
(the "Offer") to sell such Shares (the "Offered Shares") to the Company on terms
and conditions, including price, not less favorable to the Company than those on
which Purchaser proposes to sell such Offered Shares to the Proposed Transferee.
The Offer shall disclose the identity of the Proposed Transferee, the Offered
Shares proposed to be sold, the total number of Shares owned by Purchaser, 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 or any portion 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 option, but not the obligation, to
purchase all or any portion of the Offered Shares, on the same terms as
specified in the Offer. Within twenty (20) days after the giving of the Offer,
the Company shall give written notice to Purchaser stating whether or not it
elects to exercise its option, the number of Offered Shares to be purchased, and
a date and time for consummation of such purchase not more than ninety (90) days
after the giving of such Offer by Purchaser. Failure by the Company to give such
notice within such time period shall be deemed an election by it not to exercise
its option.

          (c)  If the Company does not exercise its option to purchase any
remaining Offered Shares, the Offered Shares not purchased may be sold by
Purchaser at any time within 90 days after the date the Offer was made. Any such
sale shall be to the Proposed Transferee, at not less than the price and upon
other terms and conditions, if any, not more favorable to the proposed
Transferee than those specified in the Offer and such transferred Offered Shares
shall remain subject to the terms of this Agreement. Any Offered Shares not sold
within such 90-day period shall not be sold without Purchaser again complying
with the terms and condition of this Section 7.

                                      -4-
<PAGE>

     8.   Termination of Restrictions.  The restrictions contained in Sections 6
          ---------------------------
and 7 shall terminate upon the Consummation of a firmly underwritten public
offering registered under the Securities Act, with an aggregate minimum gross
offering price to the public of $7,000,000.

     9.   Notice.  Notices given hereunder shall be deemed to have been duly
          ------
given on the date of personal delivery or on the date of postmark if mailed by
certified or registered mail, return receipt requested, to the party being
notified at its address specified in the introductory paragraph of this
Agreement or such other address as the addressee may subsequently notify the
other parties of in writing.

     10.  Entire Agreement and Amendments.  This Agreement constitutes the
          -------------------------------
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto. To the
extent any term or other provision of any other indenture, agreement or
instrument by which any party hereto is bound conflicts with this Agreement,
this Agreement shall have precedence over such conflicting term or provision.

     11.  Governing Law; Successors and Assigns. This Agreement shall be
          -------------------------------------
governed by the laws of the State of Delaware and shall be binding upon the
heirs, personal representatives, executors, administrators, successors and
assigns of the parties.

     12.  Waivers.  No Waiver of any breach or default hereunder shall be
          -------
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature.

     13.  Severability.  If any provision of this Agreement shall be held to be
          ------------
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.

     14.  Captions.  Captions are for convenience only and are not deemed to be
          --------
part of this Agreement.

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

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
                  --------------------------------------------

                                      -5-

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