Document:

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                                                                    Exhibit 10.2

               THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
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     THIRD AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement") dated
as of March 31, 2000, by and among 3-DIMENSIONAL PHARMACEUTICALS, INC., a
Delaware corporation (the "Company"), and those stockholders of the Company
whose names appear on the signature pages hereof.

                              W I T N E S S E T H
                              -------------------

     WHEREAS, certain of the parties hereto have entered into that certain
Amended and Restated Stockholders' Agreement by and among them, dated as of
January 6, 1998 (the "Stockholders' Agreement");

     WHEREAS, the Company has entered into a Series A-5 Preferred Stock Purchase
Agreement, dated as of March 31, 2000 (the "Stock Purchase Agreement"), between
the Company and the investors ("Investors") listed on Schedule 1 providing for
the purchase by the Investors of shares of Series A-5 Preferred Stock, $.001 par
value per share, of the Company, and, in connection therewith, the Company has
agreed to enter into this Agreement which is Exhibit 3.2.3 of the Stock Purchase
Agreement; and

     WHEREAS, in connection with the Stock Purchase Agreement, the parties
hereto desire to amend and restate the Stockholders' Agreement as provided for
herein.

     NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and undertakings hereunder and pursuant to the Stock Purchase
Agreement, the parties hereto do hereby amend and restate the Stockholders'
Agreement in its entirety and hereby agree as follows:

     SECTION 1.  Definitions.
                 -----------

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

          "Affiliate" shall mean, with respect to any specified Person, (i) any
other Person which owns, directly or indirectly, individually or as part of a
group (as such term is defined under the Exchange Act), greater than 50% of the
voting stock or other capital interest of such specified Person or (ii) any
other Person of whom greater than 50% of the voting stock is owned, directly or
indirectly, individually or as part of a group (as such term is defined under
the Exchange Act), by such specified Person.

          "Bylaws" shall mean the Bylaws of the Company, as amended.

          "Capital Stock" shall mean any (i) shares of Common Stock, Preferred
Stock or any
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other equity security of the Company, (ii) debt securities convertible into or
exchangeable for any equity security of the Company or (iii) options, warrants
or other rights to subscribe for, purchase or otherwise acquire any such equity
security or debt security of the Company.

          "Charter" shall mean the Certificate of Incorporation of the Company,
as restated and/or amended from time to time.

          "Commission" shall mean the Securities and Exchange Commission or any
other Federal agency administering the Securities Act at the applicable time.

          "Common Shares" shall mean the issued and outstanding shares of the
Company's Common Stock.

          "Common Stock" shall mean the Company's authorized Common Stock, $.001
par value.

          "Equity Stock" shall have the meaning set forth in Rule 3a11-1 under
the Exchange Act.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and any successor statute and the rules and regulations thereunder, as
shall be in effect from time to time.

          "Excluded Stock" shall mean (a) the Preferred Shares, (b) the Option
Shares, (c) Common Stock issuable upon conversion of the Preferred Shares, (d)
the Warrants issued or issuable pursuant to the Loan Agreements dated as of
December 15, 1994, as amended, August 15, 1995, December 12, 1995, February 12,
1996, June 20, 1996 and September 25, 1996 between the Company and certain of
the Preferred Stockholders and the Common Stock issued pursuant to the exercise
thereof, (e) the Warrants issued in connection with the Master Lease Agreement
entered into between the Company and Transamerica Business Credit Corporation in
June 1997 and the Common Stock issued pursuant to the exercise thereof, (f)
securities issued pursuant to the acquisition of another corporation,
partnership, joint venture, trust or other entity by the Company by merger,
consolidation, stock acquisition, reorganization, or otherwise, whereby the
Company, or its stockholders of record immediately prior to the effectiveness of
such transaction, directly or indirectly, own at least the majority of the
voting power of such other entity or the resulting or surviving corporation
immediately after such transaction and (g) securities authorized by the
affirmative vote of at least 75% of the Company's Board of Directors then in
office to be issued in connection with (x) bridge loan financings from
institutional and/or other accredited investors or (y) corporate partnering
transactions or other strategic alliances with pharmaceutical or other companies
related to the Company's business.

          "Family" shall include any spouse, lineal ancestor or descendant, or
sibling.

          "Five Percent (5%) Stockholder" shall mean any Preferred Stockholder
owning (either of record or beneficially), at any time, five percent (5%) or
more of the Company's then outstanding Common Shares.

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          "Group" shall mean as to (a) a Preferred Stockholder that is a limited
partnership, any and all of the venture capital limited partnerships now
existing or hereafter arising that are "affiliates" (as defined by Rule 405
promulgated under the Securities Act), in whole or in part, of one or more
general partners or of one or more general partners of a general partner of such
Preferred Stockholder and any predecessor or successor partnership and any
limited and general partners of any such partnership, (b) a Preferred
Stockholder that is a trust, any of the beneficiaries, settlers or grantors now
existing or hereafter arising of, or any Person under common control with, such
trust and (c) any other Preferred Stockholder, its Affiliates.

          "Holder" shall mean each Preferred Stockholder and each holder of the
Warrants issued or issuable pursuant to the Loan Agreements dated as of December
15, 1994, as amended, August 15, 1995, December 12, 1995, February 12, 1996,
June 20, 1996 and September 25, 1996 between the Company and certain of the
Preferred Stockholders or of the Common Stock issued pursuant to the exercise
thereof and each holder of the Warrants issued or issuable pursuant to the 1999
Bridge Financing Agreements dated as of November 18, 1999 between the Company
and certain of the Preferred Stockholders and the Common Stock issued or to be
issued pursuant to the exercise thereof.

          "Initial Public Offering" shall mean the Company's initial
distribution of Common Stock in an underwritten Public Offering to the general
public pursuant to a registration statement filed with and declared effective by
the Commission pursuant to the Securities Act resulting in gross proceeds
(before underwriting commissions and offering expenses) to the Company of not
less than $15 million.

          "Offer" shall have the meaning set forth in Section 4(b) hereof.

          "Offered Shares" shall have the meaning set forth in Section 4(a)
hereof.

          "Option Shares" shall mean up to 9,325,000 shares of Common Stock
issued, available for issuance or subject to options, warrants or rights granted
or authorized to be granted to employees and others who provide services to the
Company pursuant to any Stock Plan.

          "Person" shall mean and include a natural person, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.

          "Preferred Shares" shall mean the issued and outstanding shares of the
Company's Preferred Stock.

          "Preferred Stock" shall mean the Company's authorized Series A-1
Preferred Stock, $.001 par value, Series A-2 Preferred Stock, $.001 par value,
Series A-3 Preferred Stock, $.001 par value, Series A-4 Preferred Stock, $.001
par value and Series A-5 Preferred Stock.

          "Preferred Stockholder" shall mean (a) each Person purchasing or who
has purchased

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and holds Preferred Shares of the Company and (b) any Person to whom Preferred
Shares or Registrable Securities are Transferred and to whom registration rights
are assigned in accordance with Section 6.10.

          "Preferred Stockholder's Group" shall mean each Person purchasing or
who has purchased and holds Preferred Shares from the Company, together with any
member of such Person's Group.

          "Pro Rata Fraction" shall have the meaning set forth in Section 4(a).

          "Public Offering" shall mean a distribution of Common Stock in an
underwritten public offering to be the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.

          "Registrable Securities" shall mean any shares of Common Stock issued
or to be issued pursuant to the conversion of Preferred Shares, and any shares
of Common Stock issued or to be issued pursuant to the exercise of the Warrants
issued or issuable pursuant to the Loan Agreements dated as of December 15,
1994, as amended, August 15, 1995, December 12, 1995, February 12, 1995, June
20, 1996 and September 25, 1996 between the Company and certain of the Preferred
Stockholders, and any Common Stock issued or to be issued pursuant to the
exercise of the Warrants issued or issuable pursuant to the 1999 Bridge
Financing Agreements dated as of November 18, 1999 between the Company and
certain of the Preferred Stockholders.

          "Securities Act" shall mean the Securities Act of 1933, as amended,
and any successor statute and the rules and regulations of the Commission
thereunder, as shall be in effect at the applicable time.

          "Shares" shall mean and include all shares of voting capital stock of
the Company now owned or hereafter acquired by any Preferred Stockholder or
transferee of such Preferred Stockholder.

          "Stock Plan" shall mean the Company's Equity Compensation Plan or any
stock option plan for officers, directors, employees and others who render
services to the Company.

          "Transfer" shall include any direct or indirect sale, assignment,
transfer, pledge, hypothecation or other disposition of any Shares or of any
legal or beneficial interest therein.

     SECTION 2. Representations.
                ---------------

     2.1  By the Company.  The Company represents to each Preferred Stockholder
          --------------
that:

          (a) The execution, delivery and performance by the Company of this
Agreement and all transactions contemplated in this Agreement have been duly
authorized by all action required by law, its Charter, its Bylaws or otherwise.

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          (b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms.

     2.2  By the Preferred Stockholders.  Each Preferred Stockholder, as to
          -----------------------------
itself or himself, represents to the Company and the other Preferred
Stockholders that:

          (a) The execution, delivery and performance by such Preferred
Stockholder of this Agreement and all transactions contemplated in this
Agreement have been duly authorized by all action required by law, and by the
certificate of incorporation and by-laws, partnership agreement or other
governing instrument of such Preferred Stockholder.

          (b) This Agreement has been duly executed and delivered by such
Preferred Stockholder and constitutes the legal, valid and binding obligation of
such Preferred Stockholder enforceable against it or him in accordance with its
terms.

     SECTION 3.  Legend on Shares and Notice of Transfer.
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     3.1  Restrictive Legends.    Each certificate evidencing Shares, and each
          -------------------
certificate evidencing Shares held by subsequent transferees of any such
certificate, shall (unless otherwise permitted by the provisions of Section 3.2
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
     INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
     ANY STATE SECURITIES LAW. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS
     SUBJECT TO THE CONDITIONS SPECIFIED IN THE THIRD AMENDED AND RESTATED
     STOCKHOLDERS' AGREEMENT DATED AS OF MARCH 31, 2000, AMONG 3-DIMENSIONAL
     PHARMACEUTICALS, INC. AND CERTAIN OTHER SIGNATORIES THERETO.  NO TRANSFER
     OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE
     BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
     WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
     SECRETARY OF 3-DIMENSIONAL PHARMACEUTICALS, INC.  THESE SECURITIES MAY NOT
     BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
     REGISTRATION UNLESS EXEMPTIONS THEREFROM ARE AVAILABLE UNDER THE SECURITIES
     ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW.

     3.2  Notice of Transfer. (a)  Each of the Preferred Stockholders, and any
          ------------------
other holder of any Shares by acceptance thereof, agrees that, prior to any
Transfer of any Shares, such holder will give written notice to the Company of
such holder's intention to effect such Transfer and to comply in all other
respects with the provisions of this Section 3.2.  Each such notice shall
contain (i) a

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statement setting forth the intention of said holder's prospective transferee
with respect to its retention or disposition of said Shares, and (ii) unless
waived by the Company, an opinion of counsel for said holder (who may be the
inside or staff counsel employed by said holder), or an opinion of counsel for
the Company as to the necessity or non-necessity for registration under the
Securities Act and applicable state securities laws in connection with such
Transfer and stating the factual and statutory bases relied upon by counsel. The
following provisions shall then apply:

          (i) If in the opinion of counsel for the Company the proposed Transfer
     of Shares may be effected without registration or qualification under the
     Securities Act and any applicable state securities laws, then the
     registered holder of such Shares shall be entitled to Transfer such Shares
     in accordance with the intended method of disposition specified in the
     statement delivered by said holder to the Company.

          (ii) If in the opinion of counsel for the Company the proposed
     Transfer of such Shares may not be effected without registration under the
     Securities Act or registration or qualification under any applicable state
     securities laws, the registered holder of such Shares shall not be entitled
     to Transfer such Shares until the requisite registration or qualification
     is effective.

          (b) Each certificate evidencing the Shares issued upon such Transfer
(and each certificate evidencing any balance of such Shares not transferred)
shall bear the legend set forth in Section 3.1 hereof unless (i) in the opinion
of counsel (reasonably acceptable to the Company) addressed to the Company the
registration of future Transfers is not required by the applicable provisions of
the Securities Act or applicable state securities laws; (ii) the Company shall
have waived the requirement of such legend; or (iii) in the reasonable opinion
of counsel to the Company, such Transfer shall have been made in connection with
an effective registration statement filed pursuant to the Securities Act or in
compliance with the requirements of Rule 144 or Rule 144A (or any similar or
successor rule) promulgated under the Securities Act, and in compliance with
applicable state securities laws.

          (c)  Notwithstanding the provisions of this Section 3, in the case of
a Transfer by a holder to a member of such holder's Group, no such opinion of
counsel shall be necessary, provided that the transferee agrees in writing to be
                            --------
subject to Sections 3.1 and 3.2 hereof to the same extent as if such transferee
were originally a signatory to this Agreement.

     SECTION 4. Rights to Purchase Additional Stock..
                ------------------------------------

          (a) Except for Excluded Stock, the Preferred Stockholders shall have
the right to subscribe to any and all issuances of Capital Stock of the Company
("Offered Shares").  Each Preferred Stockholder shall have the right to purchase
that number of Offered Shares as shall be equal to the number of Offered Shares
multiplied by a fraction, the numerator of which shall be the number of Shares
then owned by such Preferred Stockholder and denominator of which shall be the
aggregate number of Shares then owned by all of the Preferred Stockholders (the
"Pro Rata Fraction").  For purposes of calculating the Pro Rata Fraction, each
Preferred Share shall be deemed to represent the number of Common Shares into
which the Preferred Share is then convertible.

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          (b) In the event the Company shall propose to issue Capital Stock
except for Excluded Stock, the Company shall give written notice (the "Offer")
to each Preferred Stockholder, which shall set forth the number and kind or
class of shares of Capital Stock proposed to be issued the terms and conditions
thereof and the price therefor.  Such notice shall be given at least 20 days
prior to the issuance of such Capital Stock.

          (c) The Offer by its term shall remain open and irrevocable for a
period of 20 days from the date of its delivery to such Preferred Stockholder
("20-Day Period").

          (d) The Preferred Stockholder shall evidence its acceptance of the
Offer by delivering a written notice ("Notice of Acceptance"), signed by the
Preferred Stockholder, setting forth the number of Offered Shares which the
Preferred Stockholder elects to purchase.  The Notice of Acceptance must be
delivered to the Company prior to the end of the 20-Day Period.

          (e) If the Preferred Stockholders do not tender Notices of Acceptance
for all of the Offered Shares, the Company shall have 90 days from the
expiration of the 20-Day Period to sell all or any part of the Offered Shares
refused by the Preferred Stockholders to any person(s), but only upon terms and
conditions which are in all material respects no more favorable to such other
person(s) than those set forth in the Offer.

          (f) Upon the closing of the sale of Offered Shares to any third party,
each Preferred Stockholder shall purchase from the Company, and the Company
shall issue and sell to such Preferred Stockholder, any Offered Shares for which
such Preferred Stockholder tendered a Notice of Acceptance upon the terms
specified in the Offer.

          (g) In each case, any Offered Shares not purchased either by the
Preferred Stockholders or by any other person in accordance with this Section 4
may not be sold or otherwise disposed of until they are again offered to the
Preferred Stockholder under the procedures specified in this Section 4.

          (h) If the Capital Stock to be issued by the Company is to be issued
pursuant to a Public Offering, notwithstanding the time periods set forth above,
the Company may require that the Preferred Stockholders make an election to
either (i) commit to purchase shares of Capital Stock from the Company at the
public offering price at the closing of the Public Offering or (ii) waive their
rights to subscribe for additional shares of Common Stock to be issued in the
Public Offering.  Such election shall be made sufficiently in advance of the
filing of the registration statement relating to the Public Offering as shall be
reasonably requested by the Company.

          (i) The rights provided by this Section 4 may be assigned by any
Preferred Stockholder to any and all members of its Group, provided that all
                                                           --------
such rights of any assignee to purchase Offered Shares will be subject to
receipt of appropriate representations from such assignee as reasonably
requested by the Company to ensure compliance with all applicable securities
laws.

     SECTION 5.  Reporting of Public Information Rule 144.
                 ----------------------------------------

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          (a) With a view to making available the benefits of Rule 144 under the
Securities Act (or any similar or successor rule which may at any time permit
the sale of Common Shares to the public without registration), at all times
after ninety (90) days after any registration statement covering an offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:

          (i) make and keep public information available, as those terms are
     defined in Rule 144 under the Securities Act;

          (ii) use its best efforts to file with the Commission in a timely
     manner all reports and other documents required of the Company under the
     Securities Act and the Exchange Act; and

          (iii) furnish to each Preferred Stockholder promptly upon request a
     written statement by the Company as to its compliance with the reporting
     requirements of the Exchange Act, a copy of the most recent annual or
     quarterly report of the Company, and such other reports and documents so
     filed by the Company as such holder may reasonably request in availing
     itself of Rule 144 (or any similar or successor rule).

          (b) With a view to making available the benefits of Rule 144A (or any
similar or successor rule), the Company shall, upon request of a Preferred
Stockholder, make and keep available such information as is required pursuant to
that rule.

     SECTION 6.  Registration Rights.
                 --------------------

     6.1  Demand Registration Rights.  Upon written request by Holders
          --------------------------
representing in the aggregate at least 50% of the total number of Registrable
Securities that have not been registered under the Securities Act, the Company
shall use its best efforts to effect the registration under the Securities Act
and registration or qualification under all applicable state securities laws of
the Registrable Securities, as requested by the Holders all as provided in the
following provisions of this Section 6. Holders may require the Company to
effect no more than four registrations under the Securities Act, in the
aggregate, upon the request of the Holders pursuant to this Section 6.1. Except
as otherwise provided in Section 6.6., any registration which is not declared
effective pursuant to the Securities Act and which does not remain effective as
required by Section 6.5(a) below shall not constitute one of the four
registrations which the Company is obligated to effect pursuant to this Section
6.1. A request by a Holder to have the Company effect the registration of
Registrable Securities shall not obligate the Holder to convert them into Common
Stock, whether on not the registration of the Registrable Securities shall
become effective, provided that the Holder shall convert Registrable Securities
into Common Stock prior to the sale of such Registrable Securities pursuant to
such registration statement.

     6.2  Registration Requested by Holders.  Whenever the Company shall be
          ---------------------------------
requested, pursuant to Section 6.1 hereof, to effect the registration of any of
the Registrable Securities under the Securities Act (a "Request for
Registration"), the Company shall give notice of such proposed

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registration to all Holders at least 60 days before the Company files a
registration statement and thereupon shall, as expeditiously as possible after
such 60-day notice period, use its best efforts to effect the registration under
the Securities Act and under all applicable state securities laws of:

          (a) all Registrable Securities which the Company has been requested to
register pursuant to the Request for Registration; and

          (b) all other Registrable Securities which Holders have, within 20
days after the Company has given such notice, requested the Company to register;

all to the extent requisite to permit the sale or other disposition by the
Holders so to be registered. If the Holders who requested the registration of
Registrable Securities engage one or more underwriters to distribute such
Registrable Securities, the Company shall permit the managing underwriter(s) and
counsel to the underwriter(s) at the Company's expense to visit and inspect any
of the properties of the Company, examine its books, take copies and extracts
therefrom and discuss the affairs, finances and accounts of the Company with its
officers, employees and public accountants (and by this provision the Company
hereby authorizes said accountants to discuss with such underwriter(s) and such
counsel its affairs, finances and accounts), at reasonable times and upon
reasonable notice, with or without a representative of the Company being
present.  The Company shall have the right to include in any registration of
Registrable Securities required pursuant to this Section 6.2 additional shares
of its Common Stock ("Company Securities") or shares of Common Stock that have
the benefit of duly exercised registration rights contractually binding on the
Company ("Third Party Registrable Securities"), provided that if any Registrable
                                                --------
Securities to be so registered for sale are to be distributed by or through
underwriters, then all Registrable Securities to be so registered for sale,
Company Securities and Third Party Registrable Securities, if any, shall be
included in such underwriting on the same terms and provided, further that if,
                                                    --------  -------
in the written opinion of the managing underwriter(s) the total amount of such
securities to be registered will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially and adversely
affecting the entire offering, then the Company shall exclude from such
underwriting (x) first, the maximum number of Company Securities and Third Party
Registrable Securities as is necessary in the opinion of the managing
underwriter(s) to reduce the size of the offering and (y) then, the minimum
number of Registrable Securities, pro rata to the extent practicable, on the
                                  --- ----
basis of the number of Registrable Securities requested to be registered among
the participating Holders, as is necessary to reduce the size of the offering.
(A registration that covers both Registrable Securities and Company Securities
or Third Party Registrable Securities shall be deemed to have been requested
pursuant to a Request for Registration if the Registrable Securities constitute
at least 50% of the total offering on the effective date of the registration
statement but shall not be deemed to be one of the four registrations referred
to in Section 6.1 hereof if the Registrable Securities constitute less than 50%
of the total offering on the effective date of the registration statement.)

     6.3  "Piggyback" Registrations. (a)  If the Company at any time proposes
           ------------------------
other than in accordance with a Request for Registration to register any of its
securities under the Securities Act on Form S-1, S-2 or S-3 or on any other form
upon which the Registrable Securities may be registered for sale to the general
public, solely for cash, whether for its own account or for the

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account of others, the Company will at each such time give notice to all Holders
of such proposal at least 30 days before the Company files a registration
statement. Upon the request of any Holder given within 20 days after the Company
has given such notice, the Company will cause the Registrable Securities which
the Company has been requested to register by such Holder to be registered under
the Securities Act, all to the extent requisite to permit the sale or other
disposition by such Holder of the Registrable Securities so registered.

          (b) If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of the Company by or through a firm of underwriters then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this Section 6.3 shall also be included in such underwriting on the same
terms as other securities of the same class as the Registrable Securities
included in such underwriting, provided that if, in the written opinion of the
                               --------
managing underwriter(s), the total amount of such securities to be so registered
and distributed for the account of the Company, when added to the Registrable
Securities and the securities held by holders of securities other than the
Registrable Securities, if any, will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially and adversely
affecting the entire offering, then (subject to clause (d) of this Section 6.3)
the Company shall exclude from such underwriting (x) first, the maximum number
of securities, if any, other than Registrable Securities, being sold for the
account of persons other than the Company as is necessary to reduce the size of
the offering and (y) then, the minimum number of Registrable Securities, pro
                                                                         ---
rata to the extent practicable, on the basis of the number of Registrable
----
Securities requested to be registered among the participating Holders, as is
necessary in the opinion of the managing underwriter(s) to reduce the size of
the offering.

          (c) If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of holders of Third Party Registrable Securities or holders (other than
the Company) of other securities of the Company other than Registrable
Securities by or through a firm of underwriters of recognized standing under
underwriting terms appropriate for such transaction, then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this Section 6.3 shall also be included in such underwriting on the same
terms as other securities included in such underwriting, provided that if, in
                                                         --------
the written opinion of the managing underwriter or underwriters, the total
amount of such securities to be so registered, when added to such Registrable
Securities, will exceed the maximum amount of the Company's securities which can
be marketed (i) at a price reasonably related to their then current market
value, or (ii) without otherwise materially and adversely affecting the entire
offering, then the Company shall exclude from such underwriting the number of
Registrable Securities and other securities, pro rata to the extent practicable,
                                             --- ----
on the basis of the number of securities requested to be registered, as is
necessary to in the opinion of the managing underwriter(s) to reduce the size of
the offering.

          (d) Notwithstanding Section 6.3 (a) and (b), the Company shall not
exclude more Registrable Securities from registration than is necessary to
reduce the number of Registrable Securities to be registered to one-fifth of the
total number of securities to be registered, provided, however, that the Company
                                             --------  -------
may exclude all Registrable Securities from registration in connection

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with the Company's Initial Public Offering in its sole discretion, whether or
not such exclusion is required in the opinion of the managing underwriter(s).

     6.4  Registrations on S-3.  At such time as the Company shall have
          --------------------
qualified for the use of Form S-3 (or any successor form promulgated under the
Securities Act), each Holder shall have the right to request in writing an
unlimited number of registrations on Form S-3.    Each such request by a Holder
shall: (a) specify the number of Registrable Securities which the Holder intends
to sell or dispose of, and (b) state the intended method by which the Holder
intends to sell or dispose of such Registrable Securities.  Upon receipt of a
request pursuant to this Section 6.4, the Company shall use its best efforts to
effect such registration or registrations on Form S-3.  Notwithstanding the
foregoing: (i) the Company shall not be obligated to effect more than one such
registration on Form S-3 pursuant to this Section 6.4 during any thirteen-month
period (provided that this limitation shall not apply to any member of a
Preferred Stockholder Group if a member of such Preferred Stockholder Group has
not caused the Company to effect at least one such registration on Form S-3
during the proceeding thirteen-month period), and (ii) the Company shall not be
obligated to effect any registration on Form S-3 under this Section 6.4 if the
Holders propose to sell in the aggregate a number of Registrable Securities that
they otherwise would be eligible to sell during one three-month period in
compliance with Rule 144 under the Securities Act.

     6.5  Company's Obligations in Registration.  Whenever the Company is
          -------------------------------------
obligated to effect the registration of any Registrable Securities under the
Securities Act, as expeditiously as possible the Company will use its best
efforts to:

          (a) prepare and file with the Commission, a registration statement
with respect to such Registrable Securities and cause such registration
statement to become and remain effective, provided that the Company shall not be
                                          --------
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto, later than the last business day of the
fifteenth month following the date on which such registration statement becomes
effective under the Securities Act or such longer period during which the
Holders registered thereunder shall pay all expenses reasonably incurred to keep
such registration statement effective with respect to any of the Registrable
Securities so registered and provided, further, that in the event the Commission
                             --------  -------
shall have declared any other registration statement with respect to an offering
of securities of the Company to be effective within four months prior to the
Company's receiving a Request for Registration, the Company may delay the
effective date of the registration statement filed in response to the Request
for Registration until six months after the effective date of the previous
registration statement;

          (b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with provisions of the Securities Act with respect to the disposition
of all Registrable Securities covered by such registration statement whenever
the Holders covered by such registration statement shall desire to dispose of
the same;

          (c) furnish to the Holders for whom such Registrable Securities are
registered or are to be registered such numbers of copies of a printed
prospectus, including a preliminary

                                       11
<PAGE>

prospectus and any amendments or supplements thereto, in conformity with the
requirements of the Securities Act, and such other documents as such Holders may
reasonably request in order to facilitate the disposition of such Registrable
Securities;

          (d) notify each Holder at any time when a prospectus relating to the
Registrable Securities covered by such registration statement is required to be
delivered under the Securities Act, of the Company's becoming aware that the
prospectus in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
at the request of any Holder prepare and furnish to such Holder any reasonable
number of copies of any supplement to or amendment of such prospectus necessary
so that, as thereafter delivered to any purchaser of the Registrable Securities,
such prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading;

          (e) register or qualify the Registrable Securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as the Holders for whom such Registrable Securities are registered
or are to be registered shall reasonably request, and do any and all other
reasonable acts and things which may be necessary or advisable to enable such
Holders to consummate the disposition in such jurisdictions of such Registrable
Securities, provided that the Company shall not be required to do business or to
            --------
file a general consent to service of process in any such states or
jurisdictions, and provided, further, that (notwithstanding any other provision
                   --------  -------
of this Agreement with respect to the bearing of expenses) if any jurisdiction
in which the Registrable Securities shall be qualified shall require that
expenses incurred in connection with the qualifications of the Registrable
Securities in that jurisdiction be borne by the Holders thereof and not by the
Company, then such expenses shall be payable by the selling Holders pro rata, to
                                                                    --- ----
the extent required by such jurisdiction;

          (f) furnish to the Holders for whom such Registrable Securities are
registered or are to be registered an agreement satisfactory in form and
substance to them by the Company and each of its officers, directors and holders
of 5% or more of any class of capital stock, that during the 30 days before and
the 180 days after the effective date of any underwritten public offering, the
Company and such officers, directors and 5% security holders shall not offer,
sell, contract to sell or otherwise dispose of any shares of capital stock or
securities convertible into capital stock, except as part of such underwritten
public offering and except that gifts may be made to relatives or their legal
representatives upon the condition that the donees agree in writing to be bound
by the restrictions contained in this clause (f) of Section 6.5;

          (g) in connection with any underwritten offering, furnish to the
Holders for whom such Registrable Securities are registered or are to be
registered at the closing of the sale of such Registrable Securities by such
Holders a signed copy of (i) an opinion or opinions of counsel for the Company
acceptable to such Holders in form and substance as is customarily given to
underwriters in public offerings, and (ii) a "cold comfort" letter from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accounts to underwriters
in an underwritten public offering, to the extent that such "cold

                                       12
<PAGE>

comfort" letters are then available to selling stockholders;

          (h) otherwise use its efforts to comply with all applicable rules and
regulations of the Commission, and, if required, make available to its security
holders, as soon as reasonably practicable, an earning statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first day of the Company's first calendar quarter after the effective
date of the registration statement, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;

          (i) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on the principal securities exchange
on which similar equity securities issued by the Company are then listed, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange or, if similar equity securities are not listed, to use its best
efforts to cause such Registrable Securities to be included on the Nasdaq
National Market of The Nasdaq Stock Market, Inc.;

          (j) in connection with any underwritten offering, enter into an
underwriting agreement with the underwriters of such offering in the form
customary for such underwriters for similar offerings, including such
representations and warranties by the Company, provisions regarding the delivery
of opinions of counsel for the Company and accountants' letters, provisions
regarding indemnification and contribution, and such other terms and conditions
as are at the time customarily contained in such underwriter's underwriting
agreements for similar offerings; and

          (k) permit any Holder who, in the sole judgment, exercised in good
faith, of such Holder, might be deemed to be a controlling person of the
Company, to participate in the preparation of such registration statement and to
require the insertion therein of material, furnished to the Company in writing,
that in the judgment of such Holder, as aforesaid, should be included.

     6.6  Payment of Registration Expenses.  The costs and expenses of all
          --------------------------------
registrations and qualifications under the Securities Act, and of all other
actions which the Company is required to take or effect pursuant to this Section
6, shall be paid by the Company or holders of Third Party Registrable Securities
or other securities of the Company other than Registrable Securities, if any
(including, without limitation, all registration and filing fees, printing
expenses, auditing costs and expenses, and the reasonable fees and disbursements
of counsel for the Company and, in connection with registrations under Section
6.1, one special counsel for the Holders) and the Holders shall pay only the
underwriting discounts and commissions and transfer taxes, if any, relating to
the Registrable Securities sold by them; provided that the Company shall pay
                                         --------
without reimbursement such costs and expenses of no more than four registrations
which become effective under the Securities Act as a result of requests for
registration pursuant to Section 6.4, and provided, further, that the Company
                                          --------  -------
shall not be obligated to pay for any costs or expenses incurred in connection
with a registration begun pursuant to a Request for Registration under Section
6.1 if such Request for Registration is subsequently withdrawn at the request of
the Holders of a majority of the Registrable Securities to be registered (in
which case all participating Holders shall bear such costs and expenses) unless
the Holders of a majority of the Registrable Securities agree to forfeit their
right to one demand registration under Section 6.1, and provided, further, that
                                                        --------  -------
in the event more than four

                                       13
<PAGE>

registrations of Registrable Securities become effective under the Securities
Act as a result of requests for registration pursuant to Section 6.4, the
Holders and holders of other securities, if any, included in such registrations
shall reimburse the Company pro rata for all registration and filing fees,
reasonable printing expenses, reasonable auditing costs and expenses (excluding
costs and expenses of the Company's annual audit) and the reasonable fees and
expenses of counsel for the Company and such reimbursement shall be made to the
Company within five business days after the effective date of such a
registration statement.

     6.7  Information from Holders.  Notices and requests delivered by Holders
          ------------------------
to the Company pursuant to this Section 6 shall contain such information
regarding the Registrable Securities to be so registered and the intended method
of disposition thereof as shall reasonably be required in connection with the
action to be taken.  Each Holder hereby agrees to provide the Company, or its
agents or designees, with all information reasonably required in connection with
the registration under the Securities Act or any applicable state securities law
of any Registrable Securities.

     6.8  Indemnification.  (a)  In the event of any registration under the
          ---------------
Securities Act of any Registrable Securities pursuant to this Section 6, to the
extent permitted by law, the Company shall indemnify and hold harmless each
Holder disposing of such Registrable Securities and each other person, if any,
which controls (within the meaning of the Securities Act) such Holder and each
other person (including underwriters) who participates in the offering of such
Registrable Securities, against any losses, claims, damages or liabilities,
joint or several, to which such Holder or controlling person or participating
person may become subject under the Securities Act or otherwise, to the extent
that such losses, claims, damages or liabilities (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date thereof, in any
registration statement under which such Registrable Securities were registered
under the Securities Act, in any preliminary prospectus or final prospectus
contained therein, or in any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein (in the case of a prospectus, in the light of the
circumstances under which they were made) or necessary to make the statements
therein not misleading, and will reimburse such Holder and each such controlling
person or participating person for any legal or any other expenses reasonably
incurred by such Holder or such controlling person or participating person in
connection with investigating or defending any such loss, claim, damage,
liability or proceeding, provided that the Company will not be liable in any
                         --------
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, preliminary or
final prospectus or amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by an instrument duly executed
by any such Holder or any such controlling or participating person, as the case
may be, specifically for use in the preparation thereof unless such Holder or
such controlling or participating person, as the case may be, in writing
corrects such information or provides additional information in a manner such
that the Company could reasonably correct such untrue statement or omission
contained in any such filings, and provided, further, that the Company will not
                                   --------  -------
be liable for any amounts paid in settlement of any such loss, claim, damage or
liability if such settlement is

                                       14
<PAGE>

effected without the consent of the Company. Each such Holder will, if requested
by the Company prior to the initial filing of any such registration statement,
agree in writing, severally but not jointly, to indemnify and hold harmless the
Company and each person which controls (within the meaning of the Securities
Act) the Company and each other person (including underwriters) who participates
in the offering of such Registrable Securities against all losses, claims,
damages and liabilities to which the Company or such controlling person or
participating person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities arise out of or are based
upon any untrue statement of any material fact contained, on the effective date
thereof, in any registration statement under which such Registrable Securities
were registered under the Securities Act, or in any preliminary prospectus or
final prospectus contained therein, or in any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
statement or omission made in such registration statement, preliminary or final
prospectus or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by an instrument duly executed by
such Holder and specifically stated to be for use in the preparation thereof
unless such Holder in writing corrects such information or provides additional
information in a manner such that the Company could reasonably correct such
untrue statement or omission contained in any such filings. Each indemnified
party shall cooperate with each indemnifying party in defending any loss, claim,
damage, liability or proceeding.

          (b) To the extent permitted by law, indemnification similar to that
specified in the preceding clause of this Section 6.8 (with appropriate
modifications) shall be given by the Company and, at the Company's request, each
Holder with respect to any registration or other qualification of securities
under any state securities and "blue sky" laws.

          (c) If the indemnification provided for in clause (a) and (b) of this
Section 6.8 is unavailable or insufficient to hold harmless an indemnified
party, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party referred to in clauses (a) and (b) of this
Section 6.8 in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the other
hand in connection with statements or omissions which resulted in losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations.  The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omissions.  The parties agree that
it would not be just and equitable if contributions pursuant to this clause were
to be determined by pro rata allocation or by any other method of allocation
                    --- ----
which does not take account of the equitable considerations referred to in the
first sentence of this clause.  The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this clause shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any loss, claim, damage, liability or proceeding which is the
subject of this clause.  No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f)

                                       15
<PAGE>

of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

          (d) Each indemnified party shall notify the indemnifying party in
writing within 10 days after its receipt of notice of the commencement of any
action against it in respect of which indemnity may be sought from the
indemnifying party pursuant to this Section 6.8. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party, the indemnifying party will be entitled to participate in the defense
with counsel satisfactory to such indemnified party.  Each indemnified party
shall cooperate with each indemnifying party in defending any loss, claim,
damage, liability or proceeding.

          (e) Notwithstanding clauses (a) through (c) of this Section 6.8, the
aggregate amount which may be recovered by the Company, controlling persons of
the Company or underwriters from each Holder pursuant to the indemnification and
contribution provided for in this Section 6.8 shall be limited to the total net
proceeds for which the Registrable Securities were sold by such Holder.

          (f) Notwithstanding any of the foregoing, if, in connection with an
underwritten public offering of Registrable Securities, the Company, the selling
stockholders and the underwriter(s) enter into an underwriting or purchase
agreement relating to such offering which contains provisions covering
indemnification and contribution among the parties, the indemnification and
contribution provisions of this Section 6.8 shall be deemed inoperative for
purposes of such offering.

     6.9  Market Stand-Off Agreement.  Each Holder agrees, if requested by the
          --------------------------
Company or an underwriter in connection with a Public Offering, that during the
30 days before and the 180 days after the effective date of any Public Offering,
such Holder shall not offer, sell, contract to sell or otherwise dispose of any
shares of Capital Stock or securities convertible into Capital Stock, except as
part of such Public Offering.  The Company may impose stop transfer instructions
with respect to the securities subject to the foregoing restrictions until the
end of the stand-off period.  The foregoing provisions shall not apply to any
Holder after the Company's Initial Public Offering if the Holder or its group
(as defined in the Exchange Act) beneficially owns less than 5% of the Company's
Common Stock.

     6.10 Assignment of Registration Rights.  The right to cause the Company to
          ---------------------------------
register Registrable Securities pursuant to this Section 6 may be assigned by a
Holder to any member of such Holder's Group or in connection with a Transfer of
any Registrable Securities representing at least 1% of the then outstanding
Registrable Securities, provided that such assignment shall be effective only if
                        --------
the transferee becomes a party to this Agreement and agrees to be bound as a
Preferred Stockholder hereunder, and provided, further, that such registration
                                     --------  -------
rights may not be Transferred to a competitor of the Company (as determined in
good faith by the Board of Directors) unless such Transfer is to a member of
such Holder's Group.  A Holder shall retain all rights under this Section 6 with
respect to all Registrable Securities that are not subject to such Transfer.

     6.11 Amendment of Registration Rights.  Any provision of this Section 6 may
          --------------------------------
be amended or the observance thereof may be waived (either generally or in a
particular instance and either

                                       16
<PAGE>

retroactively or prospectively), only with the written consent of the Company
and the Holders of a majority of the Registrable Securities then outstanding;
provided, however, any amendment or waiver which adversely affects Rho
Management Trust II, Abingworth Bioventures SICAV, Biotech Growth SA or any
member of any of their Groups may not be made without the written consent of Rho
Management Trust II, Abingworth Bioventures SICAV or Biotech Growth SA and/or
their respective Group member, as the case may be. Any amendment or waiver
effected in accordance with this Section 6.11 shall be binding upon each
Preferred Stockholder, each future Holder and the Company.

     6.12 Rights That May Be Granted To Subsequent Investors.  (a) Within the
          --------------------------------------------------
limitations prescribed by this paragraph (a), but not otherwise, the Company may
grant to subsequent investors in the Company rights of incidental registration
(such as those provided in Section 6.3).  Such rights may only pertain to shares
of Common Stock, including shares of Common Stock into which any other
securities may be converted.  Such rights may be granted with respect to (i)
registrations actually requested by initiating Holders pursuant to Section 6.1,
but only in respect of that portion of any such registration as remains after
inclusion of all Registrable Securities requested by Holders and (ii)
registrations initiated by the Company, but only in respect of that portion of
such registration as remains after inclusion of all Registrable Securities.
With respect to registrations which are for Public Offerings, "available
portion" shall mean the portion of the underwritten shares that is available as
specified in clauses (i) and (ii) of the third sentence of this paragraph (a).
Shares not included in such underwriting shall not be registered.

          (b) The Company may not grant to subsequent investors in the Company
rights of registration upon request (such as those provided in Section 6.1)
unless (i) such rights are limited to shares of Common Stock, (ii) all Holders
are given enforceable contractual rights to participate in registrations
requested by such subsequent investors, such participation to be on a pro rata
                                                                      --- ----
basis and subject to the limitations described in the final three sentences of
paragraph (a) of this Section 6.12, (iii) such rights shall not become effective
prior to 90 days after the effective date of the first registration pursuant to
Section 6.1 and (iv) such rights shall not be more favorable than those granted
to the Holders.

     6.13 Termination of Obligations.  Notwithstanding any other provisions of
          --------------------------
this Agreement, all of the obligations of the Company under this Section 6 shall
terminate as to any Holder on the first day that such Holder may freely sell
such Registrable Securities in compliance with Rule 144(k) as now in effect or
hereafter amended under the Securities Act, provided that in the event such
                                            --------
Holder becomes an affiliate of the Company (as defined in Rule 144 under the
Securities Act) after such date and prior to December 31, 2007, the Company's
obligations under this Section 6 shall survive and continue as to such Holder
during the period in which such Holder is an affiliate of the Company (as
defined in Rule 144 under the Securities Act), and provided, further, that
                                                   --------  -------
notwithstanding the provisions of this Section 6.13, all of the obligations of
the Company under this Section 6 shall terminate as to all Holders on December
31, 2007.

     SECTION 7. Duration of Agreement.  The rights and obligations of each
                ---------------------
Preferred Stockholder, except the rights and obligations contained in Sections 5
and 6 hereof, and the covenants hereunder to that Preferred Stockholder shall
terminate as to each Preferred Stockholder

                                       17
<PAGE>

upon the earlier of (i) December 31, 2007 and (ii) the closing of the Initial
Public Offering by the Company. The obligations contained in Sections 5 and 6
shall survive indefinitely until, by their respective terms, they are no longer
applicable.

     SECTION 8.  Remedies.  In case any one or more of the covenants and/or
                 --------
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce their rights either by suit in
equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach; and/or an action for specific
performance of any such covenant or agreement contained in this Agreement and/or
a temporary or permanent injunction, in any case without showing any actual
damage. The rights, powers and remedies of the parties under this Agreement are
cumulative and not exclusive of any other right, power or remedy which such
parties may have under any other agreement or law. No single or partial
assertion or exercise of any right, power or remedy of a party hereunder shall
preclude any other or further assertion or exercise thereof. Any purported
Transfer in violation of the provisions of this Agreement shall be void ab
initio. -- ------

     SECTION 9.  Successors and Assigns.  Except as otherwise expressly
                 ----------------------
provided herein, this Agreement shall bind and inure to the benefit of the
Company, each of the Preferred Stockholders and the respective successors or
heirs and personal representatives and permitted assigns of the Company and each
of the Preferred Stockholders. Each Preferred Stockholder agrees further that it
shall not transfer any Shares to any Person not a party to this Agreement unless
such Person becomes a party to this Agreement contemporaneously with such
transfer by executing and delivering to the Company an agreement to be bound
hereby, whereupon such Person shall be deemed a Preferred Stockholder and shall
have the same rights and obligations as other Preferred Stockholders.

     SECTION 10.  Entire Agreement.  This Agreement supersedes all prior
                  ----------------
agreements among the parties with respect to its subject matter (including
without limitation the Amended and Restated Stockholders' Agreement, dated as of
January 6, 1998, which is hereby terminated and of no further force or effect),
and is intended (with the documents referred to herein) as a complete and
exclusive statement of the terms of the agreement among the parties with respect
thereto.

     SECTION 11.  Notices.  All notices, requests, consents and other
                  -------
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person, duly sent by first class
registered or certified airmail, postage prepaid, or telecopied or telexed to
such party at the address or telecopier number set forth below, or such other
address or telecopier number as may hereafter be designated in writing by the
addressee; provided, however, that if the Preferred Stockholder is foreign,
notice shall be sent by both two-day guaranteed international air courier, and
telecopied or telexed to such Preferred Stockholder:

          (a)  If to the Company:

               3-Dimensional Pharmaceuticals, Inc.
               Eagleview Corporate Center

                                       18
<PAGE>

               665 Stockton Drive, Suite 104
               Exton, PA  19341
               Telecopier No.: (610) 458-8249
               Attention:  Thomas P. Stagnaro, President
                           and Chief Executive Officer

               with a copy to:

               Morgan, Lewis & Bockius LLP
               2000 One Logan Square
               Philadelphia, PA  19103-6993
               Telecopier No.: (215) 963-5299
               Attention:  David R. King, Esq.

          (b) If to HealthCare Ventures III, L.P. and HealthCare Ventures IV,
L.P.:

               44 Nassau Street
               Princeton, NJ  08542-4511
               Telecopier No.: (609) 430-9525
               Attention:  Jeffrey Steinberg

               with a copy to:

               Counsel to HealthCare Ventures III, L.P. and
               HealthCare Ventures IV, L.P. pursuant to instructions
               received from such Preferred Stockholders

          (c)  If to Rho Management Trust II:

               c/o Rho Management Co., Inc.
               767 Fifth Avenue - 43rd Fl.
               New York, NY  10153
               Telecopier No.: (212) 751-3613
               Attention:  Joshua Ruch

               with a copy to:

               Gregory F.W. Todd, Esq.
               888 7th Avenue - 45th Floor
               New York, NY  10019
               Telecopier No.: (212) 246-5454

          (d)  If to Hudson Trust:

               Hudson Trust

                                       19
<PAGE>

               The Office Center
               666 Plainsboro, Suite 445
               Plainsboro, NJ  08536
               Attention:  Tina March

          (e)  If to Commonwealth Venture Partners II, L.P.:

               c/o Philadelphia Ventures, Inc.
               The Bellevue
               200 South Broad Street
               Philadelphia, PA  19102
               Attention:  Thomas R. Morse

          (f)  If to Larry Abrams:

               24 Central Park South
               New York, NY  10019

          (g)  If to M & G Equities:

               c/o American Stock Transfer & Trust Company
               40 Wall Street
               New York, NY  10005
               Attention:  Michael Karfunkel

          (h)  If to Henry Rothman:

               209 West 86th Street
               New York, NY  10024

          (i)  If to Abingworth Bioventures SICAV

               Abingworth Bioventures SICAV
               c/o Sanne & Cie
               Boite Postale 566
               L-2015 Luxembourg
               Telecopier No.: (352) 43 54 10
               Attention:  Karl U. Sanne

               With a copy to:

               Abingworth Management Limited
               26 St. James's Street
               London SW1A 1HA
               England

                                       20
<PAGE>

               Telecopier No.: 44 171 930-1891
               Attention:  Stephen Bunting, Ph.D.

               and to:

               Testa, Hurwitz & Thibeault, LLP
               High Street Tower
               125 High Street
               Boston, MA  02110
               Telecopier No.:  (617) 248-7100
               Attention:  Kenneth J. Gordon, Esq.
          (j)  If to Sentron Medical, Inc.

               4445 Lake Forest Drive, Suite 600
               Cincinnati, OH 45252
               Telecopier No.: (513) 563-3261
               Attention:  Rick D'Augustine

          (k)  If to the State of Michigan Retirement Systems:

               Department of Treasury
               Treasury Building
               430 Allegan
               Lansing, MI 48922
               Telecopier No.: (517) 335-3668
               Attention:  Joseph A. Taylor

          (l)  If to Aetna Life Insurance Company

               151 Farmington Avenue - RC21
               Hartford, CT 06156-9000
               Telecopier No.: (860) 273-8650
               Attention:  David Clarke, Managing Director

          (m)  If to Biotech Growth SA

               c/o Bellevue Asset Management AG
               Grafenauweg 4
               CH-6301 Zug
               Switzerland
               Telecopier No.: 011-41-724-5958
               Attention:  Dr. Andreas Bremer

               With a copy to:

                                       21
<PAGE>

               Baker & McKenzie
               815 Connecticut Avenue, N.W.
               Washington, DC 20006
               Telecopier No.: (202) 452-7072
               Attention:  Daniel Goelzer, Esq.

     All such notices, requests, consents and communications shall be deemed to
have been given (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of telex or telecopier transmission, on the date on
which the sender receives machine confirmation of such transmission, and (iii)
in the case of mailing, on the fifth business day following the date of such
mailing. Notwithstanding the above, any notice or communication to an address
outside the United States shall additionally be given by telecopier and
confirmed in writing sent by two day guaranteed international courier.

     SECTION 12.  Changes.  Except as otherwise provided in Section 6.11, the
                  -------
terms and provisions of this Agreement may not be modified or amended, or any of
the provisions hereof waived, temporarily or permanently, except pursuant to the
written consent of (i) the Company, and (ii) the holders of a majority of the
voting power of the Shares; provided, however, any modification, amendment or
                            --------  -------
waiver which adversely affects Rho Management Trust II, Biotech Growth SA or any
member of either of their Groups may not be made without the written consent of
Rho Management Trust II or Biotech Growth SA and/or their respective Group
member, as the case may be.

     SECTION 13.  Counterparts.  This Agreement may be executed in any number of
                  ------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.

     SECTION 14.  Headings.  The headings of the various sections of this
                  --------
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

     SECTION 15.  Nouns and Pronouns.  Whenever the context may require, any
                  ------------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice- versa.

     SECTION 17. Severability.  Any provision of this Agreement that is
                 ------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability. Such
prohibition or unenforceability in any one jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

             [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

                                       22
<PAGE>

    SECTION 17.  Governing Law.  This Agreement shall be governed by and
                 -------------
construed in accordance with (a) the laws of the Commonwealth of Pennsylvania
without giving effect to the principles of conflicts of law thereof and (b) the
laws of the State of Delaware applicable to corporations organized under the
laws of such state.

    IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written, in the case of corporations by their respective
officers thereunto duly authorized.

                              3-DIMENSIONAL PHARMACEUTICALS, INC.

                              By:  /s/ David C. U'Prichard
                                 _____________________________________

                              STOCKHOLDERS:
                              ------------

                              HEALTHCARE VENTURES III, L.P.

                              By:  HealthCare Partners III, L.P.,
                                    its General Partner

                                    By:  /s/ Jeffrey Steinberg
                                       _______________________________

                              HEALTHCARE VENTURES IV, L.P.

                              By:  HealthCare Partners IV, L.P.
                                    Its General Partner

                                    By:  /s/ Jeffrey Steinberg
                                       ___________________________

                              HEALTHCARE VENTURES V, L.P.

                              By:  HealthCare Partners V, L.P.
                                    Its General Partner

                                    By:  /s/ Jeffrey Steinberg
                                       ___________________________

                                       23
<PAGE>

                              RHO MANAGEMENT TRUST II (formerly Everest Trust)

                              By:  /s/ Illegible
                                 __________________________________

                              HUDSON TRUST

                              By:  /s/ Scott Ciccone
                                 _______________________________

                              COMMONWEALTH VENTURE PARTNERS II, L.P.

                              By:     Charles A. Burton
                                   ________________________________
                                    Its General Partner

                                    By:  /s/ Charles A. Burton
                                       ___________________________

                              M & G EQUITIES

                              By:  /s/ Michael Karfunkel
                                 __________________________________

                                /s/ Larry Abrams
                              __________________________________
                              LARRY ABRAMS

                                /s/ Henry Rothman
                              __________________________________
                              HENRY ROTHMAN

                              ABINGWORTH BIOVENTURES SICAV

                              By:  /s/ M. - Rose Dock
                                 __________________________________

                                       24
<PAGE>

                              SENTRON MEDICAL, INC.

                              By:  /s/ Steve R. Gailar
                                 __________________________________

                              STATE TREASURER OF THE STATE OF
                              MICHIGAN, CUSTODIAN OF THE MICHIGAN
                              PUBLIC SCHOOL EMPLOYEES' RETIREMENT
                              SYSTEM, STATE EMPLOYEES' RETIREMENT
                              SYSTEM, MICHIGAN STATE POLICE
                              RETIREMENT SYSTEM, AND MICHIGAN
                              JUDGES RETIREMENT SYSTEM

                              By:
                                 __________________________________

                              AETNA LIFE INSURANCE COMPANY

                              By:  /s/ David Clarke
                                 __________________________________

                              BIOTECH GROWTH SA

                              By:  Nora Frey
                                 __________________________________

                              By:  /s/ Nora Frey
                                 __________________________________

                                       25<PAGE>

                                                                    Exhibit 10.3
                                                                       EXHIBIT A

                      3-DIMENSIONAL PHARMACEUTICALS, INC.

                  SERIES B PREFERRED STOCK PURCHASE AGREEMENT

     This Series B Preferred Stock Purchase Agreement (the "Agreement") is made
as of October 11, 1996 by and between 3-Dimensional Pharmaceuticals, Inc., a
Delaware corporation, having a place of business at Eagleview Corporate Center,
665 Stockton Drive, Suite 104, Exton, Pennsylvania 19341, U.S.A. (the
"Company"), and Merck KGaA, a German corporation, having a place of business at
Frankfurter Strasse 250, 64271 Darmstadt, Germany ("Merck").

                                  Background
                                  ----------

     The Company and Merck have entered into a Collaborative Research and
License Agreement (the "Collaborative Agreement") dated as of the date hereof.
In connection with the Collaborative Agreement, Merck has agreed to acquire
1,000,000 shares of Series B Preferred Stock (as hereinafter defined) of the
Company.

                                  Witnesseth:
                                  ----------

     1.   Authorization and Sale of the Shares.
          ------------------------------------

          1.1  Authorization of the Shares.  The Company has authorized the
               ---------------------------
issuance and sale to Merck of 1,000,000 shares (the "Shares") of its Series B
Convertible Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock").  The Series B Preferred Stock has the rights provided for in the Terms
of Series B Preferred Stock attached hereto as Exhibit A (the "Series B
                                               ---------
Preferred Stock Terms") and incorporated herein.  The Series B Preferred Stock
Terms have been included in an amendment and restatement of the Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
of the Company.  The shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company issuable upon conversion of the Shares are
hereinafter referred to as the "Conversion Shares." The Shares and the
Conversion Shares are hereinafter collectively referred to as the "Securities."

          1.2  Sale of Shares.  Subject to the terms and conditions hereof,
               --------------
Merck will purchase the Shares at a purchase price of $2.25 per share, payable
at the Closing by wire transfer in immediately available funds to the account
designated by the Company in Exhibit B hereto and incorporated herein.
                             ---------

     2.   Closing Date.  The closing of the purchase and sale of the Shares to
          ------------
Merck hereunder (the "Closing") shall be held at the offices of Morgan, Lewis &
Bockius LLP, 2000 One Logan
<PAGE>

                                                                       EXHIBIT A

Square, Philadelphia, Pennsylvania, 19103, simultaneously with the execution and
delivery of this Agreement, or at such other time and place as the Company and
Merck may agree. The date of the Closing is referred to herein as the "Closing
Date."

     3.   Representations and Warranties of the Company.  The Company represents
          ---------------------------------------------
and warrants to Merck as of the date hereof and as of the Closing Date as
follows:

          3.1  Organization and Standing.  The Company has been duly
               -------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware.

          3.2  Corporate Power; Authorization.  The Company has all requisite
               ------------------------------
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement, to sell and issue the Shares and to carry
out and perform all of its obligations hereunder.  This Agreement has been duly
authorized, executed and delivered on behalf of the Company and constitutes the
valid and binding agreement of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) as limited by equitable principles generally
and (iii) rights to indemnification and contribution hereunder may be limited by
applicable law.  The consummation of the transactions contemplated herein and
the fulfillment of the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under, the Company's Certificate
of Incorporation, the Company's bylaws, or any material indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which it is bound.

          3.3  Stockholder Approval.  The holders of Series A-1 Preferred Stock
               --------------------
(as defined below), voting separately as a single class in accordance with the
terms of the Certificate of Incorporation, have approved the designation of the
Series B Preferred Stock and the amendment to the Certificate of Incorporation
increasing the authorized capital stock of the Company and establishing the
Series B Preferred Stock Terms.  In addition, the holders of Series A-1
Preferred Stock and Common Stock, voting together as a single class in
accordance with the terms of the Certificate of Incorporation and the Delaware
General Corporation Law, as amended, have approved the amendment to the
Certificate of Incorporation increasing the authorized capital stock of the
Company.

          3.4  Series A-1 Preferred Stock Waiver.  The holders of Series A-1
               ---------------------------------
Preferred Stock have waived their rights pursuant to Section 4 of the
Stockholders' Agreement to purchase Series B Preferred Stock contemporaneously
with the Closing of this Agreement upon the same terms and conditions as are set
forth herein and in the Series B Preferred Stock Terms.

          3.5  Capitalization.  As of the date hereof, the authorized capital
               --------------
stock of the Company is 28,358,152 shares, consisting of 16,019,076 shares of
Common Stock and 7,005,086 shares of Series A-1 Convertible Preferred Stock, par
value $.001 per share (the "Series A-1 Preferred Stock"), 4,333,990 shares of
Series A-2 Convertible Preferred Stock, par value $.001 per

                                      -2-
<PAGE>

                                                                       EXHIBIT A

share (the "Series A-2 Preferred Stock, and together with the Series A-1
Preferred Stock, the "Series A Preferred Stock"), and 1,000,000 shares of Series
B Preferred Stock. The issued and outstanding shares of capital stock of the
Company as of the date hereof are set forth in Schedule 3.5 hereto.

          3.6  Shares; Conversion Shares.  The Company has full corporate power
               -------------------------
and authority to sell the Shares on the terms and conditions contemplated
herein, and when so sold against payment therefor as provided herein, the Shares
will be validly authorized and issued, fully paid and nonassessable and will
have the rights, preferences and privileges described in the Series B Preferred
Stock Terms.  The issuance and delivery of the Shares is not subject to
preemptive or any similar rights of the stockholders of the Company or any liens
or encumbrances arising through the Company, except such preemptive or similar
rights as will have been waived prior to the Closing hereunder; and when the
Conversion Shares are issued in accordance with the Series B Preferred Stock
Terms, they will be validly issued and outstanding, fully paid and nonassessable
and free of any liens or encumbrances arising through the Company.

     4.   Representations and Warranties of Merck.  Merck represents and
          ---------------------------------------
warrants to the Company as of the date hereof and as of the Closing Date as
follows:

          4.1  Investment Representations.  Merck is aware of the Company's
               --------------------------
business affairs and financial condition, has had an opportunity to ask
questions, review documents and gather information about the Company and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities.  Merck has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Securities.  Merck is an
"accredited investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended (the "Securities Act").

          4.2  Investment Intent.  Merck is purchasing the Securities for
               -----------------
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act.  Merck understands that the Securities have not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Merck's investment intent as
expressed herein.  Merck is familiar with Rule 144 under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.

          4.3  No Legal, Tax or Investment Advice.  Merck understands that
               ----------------------------------
nothing in this Agreement or any other materials presented to Merck in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice.  Merck has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares.

          4.4  Corporate Power; Authority.  Merck has all requisite legal and
               --------------------------
corporate power and has taken all requisite corporate action to execute, deliver
and perform it obligations under this Agreement.  This Agreement has been duly
authorized, executed and delivered on behalf

                                      -3-
<PAGE>

                                                                       EXHIBIT A

of Merck and constitutes the valid and binding agreement of Merck, enforceable
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally and (iii) rights to indemnification and contribution
hereunder may be limited by applicable law.

     5. Restrictions on Transfer and Registration Rights.
        ------------------------------------------------

          5.1  Restrictions on Transferability.  The Securities shall not be
               -------------------------------
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement.  The Company shall be entitled to give stop transfer instructions to
the transfer agent with respect to the Securities in order to enforce the
foregoing restrictions.  The following provisions shall govern the transfer of
the Securities:

          5.1.1       Merck, and any other holder of any Securities by
acceptance thereof, agrees that, prior to any transfer of any Securities, such
holder will give written notice to the Company of such holder's intention to
effect such transfer and to comply in all other respects with the provisions of
this Section 5.1. Each such notice shall contain (i) a statement setting forth
the intention of such holder's prospective transferee with respect to its
retention or disposition of such Securities, and (ii) unless waived by the
Company, an opinion of counsel for such holder (who may be the inside or staff
counsel employed by such holder), as to the necessity or non-necessity for
registration under the Securities Act and applicable state securities laws in
connection with such transfer and stating the factual and statutory bases relied
upon by counsel. The following provisions shall then apply:

          5.1.1.1        If in the opinion of counsel for the Company the
proposed transfer of such Securities may be effected without registration or
qualification under the Securities Act and any applicable state securities laws,
then the registered holder of such Securities shall be entitled to transfer such
Securities in accordance with the intended method of disposition specified in
the statement delivered by such holder to the Company.

          5.1.1.2        If in the opinion of counsel for the Company the
proposed transfer of such Securities may not be effected without registration
under the Securities Act or registration or qualification under any applicable
state securities laws, the registered holder of such Securities shall not be
entitled to transfer such Securities until the requisite registration or
qualification is effective.

          5.1.2.    Each certificate evidencing the Securities issued upon such
transfer (and each certificate evidencing any untransferred balance of such
Securities) shall bear the legend set forth in Section 5.2 hereof unless (i) in
the opinion of counsel (reasonably acceptable to the Company) addressed to the
Company the registration of future transfers is not required by the applicable
provisions of the Securities Act or applicable state securities laws; (ii) the
Company shall have waived the requirement of such legend; or (iii) in the
reasonable opinion of counsel to the

                                      -4-
<PAGE>

                                                                       EXHIBIT A

Company, such transfer shall have been made in connection with an effective
registration statement filed pursuant to the Securities Act or in compliance
with the requirements of Rule 144 or Rule 144A (or similar or successor rule)
promulgated under the Securities Act, and in compliance with applicable state
securities laws.

          5.2  Restrictive Legends.  Each certificate representing Securities
               -------------------
shall bear substantially the following legends (in addition to any legends
required under applicable securities laws):

          THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
          INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
          1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
          REGISTRATION OR AN EXEMPTION THEREFROM.

          THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS
          THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
          RESTRICTIONS, AND THE HOLDER OF THE SHARES REPRESENTED BY THIS
          CERTIFICATE (INCLUDING ANY HOLDERS) ARE BOUND BY THE TERMS OF A SERIES
          B PREFERRED STOCK PURCHASE AGREEMENT BETWEEN THE ORIGINAL PURCHASER
          AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY).

     5.3  Registration of Shares.
          ----------------------

          5.3.1  Registration on Demand.  Merck will have the right, on one
                 ----------------------
occasion after the expiration of 12 months after the Company has completed an
initial public offering of the Common Stock, to require the Company to file a
registration statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act to
register the resale of the Conversion Shares, or if Form S-3 is not available,
to otherwise effect the registration under the Securities Act of the resale of
the Conversion Shares.  The Company shall not be obligated to file and cause to
become effective any Registration Statement within a period of four months after
the date of a request for registration pursuant to this Section 5.3.1 if, at the
time of such request, the filing of such registration statement would, as
determined in good faith by a majority of the Board, be seriously detrimental to
the Company or its stockholders or adversely affect a material financing project
or a material proposed or pending acquisition, merger or other similar corporate
transaction to which the Company is or expects to be a party, provided that such
right of the Company to delay a request for registration may be exercised by the
Company not more than once in any one-year period.

          5.3.2.  Piggyback Registration.  If the Company at any time proposes
                  ----------------------
to register any

                                      -5-
<PAGE>

                                                                       EXHIBIT A

of its securities under the Securities Act (other than a registration effected
on either Form S-4 or S-8, or similar or successor forms) for the purpose of
selling such securities to the public whether for its own account or for the
account of any of its security holders or both, the Company shall each such time
promptly give written notice to Merck of its intention so to do. Upon the
written request of Merck given within 15 days after such notice (which request
shall state the number of Conversion Shares to be disposed of by Merck and, if
such offering is not underwritten, the intended method of disposition of such
Conversion Shares by Merck), the Company will use its best efforts to cause
promptly all Conversion Shares of which registration is requested to be
registered or qualified under the Securities Act or any other applicable federal
or state law or regulation so as to permit the sale or other disposition thereof
in accordance with Merck's written request. If the registration is to be
effected in connection with an underwritten offering,

               5.3.2.1  Merck shall be required to sell the Conversion Shares
through the underwriter(s);

               5.3.2.2 Merck (together with the Company) shall enter into an
underwriting agreement with the managing underwriter in the form customarily
used by such underwriter; and

              5.3.2.3.  if the managing underwriter thereof determines that the
total number of shares of the Common Stock to be sold in such offering should be
limited due to market conditions or otherwise, subject to any preferential
registration rights of the holders of Series A Preferred Stock set forth in the
Stockholders Agreement (the "Preferential Registration Rights"), the reduction
in the total number of shares offered shall be made by first excluding any
shares of selling stockholders who are not holders of contractual rights to have
such shares registered under the Securities Act, and then, if necessary, by
excluding pro rata (based on the number of shares held by each of such security
holders) the Conversion Shares to be sold by Merck and the holders of other
contractual rights to have such shares registered pursuant to agreements
comparable to this Section 5.3.2 before any reduction is made in the total
number of shares to be sold pursuant thereto by the Company and any holders of
Preferential Registration Rights;

provided, however, that the Company may exclude all Conversion Shares from
--------  -------
registration in connection with the Company's initial public offering in its
sole discretion, whether or not such exclusion is required in the opinion of the
managing underwriter.

                                      -6-
<PAGE>

                                                                       EXHIBIT A

   5.4  About Registration.
        ------------------

          5.4.1.    The Company shall pay all Registration Expenses (as
hereinafter defined) in connection with any registration, qualification or
compliance hereunder, and Merck shall pay all Selling Expenses (as hereinafter
defined) and other expenses that are not Registration Expenses relating to the
securities ("Registrable Securities") resold by Merck.  "Registration Expenses"
shall mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions of this Agreement, including without
limitation all federal and state registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration.  "Selling Expenses" shall mean
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for
Merck.

          5.4.2.    In the case of any registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Registrable Securities and
keep such Registration Statement effective until the securities covered by such
Registration Statement have been sold, but in no event longer than 180 days;
(ii) furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as Merck from time
to time may reasonably request; (iii) provide a transfer agent and registrar for
all Registrable Securities registered pursuant to the Registration Statement and
a CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and (iv) file the documents required of
the Company and otherwise use its best efforts to maintain requisite blue sky
clearance in (A) all jurisdictions in which any of the Conversion Shares is
originally sold and (B) all other states specified in writing by Merck, provided
as to clause (B), however, that the Company shall not be required to qualify to
do business or consent to service of process in any state in which it is not now
so qualified or has not so consented.

          5.4.3.    Merck shall furnish to the Company such information
regarding it and the distribution proposed by it as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance described herein. Merck shall
represent that such information is true and complete.

   5.5  Expiration of Registration Rights.  Notwithstanding anything to
        ---------------------------------
the contrary contained herein, the registration rights granted hereunder and the
Company's obligations under this Section 5 will expire on the earlier of (i) the
expiration of the five-year period commencing 12 months after the Company has
completed an initial public offering of the Common Stock and (ii) the date on
which all of the Conversion Shares can be sold freely without restriction under
the Securities Act.

                                      -7-
<PAGE>

                                                                       EXHIBIT A

     5.6. Indemnification and Contribution.
          --------------------------------

          5.6.1.  The Company agrees to indemnify and hold harmless Merck from
and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which Merck may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any claim by a third party asserting any untrue statement of a
material fact or omission of a material fact contained in a Registration
Statement, on the effective date thereof, or arise out of any failure by the
Company to fulfill any undertaking included in such Registration Statement, and
the Company will, as incurred, reimburse Merck for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the Company shall not be
                             --------  -------
liable in any such case to the extent that such loss, claim, damages or
liability arises out of, or is based upon (i) an untrue statement made in such
Registration Statement in reliance upon and in conformity with information
furnished to the Company by or on behalf of Merck for use in preparation of such
Registration Statement or (ii) any untrue statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to Merck prior to the
pertinent sale or sales by Merck.

          5.6.2.   Merck agrees to indemnify and hold harmless the Company and
its successors, assigns, officers, directors, employees, stockholders, agents
and affiliates from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which the Company may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon any claim by a third party asserting (i) an untrue
statement made in such Registration Statement in reliance upon and in conformity
with information furnished to the Company by or on behalf of Merck for use in
preparation of such Registration Statement, provided that Merck shall not be
liable in any such case for (i) any untrue statement included in any prospectus
which statement has been corrected, in writing, by Merck and delivered to the
Company before the sale from which such loss occurred or (ii) any untrue
statement in any prospectus that is corrected in any subsequent prospectus that
was delivered to Merck prior to the pertinent sale or sales by Merck, and Merck
will, as incurred, reimburse the Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim.

          5.6.3.    Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 5.6, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person.  After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal

                                      -8-
<PAGE>

                                                                       EXHIBIT A

expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided that if there exists or shall exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the indemnified person
and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person.

          5.6.4.     The obligations of the Company and Merck under this Section
5 shall be in addition to any liability which the Company and Merck may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company or Merck within the meaning of the
Securities Act.

      5.7. Transfer of Registration Rights.  The right to sell Registrable
           -------------------------------
Securities pursuant to a Registration Statement described herein may not be
assigned or transferred by Merck.

      5.8. Lock-Up Upon Initial Public Offering.  Merck agrees that, in the
           ------------------------------------
event the Company proposes to conduct an underwritten initial public offering of
the Common Stock at a time at which Merck remains the holder of at least fifty
percent of the Securities, Merck will agree to be a party and subject to any
lock-up agreement with the underwriter(s) for such initial public offering with
respect to the sale, transfer, conversion or other disposition of the
Securities, which lock-up agreement will contain no more restrictive terms and
conditions than those to which the Company's then current directors, officers
and significant stockholders will be subject in connection therewith.

     6.   Miscellaneous.
          -------------

          6.1. Expenses.  The Company and Merck shall each pay its own expenses
               --------
incurred in connection with the negotiation, execution and performance of this
Agreement.

          6.2. Waivers and Amendments.  With the written consent of the Company
               ----------------------
and the record holders of more than fifty percent of the Shares then
outstanding, the terms of this Agreement may be waived or amended.

          6.3. Governing Law.  This Agreement shall be governed in all respects
               -------------
by the laws of the State of Delaware as such laws are applied to agreements
between Delaware residents entered into and to be performed entirely within
Delaware, without giving effect to the conflicts of laws provisions thereof.

          6.4. Survival.  The representations, warranties, covenants and
               --------
agreements made herein shall survive any investigation made by the Company or
Merck and the Closing.

          6.5. Successors and Assigns.  The provisions hereof shall inure to the
               ----------------------
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto (specifically including successors in
interest to the Shares).

                                      -9-
<PAGE>

                                                                       EXHIBIT A

          6.6.  Entire Agreement.  This Agreement constitutes the full and
                ----------------
entire understanding and agreement between the parties with regard to the
subject hereof.

          6.7.  Notices, etc.  All notices and other communications required or
                -------------
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by facsimile, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (a) if to Merck, at the address set forth at the
beginning of this Agreement or at such other address as Merck shall have
furnished the Company in writing, or (b) if to the Company, at its address set
forth at the beginning of this Agreement, or at such other address as the
Company shall have furnished to Merck in writing.

          6.8.  Severability of this Agreement.  If any provision of this
                ------------------------------
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

          6.9.  Titles and Subtitles.  The titles of the paragraphs and
                --------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.

          6.10. Counterparts.  This Agreement may be executed in any number of
                ------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

                                     -10-

<PAGE>

                                                                       EXHIBIT A

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.

                              3-DIMENSIONAL PHARMACEUTICALS, INC.

                              By:     /s/ Thomas P. Stagnaro
                                    _________________________________
                                    Name:
                                    Title:

                              MERCK KGaA

                              By:     /s/ J. Sombroek
                                    _________________________________
                                    Name:
                                    Title:

                                     -11-
<PAGE>

                                                                       EXHIBIT A

B.   TERMS OF SERIES B PREFERRED STOCK
     ---------------------------------

     The Series B Preferred Stock shall have the following designations, powers,
preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:

   6.11.  Dividends.
          ---------

      6.11.1  Dividends are payable on the Series B Preferred Stock, when, as
and if declared by the Board of Directors.

      6.11.2  So long as any Series B Preferred Stock is outstanding the
Corporation shall not declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Corporation or other property)
on shares of its Common Stock unless prior thereto or simultaneously therewith
any dividends and distributions previously declared on the Series B Preferred
Stock shall have been paid or the Corporation shall have irrevocably deposited
or set aside cash or obligations the payment of which is backed by United States
Obligations sufficient for the payment thereof.

      6.11.3  If the Board of Directors declares dividends or other
distributions (other than on Liquidation (as hereinafter defined)) on the Common
Stock in cash, property or securities (including Common Stock) of the
Corporation (or subscription or other rights to purchase or acquire securities
(including Common Stock) of the Corporation), the Board of Directors shall
simultaneously declare a dividend or distribution at the same rate and in the
same form on the Series B Preferred Stock so that the Series B Preferred Stock
participates equally with the Series A Preferred Stock and the Common Stock in
such dividend or distribution.  For purposes of determining its proportional
share of the dividend or distribution, each share of the Series B Preferred
Stock shall be deemed to be that number of shares of Common Stock into which
such share of Series B Preferred Stock is then convertible, rounded to the
nearest one-tenth of a share.

   6.12.  Rights on Liquidation, Dissolution, Winding-up.
          ----------------------------------------------

        6.12.1. In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation (collectively, a "Liquidation"), whether
voluntary or involuntary, before any payment of cash or distribution of other
property shall be made to the holders of the Common Stock (the "Common
Stockholders") or any other class or series of stock ranking on Liquidation
junior to the Series B Preferred Stock, the holders of Series B Preferred Stock
("Series B Preferred Stockholders"), subject to the rights of any series of
preferred stock ranking senior to the Series A Preferred Stock and the Series B
Preferred Stock, shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders, $2.25 per
share (as appropriately adjusted for any combinations or divisions or similar
recapitalizations affecting the Series B Preferred Stock after the Original
Series B Issuance Date (as hereinafter defined)) (the "Series B Liquidation
Preference"), whether from capital, surplus or earnings, plus an amount equal to
any declared but unpaid dividends thereon. Upon the occurrence of a Liquidation,
the Series B Preferred

                                     -12-
<PAGE>

Stock shall rank pari passu with the Series A Preferred Stock and any other
                 ---- -----
series of preferred stock hereinafter created which ranks pari passu with the
                                                          ---- -----
Series A Preferred Stock (the "Pari Passu Preferred Stock").
                               ---- -----

       6.12.2. If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders, the Series B Preferred Stockholders and the holders of

Pari Passu Preferred Stock the full amounts to which they shall be entitled, the
---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders and the
holders of Pari Passu Preferred Stock shall share ratably in any distribution of
           ---- -----
assets in proportion to the amounts payable to them if all amounts payable with
respect to such shares on Liquidation were paid in full.

       6.12.3. In the event of any Liquidation, so long as the Series A
Preferred Stockholders are entitled to distributions pursuant to Section A.2(c),
after payment shall have been made to the Series A Stockholders, the Series B
Preferred Stockholders and the holders of Pari Passu Preferred Stock of the full
amount to which they shall be entitled pursuant to Section B.2(a), with respect
to each other class or series of capital stock (other than Common Stock) ranking
on Liquidation junior to the Series A Preferred Stock, the Series B Preferred
Stock and the Pari Passu Preferred Stock (in descending order of seniority), the
              ---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders and the
holders of Pari Passu Preferred Stock, as a class, shall be entitled to receive
           ---- -----
an amount equal (and in like kind) to the aggregate preferential amount fixed
for each such junior class or series of capital stock, which amount shall be
distributed among the Series A Preferred Stockholders, the Series B Preferred
Stockholders and the holders of Pari Passu Preferred Stock in an equal amount
per share of the Series A Preferred Stock, the Series B Preferred Stock and the
Pari Passu Preferred Stock then outstanding. If, upon any Liquidation, the
---- -----
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the Series A Preferred Stockholders, the Series B
Preferred Stockholders and the holders of Pari Passu Preferred Stock and a class
                                          ---- -----
Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred Stock
                                                      ---- -----
the full amounts to which they shall be entitled pursuant to the immediately
preceding sentence, the Series A Preferred Stockholders, the Series B Preferred
Stockholders and the holders of Pari Passu Preferred Stock and such other class
                                ---- -----
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series A
Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred Stock
                                                      ---- -----
and such junior class or series of capital stock which would be payable in
respect of the shares held by them upon such distribution if all amounts payable
on or with respect to such shares were paid in full.

        6.12.4. In the event that after payment of the full amount to which the
Series A Preferred Stockholders, Series B Preferred Stockholders and the holders
of Pari Passu Preferred Stock shall be entitled as aforesaid, cash or other
   ---- -----
property remains, such remaining proceeds shall be distributed pro rata among
                                                               --- ----
the Series A Preferred Stock, the Series B Preferred Stock, the Pari Passu
                                                                ---- -----
Preferred Stock and the Common Stock.  For purposes of determining its
proportional share of the cash or other property, each share of the Series B
Preferred Stock shall be deemed to be that number of shares of Common Stock into
which such share of Series B Preferred Stock is then

                                     -13-
<PAGE>

convertible, rounded to the nearest one-tenth of a share.

    6.13. Voting.
          ------

          6.13.1 General.  In addition to the rights otherwise provided for
                 -------
herein or by law, the Series B Preferred Stockholders shall be entitled to vote,
together with the Series A Preferred Stockholders, the holders of any other
class or series entitled to vote on such matters and the Common Stockholders, as
one class on all matters submitted to a vote of Stockholders, in the same manner
and with the same effect as the Series A Preferred Stockholders and the Common
Stockholders. In any such vote, each share of Series B Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into which each share of Series B Preferred Stock
is then convertible, rounded to the nearest one-tenth of a share.

          6.13.2 Protective Provision.  So long as any Series B Preferred Stock
                 --------------------
is outstanding, the Corporation shall not, without the written consent in lieu
of a meeting, or the affirmative vote at a meeting called for such purpose, of
Series B Preferred Stockholders of record that hold at least a majority of the
outstanding Series B Preferred Stock, voting as a separate class, amend, alter
or repeal, in any manner whatsoever, the designations, powers, preferences,
relative, participating, optional or other special rights, qualifications,
limitations and restrictions of the Series B Preferred Stock.

                                     -14-
<PAGE>

    6.14. Conversion.
          ----------

          6.12.1. Right to Convert.
                  ----------------

          6.14.1.1.  Any Series B Preferred Stockholder shall have the right, at
any time or from time to time, prior to the closing date of the Corporation's
first Underwritten Offering in which all of the then outstanding shares of
Series A Preferred Stock are converted in connection therewith, to convert any
or all of its shares of Series B Preferred Stock into that number of fully paid
and nonassessable shares of Common Stock for each share of Series B Preferred
Stock equal to the quotient of the Series B Liquidation Preference divided by
the Series B Preferred Conversion Price for that share (as defined in Section
B.4(d)) (as last adjusted and then in effect) rounded to one-tenth of a share.

          6.14.1.2. Any Series B Preferred Stock that remains unconverted on
such closing date shall be automatically converted without notice and without
any action on the part of the holder thereof into shares of Common Stock on the
closing date in accordance with Section B.4(a)(i). After the closing date all
rights of holders of shares of Series B Preferred Stock with respect to Series B
Preferred Stock, except the right to receive shares of Common Stock in
accordance with this Section B.4, shall cease and the shares of Series B
Preferred Stock shall no longer be deemed to be outstanding, whether or not the
Corporation has received the certificates representing such shares.

             The Corporation shall promptly send by first-class mail, postage
prepaid, to each Series B Preferred Stockholder at such holder's address
appearing on the Corporation's records a copy of (i) each registration statement
filed by the Corporation under the Securities Act and each amendment thereof and
each exhibit and schedule thereto and (ii) each order of the Securities and
Exchange Commission declaring any such registration statement to be effective.

             Holders of Series B Preferred Stock converted into shares of
Common Stock pursuant to this Section B.4 shall be entitled to payment of any
declared but unpaid dividends payable with respect to such shares of Series B
Preferred Stock, up to and including the Series B Conversion Date (as defined in
Section B.4(b) below) or the closing date, as the case may be.

        6.14.2. Mechanics of Conversion.
                -----------------------

             6.14.2.1.  Any Series B Preferred Stockholder that exercises its
right to convert its shares of Series B Preferred Stock into Common Stock shall
deliver the certificate(s) for the shares to be converted ("Series B Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.

                                     -15-
<PAGE>

          6.14.2. Each Series B Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate(s) for the
shares of Common Stock ("Common Certificate") are to be issued.  Such conversion
shall be deemed to have been effected on the date when the aforesaid delivery is
made ("Series B Conversion Date").

          6.14.2.3. As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a Common Certificate(s) for the number of full shares
of Common Stock to which such holder is entitled and a check or cash for any
fractional interest in a share of Common Stock, as provided in Section B.4(c)
below, and for any declared but unpaid dividends, payable with respect to the
converted shares of Series B Preferred Stock, up to and including the Series B
Conversion Date or the closing date set forth in Section B.4(a)(i), as the case
may be.

          6.14.2.4. The person in whose name each Common Certificate is to be
issued shall be deemed to have become a stockholder of record of Common Stock on
the applicable Series B Conversion Date or the closing date set forth in Section
B.4(a)(i), as the case may be, unless the transfer books of the Corporation are
closed on that date, in which event such holder shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open; provided, that the Series B Preferred Conversion Price shall be that
          --------
in effect on the Series B Conversion Date or such closing date, as the case may
be.

          6.14.2.5. Upon conversion of only a portion of the shares covered by a
Series B Preferred Certificate, the Corporation, at its own expense, shall issue
and deliver to or upon the written order of the holder of such Series B
Preferred Certificate, a new Series B Preferred Certificate representing the
number of unconverted shares of Series B Preferred Stock from the Series B
Preferred Certificate so surrendered.

          6.14.3.  Issuance of Common Stock on Conversion.
                   --------------------------------------

          6.14.3.1. If a Series B Preferred Stockholder shall surrender more
than one Series B Preferred Certificate for conversion at any one time, the
number of such shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B Preferred
Stock so surrendered.

          6.14.3.2 No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock.  The Corporation shall pay a
cash adjustment for such fractional interest in an amount equal to the then
Current Market Price of a share of Common Stock multiplied by such fractional
interest.

          6.14.4  Conversion Price; Adjustment.  The Series B Preferred
                  ----------------------------
Conversion Price shall initially be equal to the Series B Liquidation Preference
and shall be subject to adjustment from time to time as follows:

                                     -16-
<PAGE>

          6.14.4.1. If the Corporation shall at any time after the original
issuance of the first share of Series B Preferred Stock (the "Original Series B
Issuance Date") fix a record date for the subdivision or split-up of shares of
Common Stock, then, following the record date fixed for the determination of
holders of Common Stock entitled to receive such subdivision or split-up (or the
date of such subdivisions or split-up, if no record date is fixed), the Series B
Preferred Conversion Price shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of the Series B
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.

          6.14.4.2. If, at any time after the Original Series B Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date fixed
for such combination (or the date of such combination, if no record date is
fixed), the Series B Preferred Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of Series B Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.

          6.14.4.3. If, at any time after the Original Series B Issuance Date,
there shall be any capital reorganization, or any reclassification of the
capital stock of the Corporation (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another corporation
(other than a consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the powers, designations,
preferences and rights (or the qualifications, limitations or restrictions, if
any) of the Series B Preferred Stock) (an "Extraordinary Transaction"), the
Series B Preferred Conversion Price with respect to the Series B Preferred Stock
outstanding after the Extraordinary Transaction shall be adjusted to provide
that the shares of Series B Preferred Stock outstanding immediately prior to the
effectiveness of the Extraordinary Transaction shall be convertible into the
kind and number of shares of stock or other securities or property of the
Corporation or of the corporation resulting from or surviving such Extraordinary
Transaction which the holder of the number of shares of Common Stock deliverable
(immediately prior to the effectiveness of the Extraordinary Transaction) upon
conversion of such Series B Preferred Stock would have been entitled to receive
upon such Extraordinary Transaction. The provisions of this Section B.4(d)(iii)
shall similarly apply to successive Extraordinary Transactions.

          6.14.4.4. All calculations under this Section B.4(d) shall be made to
the nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share,
as the case may be.

          6.14.4.5. As used herein, the Current Market Price at any date of one
share of Common Stock shall be deemed to be the average of the daily closing
prices for the thirty (30) consecutive business days ending on the fifth (5th)
business day before the day in question (as adjusted for any stock dividend,
split-up, combination or reclassification that took effect during such thirty
(30) business day period) as follows:

                                     -17-
<PAGE>

          If the Common Stock is listed or admitted for trading on a national
     securities exchange, the closing price for each day shall be the last
     reported sales price regular way or, in case no such reported sales took
     place on such day, the average of the last reported bid and asked prices
     regular way, in either case, on the principal national exchange on which
     the Common Stock is listed or admitted to trading.

          If the Common Stock is not at the time listed or admitted for trading
     on any such exchange, then such price as shall be equal to the last
     reported sale price, or, if there is no such sale price, the average of the
     last reported bid and asked prices, as reported by the National Association
     of Securities Dealers Automated Quotations System ("NASDAQ") on such day.

          If, on any day in question, the security shall not be listed or
     admitted to trading on a national securities exchange or quoted on the
     NASDAQ, then such price shall be equal to the last reported bid and asked
     prices on such day as reported by the National Quotation Bureau, Inc. or
     any similar reputable quotation and reporting service, if such quotation is
     not reported by the National Quotation Bureau, Inc.

          If the Common Stock is not traded in such manner that the quotations
     referred to in this clause (v) are available for the period required
     hereunder, the Current Market Price shall be determined by the Board of
     Directors of the Corporation.

          6.14.4.6. In any case in which the provisions of this Section B.4(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of that
event (A) issuing to the holder of any share of Series B Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section B.4(c) above; provided, however, that the
                                                --------  -------
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.

          6.14.5. Notice of Adjustments.
                  ---------------------

                                     -18-
<PAGE>

          6.14.5.1. Whenever the Series B Preferred Conversion Price shall be
adjusted as provided in Section B.4(d) above, the Corporation shall file, at its
principal office, at the office of the transfer agent for the Series B Preferred
Stock, if any, or at such other place as may be designated by the Corporation, a
statement, signed by its President and by its Chief Financial Officer, showing
in detail the facts requiring such adjustment and the Series B Preferred
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent, by first-class, certified
mail, return receipt requested, postage prepaid, to each Series B Preferred
Stockholder at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of clause (ii) below.

          6.14.5.2. In the event the Corporation shall propose to file a
registration statement under the Securities Act for a Public Offering or to take
any action of the types described in clauses (i), (ii) or (iii) of Section
B.4(d) above, the Corporation shall give notice to each Series B Preferred
Stockholder, in the manner set forth in Section B.4(e)(i) above, which shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. The notice shall also set forth such facts
as are reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Series B Preferred
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon conversion of shares of Series B Preferred Stock. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least ten (10) days prior to the date so fixed, and in
case of all other action, such notice shall be given at least fifteen (15) days
prior to the taking of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any such action.

          6.14.6. Transfer Taxes.  The Corporation shall pay all documentary,
                  --------------
stamp or other transactional taxes (excluding income taxes) attributable to the
issuance or delivery of shares of capital stock of the Corporation upon
conversion of any shares of Series B Preferred Stock; provided, however, that
                                                      --------  -------
the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
B Preferred Stock in respect of which such shares are being issued.

          6.14.7. Reservation of Common Stock.  The Corporation shall at all
                  ---------------------------
times reserve, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series B Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series B Preferred
Stock.

          6.14.8. Status of Common Stock.  All shares of Common Stock which may
                  ----------------------
be issued in connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by Corporation.

                                     -19-
<PAGE>

    6.15.  Miscellaneous.
           -------------

           6.15.1 Shares of Series B Preferred Stock are not subject to or
entitled to redemption or the benefit of a sinking fund.

          6.15.2.  Converted shares of Series B Preferred Stock shall not be
reissued but shall be retired. Upon the retirement of converted shares the
capital of the Corporation shall be reduced.

          6.15.3. The shares of the Series B Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Restated Certificate of
Incorporation of the Corporation, as amended from time to time.

C.   COMMON STOCK
     ------------

     1.   Voting.
          ------

          Series A Preferred Stockholders, Series B Preferred Stockholders, any
other class or series of capital stock entitled to vote and Common Stockholders
shall vote together as one class on all matters submitted to a vote of
Stockholders, except that Series A Preferred Stockholders are entitled, in
addition, to vote as a separate class on the matters described in Section A.4(b)
and (c), and Series B Preferred Stockholders are entitled, in addition, to vote
as a separate class on the matters described in Section B.3(b).  Each Common
Stockholder shall be entitled to one vote for each share of Common Stock held on
all matters as to which Common Stockholders shall be entitled to vote.  The
number of authorized shares of Common Stock may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the Common Stock, the Series A Preferred Stock,
the Series B Preferred Stock and any other class or series of capital stock
entitled to vote, irrespective of the provisions of Section 242(b)(2) of Title 8
of the Delaware Code.

                                     -20-

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