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<PAGE>

                                  SCHEDULE 14A
                                 (RULE 14a-101)

                    INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION

                  PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:


<Table>
<S>                                            <C>
[ ]  Preliminary Proxy Statement
[ ]  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material under Rule 14a-12
</Table>


                      3-DIMENSIONAL PHARMACEUTICALS, INC.
--------------------------------------------------------------------------------
                (Name of registrant as specified in its Charter)

--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee: (Check the appropriate box):

[ ]  No fee required


[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.



     1)  Title of each class of securities to which transaction applies:


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


     2)  Aggregate number of securities to which transaction applies:


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


     3)  Per unit price or other underlying value of transaction computed
         pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
         filing fee is calculated and state how it was determined):


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


     4)  Proposed maximum aggregate value of transaction:


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


     5)  Total fee paid:


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

[X]  Fee paid previously with written preliminary materials:

[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     0-11(a)(2) and identify the filing for which the offsetting fee was paid
     previously. Identify the previous filing by registration statement number,
     or the form or schedule and the date of its filing.

     1)  Amount previously paid:

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

     2)  Form, Schedule or Registration Statement No.:

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

     3)  Filing Party:

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

     4)  Date Filed:

--------------------------------------------------------------------------------
<PAGE>

                  Dimensional Pharmaceuticals, Inc. Letterhead


                                                               February 27, 2003


Dear Stockholder:


     You are cordially invited to attend the special meeting of stockholders of
3-Dimensional Pharmaceuticals, Inc., to be held on March 27, 2003, at 10:00
a.m., local time, at our corporate headquarters, Three Lower Makefield Corporate
Center, 1020 Stony Hill Road, Suite 300, Yardley, PA 19067.


     At the special meeting, we will ask you to adopt the merger agreement among
our company, Johnson & Johnson and a wholly owned subsidiary of Johnson &
Johnson. If the merger is completed, you will be entitled to receive $5.74 in
cash, without interest, for each share of our common stock that you own.

     Our board of directors has carefully reviewed and considered the terms and
conditions of the proposed merger. Based on its review, the board of directors
has determined that the merger agreement, the merger and the transactions
described in the merger agreement are fair to and in the best interests of our
stockholders. ACCORDINGLY, OUR BOARD OF DIRECTORS HAS APPROVED AND DECLARED
ADVISABLE THE MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION
OF THE MERGER AGREEMENT.


     Your vote is important. We cannot complete the merger unless the merger
agreement is adopted by the affirmative vote of the holders of a majority of our
shares of common stock outstanding and entitled to vote at the special meeting.
Failure to submit a signed proxy or vote in person at the special meeting will
have the same effect as a vote against the adoption of the merger agreement.
Only stockholders who owned shares of our common stock at the close of business
on February 21, 2003 will be entitled to vote at the special meeting.



     Certain of our stockholders have entered into a stockholder agreement in
which they agreed to vote, in the aggregate, 7,456,600 shares of common stock
(representing approximately 33% of our outstanding shares) in favor of adopting
the merger agreement.


     PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.  If you hold your shares
in "street name", you should instruct your broker how to vote in accordance with
your voting instruction form.

     This proxy statement explains the proposed merger and merger agreement and
provides specific information concerning the special meeting. Please review this
document carefully.

                                          Sincerely,

                                            /s/ DAVID C. U'PRICHARD, PH.D.
                                          --------------------------------------
                                                David C. U'Prichard, Ph.D.
                                                 Chief Executive Officer


     This proxy statement is dated February 27, 2003, and is first being mailed
to stockholders of 3-Dimensional Pharmaceuticals, Inc. on or about February 27,
2003.

<PAGE>

                      3-DIMENSIONAL PHARMACEUTICALS, INC.

                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

                          TO BE HELD ON MARCH 27, 2003


To the stockholders of 3-Dimensional Pharmaceuticals, Inc.:


     We will hold a special meeting of the stockholders of 3-Dimensional
Pharmaceuticals, Inc. at our corporate headquarters, Three Lower Makefield
Corporate Center, 1020 Stony Hill Road, Suite 300, Yardley, PA 19067, on March
27, 2003, at 10:00 a.m., local time, and any adjournments or postponements
thereof, for the following purposes:


          1.  To consider and vote upon a proposal to adopt the merger agreement
     among Johnson & Johnson, Longbow Merger Sub, Inc., a wholly owned
     subsidiary of Johnson & Johnson and us. In the merger, we will become a
     wholly owned subsidiary of Johnson & Johnson, and each outstanding share of
     our common stock will be converted into the right to receive $5.74 in cash,
     without interest; and

          2.  To transact such other business that may properly come before the
     special meeting and any adjournments or postponements of the special
     meeting, including, if submitted to a vote of the stockholders, a motion to
     adjourn the special meeting to another time or place for the purpose of
     soliciting additional proxies.

     We will transact no other business at the special meeting except such
business as may properly be brought before the special meeting or any
adjournments or postponements of the special meeting.


     Only stockholders who owned shares of our common stock at the close of
business on February 21, 2003, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements of the special meeting.


     We cannot complete the merger unless the merger agreement is adopted by the
affirmative vote of the holders of a majority of the shares of our common stock
outstanding and entitled to vote at the special meeting. This proxy statement
describes the proposed merger and the actions to be taken in connection with the
merger and provides additional information about the parties involved. Please
give this information your careful attention. Under Delaware law, holders of our
common stock who do not vote in favor of the adoption of the merger agreement
will have the right to seek appraisal of the fair value of their shares as
determined by the Delaware Court of Chancery if the merger is completed, but
only if they submit a written demand for an appraisal prior to the vote on the
merger agreement and they comply with the Delaware law procedures explained in
the accompanying proxy statement. See "The Merger -- Appraisal Rights" on page
25.

     OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR" THE
ADOPTION OF THE MERGER AGREEMENT.

     Whether or not you plan to attend the special meeting, please complete,
sign and date the enclosed proxy and return it promptly in the enclosed
postage-paid return envelope. You may revoke the proxy at any time prior to its
exercise in the manner described in this proxy statement. Any stockholder
present at the special meeting, including any adjournments or postponements of
it, may revoke such stockholder's proxy and vote personally on the proposal to
adopt the merger agreement. Executed proxies with no instructions indicated
thereon will be voted "FOR" the adoption of the merger agreement. If you fail to
return your proxy or to vote in person at the special meeting, your shares will
not be counted for purposes
<PAGE>

of determining whether a quorum is present at the special meeting, and will
effectively be counted as a vote against the adoption of the merger agreement.

     PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.

                                          By order of the board of directors,

                                          Sincerely,

                                                 /s/ SCOTT M. HORVITZ
                                          --------------------------------------
                                                     Scott M. Horvitz
                                                        Secretary

Yardley, Pennsylvania

February 27, 2003

<PAGE>

                               TABLE OF CONTENTS


<Table>
<S>                                                           <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER......................  Q-1
SUMMARY.....................................................    1
  The Companies.............................................    1
  The Special Meeting.......................................    1
  The Merger................................................    2
  Recommendation of our Board of Directors..................    3
  Opinion of our Investment Banker..........................    3
  Interests of Our Directors and Executive Officers in the
     Merger.................................................    3
  Material U.S. Federal Income Tax Consequences of the
     Merger.................................................    4
  Accounting Treatment of the Merger........................    4
  Appraisal Rights..........................................    4
  The Paying Agent..........................................    5
  Regulatory Filings and Approvals Required to Complete the
     Merger.................................................    5
  The Merger Agreement......................................    5
  Termination of the Merger Agreement.......................    5

THE COMPANIES...............................................    6
  3-Dimensional Pharmaceuticals, Inc. ......................    6
  Johnson & Johnson.........................................    6
  Longbow Merger Sub, Inc. .................................    7

THE SPECIAL MEETING.........................................    7
  Date, Time and Place......................................    7
  Purpose of the Special Meeting............................    7
  Record Date; Shares Entitled to Vote; Quorum..............    7
  Vote Required.............................................    8
  Shares Owned by Our Directors and Executive Officers .....    8
  Voting of Proxies.........................................    8
  Revocability of Proxies...................................    8
  Solicitation of Proxies...................................    9

THE MERGER..................................................   10
  Background of the Merger..................................   10
  Reasons for the Merger....................................   14
  Recommendation of Our Board of Directors..................   16
  Opinion of Our Investment Banker -- Lazard Freres & Co.
     LLC....................................................   17
  Interests of Our Directors and Executive Officers in the
     Merger.................................................   20
  Material U.S. Federal Income Tax Consequences.............   23
  Regulatory Approvals......................................   25
  Accounting Treatment......................................   25
  Appraisal Rights..........................................   25
  Delisting and Deregistration of Our Common Stock..........   27
  Structure of the Merger...................................   28
  Effective Time of the Merger..............................   28
  The Merger Consideration..................................   28
</Table>

<PAGE>
<Table>
<S>                                                           <C>
  Treatment of Our Stock Options and Restricted Stock.......   28
  Treatment of Our Warrants.................................   29
  Surrender of Stock Certificates...........................   29
  Lost Certificates.........................................   30
  Unclaimed Amounts.........................................   30

THE MERGER AGREEMENT........................................   31
  Representations and Warranties............................   31
  Covenants.................................................   32
  Directors' and Officers' Indemnification, Advancement of
     Expenses, Exculpation and Insurance....................   35
  Employee Benefits Matters.................................   35
  Efforts to Consummate the Merger..........................   36
  Conditions to the Completion of the Merger................   37
  No Solicitation...........................................   39
  Termination...............................................   40
  Amendment, Extension and Waiver...........................   42
  Fees and Expenses.........................................   42

STOCKHOLDER AGREEMENT.......................................   43
  Voting Arrangements and Related Provisions................   43
  Termination...............................................   43

PRINCIPAL STOCKHOLDERS......................................   44
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS.........   46
OTHER MATTERS...............................................   47
FUTURE STOCKHOLDER PROPOSALS................................   47
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS...........   47
WHERE YOU CAN FIND ADDITIONAL INFORMATION...................   47
ANNEXES:
Annex A -- Agreement and Plan of Merger.....................  A-1
Annex B -- Stockholder Agreement............................  B-1
Annex C -- Opinion of Lazard Freres & Co. LLC...............  C-1
Annex D -- Section 262 of the Delaware General Corporation
  Law.......................................................  D-1
</Table>

                                        ii
<PAGE>

                     QUESTIONS AND ANSWERS ABOUT THE MERGER

Q: WHAT WILL HAPPEN TO 3-DIMENSIONAL PHARMACEUTICALS, INC. AS A RESULT OF THE
   MERGER?

A:     If the merger is completed, we will become a wholly owned subsidiary of
       Johnson & Johnson.

Q: WHAT WILL HAPPEN TO MY SHARES OF 3-DIMENSIONAL PHARMACEUTICALS, INC. COMMON
   STOCK AFTER THE MERGER?

A:     Upon completion of the merger, each share of our outstanding common stock
       will automatically be canceled and will be converted into the right to
       receive a per share amount equal to $5.74 in cash, without interest.

Q: WHAT WILL HAPPEN TO MY OPTIONS AFTER THE MERGER?

A:     Pursuant to the merger agreement, we have taken all action necessary to
       adjust the terms of all outstanding options to acquire shares of our
       common stock, whether vested or unvested, to provide that, upon
       completion of the merger, each option outstanding immediately prior to
       the completion of the merger will be canceled and the holder of that
       option will be entitled to receive a single lump sum cash payment equal
       to the number of shares of our common stock for which the option was
       exercisable, multiplied by the excess, if any, of the $5.74 per share
       merger consideration over the per share exercise price of the option. No
       payment will be made with respect to options that have per share exercise
       prices equal to or greater than $5.74.

Q: WHAT WILL HAPPEN TO MY WARRANTS AFTER THE MERGER?

A:     Pursuant to the merger agreement, we have taken any action necessary,
       including obtaining any required consents, to cause each warrant to
       acquire shares of our common stock that is outstanding immediately prior
       to the completion of the merger to be canceled in exchange for a cash
       payment equal to the number of shares of our common stock subject to the
       warrant, multiplied by the excess, if any, of the $5.74 per share merger
       consideration over the per share exercise price of the warrant. No
       payment will be made with respect to warrants that have per share
       exercise prices equal to or greater than $5.74.

Q: WILL THE MERGER BE TAXABLE TO ME?

A:     Generally, yes. The receipt of $5.74 in cash for each share of our common
       stock pursuant to the merger will be a taxable transaction for U.S.
       federal income tax purposes. For U.S. federal income tax purposes,
       generally you will realize taxable gain or loss as a result of the merger
       measured by the difference, if any, between $5.74 per share and your
       adjusted tax basis in that share.

       You should read "The Merger -- Material U.S. Federal Income Tax
       Consequences" beginning on page 23 for a more complete discussion of the
       federal income tax consequences of the merger. Tax matters can be
       complicated and the tax consequences of the merger to you will depend on
       your particular tax situation. You should consult your tax advisor to
       fully understand the tax consequences of the merger to you.

Q: DOES OUR BOARD OF DIRECTORS RECOMMEND THE ADOPTION OF THE MERGER AGREEMENT?

A:     Yes. Our board of directors recommends that our stockholders adopt the
       merger agreement. Our board of directors considered many factors in
       deciding to recommend the adoption of the merger agreement, including the
       premium to current market prices offered by Johnson & Johnson. The $5.74
       cash per share merger consideration represents an 89% premium to the
       closing price of our common stock on January 15, 2003, the last trading
       day before announcement of the signing of the merger agreement, and an
       87% premium to the average closing price of our common stock over the
       twenty trading day period up to and including January 15, 2003.

                                       Q-1
<PAGE>

Q: WHAT VOTE OF OUR STOCKHOLDERS IS REQUIRED TO ADOPT THE MERGER AGREEMENT?

A:     For us to complete the merger, stockholders holding at least a majority
       of the outstanding shares of our common stock must vote "FOR" the
       adoption of the merger agreement.

Q: AM I ENTITLED TO APPRAISAL RIGHTS?

A:     Yes. Under Delaware law, holders of our common stock who do not vote in
       favor of adopting the merger agreement will have the right to seek
       appraisal of the fair value of their shares as determined by the Delaware
       Court of Chancery if the merger is completed, but only if they submit a
       written demand for an appraisal prior to the vote on the merger agreement
       and they comply with the Delaware law procedures explained in this proxy
       statement.

Q: WHAT DO I NEED TO DO NOW?

A:     After carefully reading and considering the information contained in this
       proxy statement, please complete, sign and date your proxy and return it
       in the enclosed postage-paid return envelope as soon as possible, so that
       your shares may be represented at the special meeting. If you sign and
       send in your proxy and do not indicate how you want to vote, we will
       count your proxy as a vote in favor of the adoption of the merger
       agreement.

Q: WHAT HAPPENS IF I DO NOT SUBMIT A PROXY OR VOTE IN PERSON AT THE SPECIAL
   MEETING?


A:     Because the required vote of our stockholders is based upon the number of
       outstanding shares of our common stock, rather than upon the shares
       actually voted, the failure by the holder of any such shares to submit a
       proxy or to vote in person at the special meeting, including abstentions
       and broker non-votes, will have the same effect as a vote against the
       adoption of the merger agreement. The special meeting will take place on
       March 27, 2003, at 10:00 a.m., local time, at our corporate headquarters,
       Three Lower Makefield Corporate Center, 1020 Stony Hill Road, Suite 300,
       Yardley, PA 19067. You may attend the special meeting and vote your
       shares in person, rather than completing, signing, dating and returning
       your proxy.


Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?


A:     Yes. You can change your vote at any time before your proxy is voted at
       the special meeting. You can do this in one of three ways. First, you can
       send a written notice stating that you would like to revoke your proxy.
       Second, you can complete and submit a new proxy bearing a later date. If
       you choose either of these two methods, you must submit your notice of
       revocation or your new proxy to us prior to the special meeting at Three
       Lower Makefield Corporate Center, 1020 Stony Hill Road, Suite 300,
       Yardley, PA 19067 Attention: Secretary. Third, you can attend the special
       meeting and deliver a signed notice of revocation, deliver a later-dated
       duly executed proxy or vote in person. Attendance at the special meeting
       will not, in and of itself, result in the revocation of a proxy or cause
       shares to be voted.


Q: IF MY 3-DIMENSIONAL PHARMACEUTICALS, INC. SHARES ARE HELD IN "STREET NAME" BY
   MY BROKER OR BANK, WILL MY BROKER OR BANK VOTE MY SHARES FOR ME?

A:     Your broker or bank will vote your 3-Dimensional Pharmaceuticals, Inc.
       shares only if you provide instructions on how to vote. You should follow
       the directions provided by your broker or bank regarding how to instruct
       your broker or bank to vote your shares. Without instructions, your
       shares will not be voted, which will have the effect of a vote against
       the adoption of the merger agreement.

                                       Q-2
<PAGE>

Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?

A:     No. After the merger is completed, you will receive a transmittal form
       with instructions for the surrender of 3-Dimensional Pharmaceuticals,
       Inc. stock certificates. Please do not send in your stock certificates
       with your proxy.

Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?


A:     We are working to complete the merger as quickly as possible. In addition
       to obtaining stockholder approval, we must satisfy all other closing
       conditions, including the expiration or termination of applicable
       regulatory waiting periods. We currently expect to complete the merger
       promptly following our special meeting, which is scheduled for March 27,
       2003.


Q: WHO CAN HELP ANSWER MY QUESTIONS?

A:     If you have any questions about the merger or if you need additional
       copies of this proxy statement or the enclosed proxy, you should contact
       us at 3-Dimensional Pharmaceuticals, Inc., Three Lower Makefield
       Corporate Center, 1020 Stony Hill Road, Suite 300, Yardley, PA 19067,
       (267) 757-7200, Attention: Secretary.

                                       Q-3
<PAGE>

                                    SUMMARY

     This summary highlights selected information from this proxy statement and
may not contain all the information that is important to you. You should
carefully read this entire proxy statement and the other documents to which we
have referred you. See also "Where You Can Find Additional Information" on page
47. We have included page references parenthetically to direct you to a more
complete description of the topics presented in this summary.

THE COMPANIES


     3-Dimensional Pharmaceuticals, Inc., Three Lower Makefield Corporate
Center, 1020 Stony Hill Road, Suite 300, Yardley, Pennsylvania, 19067,
Telephone: (267) 757-7200 (see page 6).  3-Dimensional Pharmaceuticals, Inc. is
a small molecule drug discovery and development business that applies the latest
technology in high throughput screening, combinatorial chemistry, x-ray
crystallography, structure-based drug design and cheminformatics to discover and
develop new drugs in the areas of oncology, inflammation and metabolic and
cardiovascular diseases. Until January 2002, when we in-licensed a compound, all
of the drug candidates in our pipeline were discovered using all or a major
portion of our integrated set of proprietary technologies called
DiscoverWorks(R). We believe DiscoverWorks increases the productivity of the
drug discovery process by making it faster than traditional drug discovery
methods and by providing our scientists with the ability to design
characteristics into drug candidates that increase the probability of
development success. We use DiscoverWorks to discover and develop drugs for our
own pipeline and in collaboration with pharmaceuticals companies. Since December
2001, we have had a collaboration agreement with Johnson & Johnson
Pharmaceutical Research & Development, L.L.C. ("J&J PRD"), a wholly owned
subsidiary of Johnson & Johnson, under which we use our DiscoverWorks technology
to discover and optimize small molecule drug leads directed toward drug targets
identified by J&J PRD. 3-Dimensional Pharmaceuticals, Inc. has research
operations in Exton, Pennsylvania and Cranbury, New Jersey.


     Our most advanced discovery and development program has been designed to
discover and develop orally administered thrombin inhibitors to inhibit the
formation of blood clots. Our partner in the development of this program is J&J
PRD, which succeeded to the rights of Centocor, Inc., another wholly owned
subsidiary of Johnson & Johnson. Under our current agreement with J&J PRD, J&J
PRD acquired worldwide rights to our orally active direct thrombin inhibitor
program. Since entering into the collaboration, the companies have expanded it
to include inhibitors of other targets. In February 2003, the research term of
the agreement was extended through December 2003.

     Johnson & Johnson, One Johnson & Johnson Plaza, New Brunswick, NJ 08933,
Telephone: (732) 524-0400 (see page 6).  Johnson & Johnson, with approximately
108,300 employees, is one of the world's largest manufacturers of health care
products, as well as a provider of related services, for the consumer,
pharmaceutical and medical devices and diagnostics markets. Johnson & Johnson
has more than 198 operating companies in 54 countries around the world, selling
products in more than 175 countries.

     Longbow Merger Sub, Inc., One Johnson & Johnson Plaza, New Brunswick, NJ
08933, Telephone: (732) 524-0400 (see page 7).  Longbow Merger Sub, Inc. is a
wholly-owned subsidiary of Johnson & Johnson. Longbow Merger Sub, Inc. was
formed solely for the purpose of facilitating our acquisition by Johnson &
Johnson.

THE SPECIAL MEETING


     Date, Time and Place (see page 7).  The special meeting of our stockholders
will be held at our corporate headquarters, Three Lower Makefield Corporate
Center, 1020 Stony Hill Road, Suite 300, Yardley, PA 19067, at 10:00 a.m., local
time, on March 27, 2003. At the special meeting, our stockholders will be asked
to adopt the merger agreement.



     Record Date, Voting Power (see page 7).  Our stockholders are entitled to
vote at the special meeting if they owned shares of our common stock as of the
close of business on February 21, 2003, the record date. On the record date,
there were 22,595,758 shares of our common stock entitled to vote at the


                                        1
<PAGE>

special meeting. Stockholders will have one vote at the special meeting for each
share of our common stock that they owned on the record date.

     Voting and Revocability of Proxies (see page 8).  Stockholders should
complete, date and sign the accompanying proxy and promptly return it in the
pre-addressed accompanying envelope. Brokers or banks holding shares in "street
name" may vote the shares only if the stockholder provides instructions on how
to vote. Brokers or banks will provide stockholders with directions on how to
instruct the broker or bank to vote the shares. All properly executed proxies
that we receive prior to the vote at the special meeting, and that are not
revoked, will be voted in accordance with the instructions indicated on the
proxies. If no direction is indicated on a properly executed proxy returned to
us, the underlying shares will be voted "FOR" the adoption of the merger
agreement.

     We do not expect any other business to come before the special meeting. If
other business properly comes before the special meeting, the persons named as
proxies will vote in accordance with their judgment.

     A stockholder may revoke its proxy at any time prior to use by delivering
to our Secretary a signed notice of revocation or a later-dated, signed proxy.
In addition, a stockholder may revoke its proxy by delivering to the chairman of
the special meeting, on the day of the special meeting, a signed notice of
revocation or a later-dated signed proxy. A stockholder also may revoke such
stockholder's proxy by attending the special meeting and voting in person.
Attendance at the special meeting does not in itself result in the revocation of
a proxy or cause shares to be voted.

     Vote Required (see page 8).  The adoption of the merger agreement requires
the affirmative vote of stockholders holding a majority of the shares of our
common stock outstanding at the close of business on the record date.


     Shares Owned by Our Directors and Executive Officers (see page 8).  On the
record date, our directors and executive officers beneficially owned and were
entitled to vote 8,565,584 shares of our common stock, which represented
approximately 38% of the shares of our common stock outstanding on that date.



     Stockholder Agreement (see page 43).  Certain of our stockholders have
entered into a stockholder agreement with Johnson & Johnson. Under the terms of
the stockholder agreement, these stockholders have agreed to vote, in the
aggregate, 7,456,600 shares of our common stock (representing approximately 33%
of our outstanding shares) in favor of the merger and to take certain related
actions. A copy of the stockholder agreement is included in this proxy statement
as Annex B. You are encouraged to read it carefully and in its entirety.


     Solicitation of Proxies and Expenses (see page 9).  We will bear the cost
and expense associated with the solicitation of proxies from our stockholders.
In addition to solicitation by mail, our directors, officers and employees may
solicit proxies from our stockholders by telephone, internet, facsimile, or
other electronic means or in person. Brokerage houses, nominees, fiduciaries and
other custodians will be requested to forward soliciting materials to beneficial
owners and will be reimbursed for their reasonable expenses incurred in sending
proxy materials to beneficial owners.

THE MERGER

     Structure of the Merger (see page 28).  This proxy statement relates to the
proposed acquisition of our company by Johnson & Johnson pursuant to a merger
agreement, dated as of January 15, 2003, among Johnson & Johnson, Longbow Merger
Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, and us. If the merger
is completed, we will become a wholly owned subsidiary of Johnson & Johnson.

     Consideration (see page 28).  At the closing of the merger, our
stockholders will be entitled to receive, for each share of our common stock
they hold, $5.74 in cash, without interest. Based on the number of shares of our
common stock outstanding on January 15, 2003 and assuming the conversion of all
options, warrants and other securities exchangeable or exercisable for our
common stock, the aggregate consideration paid by Johnson & Johnson to our
stockholders will be $133,894,450.

                                        2
<PAGE>

     Options (see page 28).  Pursuant to the merger agreement, we have taken all
action necessary to adjust the terms of all outstanding options to acquire
shares of our common stock, whether vested or unvested, to provide that, upon
completion of the merger, each option outstanding immediately prior to the
completion of the merger will be canceled and the holder of that option will be
entitled to receive a single lump sum cash payment equal to the number of shares
of our common stock for which the option was exercisable, multiplied by the
excess, if any, of the $5.74 per share merger consideration over the per share
exercise price of the option; provided, however, if the calculation described
above results in a negative number, no payment will be made with respect to the
option.

     Warrants (see page 29).  Pursuant to the merger agreement, we have taken
any action necessary, including obtaining any required consents, to cause each
warrant to acquire shares of our common stock outstanding immediately prior to
the completion of the merger to be canceled in exchange for a lump sum cash
payment equal to the number of shares of our common stock subject to the
warrant, multiplied by the excess, if any, of the $5.74 per share merger
consideration over the per share exercise price of the warrant; provided,
however, if the calculation described above results in a negative number, no
payment will be made with respect to the warrant.

     Closing.  We expect to close the merger as soon as practicable after the
adoption of the merger agreement by our stockholders and after all other
conditions to the merger have been satisfied or waived. At present, we
anticipate that the closing will occur promptly following the special meeting of
our stockholders.

RECOMMENDATION OF OUR BOARD OF DIRECTORS (SEE PAGE 16)

     Our board of directors has determined that the merger agreement is
advisable, and that the terms of the merger agreement and the transactions
described in the merger agreement are fair to, and in the best interests of, our
stockholders. THE BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR"
THE ADOPTION OF THE MERGER AGREEMENT.

OPINION OF OUR INVESTMENT BANKER (SEE PAGE 17)

     Lazard Freres & Co. LLC acted as our investment banker in connection with
the proposed merger. We requested that Lazard, in its role as investment banker,
evaluate the fairness, from a financial point of view, of the consideration to
be received by the holders of our common stock, except for Johnson & Johnson and
its affiliates, pursuant to the merger agreement. On January 15, 2003, Lazard
delivered its oral opinion, which it subsequently confirmed in writing, to our
board of directors that, as of January 15, 2003, based upon and subject to the
considerations set forth in its opinion, the consideration to be received by
holders of our common stock, except for Johnson & Johnson and its affiliates,
pursuant to the merger agreement was fair, from a financial point of view, to
such holders.

     THE FULL TEXT OF LAZARD'S FAIRNESS OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, FACTORS CONSIDERED AND LIMITATIONS UPON THE REVIEW UNDERTAKEN
BY LAZARD IN RENDERING ITS OPINION, IS INCLUDED IN THIS PROXY STATEMENT AS ANNEX
C. WE URGE YOU TO READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. LAZARD'S
OPINION WAS ADDRESSED TO OUR BOARD OF DIRECTORS, RELATES ONLY TO THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE
HOLDERS OF SHARES OF OUR COMMON STOCK, OTHER THAN JOHNSON & JOHNSON AND ITS
AFFILIATES, PURSUANT TO THE MERGER AGREEMENT AND DOES NOT ADDRESS ANY OTHER
ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
OUR COMMON STOCK AS TO HOW TO VOTE ON THE MERGER OR ANY OTHER MATTER RELATING
THERETO.


INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (SEE PAGE 20)


     In considering the recommendation of our board of directors to vote for the
proposal to adopt the merger agreement, you should be aware that all of our
directors and executive officers have personal interests in the merger that are,
or may be, different from, or in addition to, your interests. These interests
include the following:

     - Dr. Salemme, our President and Chief Scientific Officer, will have a
       consulting arrangement with Johnson & Johnson;

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     - Dr. Bone, our Senior Vice President, Research and Development, agreed to
       an amendment to his Change in Control Agreement and had discussions with
       Johnson & Johnson about continuing employment;

     - each option, whether or not it is vested, to purchase our common stock
       held by directors and executive officers, as well as our employees, will
       be canceled upon the completion of the merger in exchange for a cash
       payment equal to the excess of the $5.74 per share merger consideration
       over the per share option exercise price, multiplied by the number of
       shares of our common stock subject to the option;

     - the restrictions on certain shares of our common stock held by Dr.
       U'Prichard, our Chief Executive Officer, and Mr. King, a director, will
       lapse upon the completion of the merger;

     - all of our executive officers will become entitled to receive severance
       payments and the continuation of certain employee benefits for periods
       ranging from nine months to two years (or, at the option of the payor,
       the cash value of the after-tax cost of such benefits to such executive
       officers) in the event that their employment is terminated under certain
       circumstances before or within two years after the completion of the
       merger; and

     - the terms of the merger agreement provide for the continued
       indemnification and liability insurance coverage of our current directors
       and executive officers.

     Our board of directors was aware of these interests and considered them,
among other matters, when approving the merger. For a more complete description,
see "The Merger -- Interests of Our Directors and Executive Officers in the
Merger".

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 23)

     The receipt of $5.74 in cash for each share of our common stock pursuant to
the merger will be a taxable transaction for U.S. federal income tax purposes.
For U.S. federal income tax purposes, generally you will realize a taxable gain
or loss as a result of the merger measured by the difference, if any, between
$5.74 per share and your adjusted tax basis in that share. The receipt of cash
in exchange for the outstanding options and warrants will be a taxable
transaction for U.S. federal income tax purposes. Holders of options and
warrants (other than those persons who received such options or warrants in
connection with their employment by, or provision of services to, us) will
generally recognize a gain or loss equal to the difference between the amount of
cash they receive and their adjusted tax basis, if any, in the options or
warrants surrendered.

     You should read "The Merger -- Material U.S. Federal Income Tax
Consequences" beginning on page 23 for a more complete discussion of the federal
income tax consequences of the merger. Tax matters can be complicated and the
tax consequences of the merger to you will depend on your particular tax
situation. We urge you to consult your tax advisor to fully understand the tax
consequences of the merger to you.

ACCOUNTING TREATMENT OF THE MERGER (SEE PAGE 25)

     Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, in accordance with Statement of Financial
Accounting Standards No. 141, "Business Combinations" and No. 142, "Goodwill and
Other Intangible Assets." This means that Johnson & Johnson will treat us as a
separate entity for periods prior to the completion of the merger and,
thereafter, our financial results will be consolidated with Johnson & Johnson's
financial results.

APPRAISAL RIGHTS (SEE PAGE 25)

     Stockholders who do not wish to accept the $5.74 per share cash
consideration payable pursuant to the merger may seek, under Delaware law,
judicial appraisal of the fair value of their shares by the Delaware Court of
Chancery. This value could be more or less than or the same as the $5.74 in cash
per

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<PAGE>

share merger consideration. This right of appraisal is subject to a number of
restrictions and technical requirements. Generally, in order to exercise
appraisal rights, among other things:

     - you must not vote in favor of the proposal to adopt the merger agreement;

     - you must make a written demand on us for appraisal in compliance with
       Delaware law before the vote on the proposal to adopt the merger
       agreement at the special meeting; and

     - you must hold your shares of record continuously from the time of making
       a written demand for appraisal until the completion of the merger.

     Merely voting against the merger agreement will not preserve your right of
appraisal under Delaware law. Also, because a submitted proxy not marked
"against" or "abstain" will be voted "for" the proposal to adopt the merger
agreement, the submission of a proxy not marked "against" or "abstain" will
result in the waiver of appraisal rights. If you hold shares in the name of a
broker or other nominee, you must instruct your nominee to take the steps
necessary to enable you to assert appraisal rights. If you or your nominee fails
to follow all of the steps required by the statute, you will lose your right of
appraisal.

     Annex D to this proxy statement contains the relevant provisions of
Delaware law relating to your right of appraisal. We encourage you to read these
provisions carefully and in their entirety.

THE PAYING AGENT

     JPMorgan Chase or another comparable institution will act as the paying
agent in connection with the merger.

REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER (SEE PAGE 25)

     The merger is subject to discretionary review by the Antitrust Division of
the U.S. Department of Justice and the Federal Trade Commission to determine
whether it is in compliance with applicable antitrust laws. The
Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits us from
completing the merger until we have furnished certain information and materials
to the Antitrust Division of the Department of Justice and the Federal Trade
Commission, and the required waiting period has ended. Both Johnson & Johnson
and we filed the required notification and report forms on February 5, 2003. The
completion of the merger also is subject to compliance with applicable laws of
the State of Delaware.

THE MERGER AGREEMENT (SEE PAGE 31)

     The merger agreement provides a detailed description of the company after
the merger, our representations and warranties to Johnson & Johnson, covenants
relating to the conduct of our business, consents and approvals required for and
conditions to the completion of the merger and our ability to consider other
acquisition proposals. The merger agreement also provides for the automatic
conversion of shares of our common stock into the right to receive the $5.74 per
share merger consideration at the effective time of the merger and instructions
on how to exchange certificates representing shares of our common stock for the
merger consideration.

TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 40)

     The merger agreement contains provisions addressing the circumstances under
which Johnson & Johnson or we may terminate the merger agreement. In addition,
the merger agreement provides that, in certain circumstances, we may be required
to pay Johnson & Johnson a termination fee of $5,480,000. For a more complete
description, see "The Merger Agreement -- Termination" and "-- Fees and
Expenses".

 A COPY OF THE MERGER AGREEMENT IS INCLUDED IN THIS PROXY STATEMENT AS ANNEX A.
     YOU ARE STRONGLY ENCOURAGED TO READ IT CAREFULLY AND IN ITS ENTIRETY.

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<PAGE>

                                 THE COMPANIES

3-DIMENSIONAL PHARMACEUTICALS, INC.

     We are a small molecule drug discovery and development business that
applies the latest technology in high throughput screening, combinational
chemistry, x-ray crystallography, structure-based drug design and
cheminformatics to discover and develop new drugs in the areas of oncology,
inflammation, and metabolic and cardiovascular diseases. Until January 2002,
when we in-licensed a compound, all of the drug candidates in our pipeline were
discovered using all or a major portion of our integrated set of proprietary
technologies called DiscoverWorks(R). We believe DiscoverWorks increases the
productivity of the drug discovery process by making it faster than traditional
drug discovery methods and by providing our scientists with the ability to
design characteristics into drug candidates that increase the probability of
development success. We use DiscoverWorks to discover and develop drugs for our
own pipeline and in collaboration with pharmaceuticals companies. Since December
2001, we have had a collaboration agreement with Johnson & Johnson
Pharmaceutical Research & Development, L.L.C. ("J&J PRD"), a wholly owned
subsidiary of Johnson & Johnson, under which we use our DiscoverWorks
technology. 3-Dimensional Pharmaceuticals, Inc. has research operations in
Exton, Pennsylvania and Cranbury, New Jersey.

     Our most advanced discovery and development program has been designed to
discover and develop orally administered thrombin inhibitors to inhibit the
formation of blood clots. Our partner in the development of this program is J&J
PRD, which succeeded to the rights of Centocor, Inc., another wholly owned
subsidiary of Johnson & Johnson. Under our current agreement with J&J PRD, J&J
PRD acquired worldwide rights to our orally active direct thrombin inhibitor
program. Since entering into the collaboration, the companies have expanded it
to include inhibitors of other targets. In February 2003, the research term of
the agreement was extended through December 2003. After our thrombin inhibitor
program, our next most advanced program is our pre-IND thrombopoietin (TPO)
mimetic drug candidate for treating people with low blood platelet counts which
is expected to begin human clinical trials in 2003.

     To date, substantially all of our revenue has been from corporate
collaborations, license agreements, government grants and public and private
sales of our equity securities. We recognized $18.2 million in revenue during
the first nine months of 2002, and our existing collaborations and grants are
estimated to provide revenue in 2002 of approximately $24.0 million. We have
incurred substantial operating losses since our inception in 1993. As of
September 30, 2002, our accumulated deficit was $88.4 million.


     We were incorporated in the State of Delaware in 1993, and we currently
have approximately 200 employees. The address of our principal executive offices
is Three Lower Makefield Corporate Center, 1020 Stony Hill Road, Suite 300,
Yardley, PA 19067, and the telephone number at that address is (267) 757-7200.
Additional information regarding our business is contained in our filings with
the Securities and Exchange Commission. See "Where You Can Find Additional
Information" on page 47.


JOHNSON & JOHNSON

     Johnson & Johnson, with approximately 108,300 employees, is one of the
world's largest manufacturers of health care products, as well as a provider of
related services, for the consumer, pharmaceutical and medical devices and
diagnostics markets. Johnson & Johnson has more than 198 operating companies in
54 countries around the world, selling products in more than 175 countries.

     Johnson & Johnson's worldwide business is divided into three segments:
consumer, pharmaceutical and medical devices and diagnostics. The consumer
segment's principal products are personal care and hygienic products, including
nonprescription drugs, adult skin and hair care products, baby care products,
oral care products, first aid products and sanitary protection products. These
products are marketed principally to the general public and distributed both to
wholesalers and directly to independent and chain retail outlets.

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<PAGE>

     The pharmaceutical segment's principal worldwide franchises are in the
antifungal, anti-infective, cardiovascular, dermatology, gastrointestinal,
hematology, immunology, neurology, oncology, pain management, psychotropic,
urology and women's health fields. These products are distributed both directly
and through wholesalers for use by health care professionals and the general
public.

     The medical devices and diagnostics segment includes a broad range of
products used by or under the direction of health care professionals, including,
suture and mechanical wound closure products, surgical equipment and devices,
wound management and infection prevention products, interventional and
diagnostic cardiology products, diagnostic equipment and supplies, joint
replacements and disposable contact lenses. These products are used principally
in the professional fields by physicians, nurses, therapists, hospitals,
diagnostic laboratories and clinics. Distribution to these markets is done both
directly and through surgical supply and other dealers.

     Johnson & Johnson was organized in the State of New Jersey in 1887. The
address of its principal executive offices is One Johnson & Johnson Plaza, New
Brunswick, New Jersey 08933, and the telephone number at that address is (732)
524-0400.

LONGBOW MERGER SUB, INC.

     Longbow Merger Sub, Inc. is a wholly owned subsidiary of Johnson & Johnson.
Longbow Merger Sub, Inc. is a Delaware corporation that was formed solely for
the purpose of facilitating our acquisition by Johnson & Johnson. The address of
its principal executive offices is One Johnson & Johnson Plaza, New Brunswick,
New Jersey 08933, and the telephone number at that address is (732) 524-0400.

                              THE SPECIAL MEETING

     We are furnishing this proxy statement to our stockholders, as of the
record date, as part of the solicitation of proxies by our board of directors
for use at the special meeting.

DATE, TIME AND PLACE


     The special meeting of our stockholders will be held at our corporate
headquarters, Three Lower Makefield Corporate Center, 1020 Stony Hill Road,
Suite 300, Yardley, PA 19067, at 10:00 a.m., local time, on March 27, 2003.


PURPOSE OF THE SPECIAL MEETING

     At the special meeting, we will ask our stockholders to adopt the merger
agreement. Our board of directors has determined that the merger and the other
transactions described in the merger agreement are fair to, and in the best
interests of, our stockholders, and has approved and declared advisable the
merger agreement and recommends that our stockholders vote "FOR" the adoption of
the merger agreement.

RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM


     Only holders of record of our common stock at the close of business on
February 21, 2003, the record date, are entitled to notice of and to vote at the
special meeting. On the record date, 22,595,758 shares of our common stock were
issued and outstanding and held by approximately 132 holders of record. A quorum
is present at the special meeting if a majority of all the shares of our common
stock issued and outstanding on the record date and entitled to vote at the
special meeting are represented at the special meeting in person or by a
properly executed proxy. In the event that a quorum is not present at the
special meeting, it is expected that the meeting will be adjourned or postponed
to solicit additional proxies. Holders of record of our common stock on the
record date are entitled to one vote per share on each matter submitted to a
vote at the special meeting.


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<PAGE>

VOTE REQUIRED

     The adoption of the merger agreement requires the affirmative vote of
stockholders holding a majority of the shares of our common stock outstanding on
the record date. Because the required vote of our stockholders is based upon the
number of outstanding shares of our common stock, rather than upon the shares
actually voted, the failure by the holder of any such shares to submit a proxy
or to vote in person at the special meeting, including abstentions and broker
non-votes, will have the same effect as a vote against the adoption of the
merger agreement.


SHARES OWNED BY OUR DIRECTORS AND EXECUTIVE OFFICERS



     At the close of business on the record date, our directors and executive
officers beneficially owned and were entitled to vote 8,565,584 shares of our
common stock, which represented approximately 38% of the shares of our common
stock outstanding on that date. Under the terms of the stockholder agreement,
certain of our directors and executive officers, as well as certain other
stockholders affiliated with certain of our directors, have agreed to vote, in
the aggregate, 7,456,600 shares of our common stock for the adoption of the
merger agreement. On the record date, such shares represented approximately 33%
of the shares of our common stock outstanding.


VOTING OF PROXIES

     All shares represented by properly executed proxies received prior to the
special meeting will be voted at the special meeting in the manner specified by
the holders. Properly executed proxies that do not contain voting instructions
will be voted "FOR" the adoption of the merger agreement. Shares of our common
stock represented at the special meeting but not voting, including shares of our
common stock for which proxies have been received but with respect to which
holders of shares have abstained, will be treated as present at the special
meeting for purposes of determining the presence or absence of a quorum for the
transaction of all business.

     Only shares affirmatively voted for the adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for that proposal. If a stockholder abstains
from voting or does not execute a proxy, it will effectively count as a vote
against the adoption of the merger agreement. Brokers or banks who hold shares
of our common stock in "street name" for customers who are the beneficial owners
of such shares may not give a proxy to vote those customers' shares in the
absence of specific instructions from those customers. If no instructions are
given to the broker or bank holding shares, or if instructions are given to the
broker or bank indicating that the broker or bank does not have authority to
vote on the proposal to adopt the merger agreement, then, in either case, the
shares will be counted as present for purposes of determining whether a quorum
exists, will not be voted on the proposal to adopt the merger agreement and will
effectively count as votes against the adoption of the merger agreement.

     The persons named as proxies by a stockholder who votes for the proposal to
adopt the merger agreement may propose and vote the shares underlying any such
proxies for one or more adjournments of the special meeting, including
adjournments to permit further solicitations of proxies. No proxy voted against
the proposal to adopt the merger agreement will be voted in favor of any such
adjournment or postponement.

     We do not expect that any matter other than the proposal to adopt the
merger agreement will be brought before the special meeting. If, however, other
matters are brought before the special meeting, the persons named as proxies
will vote in accordance with their judgment.

REVOCABILITY OF PROXIES

     A stockholder can change its vote or revoke its proxy at any time before
the proxy is voted at the special meeting. A stockholder may accomplish this in
one of three ways. First, a stockholder can send a written notice stating that
it would like to revoke its proxy. Second, a stockholder can complete and

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<PAGE>

submit a new proxy bearing a later date. If a stockholder chooses either of
these two methods, it must submit its notice of revocation or its new proxy to
us prior to the special meeting at Three Lower Makefield Corporate Center, 1020
Stony Hill Road, Suite 300, Yardley, PA 19067, Attention: Secretary. Third, a
stockholder can attend the special meeting and deliver a signed notice of
revocation, deliver a later-dated duly executed proxy, or vote in person.
Attendance at the special meeting will not in and of itself result in the
revocation of a proxy or cause shares to be voted. If you have instructed your
broker to vote your shares, you must follow directions from your broker to
change these instructions.

SOLICITATION OF PROXIES

     We will bear the cost of the solicitation of proxies from our stockholders.
In addition to solicitation by mail, our directors, officers and employees may
solicit proxies from stockholders by telephone or other electronic means or in
person. We will cause brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of stock
held of record by such persons. We will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in doing so.

     GEORGESON SHAREHOLDER COMMUNICATIONS, INC. WILL ASSIST IN OUR SOLICITATION
OF PROXIES. WE WILL PAY GEORGESON A FEE OF $12,500, PLUS REIMBURSEMENT OF
CERTAIN OUT-OF-POCKET EXPENSES, AND WILL INDEMNIFY GEORGESON AGAINST ANY LOSSES
ARISING OUT OF ITS PROXY SOLICITATION SERVICES ON OUR BEHALF.

     STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. A
transmittal form with instructions for the surrender of certificates
representing shares of our common stock will be mailed to stockholders shortly
after completion of the merger.

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<PAGE>

                                   THE MERGER

     While we believe that the following description covers the material terms
of the merger and the related transactions, this summary may not contain all of
the information that is important to you. You should carefully read this entire
document, including the annexes, and the other documents we refer to for a more
complete understanding of the merger and the related transactions.

BACKGROUND OF THE MERGER

     We have had business relationships with Johnson & Johnson since December
2000, when we entered into an agreement with Centocor, Inc., a wholly owned
subsidiary of Johnson & Johnson, under which Centocor licensed rights to our
thrombin inhibitor drug research and development program and provided financing
for our research and development activities relating to new thrombin inhibitor
drug candidates. Centocor agreed to make milestone payments to us based on drug
development milestones and to pay royalties on sales of resulting marketed
products, if any. Centocor is responsible for development and worldwide
commercialization of all drugs developed under the agreement. The agreement was
subsequently assigned by Centocor to Johnson & Johnson Pharmaceutical Research &
Development, L.L.C., or J&J PRD, another wholly owned subsidiary of Johnson &
Johnson. Since entering into the collaboration, the companies have expanded it
to include inhibitors of other targets. In February 2003, the research term of
the agreement was extended through December 2003.

     In addition, since December 2001, we have had a collaboration with J&J PRD,
under which we use our DiscoverWorks technology to discover and optimize small
molecule drug leads directed toward drug targets identified by J&J PRD.

     These arrangements and other license agreements, collaborations, government
grants and public and private sales of our equity securities have provided
funding for us since our founding in 1993. In early 2002, our management
determined that additional funding sources were necessary in order for our
company to become a fully integrated drug discovery and development company. In
view of the deteriorating financing environment for development-stage
biotechnology companies, our management increased its efforts in establishing
one or two strategic partnerships that would provide us with access to the
resources of the partners and would enable us to access additional investor
financing by lowering our overall risk profile.

     On May 10, 2002, our management engaged Lazard to assist us in connection
with exploring strategic alternatives. Initially, Lazard helped us explore
strategic partnerships with major non-U.S.-based pharmaceuticals companies and
top-tier genomics and biotechnology companies. At that time, we also initiated
various discussions regarding potential strategic partnership opportunities with
U.S.-based pharmaceuticals companies and began to evaluate potential business
combination transactions with other biotechnology companies. Lazard and our
management made initial contacts with approximately twenty companies to discuss
their possible interest in a strategic partnership with us.

     None of the discussions with pharmaceuticals companies progressed
successfully. A few of the opportunities with other biotechnology companies were
potentially attractive from a technology perspective, but the estimated
financing requirements of the post-merger entities made such opportunities
otherwise unattractive in light of the then prevailing biotechnology financing
environment.

     On June 11, 2002, Mr. John M. Gill, our Chief Operating Officer, met in
Toronto, Canada with Dr. Robert LaPolla, Executive Director, Technology
Licensing of Johnson & Johnson Pharmaceuticals Group. During the meeting, Mr.
Gill indicated our potential interest in substantially increasing the scope and
scale of the existing DiscoverWorks collaboration with Johnson & Johnson.

     On June 27, 2002, Dr. David C. U'Prichard, our Chief Executive Officer, met
with Dr. Per Peterson, Chairman, Research and Development Pharmaceuticals Group,
and Member, Executive Committee of Johnson & Johnson, in New Brunswick, New
Jersey. Dr. Peterson and Dr. U'Prichard had met on December 3, 2001 to discuss
expanding collaborations between our company and Johnson & Johnson. At that
meeting, Dr. U'Prichard and Dr. Peterson had agreed to meet in mid-2002 to
discuss again possible
                                        10
<PAGE>

business arrangements between the two companies, including a preliminary
suggestion by Dr. Peterson of a possible acquisition of us by Johnson & Johnson.
At the June 27 meeting, Dr. U'Prichard and Dr. Peterson discussed a variety of
possible business arrangements including a possible acquisition of us by Johnson
& Johnson.

     On July 26, 2002, at a regular meeting of our board of directors, Dr.
U'Prichard reported to our board of directors that Dr. Peterson had raised the
subject of a potential acquisition of us by Johnson & Johnson at their June 27,
2002 meeting. After reviewing the status of certain ongoing matters, including
our company's strategy and goals, potential strategic alliances and research and
development efforts, the board of directors determined to schedule an additional
board meeting for September 18, 2002 to further discuss various strategic
alternatives for our company. After this meeting, our management contacted
Lazard to discuss evaluating the potential transaction. From that date on,
Lazard helped facilitate the transaction process and assisted us in evaluating
and responding to discussions with Johnson & Johnson.

     In July and August 2002, our management had various discussions with senior
management teams from two major pharmaceuticals companies regarding potential
strategic collaborations. In both cases, however, discussions were terminated by
those companies, each of which, we understand, were determined to focus on
internal research programs.

     On September 16, 2002, Dr. U'Prichard, Dr. James Cavanaugh, chairman of our
board of directors and the president of HealthCare Ventures, LLC, an affiliate
of the Healthcare Ventures funds, our largest stockholder, and Mr. William
Crouse, a member of HealthCare Ventures, LLC, attended a meeting with Dr.
Peterson, Mr. Tom Heyman, Executive Vice President, Business Development of
Johnson & Johnson, and Mr. Patrick Verheyen, Vice President, Business
Development of Johnson & Johnson. During the meeting, the parties discussed
Johnson & Johnson's possible interest in acquiring us.

     On September 18, 2002, our board of directors had a meeting to discuss
strategic alternatives for our company, and Drs. U'Prichard and Cavanaugh
updated the board of directors about Johnson & Johnson's possible interest in
acquiring us. In addition, at the meeting our management thoroughly reviewed
various strategic alternatives regarding significantly reducing costs.

     On September 20, 2002, Dr. Peterson, during a telephonic meeting with Dr.
U'Prichard, reiterated Johnson & Johnson's possible interest in acquiring us.
Dr. Peterson also informed Dr. U'Prichard that he would initiate discussions
within Johnson & Johnson to determine whether to request the right to conduct a
formal due diligence review of our business. Dr. Peterson told Dr. U'Prichard
that these internal discussions would occur over an approximately two-week time
period.

     On September 26, 2002, Dr. U'Prichard met with Dr. Peterson in New
Brunswick, New Jersey. They discussed various ideas for how our company could
function within the Johnson & Johnson organization.

     From September through November 2002, our management team discussed the
potential of engaging in various business arrangements with a drug discovery
services company, two pharmaceuticals companies (one of which we have a
collaboration arrangement with) and a private and a publicly traded
biotechnology company. Lazard participated in these discussions. These
preliminary discussions did not lead to further discussions either because our
management decided that the business arrangement would not create value for our
stockholders or because the other party failed to pursue discussions with us.

     During telephonic meetings of our board of directors on September 27, 2002
and October 3, 2002, our management updated the board of directors about Johnson
& Johnson's continued interest in a possible acquisition of our company. In
addition, during these meetings, our management provided the board of directors
with updated information regarding our management's discussions with other
companies.

     On October 4, 2002, during a telephonic meeting, Dr. Peterson informed Dr.
U'Prichard that Johnson & Johnson was interested in conducting a business,
financial and legal due diligence review of our business and technology with a
view toward a potential acquisition of us.

     On October 8, 2002, Mr. Verheyen contacted Mr. Gill by telephone to discuss
a due diligence review of our business and technology and to arrange for an
appropriate confidentiality agreement. During the
                                        11
<PAGE>

discussion, Mr. Gill inquired as to Johnson & Johnson's valuation of the
company. Mr. Verheyen told Mr. Gill that Johnson & Johnson was not prepared to
discuss valuation at that time.

     On October 14, 2002, during a telephonic meeting of our board of directors,
Mr. Gill and Dr. U'Prichard updated our board of directors about the discussions
with Johnson & Johnson regarding a possible acquisition of us. Our board of
directors instructed management to continue the discussions and to permit
Johnson & Johnson's due diligence review on a non-exclusive basis.


     At the meeting, Dr. Cavanaugh informed the board of directors that a
subsidiary of Johnson & Johnson was a limited partner of one of the HealthCare
Ventures funds that holds our shares. Dr. Cavanaugh and Mr. Harold R. Werner are
President and Managing Director of HealthCare Ventures, LLC, respectively. The
board of directors concluded that this relationship did not require Dr.
Cavanaugh and Mr. Werner to recuse themselves from deliberations relating to a
transaction with Johnson & Johnson. After the meeting, Dr. Claypool notified the
board of directors that Phoenix Data Systems, Inc., a privately held company of
which Dr. Claypool is the chief executive officer, has significant business
dealings with certain subsidiaries of Johnson & Johnson. Thereafter, our
management asked Dr. Claypool to consider whether he would participate in an
evaluation of a transaction with Johnson & Johnson.


     On October 16, 2002, after negotiation between our legal counsel and legal
counsel for Johnson & Johnson and our receipt of advice from Lazard, we executed
a confidentiality agreement with Johnson & Johnson that allowed it to begin its
due diligence review and provided appropriate protections for our company.

     On October 22, 2002, Johnson & Johnson began its business, financial,
technical and legal due diligence review of our business and technology. This
review focused on information and data we provided for Johnson & Johnson's
review.

     On October 25, 2002, at a meeting in New Brunswick, New Jersey attended
also by representatives of Lazard, our management team presented a comprehensive
overview of our business and technology to the Johnson & Johnson due diligence
team.

     On October 26, 2002, at meetings at our research sites in Exton,
Pennsylvania and Cranbury, New Jersey, attended by our senior management and
scientific team and representatives of Lazard, senior Johnson & Johnson drug
discovery executives evaluated our research sites and reviewed our technologies
and research and development programs and capabilities.

     On October 28, 2002, during a telephonic meeting of our board of directors,
Dr. U'Prichard and Mr. Gill updated our board of directors about the progress of
discussions with Johnson & Johnson and told the board of directors that Johnson
& Johnson was not yet prepared to discuss valuation. The board of directors
instructed management to continue with discussions.

     On October 29, 2002, we amended our engagement with Lazard to include the
retention of Lazard as sole investment banker in connection with any sale of our
company or disposition of significant assets.

     On November 13, 2002, Mr. Verheyen informed Mr. Gill by telephone that
Johnson & Johnson would complete sufficient due diligence to discuss valuation
by early December 2002.

     On December 4, 2002, Messrs. Verheyen and Heyman and Mr. Michael Chuisano,
Director, Business Development of Johnson & Johnson, met with Mr. Gill and Mr.
Scott Horvitz, our Chief Financial Officer, in Princeton, New Jersey. They
discussed potential financial, legal and other terms and conditions (including,
but not limited to, certain deal protection provisions) for a possible
acquisition. Mr. Verheyen informed Mr. Gill that Johnson & Johnson would require
the execution of a non-solicitation agreement between our company and Johnson &
Johnson if our board of directors was prepared to move forward based upon a
proposed valuation of the transaction.

     On December 5, 2002, during a telephonic meeting of our board of directors,
Mr. Gill and Dr. U'Prichard discussed the terms and conditions outlined by
Johnson & Johnson with our board of

                                        12
<PAGE>

directors and representatives from Lazard. The board of directors instructed our
management to continue discussions to see if they would lead to acceptable terms
and conditions.

     On December 5, 2002, Messrs. Gill and Horvitz discussed further the
potential terms for the possible acquisition with Messrs. Verheyen and Chuisano.

     On December 6, 2002, Messrs. Verheyen, Heyman, Chuisano and Mr. John
Crisan, Assistant General Counsel of Johnson & Johnson, met with Messrs. Gill
and Horvitz, Ms. Melinda Rudolph, our General Counsel, and a representative from
Lazard to discuss further the potential terms for the possible acquisition.

     On December 5 and 6, 2002, Dr. U'Prichard and a team from our company met
with members of the management of a public biotechnology company ("Company A")
to discuss a possible business combination. Dr. U'Prichard had previously met
with the chief executive officer of Company A in September 2002, at which
meeting Dr. U'Prichard and the chief executive officer of Company A had
concluded that there were potential technology and pipeline synergies between
the two companies that warranted further discussions relating to a possible
business combination. In addition, a team from Company A had visited our company
in November 2002.

     On December 8, 2002, Mr. Gill discussed with Mr. Verheyen by telephone the
potential financial terms of the possible acquisition by Johnson & Johnson.

     On December 9, 2002, Messrs. Verheyen and Heyman telephoned Dr. U'Prichard
and Mr. Gill and presented terms of an all-cash merger for an aggregate purchase
price of approximately $137 million (which amount includes the exercise price
relating to the in-the-money options and warrants), and price per share merger
consideration of $5.74, subject to finalization of our fully diluted share
capitalization information and the satisfactory completion of business,
financial and legal due diligence and the satisfactory resolution of the terms
of the merger agreement and stockholder agreement.

     On December 11, 2002, Messrs. Gill and Horvitz from our company met with
Messrs. Verheyen and Chuisano of Johnson & Johnson to discuss the proposed
financial terms of the per share merger consideration, as well as other key
terms and conditions for the acquisition.

     On December 12, 2002, our board of directors held a regularly scheduled
meeting at which it discussed various ordinary-course board matters, and also
received an update from Dr. U'Prichard and Mr. Gill regarding recent discussions
with Company A and the proposed merger with Johnson & Johnson. Representatives
of Lazard attended this meeting.

     Dr. U'Prichard presented an analysis of various factors relating to a
potential business combination with Company A, and reported on the December 5-6,
2002 meetings between us and Company A. Dr. U'Prichard reported that, during the
December meetings, Company A's chief executive officer raised, as he had during
the earlier meetings, the possibility of a business combination with us, but
that specific terms of such a transaction were not discussed during those
meetings or thereafter. After an extensive discussion among the members of the
board of directors and representatives of Lazard, the board decided not to
proceed with further discussions with Company A because it believed that the
discussions were still of a preliminary nature, that the potential combined
entity would need to find very significant external financing in a difficult
financing environment, that a transaction with Company A would not enhance
stockholder value and that Company A's pipeline was not significantly more
advanced than ours.

     Mr. Gill and Dr. U'Prichard then discussed with the board of directors the
proposed terms of the acquisition of us by Johnson & Johnson. The board of
directors discussed the financial and other terms of the proposal by Johnson &
Johnson, including the deal protection provisions and the stockholder agreement.
Representatives of Lazard then led a detailed discussion of the strategic
alternatives available to us, including a merger, strategic partnerships or
continued operation on a "stand alone" basis and the valuation and financing
issues regarding each alternative, including the Johnson & Johnson proposal. Our
counsel, Morgan, Lewis & Bockius LLP, reviewed the board's fiduciary
responsibilities with regard to the proposal by Johnson & Johnson.

                                        13
<PAGE>


     During the course of these discussions, Dr. William Claypool, one of our
directors, notified the board that he was recusing himself from all future
deliberations regarding any potential transaction with Johnson & Johnson because
of the previously disclosed relationship between Phoenix Data Systems, Inc. and
certain subsidiaries of Johnson & Johnson. After Dr. Claypool's recusal, the
balance of the board concluded that the December 9 proposal represented a basis
to move forward with exclusive negotiations with Johnson & Johnson. That
afternoon, Mr. Gill called Mr. Verheyen to communicate the outcome of the
meeting.


     On December 18, 2002, we executed a non-solicitation agreement with Johnson
& Johnson, providing for, among other things, a period of exclusive negotiations
from December 18, 2002 through and including February 1, 2003.

     On December 19, 2002, Johnson & Johnson submitted draft merger and
stockholder agreements to us through their legal counsel, Cravath, Swaine &
Moore. Negotiations commenced and continued over the next several days.

     Following negotiations with Johnson & Johnson and its counsel on the terms
of the proposed drafts, and after reviewing the terms of the merger agreement
with our management and Lazard, our counsel submitted a revised merger agreement
to Johnson & Johnson's counsel on December 26, 2002.

     Between December 29, 2002 and January 15, 2003, our representatives (with
advice from Lazard), representatives of Johnson & Johnson, representatives of
certain of our stockholders who were being asked to execute the stockholder
agreement and our and their respective legal counsel continued to negotiate the
terms of the merger agreement and stockholder agreement.

     On January 13, 2003, Johnson & Johnson notified us that, subject to
completion of due diligence and satisfactory resolution of the legal and other
terms of the merger agreement and stockholder agreement, the Johnson & Johnson
Executive Committee had approved the execution of the merger agreement.

     During the morning of January 15, 2003, Johnson & Johnson completed its due
diligence review. On that date, Johnson & Johnson, through Cravath, Swaine &
Moore, delivered final drafts of the merger agreement and stockholder agreement
to us.

     On the afternoon of January 15, 2003, our board of directors met to
consider the proposed merger with Johnson & Johnson. Dr. Claypool did not attend
the meeting. Our special Delaware counsel, Richards, Layton & Finger, P.A.,
reviewed the board's fiduciary responsibilities with regard to the proposed
transaction, and Morgan, Lewis & Bockius LLP led the board through a discussion
of the key provisions of the merger agreement and stockholder agreement,
including the background of the negotiations regarding certain terms of the
merger agreement. Lazard reviewed with the board the basis of its analysis of
the proposed transaction with Johnson & Johnson and delivered its oral opinion
(subsequently confirmed in writing) that, as of January 15, 2003, based upon and
subject to the considerations set forth in the opinion, the consideration to be
received by the holders of our common stock pursuant to the merger agreement was
fair, from a financial point of view, to such holders. Our board of directors
engaged in further discussion and deliberation regarding the proposed
transaction and determined that the merger agreement, the merger and the
transactions described in the merger agreement were fair to, and in the best
interests of, our company and our stockholders, approved and declared advisable
the merger agreement, authorized management to execute the merger agreement and
resolved to recommend that our stockholders vote to adopt the merger agreement.

     Following the meeting of our board, we executed the merger agreement and
the relevant stockholders and Johnson & Johnson executed the stockholder
agreement. We and Johnson & Johnson jointly announced the execution of the
merger agreement in a press release issued on January 16, 2003.

REASONS FOR THE MERGER

     During the course of reaching its decision to approve the merger and the
merger agreement, our board of directors considered and reviewed with our senior
management and outside advisors a number of general

                                        14
<PAGE>

factors relevant to the merger, including our strategic business plan, our drug
discovery programs, our product candidates under development, our technology
platform and technology development programs, our financial position, current
securities market conditions and our potential for growth in revenues and
earnings.

     Our board of directors also considered a number of potentially positive
factors in its deliberations, including, among other matters:

     - the current and historical market prices of our common stock relative to
       the $5.74 per share merger consideration, and the fact that $5.74 per
       share represented an 89% premium over the closing price of our common
       stock on January 15, 2003 and an 87% premium to the average closing price
       of our common stock over the twenty trading day period up to and
       including January 15, 2003;

     - the belief by our board of directors that we have obtained the highest
       price per share that Johnson & Johnson is willing to pay;

     - our assessment as to the low likelihood that a third party would offer a
       higher price than Johnson & Johnson;

     - the fact that the merger consideration is all cash, which provides
       certainty of value to holders of our common stock compared to a
       transaction in which stockholders would receive stock;

     - the view of management that the trading value for shares of our common
       stock was not likely to exceed the $5.74 per share merger consideration
       in the near term if we remained independent;

     - the support for the merger expressed by certain of our principal
       stockholders, as evidenced by the stockholder agreement;

     - the potential stockholder value that could be expected to be generated
       from the other strategic options available to us, including remaining
       independent and continuing to implement our growth strategy (subject to
       obtaining necessary financing that would not significantly dilute our
       stockholders and appropriately reducing costs) or pursuing other
       strategic alternatives, as well as the risks and uncertainties associated
       with those alternatives, and the board of directors' assessment that none
       of these options were reasonably likely to create greater value than the
       merger;

     - the financial analyses of Lazard presented orally to our board of
       directors on January 15, 2003, and the oral opinion of Lazard delivered
       on January 15, 2003, which it subsequently confirmed in writing, to our
       board of directors that, as of January 15, 2003, based upon and subject
       to the matters set forth in its opinion, the consideration to be received
       by holders of our common stock, other than Johnson & Johnson and its
       affiliates, pursuant to the merger agreement was fair, from a financial
       point of view, to such holders;

     - discussions with our management and Lazard regarding the potential
       transaction with Johnson & Johnson and our business, financial condition,
       competitive position, business strategy, strategic options and prospects,
       as well as the risks involved in achieving these prospects, the nature of
       our business and the industry in which we compete, and current industry,
       economic and market conditions, both on an historical and on a
       prospective basis;

     - the fact that the merger would be subject to the approval of our
       stockholders and that if a higher offer were to be made to our
       stockholders prior to the completion of the merger, our stockholders
       (other than those stockholders that are parties to the stockholder
       agreement) would be free to reject the transaction with Johnson &
       Johnson;

     - the availability of appraisal rights for our stockholders who properly
       exercise their statutory appraisal rights;

                                        15
<PAGE>

     - the terms of the merger agreement, as reviewed by our board of directors
       with our legal advisors, including:

      - sufficient operating flexibility for us to conduct our business in the
        ordinary course between signing and closing;

      - the absence of a financing condition; and

      - our ability to furnish information to and conduct negotiations with a
        third party, as more fully described under "The Merger Agreement -- No
        Solicitation";

     - management's assessment, after its review and discussion with Lazard,
       among others, that Johnson & Johnson has the financial capability to
       complete the merger; and

     - the view of our board of directors, based upon the advice of management
       after consultation with our legal counsel, that the regulatory approvals
       necessary to complete the merger could be obtained.

     Our board of directors also considered a number of potentially negative
factors in its deliberations concerning the merger, including, but not limited
to:

     - that we will no longer exist as an independent company and our
       stockholders will no longer participate in our growth;


     - that, under the terms of the merger agreement and the stockholder
       agreement, neither we nor the relevant stockholders can solicit other
       acquisition proposals, we must pay to Johnson & Johnson a termination fee
       if the merger agreement is terminated under certain circumstances and
       certain holders of our common stock have agreed to vote, in the
       aggregate, approximately 33% of our outstanding common stock for the
       merger, all of which may deter others from proposing an alternative
       transaction that may be more advantageous to our stockholders;


     - the fact that gains from an all-cash transaction would be taxable to our
       stockholders for U.S. federal income tax purposes; and

     - that if the merger does not close, our employees will have expended
       extensive efforts to attempt to complete the transaction and will have
       experienced significant distractions from their work during the pendency
       of the transaction.

     During its consideration of the transaction with Johnson & Johnson, our
board of directors was also aware that all of our directors and executive
officers have interests in the merger that are, or may be, different from, or in
addition to, those of our stockholders generally, as described under "The
Merger -- Interests of Our Directors and Executive Officers in the Merger". Dr.
William Claypool, one of our directors, recused himself from the vote of our
board of directors approving the merger because of his position as chief
executive officer of Phoenix Data Systems, Inc., a privately held company that
has significant business dealings with certain subsidiaries of Johnson &
Johnson.

     This summary is not meant to be an exhaustive description of the
information and factors considered by our board of directors but is believed to
address the material information and factors considered. In view of the wide
variety of factors considered by our board of directors, it is not possible to
quantify or to give relative weights to the various factors. After taking into
consideration all the factors set forth above, as well as other factors not
specifically described above, our board of directors approved the merger and the
merger agreement and the transactions described in the merger agreement because
of their belief that the merger is advisable to, and in the best interests of,
our stockholders.

RECOMMENDATION OF OUR BOARD OF DIRECTORS

     Our board of directors has determined that the merger and the other
transactions described in the merger agreement are fair to, and in the best
interests of, our stockholders. Accordingly, our board of directors has approved
and declared advisable the merger agreement and recommends that our stockholders
vote "FOR" the adoption of the merger agreement.

                                        16
<PAGE>

OPINION OF OUR INVESTMENT BANKER -- LAZARD FRERES & CO. LLC

     We retained Lazard to act as our investment banker in connection with the
merger. We selected Lazard to act as our investment banker based on Lazard's
qualifications, expertise and reputation and its knowledge of our business and
affairs. At the meeting of our board of directors on January 15, 2003, Lazard
rendered its oral opinion, subsequently confirmed in writing, that, as of
January 15, 2003, based upon and subject to the considerations set forth in its
opinion, the consideration to be received by the holders of shares of our common
stock, except for Johnson & Johnson and its affiliates, pursuant to the merger
agreement was fair, from a financial point of view, to such holders.

     THE FULL TEXT OF LAZARD'S OPINION, DATED AS OF JANUARY 15, 2003, WHICH SETS
FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS
CONSIDERED AND LIMITATIONS UPON THE REVIEW UNDERTAKEN BY LAZARD IN RENDERING ITS
OPINION, IS INCLUDED IN THIS PROXY STATEMENT AS ANNEX C. WE URGE YOU TO READ
THIS OPINION CAREFULLY AND IN ITS ENTIRETY. LAZARD'S OPINION WAS ADDRESSED TO
OUR BOARD OF DIRECTORS, RELATES ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF SHARES OF OUR COMMON
STOCK PURSUANT TO THE MERGER AGREEMENT AS OF THE DATE OF THE OPINION, DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY HOLDER OF OUR COMMON STOCK AS TO HOW TO VOTE ON THE MERGER OR ANY MATTER
RELATED THERETO. THE FOLLOWING IS ONLY A SUMMARY OF LAZARD'S WRITTEN OPINION AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.

     In connection with rendering its opinion, Lazard, among other things:

     - reviewed the financial terms and conditions of the merger agreement;

     - analyzed certain historical business and financial information relating
       to our company;

     - reviewed various financial forecasts and other data provided to Lazard by
       our management relating to our business and publicly available forecasts
       prepared by nationally recognized research analysts who report on us;

     - held discussions with members of our senior management with respect to
       our business and prospects and our strategic objectives;

     - reviewed public information with respect to certain other companies in
       lines of business Lazard believes to be generally comparable to our lines
       of business;

     - reviewed the financial terms of certain business combinations involving
       companies in lines of business Lazard believes to be generally comparable
       to our lines of business;

     - reviewed the historical stock prices and trading volumes of the common
       stock of our company; and

     - conducted such other financial studies, analyses and investigations as it
       deemed appropriate.

     In addition, Lazard assumed and relied upon, without independent
verification, the accuracy and completeness of the foregoing information
supplied or otherwise made available to it for the purposes of its opinion. With
respect to the financial forecasts provided to Lazard by us, Lazard assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of our management of the future financial performance of
our business. Lazard assumed no responsibility for and expressed no view as to
such forecasts or the assumptions on which they were based. In addition, Lazard
assumed that the merger will be consummated in accordance with the terms set
forth in the merger agreement, without any waiver of any material terms or
conditions by our company and that obtaining the necessary regulatory approvals
for the merger will not have an adverse effect on the merger. Lazard has not
made any independent valuation or appraisal of the assets or liabilities of our
company or concerning the solvency or fair value of our company, nor has Lazard
been furnished with any such appraisals. Lazard's opinion is necessarily based
on economic, monetary, market and other conditions as in effect on, and the
information made available to it as of, the date of its opinion. In rendering
its opinion, Lazard was not opining as to the prices at which our common stock
will trade before the consummation of the merger.

                                        17
<PAGE>

     Lazard discussed a variety of strategic possibilities with our company and
had certain conversations with entities it identified as well as entities that
we identified regarding their possible interest in a strategic transaction or
relationship with our company. However, Lazard did not initiate or complete a
process to solicit third party indications of interest in a sale transaction.

     The following is a summary of the material financial analyses performed by
Lazard in connection with its oral opinion and its written opinion, each as of
January 15, 2003.

  LIQUIDATION VALUATION ANALYSIS

     In reviewing the potential value of our company in connection with a
liquidation of our company, Lazard relied upon our management's projections for
cash and cash equivalents as of March 31, 2003 and balance sheet information
provided by our management for other assets and liabilities of our company as of
December 31, 2002. In addition, Lazard worked with our management to estimate a
range of potential values for a sale of our company's technology and development
programs in the context of a hypothetical liquidation of our company. The
methodology for the liquidation valuation analysis combines the value of assets
and estimated proceeds from the sale of technology and development programs and
subtracts the liabilities of our company and any liquidation-related costs to
arrive at a range of liquidation values for the company. The implied liquidation
values per share of our common stock range from approximately $3.14 to $3.78.
This range falls below the merger consideration of $5.74 per share.

  PUBLIC MARKET COMPARABLES

     Lazard reviewed certain publicly traded comparable companies that have (i)
human therapeutic product candidates in pre-clinical development, or phase I or
II of clinical development, and/or (ii) comparable technology platforms.

     Normalized Technology Valuation Analysis.  Technology value equals equity
value minus net cash. Lazard derived our company's implied technology value from
the range of technology values of the following comparable publicly traded
companies:

     - Alexion Pharmaceuticals, Inc.,

     - ARIAD Pharmaceuticals, Inc.,

     - ImmunoGen, Inc.,

     - Kosan Biosciences Inc.,

     - Peregrine Pharmaceuticals Inc.,

     - Seattle Genetics, Inc.,

     - Arena Pharmaceuticals Inc.,

     - Arqule, Inc.,

     - Array BioPharma Inc.,

     - Evotec OAI, and

     - Pharmacopeia Inc.

     Our company's implied equity value equals the implied technology value plus
the company's net cash as of December 31, 2002. The range of technology values
implies an equity value per share of our common stock of $1.99 to $6.26. The
merger consideration of $5.74 per share fits within this range.

     Pipeline Valuation Analysis.  Lazard derived the implied pipeline value of
our company from the range of technology values per expected marketed product
for the following comparable publicly traded companies, a range that was used to
capitalize our company's number of expected marketed products:

     - Alexion Pharmaceuticals, Inc.,

     - ARIAD Pharmaceuticals, Inc.,

     - ImmunoGen, Inc.,
                                        18
<PAGE>

     - Kosan Biosciences Inc.,

     - Peregrine Pharmaceuticals Inc., and

     - Seattle Genetics, Inc.

     The number of expected marketed products is based on historical industry
pipeline product survival and attrition statistics applied to the pipelines of
these comparable publicly traded companies and to our company. Our company's
implied equity value equals the implied pipeline value plus our company's net
cash as of December 31, 2002. Lazard used the technology values per expected
marketed product to develop a range of implied pipeline values. The range of
pipeline values implies an equity value per share of company common stock of
$3.85 to $5.86. The merger consideration of $5.74 per share fits within this
range.

  PRECEDENT TRANSACTIONS ANALYSIS

     Lazard reviewed certain precedent transactions involving companies
comparable to our company based on their size and product portfolios. The
transactions reviewed include:

     - H. Lundbeck A/S/Synaptic Pharmaceutical Corporation,

     - Johnson & Johnson/Orapharma, Inc.,

     - Versicor Inc./Biosearch Italia SpA,

     - Schering AG/Collateral Therapeutics, and

     - Merck & Co., Inc./Sibia Neurosciences Inc.

     Lazard derived a range of technology values per expected marketed product
from the transaction values of these precedent transactions and the number of
expected marketed products of the applicable company. Lazard derived an implied
pipeline value of our company from the range of technology values per expected
marketed product. Our company's implied equity value equals the implied pipeline
value plus our company's net cash as of December 31, 2002. The range of pipeline
values implies an equity value per share of our common stock of $4.19 to $10.54.
The merger consideration of $5.74 per share fits within this range.

  PRECEDENT TRANSACTION PREMIUMS PAID ANALYSIS

     Lazard reviewed the premiums paid in the following recent transactions in
the biotechnology sector that are comparable to the merger in terms of size,
technology platform and/or product portfolio:

     - Gilead Sciences, Inc./Triangle Pharmaceuticals, Inc.,

     - H. Lundbeck A/S/Synaptic Pharmaceutical Corporation,

     - Johnson & Johnson/Orapharma, Inc.,

     - Hyseq Pharmaceuticals, Inc./VARIAGENICS, Inc.,

     - Versicor Inc./Biosearch Italia SpA,

     - Serono S.A./Genset S.A.,

     - Schering AG/Collateral Therapeutics,

     - Celera Genomics/Axys Pharmaceuticals, Inc.,

     - Merck & Co., Inc./Rosetta Inpharmatics,

     - Vertex Pharmaceuticals Incorporated/Aurora Biosciences Corporation, and

     - Merck & Co., Inc./Sibia Neurosciences Inc.

     The resulting range of implied per share values based on 1-trading day,
average 5-trading day, 20-trading day, and average 20-trading day premiums is
$3.95 to $8.82 per share of our common stock. The merger consideration of $5.74
per share fits within this range.

                                        19
<PAGE>

 DISCOUNTED CASH FLOW ANALYSIS

     Lazard performed a discounted cash flow analysis based on the present value
of certain probability weighted product and program forecasts of our company
provided to Lazard by our management. The terminal value post-patent expiration
was based on an assumption that each product will face generic competition such
that its revenues would decline by approximately 35%-50% a year for
approximately three years followed by a range of perpetuity decline rates of
(10%) to 0%. The range of discount rates was 16% to 20% based on a weighted
average cost of capital analysis for comparable publicly traded companies. The
implied equity values include the net cash per share of our company's common
stock as of December 31, 2002. Using this analysis, Lazard derived a range of
implied equity values per share of our common stock of $4.42 to $6.05. The
merger consideration of $5.74 per share fits within this range.

     In connection with the review of the merger by our board of directors,
Lazard performed a variety of financial and comparative analyses for purposes of
rendering its opinion. The summary set forth above does not purport to be a
complete description of the analyses performed by Lazard. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analyses or summary description. In arriving at its opinion, Lazard
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any analysis or factor considered by it. Lazard
believes that its analyses must be considered as a whole and that selecting
portions of these analyses, without considering all of them, would create an
incomplete view of the process underlying its analyses and opinion.

     In performing its analyses, Lazard made numerous assumptions with respect
to industry performance, general business, economic, regulatory, market and
financial conditions and other matters, many of which are beyond our control or
the control of Lazard. The estimates and forecasts contained in Lazard's
analyses and the valuation ranges resulting from any particular analysis do not
necessarily indicate actual values or predict future results or values, which
may be significantly more or less favorable than those suggested by these
analyses. Lazard's analyses do not purport to be appraisals or to reflect the
prices at which our business or securities may actually be sold or the prices at
which our common stock might actually trade. Accordingly, these analyses and
estimates are inherently subject to substantial uncertainty.

     In addition, as described above, the opinion rendered by and the
presentation made by Lazard to our board of directors were only a few of many
factors taken into consideration by our board of directors in making its
decision to approve the merger and should not be viewed as determinative of the
opinion of our board of directors or management. The terms of the merger
agreement were determined through arm's-length negotiations between Johnson &
Johnson and us and were approved by our board of directors. Lazard has consented
to the inclusion of and references to its opinion in this proxy statement.

     Lazard is an internationally recognized investment banking firm and is
continuously engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, leveraged
buyouts and valuations for estate, corporate and other purposes. In the ordinary
course of business, Lazard and its affiliates may from time to time effect
transactions and hold securities, including derivative securities, of our
company or Johnson & Johnson for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.

     Under the terms of Lazard's engagement, Lazard is entitled to receive usual
and customary fees from the company for its services, a substantial portion of
which is contingent upon the completion of the merger. We have also agreed to
reimburse Lazard for its expenses, including the fees and expenses of its legal
counsel, and to indemnify Lazard and certain related parties against certain
liabilities, including certain liabilities under the federal securities laws,
related to or arising out of Lazard's engagement.

INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER

     In considering the recommendation of our board of directors with respect to
the merger, our stockholders should be aware that all of our directors and
executive officers have personal interests in the merger that are, or may be,
different from, or in addition to, your interests. Our board of directors was

                                        20
<PAGE>

aware of the interests described below and considered them, among other matters,
when approving the merger.

     Change in Control Agreements.  We entered into change in control agreements
(the "Change in Control Agreements"), each dated as of November 2, 2002, with
the following executive officers: Dr. David C. U'Prichard, Dr. F. Raymond
Salemme, Mr. John M. Gill, Dr. Roger F. Bone, Mr. Scott M. Horvitz and Ms.
Melinda P. Rudolph. The Change in Control Agreements provide that if (1) a
change in control (as defined in the Change in Control Agreements) has occurred
and an executive officer's employment is terminated by us without cause (as
defined in the Change in Control Agreements) before or within two years after
such change in control, or (2) the executive officer's employment is terminated
without cause within six months prior to the change in control upon the
direction or request of another party to the change in control or (3) the
executive officer terminates employment for good reason (as defined in the
Change in Control Agreements and described in more detail below) before or
within two years after such change in control, then the executive officer will
become entitled to receive the following benefits:

     - a lump sum payment equal to the unpaid amount of the executive officer's
       base salary earned through the date of termination of employment and a
       pro-rated amount of the target annual incentive bonus that the executive
       officer would have received for the year of termination of employment;

     - a lump sum payment equal to two times (0.75 times, in the case of Mr.
       Horvitz and Ms. Rudolph) the sum of the executive officer's base salary
       and annual incentive bonus (based on the executive officer's base salary
       and target annual bonus in effect at termination of employment or the
       change in control, whichever is higher) for the year of termination of
       employment;

     - continued medical, dental, vision, life insurance and long-term
       disability coverage during the two years (nine months, in the case of Mr.
       Horvitz and Ms. Rudolph) following termination of employment, or, at the
       option of the payor, the cash value of the after-tax cost to the
       executive officer of continuing such coverage;

     - outplacement assistance during the two years (nine months, in the case of
       Mr. Horvitz and Ms. Rudolph) following termination of employment paid for
       by us subject to a maximum cost of $35,000 ($25,000, in the case of Mr.
       Horvitz and Ms. Rudolph); and

     - any other amounts earned, accrued or owing but not yet paid and any other
       benefits in accordance with the terms of any of our other employee
       benefit plans or programs.

     For purposes of the Change in Control Agreements, "good reason" is defined
generally to include certain adverse changes in the executive's duties and
responsibilities, reductions in base salary, reductions in aggregate level of
target incentive compensation and benefits or certain relocations of the
executive's primary place of employment.

     The consummation of the merger will constitute a change in control for
purposes of the Change in Control Agreements.

     The Change in Control Agreements also provide that, at the time of a change
in control, any and all stock options or restricted stock awards held by the
executive officers shall become fully vested and immediately exercisable.

     The Change in Control Agreements that we executed with Dr. U'Prichard, Dr.
Salemme, Mr. Gill and Dr. Bone provide that in the event any payment or
distribution to or for the benefit of them under the Change in Control
Agreements or otherwise is deemed to constitute an "excess parachute payment"
within the meaning of Section 280G of the Internal Revenue Code, and such
payments will cause Dr. U'Prichard, Dr. Salemme, Mr. Gill and Dr. Bone to incur
an excise tax under Section 4999 of the Internal Revenue Code, then Dr.
U'Prichard, Dr. Salemme, Mr. Gill and Dr. Bone shall be paid an additional
gross-up payment such that, after payment of all federal, state and local income
tax, employment tax and excise tax on the gross-up payment, Dr. U'Prichard, Dr.
Salemme, Mr. Gill and Dr. Bone shall be fully reimbursed for the amount of such
original underlying excise tax. The Change in
                                        21
<PAGE>

Control Agreements with Dr. U'Prichard, Dr. Salemme, Mr. Gill and Dr. Bone
provide that this gross-up payment will be made only if the executive's net
benefit is at least the greater of $50,000 or 110% of the maximum amount that
can be paid without incurring an excise tax under Section 4999 of the Internal
Revenue Code. If payment of a gross-up payment is not required, the Change in
Control Agreements provide that the amounts payable under the Change in Control
Agreements that are considered "excess parachute payments" will be reduced to
the maximum amount that may be paid without imposition of the excise tax under
Section 4999 of the Internal Revenue Code, if reduction of such amounts is
beneficial to the executive.

     The Change in Control Agreements with Mr. Horvitz and Ms. Rudolph do not
include parachute tax gross-up provisions as described above. Their Change in
Control Agreements provide only that the amounts payable under the Change in
Control Agreements that are considered "excess parachute payments" will be
reduced to the maximum amount that may be paid without imposition of the excise
tax under Section 4999 of the Internal Revenue Code, if reduction of such
amounts is beneficial to the executive.


     Assuming that the merger is completed on March 31, 2003, and excluding any
gross-up payments for excise taxes that may be payable under Section 4999 of the
Internal Revenue Code and the value of any vesting of options and restricted
stock, the estimated maximum aggregate amount of change in control benefits,
including the cash severance payments, pro-rated annual incentive bonus, the
value of continued welfare benefits (assuming welfare benefits will be continued
and will not be cashed out) and the value of outplacement services that would be
payable under the terms of the Change in Control Agreements to Dr. U'Prichard,
Dr. Salemme, Mr. Gill, Dr. Bone, Mr. Horvitz and Ms. Rudolph upon a termination
of their employment without cause immediately following the merger (or, in the
case of Dr. Salemme, upon a termination of his consulting arrangement (as
described below) during the two-year period following the merger), is
approximately $1,226,000 for Dr. U'Prichard, $967,000 for Dr. Salemme, $953,000
for Mr. Gill, $701,000 for Dr. Bone, $256,000 for Mr. Horvitz and $261,000 for
Ms. Rudolph.


     Consulting Arrangement with Dr. Salemme.  As an inducement to Johnson &
Johnson to enter into the merger agreement, Dr. Salemme, our President and Chief
Scientific Officer and a member of our board of directors, and Johnson & Johnson
agreed, in a letter agreement dated January 15, 2003 (the "Salemme Letter
Agreement") that, upon completion of the merger, Dr. Salemme will cease being
our employee and will commence providing services as a consultant to Johnson &
Johnson and the company after the merger on an exclusive basis. The Salemme
Letter Agreement anticipates that the consulting arrangement will have an
initial term of nine months, renewable on a month-to-month basis thereafter as
mutually agreed between Dr. Salemme and Johnson & Johnson. For his consulting
services, Dr. Salemme will receive consulting fees in the amount of $36,000 per
month for the duration of the initial term, and additional fees at an amount to
be mutually agreed between Dr. Salemme and Johnson & Johnson if the initial term
is extended. The Salemme Letter Agreement states that Johnson & Johnson may
terminate the consulting arrangement at any time, either during or following the
initial term, with 30 days advance notice, in which event no consulting fees
will be payable for any period following such termination. The Salemme Letter
Agreement also provides that, for purposes of Dr. Salemme's existing
confidentiality agreement with us (including, without limitation, the provisions
thereof relating to proprietary information, noncompetition, nonsolicitation
and, to the extent relating to cheminformatics and structure-based drug design,
inventions), Dr. Salemme's employment with us and our subsidiaries and
affiliates will not be treated as having been terminated until his services as a
consultant under the consulting arrangement are terminated.


     The Salemme Letter Agreement also modified Dr. Salemme's Change in Control
Agreement to clarify that, in light of the consulting arrangement discussed
above, Dr. Salemme would not be entitled to any payments or benefits under his
Change in Control Agreement unless his consulting arrangement is terminated (or
is not renewed on mutually agreeable terms) prior to the second anniversary of
the completion of the merger by Johnson & Johnson or the company after the
merger without cause or by Dr. Salemme with the consent of Johnson & Johnson and
the company after the merger or following a breach of the consulting arrangement
by Johnson & Johnson or the company after the merger.

                                        22
<PAGE>

     Letter Agreement with Dr. Bone.  As an inducement to Johnson & Johnson to
enter into the merger agreement, Dr. Bone, our Senior Vice President, Research
and Development, agreed in a letter agreement dated January 15, 2003 that for
purposes of his Change in Control Agreement, the definition of good reason would
be modified generally to exclude certain changes in his duties and
responsibilities following the completion of the merger that would otherwise be
considered good reason under his Change in Control Agreement. Dr. Bone had
discussions with Johnson & Johnson about continuing employment.

     Treatment of Outstanding Stock Options and Restricted Stock.  Pursuant to
the merger agreement, our board of directors and compensation committee took
action to accelerate the vesting and exercisibility of outstanding stock options
and to cause the restrictions on our restricted stock to lapse upon completion
of the merger. Each outstanding unexercised option to purchase our common stock
held by directors and executive officers, as well as our employees and
consultants, will be canceled upon the completion of the merger in exchange for
a cash payment equal to the excess of the $5.74 per share merger consideration
over the per share option exercise price, multiplied by the number of shares of
our common stock subject to the option.

     Only the directors and executive officers identified in the following table
benefit from the acceleration of the vesting of and exercisability of our stock
options and the lapse of restrictions on restricted stock:

<Table>
<Caption>
                                                                  NUMBER OF SHARES
                                                            UNDERLYING UNVESTED OPTIONS*
                                                                   AND SHARES OF
DIRECTOR/EXECUTIVE OFFICER                                        RESTRICTED STOCK         VALUE**
--------------------------                                  ----------------------------   --------
<S>                                                         <C>                            <C>
Dr. David C. U'Prichard...................................            153,571              $559,997
Mr. David King............................................              3,570              $ 20,492
Dr. Zola P. Horovitz......................................                893              $  2,500
All Directors and Executive Officers......................            158,034              $582,989
</Table>

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

 * Excludes shares underlying unvested stock options that have a per share
   exercise price that is equal to or greater than the merger consideration of
   $5.74.

** Based on $5.74 per share (net of the exercise price for stock options).

     Indemnification.  The terms of the merger agreement provide for the
continued indemnification of our current directors and officers, as more fully
described under "The Merger Agreement -- Directors' and Officers'
Indemnification, Advancement of Expenses, Exculpation and Insurance".

     Relationships with Johnson & Johnson.  Three of our directors have indirect
business relationships with certain subsidiaries of Johnson & Johnson. Dr.
William Claypool is chief executive officer of Phoenix Data Systems, Inc., a
privately held company that has significant business dealings with certain
subsidiaries of Johnson & Johnson. Dr. James H. Cavanaugh and Mr. Harold R.
Werner are President and Managing Director, respectively, of HealthCare
Ventures, LLC, an affiliate of the HealthCare Ventures funds, our principal
stockholder. A subsidiary of Johnson & Johnson is a limited partner in one of
the four HealthCare Ventures funds that holds our common stock.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the material U.S. Federal income tax
consequences of the merger to stockholders whose shares of our common stock are
converted into the right to receive cash under the merger and to individuals who
receive cash in exchange for our outstanding options and warrants. The
discussion does not purport to consider all aspects of U.S. Federal income
taxation that might be relevant to our stockholders. The discussion is based on
current law which is subject to change, possibly with retroactive effect. The
discussion applies only to stockholders who hold shares of our common stock as
capital assets, and to holders of our outstanding options and warrants. This
discussion does not apply to certain types of stockholders (such as insurance
companies, tax-exempt organizations, financial institutions, traders,
broker-dealers, persons who hold or have held our common stock as part of a
straddle or a

                                        23
<PAGE>

hedging, integrated constructive sale or conversion transaction for tax
purposes) who may be subject to special rules.

     This discussion does not discuss the tax consequences to any stockholder
who, for U.S. Federal income tax purposes, is a non-resident alien individual,
foreign corporation, foreign partnership or foreign estate or trust, and does
not address any aspect of state, local or foreign tax laws.

     The receipt of cash for shares of our common stock pursuant to the merger
will be a taxable transaction for U.S. Federal income tax purposes. In general,
a stockholder who surrenders shares of our common stock for cash pursuant to the
merger will recognize a capital gain or loss for U.S. Federal income tax
purposes equal to the difference, if any, between the amount of cash received
and the stockholder's adjusted tax basis in the shares of our common stock
surrendered. Gain or loss will be determined separately for each block of shares
(i.e., shares acquired at the same cost in a single transaction) surrendered for
cash pursuant to the merger. Such gain or loss will be long-term capital gain or
loss provided that a stockholder's holding period for such shares is more than
one year at the time of the completion of the merger. Capital gains of
individuals derived in respect of capital assets held for more than one year are
eligible for reduced rates of taxation. There are limitations on the
deductibility of capital losses.

     The receipt of cash in exchange for the outstanding options and warrants
will be a taxable transaction for U.S. Federal income tax purposes. Holders of
options and warrants will recognize a gain or loss equal to the difference, if
any, between the amount of cash they receive and their adjusted tax basis, if
any, in the options or warrants surrendered. Persons who received their options
or warrants in connection with their employment by or provision of services to
us generally will recognize ordinary income or loss; persons who did not
purchase or receive their options or warrants in connection with their
employment by or provision of services to us generally will recognize capital
gain or loss if the underlying stock would have been a capital asset in their
hands. A holder's basis in an option or warrant generally will equal the amount
(if any) paid for that option or warrant. Payments in exchange for options
received in connection with employment by us generally will be subject to
applicable income and employment tax withholding.

     Backup Federal withholding tax generally will be withheld from all cash
payments to which a holder of shares or other payee is entitled pursuant to the
merger agreement, if (1) the IRS notifies us or our paying agent that the
taxpayer identification number (typically, the social security number in the
case of individuals, or employer identification number, in the case of other
stockholders) provided by the holder of shares of common stock or other payee is
incorrect; (2) the holder does not have a taxpayer identification number and
does not provide one to us within 60 days of signing the Substitute W-9; (3) the
holder of shares of common stock or other payee underreports interest and
dividend payments that he or she receives on his or her tax return and the IRS
notifies us or our paying agent that withholding is required; (4) the holder or
other payee fails to certify under penalties of perjury that he or she is not
subject to backup withholding; or (5) the holder or other payee fails to certify
under penalties of perjury that he or she is a U.S. person or U.S. resident
alien. Each of our stockholders and, if applicable, each other payee, should
complete and sign the Substitute Form W-9 included as part of the letter of
transmittal to be returned to the paying agent, in order to provide the
information and certification necessary to avoid backup withholding tax, unless
an exemption applies and is established in a manner satisfactory to the paying
agent.

     Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your U.S. Federal income tax liability provided
that you furnish the required information to the IRS.

     THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR
GENERAL INFORMATION PURPOSES ONLY AND ARE NOT INTENDED TO CONSTITUTE A COMPLETE
DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE MERGER. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, WE URGE EACH STOCKHOLDER TO CONSULT WITH THEIR TAX
ADVISOR REGARDING THE APPLICABILITY OF THE RULES DISCUSSED ABOVE TO THE
STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO THE STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
                                        24
<PAGE>

REGULATORY APPROVALS

     Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
rules promulgated thereunder by the Federal Trade Commission, certain
transactions, including the merger, may not be completed unless certain waiting
period requirements have been satisfied. Johnson & Johnson and we filed a
notification and report form with the Antitrust Division of the Department of
Justice and the Federal Trade Commission on February 5, 2003. At any time before
or after the effective time of the merger, the Antitrust Division, the Federal
Trade Commission or others could take action under the antitrust laws, including
seeking to prevent the merger, to rescind the merger or to conditionally approve
the merger upon the divestiture by us or Johnson & Johnson of substantial
assets. In addition, under certain circumstances, private parties and state
attorneys general may also bring actions under U.S. antitrust laws. There can be
no assurance that a challenge to the merger on antitrust grounds will not be
made or, if such a challenge is made, that it would not be successful.

ACCOUNTING TREATMENT

     Johnson & Johnson intends to treat the merger as a purchase for accounting
and financial reporting purposes, in accordance with Statement of Financial
Accounting Standards No. 141, "Business Combinations" and No. 142, "Goodwill and
Other Intangible Assets." This means that Johnson & Johnson will treat us as a
separate entity for periods prior to the completion of the merger and,
thereafter, our financial results will be consolidated with Johnson & Johnson's
financial results.

APPRAISAL RIGHTS

     Holders of shares of our common stock who do not vote in favor of the
adoption of the merger agreement and who properly demand appraisal of their
shares will be entitled to appraisal rights in connection with the merger under
Section 262 of the General Corporation Law of the State of Delaware ("Section
262").

     THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER SECTION 262 AND IS QUALIFIED IN ITS ENTIRETY BY THE
FULL TEXT OF SECTION 262 WHICH IS ATTACHED TO THIS PROXY STATEMENT AS EXHIBIT D.
ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" ARE TO THE
RECORD HOLDER OF THE SHARES OF OUR COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE
ASSERTED. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF OUR COMMON STOCK
HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER, FIDUCIARY,
DEPOSITARY OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO
FOLLOW THE STEPS SUMMARIZED BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT
APPRAISAL RIGHTS.

     Under Section 262, persons who hold shares of our common stock who follow
the procedures set forth in Section 262 will be entitled to have their shares of
our common stock appraised by the Delaware Court of Chancery and to receive
payment of the "fair value" of the shares, exclusive of any element of value
arising from the accomplishment or expectation of the merger, together with a
fair rate of interest, as determined by the court.

     Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the adoption of the merger agreement
by our stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders entitled to appraisal rights that
appraisal rights are available and include in the notice a copy of Section 262.
This proxy statement shall constitute the notice, and the applicable statutory
provisions are attached to this proxy statement as Exhibit D. Any holder of our
common stock who wishes to exercise appraisal rights or who wishes to preserve
such holder's right to do so, should review the following discussion and Exhibit
D carefully because failure to timely and properly comply with the procedures
specified will result in the loss of appraisal rights.

     A holder of shares of our common stock wishing to exercise the holder's
appraisal rights must deliver to us, before the vote on the adoption of the
merger agreement at the special meeting, a written demand for the appraisal of
such holder's shares and must not vote in favor of the adoption of the merger
agreement. A holder of shares of our common stock wishing to exercise appraisal
rights must hold of

                                        25
<PAGE>

record the shares on the date the written demand for appraisal is made and must
continue to hold the shares of record through the effective time of the merger.
A vote against the adoption of the merger agreement will not in and of itself
constitute a written demand for appraisal satisfying the requirements of Section
262. The written demand for appraisal must be in addition to and separate from
any proxy or vote. The demand must reasonably inform us of the identity of the
holder as well as the intention of the holder to demand an appraisal of the
"fair value" of the shares held by the holder.

     Only a holder of record of shares of our common stock is entitled to assert
appraisal rights for the shares of our common stock registered in that holder's
name. A demand for appraisal in respect of shares of our common stock should be
executed by or on behalf of the holder of record, fully and correctly, as the
holder's name appears on the holder's stock certificates, and must state that
the person intends thereby to demand appraisal of the holder's shares of our
common stock in connection with the merger. If the shares of our common stock
are owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in that capacity, and if the
shares of our common stock are owned of record by more than one person, as in a
joint tenancy and tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including an agent for two or
more joint owners, may execute a demand for appraisal on behalf of a holder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is acting
as agent for the record owner or owners. A record holder such as a broker who
holds shares of our common stock as nominee for several beneficial owners may
exercise appraisal rights with respect to the shares of our common stock held
for one or more beneficial owners while not exercising the rights with respect
to the shares of our common stock held for other beneficial owners; in such
case, however, the written demand should set forth the number of shares of our
common stock as to which appraisal is sought and where no number of shares of
our common stock is expressly mentioned the demand will be presumed to cover all
shares of our common stock held in the name of the record owner. Stockholders
who hold their shares of our common stock in brokerage accounts or other nominee
forms and who wish to exercise appraisal rights are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by such a nominee.

     All written demands for appraisal pursuant to Section 262 should be sent or
delivered to 3-Dimensional Pharmaceuticals at 3-Dimensional Pharmaceuticals,
Inc., Three Lower Makefield Corporate Center, 1020 Stony Hill Road, Suite 300,
Yardley, PA 19067, Attention: Secretary.

     Within 10 days after the effective time of the merger, the surviving
corporation must notify each holder of our common stock who has complied with
Section 262 and who has not voted in favor of the adoption of the merger
agreement that the merger has become effective. Within 120 days after the
effective time of the merger, but not thereafter, the surviving corporation or
any holder of our common stock who has so complied with Section 262 and is
entitled to appraisal rights under Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
holder's shares of our common stock. The surviving corporation is under no
obligation to and has no present intention to file a petition. Accordingly, it
is the obligation of the holders of our common stock to initiate all necessary
action to perfect their appraisal rights in respect of shares of our common
stock within the time prescribed in Section 262.

     Within 120 days after the effective time of the merger, any holder of our
common stock who has complied with the requirements for exercise of appraisal
rights will be entitled, upon written request, to receive from the surviving
corporation a statement setting forth the aggregate number of shares not voted
in favor of the adoption of the merger agreement and with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. The statement must be mailed within ten days after a written
request therefor has been received by the surviving corporation or within ten
days after the expiration of the period for delivery of demands for appraisal,
whichever is later.

     If a petition for an appraisal is timely filed by a holder of shares of our
common stock and a copy thereof is served upon the surviving corporation, the
surviving corporation will then be obligated within 20 days to file with the
Delaware Register in Chancery a duly verified list containing the names and

                                        26
<PAGE>

addresses of all stockholders who have demanded an appraisal of their shares and
with whom agreements as to the value of their shares have not been reached.
After notice to the stockholders as required by the Court, the Delaware Court of
Chancery is empowered to conduct a hearing on the petition to determine those
stockholders who have complied with Section 262 and who have become entitled to
appraisal rights thereunder. The Delaware Court of Chancery may require the
holders of shares of our common stock who demanded payment for their shares to
submit their stock certificates to the Register in Chancery for notation thereon
of the pendency of the appraisal proceeding; and if any stockholder fails to
comply with the direction, the Court of Chancery may dismiss the proceedings as
to the stockholder.

     After determining the holders of our common stock entitled to appraisal,
the Delaware Court of Chancery will appraise the "fair value" of their shares of
our common stock, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Holders of our common stock considering seeking appraisal should be aware that
the fair value of their shares of our common stock as so determined could be
more than, the same as or less than the consideration they would receive
pursuant to the merger if they did not seek appraisal of their shares of our
common stock and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value under
Section 262. We do not anticipate offering more than the merger consideration to
any stockholder exercising appraisal rights and reserve the right to assert, in
any appraisal proceeding, that, for purposes of Section 262, the "fair value" of
a share of our common stock is less than the merger consideration. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings. In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The Court will also determine the amount of interest, if any, to be paid
upon the amounts to be received by persons whose shares of our common stock have
been appraised. The costs of the action may be determined by the Court and taxed
upon the parties as the Court deems equitable. The Court may also order that all
or a portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all the shares entitled to be appraised.

     Any holder of shares of our common stock who has duly demanded an appraisal
in compliance with Section 262 will not, after the effective time of the merger,
be entitled to vote the shares of our common stock subject to the demand for any
purpose or be entitled to the payment of dividends or other distributions on
those shares of our common stock (except dividends or other distributions
payable to holders of record of our common stock as of a record date prior to
the effective time of the merger).

     If any stockholder who demands appraisal of shares of our common stock
under Section 262 fails to perfect, or effectively withdraws or loses, such
holder's right to appraisal, the shares of our common stock of the stockholder
will be converted into the right to receive $5.74 in cash per share. A
stockholder will fail to perfect, or effectively lose or withdraw, the holder's
right to appraisal if no petition for appraisal is filed within 120 days after
the effective time of the merger, or if the stockholder delivers to the
surviving corporation a written withdrawal of the holder's demand for appraisal
and an acceptance of the merger, except that any attempt to withdraw made more
than 60 days after the effective time of the merger will require the written
approval of the surviving corporation and, once a petition for appraisal is
filed, the appraisal proceeding may not be dismissed as to any holder absent
court approval.

     FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT THE
HOLDER OF OUR COMMON STOCK WILL BE ENTITLED TO RECEIVE THE CONSIDERATION
SPECIFIED IN THE MERGER AGREEMENT).

DELISTING AND DEREGISTRATION OF OUR COMMON STOCK

     If the merger is completed, our common stock will be delisted from the
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934.

                                        27
<PAGE>

STRUCTURE OF THE MERGER

     The merger agreement provides that, upon the terms and subject to the
conditions of the merger agreement, Longbow Merger Sub, Inc. will be merged with
and into us and the separate corporate existence of Longbow Merger Sub, Inc.
will thereupon cease, and we will be the surviving corporation and all of our
rights, privileges, powers, immunities, purposes and franchises will continue
unaffected by the merger, except that all of our then outstanding common stock
will be owned by Johnson & Johnson and all outstanding options and warrants will
be canceled.

EFFECTIVE TIME OF THE MERGER

     The merger will become effective when a certificate of merger is duly filed
with the Secretary of State of the State of Delaware or at such later time as
the parties agree to and specify in the certificate of merger. Such filing will
be made no later than the second business day after the satisfaction or waiver
of the conditions to the completion of the merger described in the merger
agreement. See "The Merger Agreement -- Conditions to the Completion of the
Merger".

     The merger agreement also provides that:

     - our restated certificate of incorporation will be amended at the
       completion of the merger to be in the form of Exhibit A to the merger
       agreement and, as so amended, will be the restated certificate of
       incorporation of the surviving corporation until changed or amended;

     - the bylaws of Longbow Merger Sub, Inc. as in effect immediately prior to
       the closing of the merger will be the bylaws of the surviving
       corporation;

     - the directors of Longbow Merger Sub, Inc. immediately prior to the
       closing of the merger will be the directors of the surviving corporation;
       and

     - the officers of Longbow Merger Sub, Inc. immediately prior to the closing
       of the merger will be the officers of the surviving corporation.

THE MERGER CONSIDERATION

     Each share of our common stock issued and outstanding immediately before
the merger, other than treasury shares, shares for which appraisal rights have
been perfected and shares held by Johnson & Johnson, will automatically be
canceled and will cease to exist and will be converted into the right to receive
$5.74 in cash, without interest. After the merger is effective, each holder of a
certificate representing any of these shares of our common stock will no longer
have any rights with respect to the shares, except for the right to receive the
$5.74 per share merger consideration or, if a holder exercises appraisal rights,
the right to receive payment of the judicially determined fair value of its
shares upon compliance with the requirements of Delaware law. Each share of our
common stock held by us as treasury shares or held by Johnson & Johnson at the
time of the merger will be canceled without any payment.

YOU SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

TREATMENT OF OUR STOCK OPTIONS AND RESTRICTED STOCK

     Prior to the completion of the merger, holders of outstanding stock options
will have the opportunity to exercise all of their outstanding stock options,
whether vested or unvested. Upon completion of the merger, each outstanding
stock option that has not been exercised will be canceled and the holder of that
stock option will be entitled to receive a single lump sum cash payment equal to
the product of:

     - the number of shares of our common stock for which the stock option has
       not been exercised; and

     - the excess, if any, of the $5.74 per share merger consideration over the
       per share exercise price of the stock option;

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<PAGE>

provided, however, if the calculation described above results in a negative
number, no payment will be made with respect to the stock option.

     Subject to any applicable withholding taxes, the payment for option shares
will be made, without interest, by the paying agent as soon as practicable
following the completion of the merger.

     We are required to ensure that there will be no stock options exercisable
for our capital stock outstanding as of the effective time.

     All outstanding shares of our restricted stock will become fully vested and
all restrictions thereon will lapse immediately before the merger, and, in the
merger, the shares will be canceled and converted into the right to receive
$5.74 in cash, without interest, as described in "The Merger Consideration"
above.

TREATMENT OF OUR WARRANTS

     Pursuant to the merger agreement, we have taken any action necessary,
including obtaining any required consents, to cause each warrant to acquire
shares of our common stock outstanding immediately prior to the completion of
the merger to be canceled in exchange for a lump sum cash payment equal to the
product of:

     - the number of shares of our common stock subject to the warrant; and

     - the excess, if any, of the $5.74 per share merger consideration over the
       per share exercise price of the warrant;

provided, however, if the calculation described above results in a negative
number, no payment will be made with respect to the warrant.

     Payments with respect to warrants shall be made by the paying agent as soon
as practicable following the effective time of the merger. All amounts payable
shall be subject to any required withholding of taxes and shall be paid without
interest.

SURRENDER OF STOCK CERTIFICATES

     At the effective time of the merger, Johnson & Johnson will deposit the
aggregate merger consideration into an exchange fund with JPMorgan Chase or
another comparable institution, as paying agent. At the effective time of the
merger, shares of our common stock (except for shares for which appraisal rights
have been perfected, as described in "Appraisal Rights" above):

     - will no longer be outstanding;

     - will automatically be canceled; and

     - will cease to exist.

     In addition, from and after the effective time of the merger, each
certificate formerly representing any such share of our common stock will
represent only the right to receive the $5.74 per share merger consideration
which the holder of the certificate is entitled to receive pursuant to the
merger.

     No interest will accrue or be paid with respect to the merger
consideration. Until holders of certificates previously representing shares of
our common stock have surrendered those certificates to the paying agent for
exchange, holders will not receive the merger consideration due in respect of
the shares formerly represented by such certificates.

     As soon as practicable after the effective time of the merger, the paying
agent will mail to each holder of record of shares of our common stock a letter
of transmittal and instructions for its use in delivering certificates to the
paying agent in exchange for the merger consideration due in respect of the
shares formerly represented by such certificates. After receipt of its
certificates by the paying agent, together with a properly executed letter of
transmittal, the paying agent will deliver to each stockholder the $5.74 per
share merger consideration multiplied by the number of shares formerly
represented by the

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<PAGE>

certificate(s) surrendered by the stockholder. In the event of a transfer of
ownership of our common stock which is not registered in the transfer records of
our transfer agent, payment of the merger consideration may be made to a person
other than the person in whose name the surrendered certificate is registered
if:

     - the certificate is properly endorsed or otherwise in proper form for
       transfer; and

     - the person requesting the merger consideration pays any transfer or other
       taxes required by reason of the payment of the merger consideration due
       in respect of the shares formerly represented by such certificate to a
       person other than the registered holder of the surrendered certificate or
       establishes to Johnson & Johnson's reasonable satisfaction that such tax
       has been paid or is not applicable.

LOST CERTIFICATES

     If any certificate representing shares of our common stock is lost, stolen
or destroyed, the paying agent will deliver the applicable merger consideration
due in respect of the shares formerly represented by that certificate if:

     - the stockholder asserting the claim of a lost, stolen or destroyed
       certificate makes an affidavit of that fact; and

     - upon request of Johnson & Johnson, the stockholder posts a bond in a
       reasonable amount designated by Johnson & Johnson as security against any
       claim that may be made with respect to that certificate against Johnson &
       Johnson.

UNCLAIMED AMOUNTS

     Any portion of the exchange fund which remains undistributed to our
stockholders after the nine month anniversary of the effective time of the
merger will be delivered by the paying agent to Johnson & Johnson, upon demand,
and any of our stockholders who have not previously surrendered their stock
certificates will only be entitled to look to Johnson & Johnson for payment of
the merger consideration due in respect of the shares formerly represented by
their certificates. Subject to the other terms of the merger agreement, Johnson
& Johnson will remain liable for the payment of the merger consideration to
these stockholders.

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<PAGE>

                              THE MERGER AGREEMENT

     The following description summarizes the material provisions of the merger
agreement and is qualified in its entirety by reference to the complete text of
the merger agreement. The merger agreement included in this proxy statement as
Annex A contains the complete terms of that agreement and stockholders should
read it carefully and in its entirety.

REPRESENTATIONS AND WARRANTIES

     The merger agreement contains customary representations and warranties
relating to, among other things:

     - our corporate organization and similar corporate matters and the
       corporate organization and similar matters of Johnson & Johnson and
       Longbow Merger Sub, Inc.;

     - corporate and capital structure matters relating to our subsidiaries;

     - our capital structure;

     - our obligations with respect to our capital stock;

     - the authorization, execution, delivery, performance and enforceability
       of, and required consents, approvals, orders and authorizations of
       governmental authorities relating to, the merger agreement and related
       matters of us and of Johnson & Johnson and Longbow Merger Sub, Inc.;

     - documents we filed with the Securities and Exchange Commission and the
       accuracy of information, including financial information, contained in
       these documents;

     - the accuracy of the information supplied by us, Johnson & Johnson and
       Longbow Merger Sub, Inc. in connection with this proxy statement;

     - the absence of material changes or events concerning us or our
       subsidiaries;

     - pending or threatened material litigation against us or our subsidiaries;

     - matters related to the existence of certain of our contracts and defaults
       under our contracts;

     - our compliance with applicable laws and environmental matters;

     - absence of changes in our benefit plans;

     - absence of collective bargaining agreements or other labor union
       agreements between us or any of our subsidiaries and our employees;

     - matters affecting us relating to the Employee Retirement Income Security
       Act of 1974, as amended, and our employee benefits;

     - absence of excessive parachute payments to any of our or our
       subsidiaries' officers, directors, employees or consultants;

     - completion and accuracy of our tax filings and payment of our taxes;

     - validity of our leasehold or sublease interests in our properties and
       compliance with the terms of our leases and subleases;

     - matters relating to our intellectual property;

     - the required vote of our stockholders;

     - our satisfaction of certain state takeover statutes' requirements;

     - our engagement and payment of fees for brokers, investment bankers,
       finders and legal and financial advisors;

     - our receipt of a fairness opinion from our financial advisors;
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<PAGE>

     - certain contracts relating to research development, distribution,
       training, sale, supply, license, marketing or manufacturing;

     - our compliance with applicable regulatory and governmental requirements;

     - our maintenance of insurance;

     - the operations of Longbow Merger Sub, Inc.; and

     - Johnson & Johnson's ability to pay the aggregate merger consideration.

COVENANTS

     Under the merger agreement, we have agreed that, prior to the effective
time of the merger, subject to certain exceptions, we and our subsidiaries will
carry on our business in the ordinary course, consistent with past practice and
as currently proposed (as of the date of the merger agreement) by us to be
conducted and in compliance with applicable laws and regulations, and will use
all commercially reasonable efforts to preserve intact our current business
organizations, to keep available the services of our current officers, employees
and consultants and preserve our relationships with those persons having
business dealings with us. In addition, we have agreed that, among other things
and subject to certain exceptions, neither we nor any of our subsidiaries may,
without Johnson & Johnson's prior written consent:

     - declare, set aside or pay any dividends on, or make any other
       distribution (whether in cash, stock or property) in respect of, any of
       our capital stock or the capital stock of our subsidiaries, except for
       dividends or distributions by a wholly owned subsidiary to its
       shareholders;

     - split, combine or reclassify any of our capital stock or the capital
       stock of our subsidiaries or issue or authorize the issuance of any other
       securities in respect of, in lieu of, or in substitution for shares of
       our capital stock or the capital stock of our subsidiaries;

     - purchase, redeem or otherwise acquire any shares of our capital stock or
       the capital stock of our subsidiaries or any other securities or any
       rights, warrants or options to acquire any such shares or other
       securities, except for purchases, redemptions or other acquisitions of
       capital stock or other securities required under the terms of any plans,
       arrangements or agreements existing as of the date of the merger
       agreement between us or any of our subsidiaries and any of our or our
       subsidiaries' directors or employees;

     - issue, deliver, sell, grant, pledge or otherwise encumber or subject to
       any lien any shares of our capital stock or the capital stock of our
       subsidiaries, any other voting securities or any securities convertible
       into, or any rights, warrants, options to acquire, any such shares,
       voting securities or convertible securities, or "phantom" stock,
       "phantom" stock rights, stock appreciation rights or stock based
       performance units, other than the issuance of our common stock upon the
       exercise of options or warrants that were outstanding on the date of the
       merger agreement;

     - amend our restated certificate of incorporation or bylaws, or other
       comparable charter or organizational documents of any of our
       subsidiaries, except as may be required by law, or the rules and
       regulations of the Securities and Exchange Commission or The Nasdaq Stock
       Market, Inc.;

     - acquire by merger, consolidation, purchasing of assets or in any other
       manner any person or division, business or equity interest of any person;

     - acquire any asset or assets that, individually, has a purchase price in
       excess of $60,000 or, in the aggregate, have a purchase price in excess
       of $300,000, except for new capital expenditures which are subject to the
       limitations described below, and except for purchases of components, raw
       materials or supplies in the ordinary course of business consistent with
       past practice;

     - sell, lease, license, mortgage, sell and leaseback, dispose of or
       otherwise encumber or subject to any lien or otherwise dispose of any of
       our properties or the properties of our subsidiaries or other assets

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<PAGE>

       or any interests therein (including securitizations), except for sales of
       inventory and used equipment in the ordinary course of business,
       consistent with past practice;

     - enter into, modify or amend any lease of property, except for
       modifications or amendments that are not materially adverse to us or our
       subsidiaries taken as a whole;

     - incur any indebtedness for borrowed money or guarantee any such
       indebtedness of another person, issue or sell any debt securities or
       calls, options, warrants or other rights to acquire any debt securities
       of us or our subsidiaries, guarantee any debt securities of another
       person, enter into any "keep well" or other arrangement to maintain any
       financial statement condition of another person or enter into any
       arrangement having an economic effect of any of the foregoing;

     - make any loans, advances, or capital contributions to, or investments in,
       any other person, other than to employees for travel expenses in the
       ordinary course of business consistent with past practice;

     - make any new capital expenditure or expenditures which, individually, is
       in excess of $50,000 or (1) from January 15, 2003 to April 30, 2003, are,
       in the aggregate, in excess of $1,000,000 or (2) beginning May 1, 2003,
       are, in the aggregate, in excess of $300,000 during any calendar month;

     - except as required by law or judgment, pay, discharge, settle or satisfy
       any claims, liabilities, obligations or litigation, other than the
       payment, discharge, settlement or satisfaction in the ordinary course of
       business consistent with past practice or in accordance with the terms
       of, liabilities disclosed, reflected or reserved against in our most
       recent financial statements filed with the Securities and Exchange
       Commission or incurred since the date of such financial statements in the
       ordinary course of business consistent with past practice, cancel any
       indebtedness, waive or assign any claims or rights of substantial value,
       waive any benefits of, agree to modify in any respect, or fail to
       enforce, or consent to any matter with respect to which consent is
       required under, any standstill or similar agreement to which we or any of
       our subsidiaries is a party, or waive any material benefits of, or agree
       to modify in any material respect or fail to enforce in any material
       respect, or consent to any matter with respect to which consent is
       required under, any material confidentiality or similar agreement to
       which we or any of our subsidiaries is a party;

     - enter into contracts relating to the research, clinical trial,
       development, distribution, training, sale, supply, license, marketing,
       co-promotion or manufacturing by third parties of our products, or the
       products of our subsidiaries, or products licensed by us or any of our
       subsidiaries, or intellectual property rights of ours or of our
       subsidiaries, which, individually, has a value in excess of $60,000 or,
       in the aggregate, have a value in excess of $300,000;

     - enter into, modify, amend or terminate any contract or waive, release or
       assign any material rights or claims under such contract, which if so
       entered into, modified, amended, terminated, waived, released or assigned
       would reasonably be expected to adversely affect us in any material
       respect, impair in any material respect our ability to perform our
       obligations under the merger agreement or prevent or materially delay the
       completion of the transactions described in the merger agreement;

     - enter into any contract to the extent that the completion of the
       transactions described in the merger agreement or our compliance with the
       provisions of the merger agreement would reasonably be expected to
       conflict with, or result in a violation or breach of, or default under,
       or give rise to a right of, or result in, termination, cancellation or
       acceleration of any obligation or to the loss of a benefit under, or
       result in the creation of any lien in or upon any of our property or
       assets, or those of our subsidiaries, under, or give rise to any
       increased, additional, accelerated, or guaranteed right or entitlements
       of any third party under, or result in any material alteration of, any
       provision of such contract;

     - enter into any contract containing any restriction on our ability, or the
       ability of any of our subsidiaries, to assign our and their rights,
       interests, or obligations under such contract, unless such restriction
       expressly excludes any assignment to Johnson & Johnson or any of its
       subsidiaries in

                                        33
<PAGE>

       connection with or following the completion of the merger and the other
       transactions described in the merger agreement;

     - sell, transfer or license to any person or otherwise extend, amend or
       modify any of our intellectual property rights or any such right of our
       subsidiaries;

     - subject to certain limited exceptions, adopt, enter into, terminate or
       amend any collective bargaining agreement, benefit plan or any benefit
       agreement between us, or our subsidiaries, and one or more of our or
       their current or former directors, officers, employees or consultants;

     - subject to certain limited exceptions, increase in any manner the
       compensation, bonus or fringe or other benefits of, or pay any bonus of
       any kind or amount whatsoever to, any current or former officer,
       director, employee or consultant, except for planned salary increases and
       bonus payments described in the merger agreement;

     - subject to certain limited exceptions, pay any benefit or amount not
       required under any benefit plan or arrangement of ours or our
       subsidiaries as in effect on the date of the merger agreement;

     - subject to certain limited exceptions, grant or pay any severance or
       termination pay or increase in any manner the severance or termination
       pay of any current or former director, officer, employee or consultant;

     - subject to certain limited exceptions, grant any awards under any bonus,
       incentive, performance, or other compensation plan or arrangement,
       benefit agreement or benefit plan (including the grant of stock options,
       restricted stock, "phantom" stock, stock appreciation rights, "phantom"
       stock rights, stock based or stock related awards, performance units or
       restricted stock or the removal of existing restrictions in any benefit
       agreement or benefit plan or agreements or awards made under such benefit
       agreements or benefit plans);

     - subject to certain limited exceptions, amend or modify any stock option
       or warrant;

     - subject to certain limited exceptions, take any action to fund or in any
       other way secure the payment of compensation or benefits under any
       employee plan, agreement, contract or arrangement, or benefit plan or
       benefit agreement;

     - subject to certain limited exceptions, take any action to accelerate the
       vesting or payment of any compensation or benefit under any benefit plan
       or benefit agreement, except for the acceleration of the vesting of
       outstanding stock options as described in the merger agreement;

     - subject to certain limited exceptions, materially change any actuarial or
       other assumption used to calculate funding obligations with respect to
       any pension plan or change the way in which contributions to any pension
       plan are made or the basis on which such contributions are determined;

     - except as required by generally accepted accounting principles, revalue
       any material assets of our company or any of our subsidiaries, or make
       any changes to our accounting methods, principles or practices; or

     - authorize any of, or commit, resolve or propose or agree to take any of,
       the above actions.

     Each party agrees to notify the other party of:

     - any representation or warranty in the merger agreement that is qualified
       as to materiality becoming untrue or inaccurate in any respect;

     - any representation or warranty that is not so qualified as to materiality
       becoming untrue or inaccurate in any material respect; or

     - the failure to comply with or satisfy in any material respect any
       covenant, condition or agreement to be complied with or satisfied by the
       party under the merger agreement.

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<PAGE>

     Each party shall promptly provide the other with copies of all filings made
with any governmental entity in connection with the merger agreement.

     Between the date of the merger agreement and the effective date, we will:

     - timely file all required tax returns;

     - timely pay all taxes due;

     - accrue a reserve in the books and records and financial statements in
       accordance with past practice for all taxes payable;

     - promptly notify Johnson & Johnson of any suit, claim, action,
       investigation, proceeding or audit pending against or with respect to us
       in respect of any material amount of tax and not settle or compromise any
       such action without Johnson & Johnson's consent;

     - not make any material tax election or settle or compromise any material
       tax liability, other than with Johnson & Johnson's consent or other than
       in the ordinary course of business; and

     - terminate as of the closing date all existing tax sharing agreements, tax
       indemnity obligations and similar agreements, arrangements or practices
       to which we are or may be a party or may otherwise be bound so that
       neither we nor any or our subsidiaries will have further rights or
       liabilities under such agreements, arrangements or practices.

DIRECTORS' AND OFFICERS' INDEMNIFICATION, ADVANCEMENT OF EXPENSES, EXCULPATION
AND INSURANCE

     Johnson & Johnson has agreed to cause the surviving corporation to assume
the obligations with respect to all rights to indemnification, advancement of
expenses and all exculpation from liability for acts or omissions occurring at
or prior to the effective time of the merger existing in favor of our present
and former officers or directors as provided in our restated certificate of
incorporation or bylaws or any indemnification agreement between any such person
and us, in each case as in effect as of the date of the merger agreement, and
such obligations will survive the merger and will continue in full force and
effect in accordance with their terms. The merger agreement also provides that
Johnson & Johnson will maintain our current officers' and directors' liability
insurance for a period of six years after the completion of the merger to cover
any acts or omissions occurring at or prior to the effective time of the merger
covering those persons who were, as of the date of the merger agreement, covered
by that policy, on terms with respect to coverage and amounts no less favorable
than those of the policy in effect on the date of the merger agreement (provided
that in satisfying this obligation, Johnson & Johnson is not required to pay
more than $3,000,000 in the aggregate to obtain such coverage). In the event
such coverage cannot be obtained for $3,000,000 or less in the aggregate,
Johnson & Johnson will be obligated to provide such coverage as may be obtained
for such $3,000,000 aggregate amount.

EMPLOYEE BENEFITS MATTERS

     The merger agreement provides that, subject to applicable collective
bargaining agreements, for a period of not less than twelve months following the
completion of the merger, our employees who remain in the employment of the
surviving corporation and its subsidiaries (whom we refer to as "continuing
employees") will receive employee benefits that are substantially comparable in
the aggregate to the employee benefits provided to our employees immediately
prior to the completion of the merger. However, neither Johnson & Johnson nor
the surviving corporation nor any of their subsidiaries will have any obligation
to issue, or adopt any plans or arrangements providing for the issuance of,
shares of capital stock, warrants, options, stock appreciation rights or other
rights in respect of any shares of capital stock of any entity or any securities
convertible or exchangeable into such shares pursuant to any such plans or
arrangements, and none of our plans or arrangements providing for issuance of
shares will be taken into account in determining whether employee benefits are
substantially comparable in the aggregate.

                                        35
<PAGE>

     In addition, for a period of not less than twelve months following the
completion of the merger, the continuing employees will receive immigration
benefits generally comparable to those provided to our employees as of the date
of the merger agreement as disclosed to Johnson & Johnson.

     Johnson & Johnson will cause the surviving corporation to recognize the
service of each continuing employee as if such service had been performed with
Johnson & Johnson as follows:

     - for purposes of vesting (but not benefit accrual) under Johnson &
       Johnson's defined benefit pension plan;

     - for purposes of eligibility for vacation under Johnson & Johnson's
       vacation program;

     - for purposes of eligibility and participation under any health or welfare
       plan maintained by Johnson & Johnson (other than any post-employment
       health or post-employment welfare plan); and

     - unless covered under another arrangement with us, for benefit accrual
       purposes under Johnson & Johnson's severance plan;

but solely to the extent that Johnson & Johnson makes such plan or program
available to employees of the surviving corporation, and not for purposes of any
other employee benefit plan of Johnson & Johnson.

     In addition, subject to applicable collective bargaining agreements, with
respect to any welfare plan maintained by Johnson & Johnson in which continuing
employees are eligible to participate after the completion of the merger,
Johnson & Johnson will, and will cause the surviving corporation to:

     - waive all limitations as to preexisting conditions and exclusions with
       respect to participation and coverage requirements applicable to such
       employees to the extent such conditions and exclusions were satisfied or
       did not apply to such employees under our welfare plans prior to the
       completion of the merger; and

     - provide each continuing employee with credit for any co-payments and
       deductibles paid prior to the completion of the merger in satisfying any
       analogous deductible or out-of-pocket requirements to the extent
       applicable under any such plan.

     Nothing in the merger agreement requires Johnson & Johnson or the surviving
corporation to continue any specific plans or to continue the employment of any
specific person.

EFFORTS TO CONSUMMATE THE MERGER

     Each party agrees to use its commercially reasonable efforts to do all
things necessary, proper or advisable, in the most expeditious manner
practicable, to complete and make effective the merger and other transactions
described in the merger agreement and the stockholder agreement, including using
commercially reasonable efforts to accomplish the following:

     - the taking of all acts necessary to cause the conditions to closing to be
       satisfied as promptly as practicable;

     - the obtaining of all necessary actions or nonactions, waivers, consents
       and approvals from governmental entities and the making of all necessary
       registrations and filings (including filings with governmental entities)
       and the taking of all necessary steps to obtain an approval or waiver
       from, or avoid an action or proceeding by, any governmental entity; and

     - the obtaining of all necessary consents, approvals or waivers from third
       parties (subject to certain exceptions).

     In addition, we will take all actions necessary to ensure that no state
takeover statute or similar statute or regulation is or becomes applicable to
the merger agreement, the stockholder agreement, the merger or any of the
transactions described in the merger agreement or the stockholder agreement, and
if a state takeover statute or similar statute becomes applicable, we will take
all necessary actions to ensure that the merger and the other transactions
described in the merger agreement and the stockholder

                                        36
<PAGE>

agreement may be completed as promptly as practicable. Nothing in the merger
agreement, however, requires Johnson & Johnson to agree to, or proffer to,
divest or hold separate any assets or any portion of any business of Johnson &
Johnson, any portion of our assets or business or any portion of the assets or
business of our or their subsidiaries.

CONDITIONS TO THE COMPLETION OF THE MERGER

     Each party's obligation to effect the merger is subject to the satisfaction
or waiver of various conditions which include, in addition to other customary
closing conditions, the following:

     - the merger agreement has been adopted by the affirmative vote of
       stockholders holding a majority of the shares of our common stock
       outstanding and entitled to vote at the special meeting;

     - the waiting period applicable to the merger under the Hart-Scott-Rodino
       Antitrust Improvements Act of 1976, as amended, has expired or has been
       terminated; and

     - no restraining order, injunction or other court order or statute, law,
       rule, legal restraint or prohibition is in effect that (1) prevents the
       completion of the merger, or (2) has had or would reasonably be expected
       to have a material adverse effect on us.

     Each party's obligation to effect the merger is further subject to the
satisfaction or waiver of the following additional condition:

     - the other party to the merger agreement has performed in all material
       respects all agreements and covenants required to be performed by it
       under the merger agreement on or prior to the date on which the merger is
       to become effective.

     Johnson & Johnson's obligation to effect the merger is further subject to
satisfaction or waiver of the following additional conditions:

     - our representations and warranties set forth in the merger agreement that
       are qualified as to materiality are true and correct, and such
       representations and warranties to the extent that they are not so
       qualified are true and correct in all material respects, in each case as
       of the date of the merger agreement and as of the closing date of the
       merger as though made on the closing date, except to the extent that such
       representations and warranties expressly relate to an earlier date, in
       which case, as of such earlier date;

     - there is no pending or threatened suit, action or proceeding by any
       governmental entity, or by any other person having a reasonable
       likelihood of prevailing in a manner contemplated in clauses (1), (2) or
       (3) below, (1) challenging the acquisition by Johnson & Johnson or
       Longbow Merger Sub, Inc. of any shares of our common stock, seeking to
       restrain or prohibit the completion of the merger, or seeking to place
       limitations on the ownership of shares of our common stock, or shares of
       common stock of the surviving corporation, by Johnson & Johnson or
       Longbow Merger Sub, Inc. or seeking to obtain from us, Johnson & Johnson
       or Longbow Merger Sub, Inc. any damages that are material in relation to
       us, (2) seeking to prohibit or materially limit the ownership or
       operation by us, Johnson & Johnson or our or their subsidiaries of any
       portion of our or their respective businesses or assets, or to compel us,
       Johnson & Johnson or any of our or their subsidiaries to divest or hold
       separate any portion of our or their businesses or assets, as a result of
       the merger, (3) seeking to prohibit Johnson & Johnson or any of its
       subsidiaries from effectively controlling in any material respect our
       business or operations or (4) otherwise having or being reasonably
       expected to have, a material adverse effect;

     - there is no restraining order, injunction or other court order or
       statute, law, rule, legal restraint or prohibition that would reasonably
       be expected to result in any of the effects described in the immediately
       preceding bullet point;

                                        37
<PAGE>

     - no fewer than 80% of the employees specified in the merger agreement are
       actively employed in scientific and/or technical capacities by us on the
       closing date; and

     - Johnson & Johnson has received satisfactory evidence that Johnson &
       Johnson or we have obtained all consents, approvals, authorizations,
       qualifications and orders of third parties required in connection with
       the merger agreement and the transactions described in the merger
       agreement, including (1) certain specified consents and (2) consents to
       assignments of material contracts and material intellectual property
       rights except for those the failure of which to be obtained individually
       or in the aggregate would not reasonably be expected to restrain or
       prohibit the completion of the merger or prohibit or limit in any
       material respect the ownership or operation or effective control by
       Johnson & Johnson of any portion of our and our subsidiaries' business or
       assets, taken as a whole.

     The merger agreement provides that a "material adverse effect" on us means
any change, effect, event, occurrence, state of facts or development or
developments which individually or in the aggregate would reasonably be expected
to result in any change or effect that (1) is materially adverse to the
business, financial condition, properties, assets, liabilities (contingent or
otherwise) or results of operations of us and our subsidiaries taken as a whole,
or (2) would reasonably be expected to prevent or materially impede, interfere
with, hinder or delay our completion of the merger or the other transactions
contemplated by the merger agreement, in each case, subject to specified
guidelines of interpretation and subject further to the limitation that none of
the following will be deemed, either alone or in combination, to constitute, and
none of the following will be taken into account in determining whether there
has been or will be, a material adverse effect:

     - any change relating to the United States economy or securities markets in
       general;

     - any failure, in and of itself, by us to meet any internal or published
       projections, forecasts, or revenue or earnings predictions for any period
       ending on or after the date of the merger agreement (although the facts
       or occurrences giving rise or contributing to such failure may be deemed
       to constitute, or be taken into account in determining whether there has
       been or will be a material adverse effect); and

     - any adverse change, effect, event, occurrence, state of facts or
       development reasonably attributable to the conditions affecting the
       industry in which we participate, other than as may arise or result from
       regulatory action by a governmental entity, so long as the effects do not
       disproportionately impact us.

     Our obligation to effect the merger is further subject to satisfaction or
waiver of the following additional condition:

     - the representations and warranties of Johnson & Johnson and Longbow
       Merger Sub, Inc. set forth in the merger agreement that are qualified as
       to materiality are true and correct, and the representations of Johnson &
       Johnson and Longbow Merger Sub, Inc. set forth in the merger agreement
       that are not so qualified are true and correct in all material respects,
       in each case as of the date of the merger agreement and as of the closing
       date of the merger as though made on the closing date, except to the
       extent such representations and warranties expressly relate to an earlier
       date, in which case as of such earlier date.

     We can provide no assurance that all of the conditions precedent to the
merger will be satisfied or waived by the party permitted to do so. We cannot at
this point determine whether the waiver of any particular condition would
materially change the terms of the merger. If we determine that a waiver of a
condition would materially change the terms of the merger or otherwise be
required by applicable law, we will resolicit proxies. In making our
determination of whether the waiver of a particular condition would materially
change the terms of the merger, we would consider, among other factors:

     - the reasons for the waiver;

     - the effect of the waiver on the terms of the merger;

                                        38
<PAGE>

     - whether the requirement being waived was necessary in order to make the
       transaction fair to our stockholders from a financial point of view; and

     - the availability of alternative transactions to us and our prospects as
       an independent entity.

NO SOLICITATION

     The merger agreement provides that we will not, nor will we authorize or
permit any of our subsidiaries or our or their directors, officers, or employees
or any investment banker, financial advisor, attorney, accountant or other
advisor or representative retained by us or any of our subsidiaries to, directly
or indirectly:

     - solicit, initiate or knowingly encourage, or take any other action
       designed to, or which would reasonably be expected to, facilitate, any
       takeover proposal, as described below; or

     - enter into, continue or otherwise participate in any discussions or
       negotiations regarding, or furnish to any person any information, or
       otherwise cooperate in any way with, any takeover proposal.

     The merger agreement provides that, notwithstanding the restrictions
described above, if at any time prior to the time that our stockholders approve
the adoption of the merger agreement:

     - we receive a bona fide written takeover proposal that our board of
       directors determines in good faith, after consultation with outside
       counsel and a financial advisor of nationally recognized reputation,
       constitutes or would reasonably be expected to lead to a superior
       proposal, as described below, and

     - the takeover proposal was not solicited after the date of the merger
       agreement, was made after the date of the merger agreement and did not
       otherwise result from our breach of the merger agreement,

we may, if our board of directors determines in good faith, after consultation
with outside counsel, that it is required to do so in order to comply with its
fiduciary duties to our stockholders under applicable law, and, subject to
providing written notice of our decision to do so to Johnson & Johnson:

     - furnish, under a customary confidentiality agreement, information about
       us to the person making such superior proposal; and

     - participate in discussions or negotiations regarding such superior
       proposal.

     The merger agreement provides that:

     - the term "takeover proposal" means any inquiry, proposal or offer from
       any person relating to, or that would reasonably be expected to lead to,
       any direct or indirect acquisition or purchase, in one transaction or a
       series of transactions, of assets or businesses that constitute 15% or
       more of our revenues, net income or assets, taken as a whole, or 15% or
       more of any class of our equity securities, any tender offer or exchange
       offer that if completed would result in any person beneficially owning
       15% or more of any class of our equity securities or the equity
       securities of our subsidiaries, or any merger, consolidation, business
       combination, recapitalization, liquidation, dissolution, joint venture,
       binding share exchange or similar transaction involving us or our
       subsidiaries pursuant to which any person or the shareholders of any
       person would own 15% or more of any class of our equity securities or the
       equity securities or our subsidiaries or of any resulting parent company
       of us, other than the transactions contemplated by the merger agreement
       and the stockholder agreement; and

     - the term "superior proposal" means a bona fide offer made by a third
       party that if completed would result in the third party (or its
       stockholders) owning, directly or indirectly, all or substantially all of
       (A) our common stock then outstanding, (B) common stock of the surviving
       entity in a merger or the direct or indirect parent of the surviving
       entity in a merger, or (C) our assets, in each case, which our board of
       directors determines in good faith (after consultation with a financial
       advisor of

                                        39
<PAGE>

       nationally recognized reputation) to be (1) more favorable to our
       stockholders from a financial point of view than the merger, taking into
       account all the terms and conditions of such proposal as compared to the
       merger agreement (including any changes to the financial terms of the
       merger agreement proposed by Johnson & Johnson in response to such offer
       or otherwise), and (2) reasonably capable of being completed, taking into
       account all financial, legal, regulatory and other aspects of such
       proposal.

     The merger agreement further provides that neither our board of directors
nor any committee of our board of directors will:

     - withdraw (or modify in a manner adverse to Johnson & Johnson), or
       publicly propose to withdraw (or modify in a manner adverse to Johnson &
       Johnson), the approval, recommendation or declaration of advisability by
       our board of directors or such committee of our board of directors of the
       merger agreement, the merger or the other transactions contemplated by
       the merger agreement; or recommend, adopt or approve, or propose publicly
       to recommend, adopt or approve, any takeover proposal (any such action
       being a "Company Adverse Recommendation Change"); or

     - approve or recommend, or propose to approve or recommend, or allow us or
       any of our subsidiaries to execute or enter into, any letter of intent,
       memorandum of understanding, agreement in principle, merger agreement,
       acquisition agreement, option agreement, joint venture agreement,
       partnership agreement or other similar agreement constituting or related
       to, or that is intended to or would reasonably be expected to lead to,
       any takeover proposal, other than a customary confidentiality agreement
       to facilitate the disclosure of information about us to any person making
       a superior proposal, as described above.

     However, at any time prior to the time stockholder approval is obtained,
our board of directors may make a Company Adverse Recommendation Change if it
determines in good faith (after consultation with outside counsel) that it is
required to do so in order to comply with its fiduciary duties to our
stockholders under applicable law provided, however, that before doing so, our
board of directors is required to give Johnson & Johnson four business days
prior written notice (which notice must state the reasons for the change,
including the terms and conditions of any superior proposal that is the basis of
the proposed action by our board of directors), and is required to take into
account any changes to the financial terms of the merger agreement proposed by
Johnson & Johnson in response to such notice or otherwise before making a
Company Adverse Recommendation Change.

     If our board of directors, or any committee of our board of directors,
makes a Company Adverse Recommendation Change, Johnson & Johnson is entitled to
terminate the merger agreement. If Johnson & Johnson terminates the merger
agreement in this circumstance, we must pay Johnson & Johnson a fee in the
amount of $5,480,000. See "-- Termination" and "-- Fees and Expenses".

TERMINATION

     The merger agreement may be terminated at any time prior to the effective
time of the merger, regardless of whether our stockholders have approved the
adoption of the merger agreement:

     - by mutual written consent of Johnson & Johnson, Longbow Merger Sub, Inc.
       and us;

     - by either Johnson & Johnson or us if the merger has not been completed on
       or before June 15, 2003; provided, however, that this right to terminate
       the merger agreement is not available to any party whose breach of a
       representation or warranty or whose action or failure to act has been a
       principal cause of or resulted in the failure of the merger to be
       completed on or before June 15, 2003;

                                        40
<PAGE>

     - by either Johnson & Johnson or us if any restraining order, injunction or
       other court order or statute, law, rule, legal restraint or prohibition:

      - prevents the completion of the merger, or

      - has had or would reasonably be expected to have a material adverse
        effect on us is in effect and has become final and nonappealable;

     - by either Johnson & Johnson or us, if our stockholders do not approve the
       adoption of the merger agreement at the special meeting, or at any
       adjournment or postponement thereof;

     - by Johnson & Johnson if we have breached or failed to perform any of our
       representations, warranties, covenants or agreements set forth in the
       merger agreement, if the breach or failure to perform:

      - would give rise to the failure of the closing conditions relating to our
        representations and warranties, and our covenants or agreements
        described under the caption "-- Conditions to the Completion of the
        Merger", and

      - is incapable of being cured by us within 30 calendar days following
        receipt of written notice of such breach or failure to perform from
        Johnson & Johnson;

     - by Johnson & Johnson, if a restraining order, injunction or other court
       order or statute, law, rule, legal restraint or prohibition:

      - challenging the acquisition by Johnson & Johnson or Longbow Merger Sub,
        Inc. of any shares of our common stock, seeking to restrain or prohibit
        the completion of the merger, or seeking to place limitations on the
        ownership of shares of our common stock (or shares of common stock of
        the surviving corporation) by Johnson & Johnson or Longbow Merger Sub,
        Inc., or seeking to obtain from Johnson & Johnson, Longbow Merger Sub,
        Inc., or us any damages that are material in relation to us,

      - seeking to prohibit or materially limit the ownership or operation by us
        or Johnson & Johnson, or our or their subsidiaries, of any portion of
        our or their respective businesses or assets or to compel us, Johnson &
        Johnson, or our or their subsidiaries, to divest or hold separate any
        portion of our or their respective businesses or assets, as a result of
        the merger,

      - seeking to prohibit Johnson & Johnson or its subsidiaries from
        effectively controlling in any material respect our business or
        operations or that of any of our subsidiaries or

      - otherwise having, or being reasonably expected to have, a material
        adverse effect is in effect and has become final and nonappealable;

     - by us, if Johnson & Johnson has breached or failed to perform any of its
       representations, warranties, covenants or agreements set forth in the
       merger agreement, if the breach or failure to perform:

      - gives rise to the failure of the closing conditions relating to Johnson
        & Johnson's representations and warranties, and covenants or agreements
        described under the caption "-- Conditions to the Completion of the
        Merger", and

      - is incapable of being cured by Johnson & Johnson within 30 calendar days
        following receipt of written notice of such breach or failure to perform
        from us; or


     - by Johnson & Johnson, in the event that prior to the obtaining of
       stockholder approval, our board of directors:



      - or any committee of our board of directors withdraws (or modifies in a
        manner adverse to Johnson & Johnson), or publicly proposes to withdraw
        (or modify in a manner adverse to Johnson & Johnson), the approval,
        recommendation or declaration of advisability of the merger agreement,
        the merger or the other transactions contemplated by the merger
        agreement,

                                        41
<PAGE>


      - or any committee of our board of directors recommends, adopts or
        approves, or proposes publicly to recommend, adopt or approve, any
        takeover proposal, or


      - fails publicly to reaffirm its recommendation of the merger agreement,
        the merger or the other transactions contemplated by the merger
        agreement within ten business days of receipt of a written request by
        Johnson & Johnson to provide such reaffirmation following a takeover
        proposal.

AMENDMENT, EXTENSION AND WAIVER

     Subject to applicable law:

     - the merger agreement may be amended by mutual consent of the parties in
       writing at any time, except that after the merger agreement has been
       adopted by our stockholders, no amendment may be entered into which
       requires approval by such stockholders unless such further approval is
       obtained; and

     - at any time prior to the effective time of the merger, a party may, by
       written instrument signed on behalf of such party, extend the time for
       performance of the obligations of any other party to the merger
       agreement, waive inaccuracies in representations and warranties of any
       other party contained in the merger agreement or in any related document
       and waive compliance by any other party with any agreement or condition
       in the merger agreement.

FEES AND EXPENSES

     The merger agreement generally provides that each party will pay its own
fees and expenses in connection with the merger agreement and the transactions
described in the merger agreement, whether or not the merger is completed.
However, we must pay Johnson & Johnson a $5,480,000 termination fee if:


     - the merger agreement is terminated by Johnson & Johnson pursuant to its
       right described in the last major bullet point under the heading
       "-- Termination"; or



     - prior to obtaining stockholder approval, we or our stockholders receive a
       takeover proposal or a takeover proposal otherwise becomes publicly known
       or any person publicly announces an intention, whether or not
       conditional, to make a takeover proposal, the merger agreement is
       terminated by either Johnson & Johnson or us because either (1) the
       outside date has been reached without a vote in respect of the adoption
       of the merger agreement having been taken at the special meeting of our
       stockholders or (2) our stockholders have not adopted the merger
       agreement at the special meeting and, within twelve months after such
       termination, we complete, or enter into a definitive agreement to
       complete, the transactions described in any takeover proposal.


                                        42
<PAGE>

                             STOCKHOLDER AGREEMENT

     The following description summarizes the material provisions of the
stockholder agreement and is qualified in its entirety by reference to the
complete text of the stockholder agreement. The stockholder agreement included
in this proxy statement as Annex B contains the complete terms of that agreement
and stockholders should read it carefully and in its entirety.

VOTING ARRANGEMENTS AND RELATED PROVISIONS


     In connection with the execution of the merger agreement, certain of our
directors, executive officers and other stockholders affiliated with certain of
these executive officers entered into a stockholder agreement with Johnson &
Johnson. These directors, executive officers and other stockholders have agreed
to vote shares of our common stock (together representing approximately 33% of
the outstanding shares of our common stock as of the record date) in favor of
the adoption of the merger agreement, the approval of the merger and the
approval of the other transactions described in the merger agreement.


     Each of these stockholders also agreed to vote these shares of our common
stock held by that stockholder against the following actions:

     - any merger agreement or merger or similar transaction or takeover
       proposal as described in "The Merger Agreement -- No Solicitation"; and

     - any amendment to our restated certificate of incorporation or bylaws or
       any other proposed action or transaction that would impede, frustrate,
       prevent or nullify the merger, the merger agreement or the transactions
       described in the merger agreement.

     In connection with the stockholder agreement, the stockholders further
agreed not to:

     - sell, transfer, pledge, assign or otherwise dispose of these shares of
       our common stock or enter into any contract or other arrangement with
       respect to the sale, transfer, pledge, assignment or disposition of these
       shares of our common stock provided, however, such shares may be sold,
       transferred or assigned by the stockholders who are members of our
       management to members of such stockholder's family or family trust or to
       a charitable institution if the transferee agrees to be bound by the
       terms of the stockholder agreement;

     - enter into voting arrangements whether by proxy, voting agreement or
       otherwise with respect to these shares of our common stock;

     - solicit, initiate, encourage or otherwise facilitate, any inquiries or
       the making of any proposal that constitutes or would reasonably be
       expected to lead to a takeover proposal, as described in "The Merger
       Agreement -- No Solicitation", or enter into any agreement, or engage in
       or continue any discussions, or furnish any information with respect to,
       a takeover proposal; or

     - exercise any rights of appraisal or dissent.

     Each of the parties to the stockholder agreement has irrevocably granted
to, and appointed Johnson & Johnson and Tom Heyman, Michael Jackson and John T.
Crisan, in their respective capacities as officers or authorized representatives
of Johnson & Johnson and any individual who succeeds any of them, and each of
them individually, and any individual designated in writing by any of them, as
that party's proxy and attorney-in-fact to vote, or grant a consent with respect
to, that party's shares of our common stock which are subject to the stockholder
agreement in favor of the adoption and approval of the merger agreement and the
merger and the other transactions described therein and against certain
alternative transactions.

TERMINATION

     The stockholder agreement generally terminates on the earlier of the
effective date of the merger, the date of termination of the merger agreement
or, at the option of any stockholder, any amendment, modification, change or
waiver to the merger agreement subsequent to the date of the stockholder
agreement that results in any decrease in the price to be paid per share for
each share of our common stock.

                                        43
<PAGE>

                             PRINCIPAL STOCKHOLDERS


     The following table identifies the stockholders, other than our directors
and executive officers, that are known to us to be the beneficial owners of 5%
or more of the common stock. Unless otherwise indicated, the information is as
of February 21, 2003. For purposes of this table, and as used elsewhere in this
proxy statement, the term "beneficial owner" means any person who, directly or
indirectly, has or shares the power to vote, or to direct the voting of, a
security or the power to dispose, or to direct the disposition of, a security or
has the right to acquire shares within sixty (60) days. Except as otherwise
indicated, we believe that each owner listed below exercises sole voting and
dispositive power over its shares.



<Table>
<Caption>
                                                              AMOUNT AND NATURE OF   PERCENT OF THE
NAME AND ADDRESS OF BENEFICIAL OWNER                          BENEFICIAL OWNERSHIP    COMMON STOCK
------------------------------------                          --------------------   --------------
<S>                                                           <C>                    <C>
Funds Affiliated with HealthCare Ventures(1)................       5,301,520              23.46%
  44 Nassau Street
  Princeton, New Jersey 08542

Rho Capital Partners, Inc.(2)...............................       2,666,407              11.75%
  152 West 57th Street
  New York, NY 10019

Biotech Growth S.A.(3)......................................       2,850,485              12.62%
  c/o Bellevue Asset Management AG
  Graftenauweg 4
  CH-6301 Zug
  Switzerland

Funds Affiliated with Biotechnology Value Fund(4)...........       2,011,625               8.90%
  227 West Monroe Street, Suite 4800
  Chicago, Illinois 60606

Abingworth Bioventures SICAV, in liquidation(5).............       1,335,327               5.91%
  231 Val des Bons Malades, L-2121
  Luxembourg-Kirchberg, Luxembourg
</Table>


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


(1) This amount is reflected in a report on Schedule 13G/A that was filed on
    February 7, 2003 by HealthCare Ventures III, L.P. ("HCV III"), HealthCare
    Partners III, L.P. ("HCP III"), HealthCare Ventures IV, L.P. ("HCV IV"),
    HealthCare Partners IV, L.P. ("HCP IV"), HealthCare Ventures V, L.P. ("HCV
    V"), HealthCare Partners V, L.P. ("HCP V"), HealthCare Ventures VI, L.P.
    ("HCV VI"), HealthCare Partners VI, L.P. ("HCP VI"), James H. Cavanaugh,
    Ph.D and Messrs. Harold R. Werner, John W. Littlechild, William Crouse,
    Christopher Mirabelli, Ph.D., Augustine Lawlor, and Eric Aguiar, Ph.D.,
    includes 5,301,520 shares as to which Dr. Cavanaugh and Messrs. Werner,
    Crouse, and Littlechild claim shared voting and dispositive power, 3,182,313
    shares to which HCV III and HCP III claim shared voting and dispositive
    power, 1,184,685 shares as to which Dr. Mirabelli and Mr. Lawler claim
    shared voting and dispositive power, 934,522 shares as to which HCV IV and
    HCP IV, claim shared voting and dispositive power, 819,595 shares as to
    which HCV VI, HCP VI and Dr. Aguiar claim shared voting and dispositive
    power and 365,090 shares as to which HCV V and HCP V claim shared voting and
    dispositive power. None of the reporting persons claim sole voting or
    dispositive power.


(2) This amount, which is reflected in a report on Schedule 13G/A that was filed
    on February 13, 2002 with respect to ownership as of December 31, 2001 by
    Rho Capital Partners, Inc., Joshua Ruch, Habib Kairouz, and Mark Leschly,
    includes 101,828 shares issuable upon the exercise of warrants. Joshua Ruch,
    Habib Kairouz and Mark Leschly are the shareholders of Rho Capital Partners,
    Inc., financial advisor to Rho Management Trust II, and Mr. Ruch is also the
    Chairman and Chief Executive Officer. The reporting persons claim shared
    voting and dispositive power over all of the shares. Mr. Ruch claims sole
    voting and dispositive power with regard to 21,008 shares of common stock
    and an additional 2,500 shares of common stock issuable upon the exercise of
    stock options

                                        44
<PAGE>

    exercisable within 60 days. Mr. Ruch, Mr. Kairouz, and Mr. Leschly disclaim
    beneficial ownership of such shares except to the extent of their pecuniary
    interest therein.


(3) This amount is reflected in a report on Schedule 13G/A that was filed on
    February 14, 2003 with respect to ownership as of December 31, 2002 by BB
    Biotech AG, on behalf of Biotech Growth N.V. Biotech Growth N.V. is a wholly
    owned subsidiary of BB Biotech AG. BB Biotech AG and Biotech Growth N.V.
    claim shared voting and dispositive power over all of the shares.



(4) This amount is reflected in a report on Schedule 13G that was filed on
    February 12, 2003 by Biotechnology Value Fund, L.P. ("BVF"), Biotechnology
    Value Fund II, L.P. ("BVF2"), BVF Investments, L.L.C. ("Investments"), BVF
    Partners, L.P. ("Partners") and BVF Inc. ("BVF Inc."). Partners and BVF Inc.
    claim shared voting and dispositive power over all of the 2,011,625 shares
    included in the report, which includes not only shared voting and
    dispositive power over the shares held by BVF, BVF2 and Investments, but
    also shared voting and dispositive power over 72,240 shares held in managed
    accounts, on whose behalf Partners, as investment manager, purchased the
    shares. Of the 2,011,625 shares included in the report, BVF claims shared
    voting and dispositive power over 618,325 shares, BVF2 claims shared voting
    and dispositive power over 403,200 shares and Investments claims shared
    voting and dispositive power over 917,860 shares. None of the reporting
    persons claim sole voting or dispositive power.



(5) This amount is reflected in a report on Schedule 13G/A that was filed on
    February 11, 2003 with respect to ownership as of December 31, 2002 by
    Abingworth Bioventures SICAV, in liquidation ("Abingworth SICAV"),
    Abingworth Bioventures III A L.P. ("Abingworth III A"), Abingworth
    Bioventures III B L.P. ("Abingworth III B"), Abingworth Bioventures III C
    L.P. ("Abingworth III C") and Abingworth Bioventures III Executives L.P.
    ("Abingworth III Executives"). Abingworth SICAV claims sole voting and
    dispositive power over 1,040,327 shares and no shared voting or dispositive
    power. Abingworth III A claims sole voting and dispositive power over
    148,090 shares and no shared voting or dispositive power. Abingworth III B
    claims sole voting and dispositive power over 90,400 shares and no shared
    voting or dispositive power. Abingworth III C claims sole voting and
    dispositive power over 54,150 shares and no shared voting or dispositive
    power. Abingworth III Executives claim sole voting and dispositive power
    over 2,360 shares and no shared voting or dispositive power.


                                        45
<PAGE>

                          STOCK OWNERSHIP OF DIRECTORS
                             AND EXECUTIVE OFFICERS


     The following table and notes set forth information, as of February 21,
2003 (except as specified below), with respect to the beneficial ownership of
shares of common stock by each of our directors and executive officers and, as a
group, based upon information furnished to us by such persons. Except as
otherwise indicated, we believe that each beneficial owner listed below
exercises sole voting and dispositive power.



<Table>
<Caption>
                                                              AMOUNT OF BENEFICIAL OWNERSHIP AS
                                                                     OF FEBRUARY 21, 2003
                                                              ----------------------------------
                                                               NUMBER OF      PERCENTAGE OF THE
NAME OF BENEFICIAL OWNER                                         SHARES         COMMON STOCK
------------------------                                      ------------   -------------------
<S>                                                           <C>            <C>
David C. U'Prichard, Ph.D.(1)...............................     649,618              2.83%
F. Raymond Salemme, Ph.D.(2)................................     554,444              2.43%
James H. Cavanaugh, Ph.D.(3)................................   5,304,020             23.47%
Zola P. Horovitz, Ph.D.(4)..................................      23,463                 *
David R. King(5)............................................      15,643                 *
Joshua Ruch(6)..............................................   2,689,915             11.85%
Harold R. Werner(7).........................................   5,301,520             23.46%
William Claypool, M.D.(8)...................................       6,250                 *
John M. Gill(9).............................................      54,500                 *
Roger F. Bone, Ph.D.(10)....................................     114,826                 *
Scott M. Horvitz(11)........................................     108,867                 *
Melinda Rudolph(12).........................................      18,750                 *
All directors and executive officers as a group (12
  persons)(13)..............................................   9,540,296             40.48%
</Table>


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

  *  Less than one percent (1%).


 (1) Includes 394,834 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days. Upon consummation of the merger,
     109,354 shares of unvested stock options owned by Dr. U'Prichard, which are
     not currently exercisable within 60 days of February 21, 2003, but have
     exercise prices that are below the per share merger consideration, will
     automatically vest.



 (2) Includes 255,430 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days. Also includes 140,625 shares held by a
     trust, with respect to which Dr. Salemme exercises shared voting and
     dispositive power.


 (3) Includes 5,301,520 shares of common stock held by the funds affiliated with
     HealthCare Ventures. See note 1 to the table under "Principal
     Stockholders". Includes 2,500 shares of common stock issuable upon the
     exercise of stock options within 60 days.


 (4) Includes 20,677 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days. Upon consummation of the merger, 893
     shares of unvested stock options owned by Dr. Horovitz, which are not
     currently exercisable within 60 days of February 21, 2003, but have
     exercise prices that are below the per share merger consideration, will
     automatically vest.


 (5) Includes 2,500 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days. Also includes 9,572 shares with respect
     to which Mr. King exercises shared voting and dispositive power with his
     spouse.

 (6) Includes 2,666,407 shares of common stock held by Rho Capital Partners,
     Inc. See note 2 to the table under "Principal Stockholders". Includes 2,500
     shares of common stock issuable upon the exercise of stock options within
     60 days.

 (7) All 5,301,520 shares of common stock are held by the funds affiliated with
     HealthCare Ventures. See note 1 to the table under "Principal
     Stockholders".

                                        46
<PAGE>

 (8) Includes 6,250 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days.

 (9) Includes 54,500 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days.


(10) Includes 59,647 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days.



(11) Includes 55,296 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days.


(12) Includes 18,750 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days.


(13) Includes 872,884 shares of common stock issuable upon the exercise of stock
     options exercisable within 60 days.


                                 OTHER MATTERS

     As of the date of this proxy statement, we know of no matters that will be
presented for consideration at the special meeting other than as described in
this proxy statement.

                          FUTURE STOCKHOLDER PROPOSALS


     Our 2003 annual meeting of stockholders is not yet scheduled to take place.
We will hold the 2003 annual meeting of our stockholders only if the merger is
not completed. The deadline for submission of stockholder proposals for
inclusion in our proxy materials for the 2003 annual meeting was December 18,
2002. If we do not receive notice of any non-Rule 14a-8 matter that a
stockholder wishes to raise at our 2003 annual meeting of stockholders by March
3, 2003, the proxy holder will retain discretionary authority to vote proxies on
such matters if they are raised at our 2003 annual meeting of stockholders.


               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     The information contained in this proxy statement contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements include statements about our
ability to complete the merger.

     When used in this proxy statement, we intend the words "may", "believe",
"anticipate", "plan", "expect", "predict", "estimate", "require", "intend" and
similar words to identify "forward-looking statements". These forward-looking
statements involve risks, uncertainties and other factors that may cause our
actual results, performance or achievements, to be far different from that
suggested by our forward-looking statements. Such risks and uncertainties
include our inability to complete the merger and the other risks and factors
identified from time to time in reports we file with the Securities and Exchange
Commission or in public statements issued by us. You should not place undue
reliance on our forward-looking statements. We disclaim any obligation to update
any of these factors or to publicly announce the results of any revisions to any
of these forward-looking statements, and we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.

                   WHERE YOU CAN FIND ADDITIONAL INFORMATION

     We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the SEC at the SEC's facilities located at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 or at the
offices of the National Association of Securities Dealers, Inc. located at 1735
K Street, N.W., Washington, D.C. 20006. Please call the SEC at 1-800-SEC-0330
for further information on the SEC's public reference rooms. Our SEC filings
also are available to the public at the SEC's website at http://www.sec.gov.

                                        47
<PAGE>


     THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH PROXY SOLICITATION IN SUCH JURISDICTION. YOU SHOULD RELY ONLY ON THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT
IS DATED FEBRUARY 27, 2003. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE
MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION
TO THE CONTRARY.


     THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.

                                        48
<PAGE>

                                                                         ANNEX A

                                                                  EXECUTION COPY

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

                          AGREEMENT AND PLAN OF MERGER

                          DATED AS OF JANUARY 15, 2003

                                     AMONG

                               JOHNSON & JOHNSON,

                            LONGBOW MERGER SUB, INC.

                                      AND

                      3-DIMENSIONAL PHARMACEUTICALS, INC.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                       A-1
<PAGE>

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                              PAGE
                                                                              ----
<S>             <C>                                                           <C>
                                    ARTICLE I
                                    THE MERGER

SECTION 1.01    The Merger..................................................   A-4
SECTION 1.02    Closing.....................................................   A-4
SECTION 1.03    Effective Time..............................................   A-4
SECTION 1.04    Effects of the Merger.......................................   A-5
SECTION 1.05    Certificate of Incorporation and By-laws....................   A-5
SECTION 1.06    Directors...................................................   A-5
SECTION 1.07    Officers....................................................   A-5

                                    ARTICLE II
                 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
                CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

SECTION 2.01    Effect on Capital Stock.....................................   A-5
SECTION 2.02    Exchange of Certificates....................................   A-6

                                   ARTICLE III
                          REPRESENTATIONS AND WARRANTIES

SECTION 3.01    Representations and Warranties of the Company...............   A-7
SECTION 3.02    Representations and Warranties of Parent and Sub............  A-25

                                    ARTICLE IV
                    COVENANTS RELATING TO CONDUCT OF BUSINESS

SECTION 4.01    Conduct of Business.........................................  A-26
SECTION 4.02    No Solicitation.............................................  A-29

                                    ARTICLE V
                              ADDITIONAL AGREEMENTS

SECTION 5.01    Preparation of the Proxy Statement; Stockholders' Meeting...  A-31
SECTION 5.02    Access to Information; Confidentiality......................  A-32
SECTION 5.03    Commercially Reasonable Efforts.............................  A-32
SECTION 5.04    Company Stock Options; Warrants.............................  A-33
SECTION 5.05    Indemnification, Advancement of Expenses, Exculpation and
                Insurance...................................................  A-33
SECTION 5.06    Fees and Expenses...........................................  A-34
SECTION 5.07    Public Announcements........................................  A-35
SECTION 5.08    Stockholder Litigation......................................  A-35
SECTION 5.09    Employee Matters............................................  A-35
SECTION 5.10    Stockholder Agreement Legend................................  A-36
SECTION 5.11    Consents and Other Action...................................  A-36
</Table>

                                       A-2
<PAGE>

<Table>
<Caption>
                                                                              PAGE
                                                                              ----
<S>             <C>                                                           <C>
                                    ARTICLE VI
                               CONDITIONS PRECEDENT

SECTION 6.01    Conditions to Each Party's Obligation to Effect the
                Merger......................................................  A-36
SECTION 6.02    Conditions to Obligations of Parent and Sub.................  A-36
SECTION 6.03    Conditions to Obligation of the Company.....................  A-37
SECTION 6.04    Frustration of Closing Conditions...........................  A-38

                                   ARTICLE VII
                        TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01    Termination.................................................  A-38
SECTION 7.02    Effect of Termination.......................................  A-38
SECTION 7.03    Amendment...................................................  A-39
SECTION 7.04    Extension; Waiver...........................................  A-39
SECTION 7.05    Procedure for Termination or Amendment......................  A-39

                                   ARTICLE VIII
                                GENERAL PROVISIONS
SECTION 8.01    Nonsurvival of Representations
                and Warranties..............................................  A-39
SECTION 8.02    Notices.....................................................  A-39
SECTION 8.03    Definitions.................................................  A-40
SECTION 8.04    Interpretation..............................................  A-41
SECTION 8.05    Consents and Approvals......................................  A-41
SECTION 8.06    Counterparts................................................  A-41
SECTION 8.07.   Entire Agreement; No Third-Party Beneficiaries..............  A-41
SECTION 8.08    GOVERNING LAW...............................................  A-41
SECTION 8.09    Assignment..................................................  A-41
SECTION 8.10    Specific Enforcement; Consent to Jurisdiction...............  A-42
SECTION 8.11    Severability................................................  A-42
</Table>

<Table>
<S>         <C>
Annex I     Index of Defined Terms
Exhibit A   Restated Certificate of Incorporation of the Surviving
              Corporation
</Table>

                                       A-3
<PAGE>

     AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of January 15,
2003, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), LONGBOW
MERGER SUB, INC., a Delaware corporation and a wholly owned Subsidiary of Parent
("Sub"), and 3-DIMENSIONAL PHARMACEUTICALS, INC., a Delaware corporation (the
"Company").

     WHEREAS the Board of Directors of each of the Company and Sub has approved
and declared advisable, and the Board of Directors of Parent has approved, this
Agreement and the merger of Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of common stock, par value $.001 per share, of
the Company ("Company Common Stock"), other than (i) shares of Company Common
Stock directly owned by Parent, Sub or the Company and (ii) the Appraisal
Shares, will be converted into the right to receive $5.74 in cash;

     WHEREAS simultaneously with the execution and delivery of this Agreement
and as a condition to Parent's willingness to enter into this Agreement, Parent
and certain stockholders of the Company (the "Principal Stockholders") entered
into an agreement (the "Stockholder Agreement") pursuant to which the Principal
Stockholders agreed to vote, approve and adopt this Agreement and to take
certain other actions in furtherance of the consummation of the Merger upon the
terms and subject to the conditions set forth in the Stockholder Agreement; and

     WHEREAS Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.

     NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and subject to the
conditions set forth herein, the parties hereto agree as follows:

                                   ARTICLE I

                                   THE MERGER

     SECTION 1.01.  The Merger.  Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time. Following the Effective Time, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.

     SECTION 1.02.  Closing.  The closing of the Merger (the "Closing") will
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day after satisfaction or (to the extent
permitted by law) waiver of the conditions set forth in Article VI (other than
those conditions that by their terms are to be satisfied at the Closing, but
subject to the satisfaction or (to the extent permitted by law) waiver of those
conditions), at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York 10019, unless another time, date or place is
agreed to in writing by Parent and the Company; provided, however, that if all
the conditions set forth in Article VI shall not have been satisfied or (to the
extent permitted by law) waived on such second business day, then the Closing
shall take place on the first business day on which all such conditions shall
have been satisfied or (to the extent permitted by law) waived. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date".

     SECTION 1.03.  Effective Time.  Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the parties shall file
with the Secretary of State of the State of Delaware a certificate of merger
(the "Certificate of Merger") executed and acknowledged by the parties in
accordance with the relevant provisions of the DGCL and, as soon as practicable
on or after the Closing Date, shall make all other filings or recordings
required under the DGCL. The Merger shall become effective upon the filing of

                                       A-4
<PAGE>

the Certificate of Merger with the Secretary of State of the State of Delaware,
or at such later time as Parent and the Company shall agree and shall specify in
the Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").

     SECTION 1.04.  Effects of the Merger.  The Merger shall have the effects
set forth in Section 259 of the DGCL.

     SECTION 1.05.  Certificate of Incorporation and By-laws.  (a) The Ninth
Restated Certificate of Incorporation of the Company (the "Company Certificate")
shall be amended at the Effective Time to be in the form of Exhibit A and, as so
amended, such Company Certificate shall be the Restated Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.

     (b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.

     SECTION 1.06.  Directors.  The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

     SECTION 1.07.  Officers.  The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

                                   ARTICLE II

                EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
               CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

     SECTION 2.01.  Effect on Capital Stock.  At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Parent or Sub:

          (a) Capital Stock of Sub. Each issued and outstanding share of capital
     stock of Sub shall be converted into and become one validly issued, fully
     paid and nonassessable share of common stock, par value $0.01 per share, of
     the Surviving Corporation.

          (b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
     of Company Common Stock that is directly owned by the Company, Parent or
     Sub immediately prior to the Effective Time shall automatically be canceled
     and shall cease to exist, and no consideration shall be delivered in
     exchange therefor.

          (c) Conversion of Company Common Stock. Each share of Company Common
     Stock issued and outstanding immediately prior to the Effective Time (other
     than shares to be canceled in accordance with Section 2.01(b) and the
     Appraisal Shares) shall be converted into the right to receive $5.74 in
     cash, without interest (the "Merger Consideration"). At the Effective Time,
     all such shares of Company Common Stock shall no longer be outstanding and
     shall automatically be canceled and shall cease to exist, and each holder
     of a certificate which immediately prior to the Effective Time represented
     any such shares of Company Common Stock (each, a "Certificate") shall cease
     to have any rights with respect thereto, except the right to receive the
     Merger Consideration. The right of any holder of a Certificate to receive
     the Merger Consideration shall be subject to and reduced by the amount of
     any withholding that is required under applicable tax law.

          (d) Appraisal Rights. Notwithstanding anything in this Agreement to
     the contrary, shares (the "Appraisal Shares") of Company Common Stock
     issued and outstanding immediately prior to the Effective Time that are
     held by any holder who is entitled to demand and properly demands appraisal
     of such Appraisal Shares pursuant to, and who complies in all respects
     with, the provisions of Section 262 of the DGCL ("Section 262") shall not
     be converted into the right to receive the Merger
                                       A-5
<PAGE>

     Consideration as provided in Section 2.01(c), but instead such holder shall
     be entitled to payment of the fair value of such Appraisal Shares in
     accordance with the provisions of Section 262. At the Effective Time, all
     Appraisal Shares shall no longer be outstanding, shall automatically be
     canceled and shall cease to exist, and each holder of Appraisal Shares
     shall cease to have any rights with respect thereto, except the right to
     receive the fair value of such Appraisal Shares in accordance with the
     provisions of Section 262. Notwithstanding the foregoing, if any such
     holder shall fail to perfect or otherwise shall waive, withdraw or lose the
     right to appraisal under Section 262, or a court of competent jurisdiction
     shall determine that such holder is not entitled to the relief provided by
     Section 262, then the right of such holder to be paid the fair value of
     such holder's Appraisal Shares under Section 262 shall cease and such
     Appraisal Shares shall be deemed to have been converted at the Effective
     Time into, and shall have become, the right to receive the Merger
     Consideration as provided in Section 2.01(c). The Company shall serve
     prompt notice to Parent of any demands for appraisal of any shares of
     Company Common Stock, and Parent shall have the right to participate in and
     direct all negotiations and proceedings with respect to such demands. Prior
     to the Effective Time, the Company shall not, without the prior written
     consent of Parent, voluntarily make any payment with respect to, or settle
     or offer to settle, any such demands, or agree to do any of the foregoing.

     SECTION 2.02.  Exchange of Certificates.  (a) Paying Agent. Prior to the
Effective Time, Parent shall appoint JPMorgan Chase or another comparable bank
or trust company to act as paying agent (the "Paying Agent") for the payment of
the Merger Consideration. At the Effective Time, Parent shall deposit, or cause
the Surviving Corporation to deposit, with the Paying Agent, for the benefit of
the holders of Certificates, cash in an amount sufficient to pay the aggregate
Merger Consideration required to be paid pursuant to Section 2.01(c) (such cash
being hereinafter referred to as the "Exchange Fund").

     (b) Exchange Procedures. As soon as practicable after the Effective Time,
Parent shall cause the Paying Agent to mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent and
which shall be in customary form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Each holder of record
of a Certificate shall, upon surrender to the Paying Agent of such Certificate,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, be entitled to
receive in exchange therefor the amount of cash which the number of shares of
Company Common Stock previously represented by such Certificate shall have been
converted into the right to receive pursuant to Section 2.01(c), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment of the Merger Consideration may be made
to a person other than the person in whose name the Certificate so surrendered
is registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of such Certificate
or establish to the reasonable satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.02(b), each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration which the holder thereof has the right to receive in respect of
such Certificate pursuant to this Article II. No interest shall be paid or will
accrue on any cash payable to holders of Certificates pursuant to the provisions
of this Article II.

     (c) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock formerly represented by such Certificates.
At the close of business on the day on which the Effective Time occurs, the
stock transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificate is

                                       A-6
<PAGE>

presented to the Surviving Corporation for transfer, it shall be canceled
against delivery of cash to the holder thereof as provided in this Article II.

     (d) Termination of the Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for nine months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for, and Parent shall remain liable for,
payment of their claim for the Merger Consideration.

     (e) No Liability. None of Parent, Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash from the Exchange Fund properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to two years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration would
otherwise escheat to or become the property of any Governmental Entity), any
such Merger Consideration shall, to the extent permitted by applicable law,
become the property of Parent, free and clear of all claims or interest of any
person previously entitled thereto.

     (f) Investment of Exchange Fund. The Paying Agent shall invest the cash in
the Exchange Fund as directed by Parent. Any interest and other income resulting
from such investments shall be paid to Parent.

     (g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such reasonable amount as Parent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration with respect thereto.

     (h) Withholding Rights. Parent, the Surviving Corporation or the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts as Parent, the Surviving Corporation or the Paying Agent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by Parent, the Surviving Corporation or the Paying Agent.

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

     SECTION 3.01.  Representations and Warranties of the Company.  Except as
set forth in the disclosure schedule (with specific reference to the particular
Section or subsection of this Agreement to which the information set forth in
such disclosure schedule relates; provided, however, that any information set
forth in one section of the Company Disclosure Schedule shall be deemed to apply
to each other Section or subsection thereof or hereof to which its relevance is
readily apparent on its face) delivered by the Company to Parent prior to the
execution of this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and Sub as follows:

          (a) Organization, Standing and Corporate Power. Each of the Company
     and its Subsidiaries has been duly organized, and is validly existing and
     in good standing under the laws of the jurisdiction of its incorporation or
     formation, as the case may be, and has all requisite power and authority
     and possesses all governmental licenses, permits, authorizations and
     approvals necessary to enable it to use its corporate or other name and to
     own, lease or otherwise hold and operate its properties and other

                                       A-7
<PAGE>

     assets and to carry on its business as presently conducted and as currently
     proposed by its management to be conducted, except where the failure to
     have such government licenses, permits, authorizations or approvals
     individually or in the aggregate has not had and would not reasonably be
     expected to have a Material Adverse Effect. Each of the Company and its
     Subsidiaries is duly qualified or licensed to do business and is in good
     standing in each jurisdiction in which the nature of its business or the
     ownership, leasing or operation of its properties makes such qualification
     or licensing necessary, other than in such jurisdictions where the failure
     to be so qualified or licensed individually or in the aggregate has not had
     and would not reasonably be expected to have a Material Adverse Effect. The
     Company has made available to Parent, prior to the execution of this
     Agreement, complete and accurate copies of the Company Certificate and its
     By-laws (the "Company By-laws"), and the comparable organizational
     documents of each of its Subsidiaries, in each case as amended to the date
     hereof. The Company has made available to Parent complete and accurate
     copies of the minutes (or, in the case of minutes that have not yet been
     finalized, drafts thereof) of all meetings of the stockholders of the
     Company and each of its Subsidiaries, the Board of Directors of the Company
     and each of its Subsidiaries and the committees of each of such Board of
     Directors, in each case held since August 4, 2000 and prior to the date
     hereof.

          (b) Subsidiaries. Section 3.01(b) of the Company Disclosure Schedule
     lists each of the Subsidiaries of the Company and, for each such
     Subsidiary, the state of incorporation or formation and, as of the date
     hereof, each jurisdiction in which such Subsidiary is qualified or licensed
     to do business. All the issued and outstanding shares of capital stock of,
     or other equity interests in, each such Subsidiary have been validly issued
     and are fully paid and nonassessable and are owned directly or indirectly
     by the Company free and clear of all pledges, liens, charges, encumbrances
     or security interests of any kind or nature whatsoever (collectively,
     "Liens"), and free of any restriction on the right to vote, sell or
     otherwise dispose of such capital stock or other equity interests. Except
     for the capital stock of, or voting securities or equity interests in, its
     Subsidiaries, the Company does not own, directly or indirectly, any capital
     stock of, or other voting securities or equity interests in, any
     corporation, partnership, joint venture, association or other entity.

          (c) Capital Structure. The authorized capital stock of the Company
     consists of 45,000,000 shares of Company Common Stock and 5,000,000 shares
     of preferred stock, par value $.001 per share ("Company Preferred Stock").
     At the close of business on January 14, 2003, (i) 22,595,758 shares of
     Company Common Stock were issued and outstanding, (ii) no shares of Company
     Common Stock were held by the Company in its treasury, (iii) 5,633,499
     shares of Company Common Stock were reserved for issuance pursuant to the
     Equity Compensation Plan of the Company, as amended, and the 2000 Equity
     Compensation Plan of the Company, as amended (such plans, collectively, the
     "Company Stock Plans"), of which 3,884,538 shares of Company Common Stock
     were subject to outstanding Company Stock Options, and 47,787 shares of
     Company Common Stock were subject to vesting and restrictions on transfer
     (collectively, "Company Restricted Stock"), (iv) no shares of Company
     Preferred Stock were issued or outstanding or were held by the Company as
     treasury shares and (v) warrants to acquire 106,329 shares of Company
     Common Stock from the Company pursuant to the warrant agreements set forth
     on Section 3.01(c) of the Company Disclosure Schedule and previously
     delivered in complete and correct form to Parent (the "Warrants") were
     issued and outstanding. Except as set forth above in this Section 3.01(c),
     at the close of business on January 14, 2003, no shares of capital stock or
     other voting securities or equity interests of the Company were issued,
     reserved for issuance or outstanding. There are no outstanding stock
     appreciation rights, "phantom" stock rights, performance units, rights to
     receive shares of Company Common Stock on a deferred basis or other rights
     (other than Company Stock Options and Warrants) that are linked to the
     value of Company Common Stock (collectively, "Company Stock-Based Awards").
     Section 3.01(c) of the Company Disclosure Schedule sets forth a complete
     and accurate list, as of January 14, 2003, of all outstanding options to
     purchase shares of Company Common Stock (collectively, "Company Stock
     Options") under the Company Stock Plans or otherwise, and all outstanding
     Warrants, the number of shares of Company Common Stock (or other stock)
     subject thereto, the grant dates, expiration dates, exercise or base prices
     (if applicable) and vesting schedules
                                       A-8
<PAGE>

     thereof and the names of the holders thereof. No shares of Company Common
     Stock are subject to repurchase by the Company at a fixed purchase price.
     All outstanding Company Stock Options are evidenced by stock option
     agreements, restricted stock purchase agreements or other award agreements,
     in each case in the forms set forth in Section 3.01(c) of the Company
     Disclosure Schedule, and no stock option agreement, restricted stock
     purchase agreement or other award agreement contains terms that are
     inconsistent with such forms. As of the close of business on January 14,
     2003, there were outstanding Company Stock Options to purchase 1,162,531
     shares of Company Common Stock with exercise prices on a per share basis
     lower than the Merger Consideration, and the weighted average exercise
     price of such Company Stock Options was equal to $2.67. As of the close of
     business on January 14, 2003, there were outstanding Warrants to purchase
     101,829 shares of Company Common Stock with exercise prices on a per share
     basis lower than the Merger Consideration. Each Company Stock Option may,
     by its terms, be canceled in connection with the transactions contemplated
     hereby for a lump sum cash payment in accordance with and to the extent
     required by Section 5.04(a). All Warrants may, by their terms, be canceled
     in exchange for a lump sum cash payment in accordance with and to the
     extent required by Section 5.04(b). All outstanding shares of capital stock
     of the Company are, and all shares which may be issued pursuant to the
     Company Stock Options or the Warrants will be, when issued in accordance
     with the terms thereof, duly authorized, validly issued, fully paid and
     nonassessable and not subject to preemptive rights. There are no bonds,
     debentures, notes or other indebtedness of the Company having the right to
     vote (or convertible into, or exchangeable for, securities having the right
     to vote) on any matters on which stockholders of the Company may vote.
     Except as set forth above in this Section 3.01(c), (x) there are not
     issued, reserved for issuance or outstanding (A) any shares of capital
     stock or other voting securities or equity interests of the Company, (B)
     any securities of the Company convertible into or exchangeable or
     exercisable for shares of capital stock or other voting securities or
     equity interests of the Company or (C) any warrants, calls, options or
     other rights to acquire from the Company or any of its Subsidiaries, and no
     obligation of the Company or any of its Subsidiaries to issue, any capital
     stock, voting securities, equity interests or securities convertible into
     or exchangeable or exercisable for capital stock or voting securities of
     the Company and (y) there are not any outstanding obligations of the
     Company or any of its Subsidiaries to repurchase, redeem or otherwise
     acquire any such securities or to issue, deliver or sell, or cause to be
     issued, delivered or sold, any such securities. Neither the Company nor any
     of its Subsidiaries is a party to any voting agreement with respect to the
     voting of any such securities. Except as set forth above in this Section
     3.01(c), there are no outstanding (1) securities of the Company or any of
     its Subsidiaries convertible into or exchangeable or exercisable for shares
     of capital stock or voting securities or equity interests of any Subsidiary
     of the Company, (2) warrants, calls, options or other rights to acquire
     from the Company or any of its Subsidiaries, and no obligation of the
     Company or any of its Subsidiaries to issue, any capital stock, voting
     securities, equity interests or securities convertible into or exchangeable
     or exercisable for capital stock or voting securities of any Subsidiary of
     the Company or (3) obligations of the Company or any of its Subsidiaries to
     repurchase, redeem or otherwise acquire any such outstanding securities or
     to issue, deliver or sell, or cause to be issued, delivered or sold, any
     such securities.

          (d) Authority; Noncontravention. The Company has all requisite
     corporate power and authority to execute and deliver this Agreement and,
     subject to receipt of the Stockholder Approval, to consummate the
     transactions contemplated by this Agreement. The execution and delivery of
     this Agreement by the Company and the consummation by the Company of the
     transactions contemplated by this Agreement have been duly authorized by
     all necessary corporate action on the part of the Company and no other
     corporate proceedings on the part of the Company are necessary to authorize
     this Agreement or to consummate the transactions contemplated hereby,
     subject, in the case of the consummation of the Merger, to the obtaining of
     the Stockholder Approval. This Agreement has been duly executed and
     delivered by the Company and, assuming the due authorization, execution and
     delivery by each of the other parties hereto, constitutes a legal, valid
     and binding obligation of the Company, enforceable against the Company in
     accordance with its terms, subject to bankruptcy,

                                       A-9
<PAGE>

     insolvency, moratorium, reorganization or similar laws affecting the rights
     of creditors generally and the availability of equitable remedies. The
     Board of Directors of the Company, at a meeting duly called and held at
     which all directors of the Company were present, duly and unanimously
     adopted resolutions (i) approving and declaring advisable this Agreement,
     the Merger and the other transactions contemplated by this Agreement, (ii)
     declaring that it is in the best interests of the stockholders of the
     Company that the Company enter into this Agreement and consummate the
     Merger and the other transactions contemplated by this Agreement on the
     terms and subject to the conditions set forth in this Agreement, (iii)
     directing that the adoption of this Agreement be submitted as promptly as
     practicable to a vote at a meeting of the stockholders of the Company and
     (iv) recommending that the stockholders of the Company adopt this
     Agreement, which resolutions, as of the date of this Agreement, have not
     been subsequently rescinded, modified or withdrawn in any way. The
     execution and delivery of this Agreement do not, and the consummation of
     the Merger and the other transactions contemplated by this Agreement and
     compliance with the provisions of this Agreement will not, conflict with,
     or result in any violation or breach of, or default (with or without notice
     or lapse of time, or both) under, or give rise to a right of termination,
     cancellation or acceleration of any obligation or to the loss of a benefit
     under, or result in the creation of any Lien in or upon any of the
     properties or other assets of the Company or any of its Subsidiaries under,
     (x) the Company Certificate or the Company By-laws or the comparable
     organizational documents of any of its Subsidiaries, (y) any loan or credit
     agreement, bond, debenture, note, mortgage, indenture, lease or other
     contract, agreement, obligation, commitment, arrangement, understanding,
     instrument, permit, franchise or license, whether oral or written (each,
     including all amendments thereto, a "Contract"), to which the Company or
     any of its Subsidiaries is a party or any of their respective properties or
     other assets is subject or (z) subject to the governmental filings, the
     obtaining of the Stockholder Approval and the other matters referred to in
     the following sentence, any (A) statute, law, ordinance, rule or regulation
     applicable to the Company or any of its Subsidiaries or their respective
     properties or other assets or (B) order, writ, injunction, decree, judgment
     or stipulation, in each case applicable to the Company or any of its
     Subsidiaries or their respective properties or other assets, other than, in
     the case of clauses (y) and (z), any such conflicts, violations, breaches,
     defaults, rights, losses or Liens that individually or in the aggregate
     have not had and would not reasonably be expected to have a Material
     Adverse Effect. No consent, approval, order or authorization of, action by
     or in respect of, or registration, declaration or filing with, any Federal,
     state, local or foreign government, any court, administrative, regulatory
     or other governmental agency, commission or authority or any non-
     governmental self-regulatory agency, commission or authority (each, a
     "Governmental Entity") is required by or with respect to the Company or any
     of its Subsidiaries in connection with the execution and delivery of this
     Agreement by the Company or the consummation of the Merger or the other
     transactions contemplated by this Agreement, except for (1) the filing of a
     premerger notification and report form by the Company under the
     Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
     rules and regulations thereunder (the "HSR Act"), and the receipt,
     termination or expiration, as applicable, of approvals or waiting periods
     required under the HSR Act or any other applicable competition, merger
     control, antitrust or similar law or regulation, (2) the filing with the
     Securities and Exchange Commission (the "SEC") of (A) a proxy statement
     relating to the adoption by the stockholders of the Company of this
     Agreement (as amended or supplemented from time to time, the "Proxy
     Statement") and (B) such reports under the Securities Exchange Act of 1934,
     as amended (the "Exchange Act"), as may be required in connection with this
     Agreement and the transactions contemplated by this Agreement, (3) the
     filing of the Certificate of Merger with the Secretary of State of the
     State of Delaware and appropriate documents with the relevant authorities
     of other states in which the Company or any of its Subsidiaries is
     qualified to do business, (4) any filings required under the rules and
     regulations of the Nasdaq National Market and (5) such other consents,
     approvals, orders, authorizations, actions, registrations, declarations and
     filings the failure of which to be obtained or made individually or in the
     aggregate has not had and would not reasonably be expected to have a
     Material Adverse Effect.

                                       A-10
<PAGE>

          (e) Company SEC Documents. The Company has filed all reports,
     schedules, forms, statements and other documents (including exhibits and
     other information incorporated therein) with the SEC required to be filed
     by the Company since August 4, 2000 (the "Company SEC Documents"). As of
     their respective filing dates, the Company SEC Documents complied in all
     material respects with the requirements of the Securities Act of 1933, as
     amended (the "Securities Act"), or the Exchange Act, as the case may be,
     and the rules and regulations of the SEC promulgated thereunder applicable
     to such Company SEC Documents, and none of the Company SEC Documents
     contained any untrue statement of a material fact or omitted to state a
     material fact required to be stated therein or necessary in order to make
     the statements therein, in light of the circumstances under which they were
     made, not misleading. Except to the extent that information contained in
     any Company SEC Document has been revised, amended, supplemented or
     superseded by a later-filed Company SEC Document, none of the Company SEC
     Documents contains any untrue statement of a material fact or omits to
     state any material fact required to be stated therein or necessary in order
     to make the statements therein, in light of the circumstances under which
     they were made, not misleading. The financial statements (including the
     related notes) of the Company included in the Company SEC Documents
     complied at the time they were filed as to form in all material respects
     with applicable accounting requirements and the published rules and
     regulations of the SEC with respect thereto, have been prepared in
     accordance with generally accepted accounting principles in the United
     States ("GAAP") (except, in the case of unaudited statements, as permitted
     by the rules and regulations of the SEC) applied on a consistent basis
     during the periods involved (except as may be indicated in the notes
     thereto) and each fairly presented in all material respects the
     consolidated financial position of the Company and its consolidated
     Subsidiaries as of the dates thereof and the consolidated results of their
     operations and cash flows for the periods then ended (subject, in the case
     of unaudited statements, to normal year-end audit adjustments). Parent
     shall receive a certificate signed by the chief executive officer and the
     chief financial officer of the Company in their capacities as such, on or
     prior to the Closing Date, with respect to the most recent annual report on
     Form 10-K and all reports on Form 10-Q, all reports on Form 8-K and all
     definitive proxy materials filed with the SEC, in each case subsequent to
     the filing of the most recent Form 10-K and any amendments thereto filed
     prior to the date hereof and except for any such reports or proxy materials
     that have been certified pursuant to 18 U.S.C. Section 1350 (collectively,
     the "Covered Reports") stating that, to such person's knowledge, (i) no
     Covered Report contained an untrue statement of material fact as of the end
     of the period covered by such report (or in the case of a report on Form
     8-K or definitive proxy materials, as of the date on which it was filed)
     and (ii) no Covered Report omitted to state a material fact necessary to
     make the statements in such Covered Report, in light of the circumstances
     under which they were made, not misleading as of the end of the period
     covered by such report (or in the case of a report on Form 8-K or
     definitive proxy materials, as of the date on which it was filed). Except
     as disclosed in the Company SEC Documents filed by the Company and publicly
     available prior to the date of this Agreement (the "Filed Company SEC
     Documents"), neither the Company nor any of its Subsidiaries has any
     liabilities or obligations of any nature (whether accrued, absolute,
     contingent or otherwise) which individually or in the aggregate have had or
     would reasonably be expected to have a Material Adverse Effect. None of the
     Subsidiaries of the Company are, or have at any time since August 4, 2000
     been, subject to the reporting requirements of Sections 13(a) and 15(d) of
     the Exchange Act.

          (f) Information Supplied. None of the information supplied or to be
     supplied by the Company specifically for inclusion or incorporation by
     reference in the Proxy Statement will, at the date it is first mailed to
     the stockholders of the Company and at the time of the Stockholders'
     Meeting, contain any untrue statement of a material fact or omit to state
     any material fact required to be stated therein or necessary in order to
     make the statements therein, in light of the circumstances under which they
     are made, not misleading, except that no representation or warranty is made
     by the Company with respect to statements made or incorporated by reference
     therein based on information supplied by or on behalf of Parent or Sub in
     writing specifically for inclusion or incorporation by reference in the

                                       A-11
<PAGE>

     Proxy Statement. The Proxy Statement will comply as to form in all material
     respects with the requirements of the Exchange Act and the rules and
     regulations thereunder.

          (g) Absence of Certain Changes or Events. Except for liabilities
     incurred in connection with this Agreement and except as disclosed in the
     Filed Company SEC Documents or as expressly permitted pursuant to Section
     4.01(a)(i) through (xvi), since the date of the most recent audited
     financial statements included in the Filed Company SEC Documents, the
     Company and its Subsidiaries have conducted their respective businesses
     only in the ordinary course consistent with past practice, and there has
     not been any Material Adverse Change, and from such date until the date
     hereof there has not been (i) any declaration, setting aside or payment of
     any dividend or other distribution (whether in cash, stock or property)
     with respect to any capital stock of the Company or any of its
     Subsidiaries, other than dividends or distributions by a direct or indirect
     wholly owned Subsidiary of the Company to its shareholders, (ii) any
     purchase, redemption or other acquisition by the Company or any of its
     Subsidiaries of any shares of capital stock or any other securities of the
     Company or any of its Subsidiaries or any options, warrants, calls or
     rights to acquire such shares or other securities, (iii) any split,
     combination or reclassification of any capital stock of the Company or any
     of its Subsidiaries or any issuance or the authorization of any issuance of
     any other securities in respect of, in lieu of or in substitution for
     shares of their respective capital stock, (iv) (A) any granting by the
     Company or any of its Subsidiaries to any current or former director,
     officer, employee or consultant of the Company or its Subsidiaries of any
     increase in compensation, bonus or fringe or other benefits or any granting
     of any type of compensation or benefits to any current or former director,
     officer, employee or consultant not previously receiving or entitled to
     receive such type of compensation or benefit, except for normal increases
     in cash compensation (including cash bonuses) in the ordinary course of
     business consistent with past practice or as was required under any Company
     Benefit Agreement or Company Benefit Plan in effect as of the date of the
     most recent audited financial statements included in the Filed Company SEC
     Documents, (B) any granting by the Company or any of its Subsidiaries to
     any current or former director, officer, employee or consultant of the
     Company or any of its Subsidiaries of any right to receive any increase in
     severance or termination pay, or (C) any entry by the Company or any of its
     Subsidiaries into, or any amendments of, (1) any employment, deferred
     compensation, consulting, severance, change of control, termination or
     indemnification agreement or any other agreement with or involving any
     current or former director, officer, employee or consultant of the Company
     or any of its Subsidiaries or (2) any agreement with any current or former
     director, officer, employee or consultant of the Company or any of its
     Subsidiaries the benefits of which are contingent, or the terms of which
     are materially altered, upon the occurrence of a transaction involving the
     Company of a nature contemplated by this Agreement (all such agreements
     under this clause (C), collectively, "Company Benefit Agreements"), (D) any
     adoption of, any amendment to or any termination of any Company Benefit
     Plan, or (E) any payment of any benefit under, or the grant of any award
     under, or any amendment to, or termination of, any bonus, incentive,
     performance or other compensation plan or arrangement, Company Benefit
     Agreement or Company Benefit Plan (including in respect of stock options,
     "phantom" stock, stock appreciation rights, restricted stock, "phantom"
     stock rights, restricted stock units, deferred stock units, performance
     stock units or other stock-based or stock-related awards or the removal or
     modification of any restrictions in any Company Benefit Agreement or
     Company Benefit Plan or awards made thereunder) except as required to
     comply with applicable law or any Company Benefit Agreement or Company
     Benefit Plan in effect as of the date of the most recent audited financial
     statements included in the Filed Company SEC Documents, (v) any damage,
     destruction or loss to any tangible asset of the Company or any of its
     Subsidiaries, whether or not covered by insurance, that individually or in
     the aggregate has had or would reasonably be expected to have a Material
     Adverse Effect, (vi) any change in accounting methods, principles or
     practices by the Company materially affecting its assets, liabilities or
     businesses, except insofar as may have been required by a change in GAAP or
     (vii) any material tax election or any settlement or compromise of any
     material income tax liability.

                                       A-12
<PAGE>

          (h) Litigation. Except as disclosed in the Filed Company SEC
     Documents, there is no suit, action or proceeding pending or, to the
     Knowledge of the Company, threatened against or affecting the Company or
     any of its Subsidiaries or any of their respective assets that individually
     or in the aggregate has had or would reasonably be expected to have a
     Material Adverse Effect, nor is there any judgment, decree, injunction,
     rule or order of any Governmental Entity or arbitrator outstanding against,
     or, to the Knowledge of the Company, investigation by any Governmental
     Entity involving, the Company or any of its Subsidiaries or any of their
     respective assets that individually or in the aggregate has had or would
     reasonably be expected to have a Material Adverse Effect.

          (i) Contracts. Except as disclosed in the Filed Company SEC Documents
     and except with respect to licenses and other agreements relating to
     intellectual property, which are the subject of Section 3.01(p), as of the
     date hereof, neither the Company nor any of its Subsidiaries is a party to,
     and none of their respective properties or other assets is subject to, any
     contract or agreement that is of a nature required to be filed as an
     exhibit to a report or filing under the Securities Act or the Exchange Act
     and the rules and regulations promulgated thereunder. None of the Company,
     any of its Subsidiaries or, to the Knowledge of the Company, any other
     party thereto is in violation of or in default under (nor does there exist
     any condition which upon the passage of time or the giving of notice or
     both would cause such a violation of or default under) any Contract, to
     which it is a party or by which it or any of its properties or other assets
     is bound, except for violations or defaults that individually or in the
     aggregate have not had and would not reasonably be expected to have a
     Material Adverse Effect. Neither the Company nor any of its Subsidiaries
     has entered into any Contract with any Affiliate of the Company that is
     currently in effect other than agreements that are disclosed in the Filed
     Company SEC Documents. Neither the Company nor any of its Subsidiaries is a
     party to or otherwise bound by any agreement or covenant restricting the
     Company's or any of its Subsidiaries' ability to compete or by any
     agreement or covenant restricting in any respect the research, development,
     distribution, training, sale, supply, license, marketing or manufacturing
     of products or services of the Company or any of its Subsidiaries.

          (j) Compliance with Laws; Environmental Matters. (i) Except with
     respect to Environmental Laws, the Employee Retirement Income Security Act
     of 1974, as amended ("ERISA") and taxes, which are the subjects of Sections
     3.01(j)(ii), 3.01(l) and 3.01(n), respectively, and except as set forth in
     the Filed Company SEC Documents, each of the Company and its Subsidiaries
     is in compliance with all statutes, laws, ordinances, rules, regulations,
     judgments, orders and decrees of any Governmental Entity applicable to it,
     its properties or other assets or its business or operations (collectively,
     "Legal Provisions"), except for failures to be in compliance that
     individually or in the aggregate have not had and would not reasonably be
     expected to have a Material Adverse Effect. Each of the Company and its
     Subsidiaries has in effect all approvals, authorizations, certificates,
     filings, franchises, licenses, notices and permits of or with all
     Governmental Entities (collectively, "Permits"), including all Permits
     under the Federal Food, Drug and Cosmetic Act of 1938, as amended (the
     "FDCA"), and the regulations of the Federal Food and Drug Administration
     (the "FDA") promulgated thereunder, necessary for it to own, lease or
     operate its properties and other assets and to carry on its business and
     operations as presently conducted and as currently proposed by its
     management to be conducted, except where the failure to have such Permits
     individually or in the aggregate has not had and would not reasonably be
     expected to have a Material Adverse Effect. There has occurred no default
     under, or violation of, any such Permit, except for any such default or
     violation that individually or in the aggregate as has not had and would
     not reasonably be expected to have a Material Adverse Effect. The
     consummation of the Merger, in and of itself, would not cause the
     revocation or cancellation of any such Permit that individually or in the
     aggregate would reasonably be expected to have a Material Adverse Effect.
     No action, demand, requirement or investigation by any Governmental Entity
     and no suit, action or proceeding by any other person, in each case with
     respect to the Company or any of its Subsidiaries or any of their
     respective properties or other assets under any Legal Provision, is pending
     or, to the Knowledge of the Company, threatened, other than, in each case,
     those the outcome of which individually or in the aggregate have not had
     and would not reasonably be expected to have a Material Adverse Effect.
                                       A-13
<PAGE>

          (ii) Except for those matters disclosed in the Filed Company SEC
     Documents and those matters that individually or in the aggregate have not
     had and would not reasonably be expected to have a Material Adverse Effect:
     (A) each of the Company and its Subsidiaries is, and has been, in
     compliance with all applicable Environmental Laws and has obtained and
     complied with all Permits required under any Environmental Laws to own,
     lease or operate its properties or other assets and to carry on its
     business and operations as presently conducted and as currently proposed by
     its management to be conducted; (B) there have been no Releases or
     threatened Releases of Hazardous Materials in, on, under or affecting any
     properties currently or, to the Knowledge of the Company, formerly owned,
     leased or operated by the Company or any of its Subsidiaries; (C) there is
     no investigation, suit, claim, action or proceeding pending, or to the
     Knowledge of the Company, threatened against or affecting the Company or
     any of its Subsidiaries relating to or arising under Environmental Laws,
     and neither the Company nor any of its Subsidiaries has received any
     written notice of any such investigation, suit, claim, action or
     proceeding; (D) neither the Company nor any of its Subsidiaries has entered
     into or assumed by contract or operation of law or otherwise, any
     obligation, liability, order, settlement, judgment, injunction or decree
     relating to or arising under Environmental Laws; and (E) to the Knowledge
     of the Company, there are no facts, circumstances or conditions that would
     reasonably be expected to form the basis for any investigation, suit,
     claim, action, proceeding or liability against or affecting the Company or
     any of its Subsidiaries relating to or arising under Environmental Laws.
     The term "Environmental Laws" means all Federal, state, local and foreign
     laws (including the common law), statutes, rules, regulations, codes,
     ordinances, orders, decrees, judgments, injunctions, notices, Permits,
     treaties or binding agreements issued, promulgated or entered into by any
     Governmental Entity, relating in any way to the environment, preservation
     or reclamation of natural resources or endangered species, the presence,
     management, Release or threat of Release of, or exposure to, Hazardous
     Materials, or to human health and safety. The term "Hazardous Materials"
     means (1) petroleum products and by-products, asbestos and asbestos-
     containing materials, urea formaldehyde foam insulation, medical or
     infectious wastes, poly-chlorinated biphenyls, radon gas, radioactive
     substances, chlorofluorocarbons and all other ozone-depleting substances or
     (2) any chemical, material, substance, waste, pollutant or contaminant that
     is prohibited, limited or regulated by or pursuant to any Environmental
     Law. The term "Release" means any spilling, leaking, pumping, pouring,
     emitting, emptying, discharging, injecting, escaping, leaching, dumping,
     disposing or migrating into or through the environment or any natural or
     man-made structure.

          (k) Absence of Changes in Company Benefit Plans; Labor Relations.
     Except as disclosed in the Filed Company SEC Documents or as expressly
     permitted pursuant to Section 4.01(a)(i) through (xvi), since the date of
     the most recent audited financial statements included in the Filed Company
     SEC Documents, there has not been any adoption or amendment by the Company
     or any of its Subsidiaries of any collective bargaining agreement or any
     employment, bonus, pension, profit sharing, deferred compensation,
     incentive compensation, stock ownership, stock purchase, stock
     appreciation, restricted stock, stock option, "phantom" stock, performance,
     retirement, thrift, savings, stock bonus, paid time off, perquisite, fringe
     benefit, vacation, severance, disability, death benefit, hospitalization,
     medical, welfare benefit or other plan, program, policy, arrangement or
     understanding (whether or not legally binding) maintained, contributed to
     or required to be maintained or contributed to by the Company or any of its
     Subsidiaries or any other person or entity that, together with the Company,
     is treated as a single employer under Section 414(b), (c), (m) or (o) of
     the Code (each, a "Commonly Controlled Entity"), in each case providing
     benefits to any current or former director, officer, employee or consultant
     of the Company or any of its Subsidiaries (collectively, the "Company
     Benefit Plans"), or any material change in any actuarial or other
     assumption used to calculate funding obligations with respect to any
     Company Pension Plans, or any change in the manner in which contributions
     to any Company Pension Plans are made or the basis on which such
     contributions are determined, other than amendments or other changes as
     required to ensure that such Company Benefit Plan is not then out of
     compliance with applicable law, or reasonably determined by the Company to
     be necessary or appropriate to preserve the qualified status of a Company
     Pension Plan

                                       A-14
<PAGE>

     under Section 401(a) of the Code. Except as disclosed in the Filed Company
     SEC Documents, there exist no currently binding Company Benefit Agreements.
     There are no collective bargaining or other labor union agreements to which
     the Company or any of its Subsidiaries is a party or by which the Company
     or any of its Subsidiaries is bound. As of the date hereof, none of the
     employees of the Company or any of its Subsidiaries are represented by any
     union with respect to their employment by the Company or such Subsidiary.
     As of the date hereof, since August 4, 2000, neither the Company nor any of
     its Subsidiaries has experienced any labor disputes, union organization
     attempts or work stoppages, slowdowns or lockouts due to labor
     disagreements.

          (l) ERISA Compliance. (i) Section 3.01(l)(i) of the Company Disclosure
     Schedule contains a complete and accurate list of each Company Benefit Plan
     that is an "employee pension benefit plan" (as defined in Section 3(2) of
     ERISA) (sometimes referred to herein as a "Company Pension Plan"), each
     Company Benefit Plan that is an "employee welfare benefit plan" (as defined
     in Section 3(1) of ERISA) and all other Company Benefit Plans. The Company
     has provided to Parent complete and accurate copies of (A) each Company
     Benefit Plan (or, in the case of any unwritten Company Benefit Plans,
     descriptions thereof), (B) the two most recent annual reports on Form 5500
     required to be filed with the Internal Revenue Service (the "IRS") with
     respect to each Company Benefit Plan (if any such report was required), (C)
     the most recent summary plan description for each Company Benefit Plan for
     which such summary plan description is required and (D) each trust
     agreement and insurance or group annuity contract relating to any Company
     Benefit Plan. Each Company Benefit Plan has been administered in all
     material respects in accordance with its terms. The Company, its
     Subsidiaries and all the Company Benefit Plans are all in compliance in all
     material respects with the applicable provisions of ERISA, the Code and all
     other applicable laws, including laws of foreign jurisdictions, and the
     terms of all collective bargaining agreements.

          (ii) All Company Pension Plans intended to be tax-qualified have
     received favorable determination letters from the IRS with respect to "TRA"
     (as defined in Section 1 of Rev. Proc. 93-39), and have timely filed with
     the IRS determination letter applications with respect to "GUST" (as
     defined in Section 1 of Notice 2001-42), to the effect that such Company
     Pension Plans are qualified and exempt from Federal income taxes under
     Sections 401(a) and 501(a), respectively, of the Code, no such
     determination letter has been revoked (or, to the Knowledge of the Company,
     has revocation been threatened) and no event has occurred since the date of
     the most recent determination letter or application therefor relating to
     any such Company Pension Plan that would reasonably be expected to
     adversely affect the qualification of such Company Pension Plan or
     materially increase the costs relating thereto or require security under
     Section 307 of ERISA. In addition, all Company Pension Plans have been, or
     shall have been by the end of the 2002 plan year, amended to comply with
     the requirements of the Economic Growth and Tax Relief Reconciliation Act
     of 2001 which are or have become effective on or before the end of the 2002
     plan year, as set forth in Notice 2001-42. All Company Pension Plans
     required to have been approved by any foreign Governmental Entity have been
     so approved, no such approval has been revoked (or, to the Knowledge of the
     Company, has revocation been threatened) and no event has occurred since
     the date of the most recent approval or application therefor relating to
     any such Company Pension Plan that would reasonably be expected to
     materially affect any such approval relating thereto or materially increase
     the costs relating thereto. The Company has delivered to Parent a complete
     and accurate copy of the most recent determination letter received prior to
     the date hereof with respect to each Company Pension Plan, as well as a
     complete and accurate copy of each pending application for a determination
     letter, if any. The Company has also provided to Parent a complete and
     accurate list of all amendments to any Company Pension Plan as to which a
     favorable determination letter has not yet been received.

          (iii) Neither the Company nor any Commonly Controlled Entity has (A)
     maintained, contributed to or been required to contribute to any Company
     Benefit Plan that is subject to Title IV of ERISA or (B) has any
     unsatisfied liability under Title IV of ERISA.

                                       A-15
<PAGE>

          (iv) All reports, returns and similar documents with respect to all
     Company Benefit Plans required to be filed with any Governmental Entity or
     distributed to any Company Benefit Plan participant have been duly and
     timely filed or distributed. None of the Company or any of its Subsidiaries
     has received notice of, and to the Knowledge of the Company, there are no
     investigations by any Governmental Entity with respect to, termination
     proceedings or other claims (except claims for benefits payable in the
     normal operation of the Company Benefit Plans), suits or proceedings
     against or involving any Company Benefit Plan or asserting any rights or
     claims to benefits under any Company Benefit Plan that would give rise to
     any material liability, and, to the Knowledge of the Company, there are not
     any facts that could give rise to any material liability in the event of
     any such investigation, claim, suit or proceeding.

          (v) All contributions, premiums and benefit payments under or in
     connection with the Company Benefit Plans that are required to have been
     made as of the date hereof in accordance with the terms of the Company
     Benefit Plans have been timely made or have been reflected on the most
     recent consolidated balance sheet filed or incorporated by reference into
     the Filed Company SEC Documents. Neither any Company Pension Plan nor any
     single-employer plan of any Commonly Controlled Entity has an "accumulated
     funding deficiency" (as such term is defined in Section 302 of ERISA or
     Section 412 of the Code), whether or not waived.

          (vi) With respect to each Company Benefit Plan, (A) there has not
     occurred any prohibited transaction (within the meaning of Section 406 of
     ERISA or Section 4975 of the Code) in which the Company or any of its
     Subsidiaries or any of their respective employees, or any trustee,
     administrator or other fiduciary of such Company Benefit Plan, or any agent
     of the foregoing, has engaged that would reasonably be expected to subject
     the Company or any of its Subsidiaries or any of their respective
     employees, or a trustee, administrator or other fiduciary of any trust
     created under any Company Benefit Plan, to the tax or penalty on prohibited
     transactions imposed by Section 4975 of the Code or the sanctions imposed
     under Title I of ERISA and (B) neither the Company nor any of its
     Subsidiaries nor, to the Knowledge of the Company, any trustee,
     administrator or other fiduciary of any Company Benefit Plan nor any agent
     of any of the foregoing, has engaged in any transaction or acted in a
     manner, or failed to act in a manner, that would reasonably be expected to
     subject the Company or any of its Subsidiaries or, to the Knowledge of the
     Company, any trustee, administrator or other fiduciary, to any liability
     for breach of fiduciary duty under ERISA or any other applicable law. No
     Company Benefit Plan or related trust has been terminated, nor has there
     been any "reportable event" (as that term is defined in Section 4043 of
     ERISA) for which the 30-day reporting requirement has not been waived with
     respect to any Company Benefit Plan during the last five years, and no
     notice of a reportable event will be required to be filed in connection
     with the transactions contemplated by this Agreement.

          (vii) Section 3.01(l)(vii) of the Company Disclosure Schedule
     discloses whether each Company Benefit Plan that is an employee welfare
     benefit plan is (A) unfunded or self-insured, (B) funded through a "welfare
     benefit fund", as such term is defined in Section 419(e) of the Code, or
     other funding mechanism or (C) insured. Each such employee welfare benefit
     plan may be amended or terminated (including with respect to benefits
     provided to retirees and other former employees) without material liability
     (other than benefits then payable under such plan without regard to such
     amendment or termination) to the Company or any of its Subsidiaries at any
     time after the Effective Time. Each of the Company and its Subsidiaries
     complies in all material respects with the applicable requirements of
     Section 4980B(f) of the Code or any similar state statute with respect to
     each Company Benefit Plan that is a group health plan, as such term is
     defined in Section 5000(b)(1) of the Code or such state statute. Neither
     the Company nor any of its Subsidiaries has any material obligations for
     retiree health or life insurance benefits under any Company Benefit Plan
     (other than for continuation coverage required under Section 4980(f) of the
     Code).

          (viii) None of the execution and delivery of this Agreement, the
     Stockholder Agreement, the obtaining of the Stockholder Approval or the
     consummation of the Merger or any other transaction expressly contemplated
     by this Agreement or the Stockholder Agreement (including as a result of
     any
                                       A-16
<PAGE>

     termination of employment on or following the Effective Time) will (A)
     entitle any current or former director, officer, employee or consultant of
     the Company or any of its Subsidiaries to severance or termination pay, (B)
     accelerate the time of payment or vesting, or trigger any payment or
     funding (through a grantor trust or otherwise) of, compensation or benefits
     under, increase the amount payable or trigger any other material obligation
     pursuant to, any Company Benefit Plan or Company Benefit Agreement or (C)
     result in any breach or violation of, or a default under, any Company
     Benefit Plan or Company Benefit Agreement. The total amount of all payments
     and the fair market value of all non-cash benefits (other than Company
     Stock Options and Company Restricted Stock) that may become payable or
     provided to any director, officer, employee or consultant of the Company or
     any of its Subsidiaries under the Company Benefit Agreements (assuming for
     such purpose that such individuals' employment were terminated immediately
     following the Effective Time as if the Effective Time were the date hereof)
     will not exceed the amount set forth in Section 3.01(l)(viii) of the
     Company Disclosure Schedule.

          (ix) Neither the Company nor any of its Subsidiaries has any material
     liability or obligations, including under or on account of a Company
     Benefit Plan, arising out of the hiring of persons to provide services to
     the Company or any of its Subsidiaries and treating such persons as
     consultants or independent contractors and not as employees of the Company
     or any of its Subsidiaries.

          (x) No deduction by the Company or any of its Subsidiaries in respect
     of any "applicable employee remuneration" (within the meaning of Section
     162(m) of the Code) has been disallowed or is subject to disallowance by
     reason of Section 162(m) of the Code.

          (m) No Excess Parachute Payments. Other than payments or benefits that
     may be made to the persons listed in Section 3.01(m) of the Company
     Disclosure Schedule ("Primary Company Executives"), no amount or other
     entitlement or economic benefit that could be received (whether in cash or
     property or the vesting of property) as a result of the execution and
     delivery of this Agreement, the Stockholder Agreement, the obtaining of the
     Stockholder Approval, the consummation of the Merger or any other
     transaction contemplated by this Agreement or the Stockholder Agreement
     (including as a result of termination of employment on or following the
     Effective Time) by or for the benefit of any director, officer, employee or
     consultant of the Company or any of its Affiliates who is a "disqualified
     individual" (as such term is defined in proposed Treasury Regulation
     Section 1.280G-1) under any Company Benefit Plan, Company Benefit Agreement
     or otherwise would be characterized as an "excess parachute payment" (as
     such term is defined in Section 280G(b)(1) of the Code), and no
     disqualified individual is entitled to receive any additional payment from
     the Company or any of its Subsidiaries, the Surviving Corporation or any
     other person in the event that the excise tax required by Section 4999(a)
     of the Code is imposed on such disqualified individual (a "Parachute Gross
     Up Payment"). Section 3.01(m) of the Company Disclosure Schedule sets
     forth, calculated as of the date of this Agreement, (i) the "base amount"
     (as such term is defined in Section 280G(b)(3) of the Code) for each
     Primary Company Executive and each other disqualified individual (defined
     as set forth above) whose Company Stock Options will vest pursuant to their
     terms in connection with the execution and delivery of this Agreement, the
     Stockholder Agreement, the obtaining of the Stockholder Approval, the
     consummation of the Merger or any other transaction contemplated by this
     Agreement or the Stockholder Agreement (including as a result of any
     termination of employment on or following the Effective Time) and (ii) the
     estimated maximum amount of "parachute payments" as defined in Section 280G
     of the Code that could be paid or provided to each Primary Company
     Executive as a result of the execution and delivery of this Agreement, the
     Stockholder Agreement, the obtaining of the Stockholder Approval, the
     consummation of the Merger or any other transaction contemplated by this
     Agreement or the Stockholder Agreement (including as a result of any
     termination of employment on or following the Effective Time).

          (n) Taxes. (i) Each of the Company, its Subsidiaries and each Company
     Consolidated Group has filed or has caused to be filed in a timely manner
     (within any applicable extension period) all tax returns required to be
     filed with any taxing authority pursuant to the Code (and any applicable
     U.S.
                                       A-17
<PAGE>

     Treasury regulations) or applicable state, local or foreign tax laws. All
     such tax returns are complete and accurate in all material respects and
     have been prepared in substantial compliance with all applicable laws and
     regulations. Each of the Company, its Subsidiaries and each Company
     Consolidated Group has paid or caused to be paid (or the Company has paid
     on its behalf) all taxes due and owing, and the most recent financial
     statements contained in the Filed Company SEC Documents reflect an adequate
     reserve (determined in accordance with GAAP) (excluding any reserves for
     deferred taxes established to reflect timing differences between book and
     tax income) for all taxes payable by the Company and its Subsidiaries for
     all taxable periods and portions thereof accrued through the date of such
     financial statements.

          (ii) No tax return of the Company or any of its Subsidiaries or any
     Company Consolidated Group is or has ever been under audit or examination
     by any taxing authority, and no notice of such an audit or examination has
     been received by the Company or any of its Subsidiaries or any Company
     Consolidated Group. There is no deficiency, refund litigation, proposed
     adjustment or matter in controversy with respect to any material amount of
     taxes due and owing by the Company or any of its Subsidiaries or any
     Company Consolidated Group. Each deficiency resulting from any completed
     audit or examination relating to taxes by any taxing authority has been
     timely paid or is being contested in good faith and has been reserved for
     on the books of the Company. No issues relating to any material amount of
     taxes were raised by the relevant taxing authority in any completed audit
     or examination that could reasonably be expected to recur in a later
     taxable period. The relevant statute of limitation is closed with respect
     to Federal, state, local and foreign tax returns of the Company, its
     Subsidiaries and any Company Consolidated Group for all years through 1998.
     There is no currently effective agreement or other document extending, or
     having the effect of extending, the period of assessment or collection of
     any taxes of the Company or its Subsidiaries or any Company Consolidated
     Group, nor has any request been made in writing for any such extension, and
     no power of attorney (other than powers of attorney authorizing employees
     of the Company to act on behalf of the Company) with respect to any taxes
     has been executed or filed with any taxing authority.

          (iii) None of the Company or any of its Subsidiaries will be required
     to include in a taxable period ending after the Effective Time taxable
     income attributable to income that accrued (for purposes of the financial
     statements of the Company included in the Filed Company SEC Documents) in a
     prior taxable period (or portion of a taxable period) but was not
     recognized for tax purposes in any prior taxable period as a result of (A)
     an open transaction disposition made on or before the Effective Time, (B) a
     prepaid amount received on or prior to the Effective Time, (C) the
     installment method of accounting, (D) the completed contract method of
     accounting, (E) the long-term contract method of accounting, (F) the cash
     method of accounting or Section 481 of the Code or (G) any comparable
     provisions of state or local tax law, domestic or foreign, or for any other
     reason, other than any amounts that are specifically reflected in a reserve
     for taxes on the financial statements of the Company included in the Filed
     Company SEC Documents.

          (iv) The Company and its Subsidiaries have complied with all
     applicable statutes, laws, ordinances, rules and regulations relating to
     the payment and withholding of any material amount of taxes (including
     withholding of taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the
     Code and similar provisions under any Federal, state, local or foreign tax
     laws) and have, within the time and the manner prescribed by law, withheld
     from and paid over to the proper governmental authorities all material
     amounts required to be so withheld and paid over under applicable laws.

          (v) None of the Company or any of its Subsidiaries has constituted
     either a "distributing corporation" or a "controlled corporation" as such
     terms are defined in Section 355 of the Code in a distribution of stock
     outside of the affiliated group of which the Company is the common parent
     qualifying or intended to qualify for tax-free treatment (in whole or in
     part) under Section 355(a) or 361 of the Code.

          (vi) Neither the Company nor any of its Subsidiaries has filed a
     consent under Section 341 of the Code concerning collapsible corporations.

                                       A-18
<PAGE>

          (vii) Neither the Company nor any of its Subsidiaries joins or has
     joined, for any taxable period in the filing of any affiliated, aggregate,
     consolidated, combined or unitary tax return other than consolidated tax
     returns for the consolidated group of which the Company is the common
     parent.

          (viii) No claim has ever been made by any authority in a jurisdiction
     where any of the Company or its Subsidiaries does not file a tax return
     that it is, or may be, subject to a material amount of tax by that
     jurisdiction.

          (ix) Neither the Company nor any of its Subsidiaries is a party to or
     bound by any tax sharing agreement, tax indemnity obligation or similar
     agreement, arrangement or practice with respect to taxes (including any
     advance pricing agreement, closing agreement or other agreement relating to
     taxes with any taxing authority).

          (x) No "ownership change" (as described in Section 382(g) of the Code)
     has occurred or will occur prior to the Effective Time that would have the
     effect of limiting the use of "pre-change tax losses" (as described in
     Section 382(d) of the Code) of the Company and its Subsidiaries following
     the Effective Time.

          (xi) No taxing authority has asserted any material liens for taxes
     with respect to any assets or properties of the Company or its
     Subsidiaries, except for statutory liens for taxes not yet due and payable.

          (xii) Neither the Company nor any of its Subsidiaries has been a
     United States real property holding corporation within the meaning of
     Section 897(c)(2) of the Code during the applicable period specified in
     Section 897(c)(1)(A)(ii) of the Code.

          (xiii) As used in this Agreement (A) "tax" or "taxes" shall include
     (whether disputed or not) all (x) Federal, state, local and foreign income,
     property, sales, use, excise, withholding, payroll, employment, social
     security, capital gain, alternative minimum, transfer and other taxes and
     similar governmental charges, including any interest, penalties and
     additions with respect thereto, (y) liability for the payment of any
     amounts of the type described in clause (x) as a result of being a member
     of an affiliated, consolidated, combined, unitary or aggregate group and
     (z) liability for the payment of any amounts as a result of being party to
     any tax sharing agreement or as a result of any express or implied
     obligation to indemnify any other person with respect to the payment of any
     amounts of the type described in clause (x) or (y); (B) "Company
     Consolidated Group" means any affiliated group within the meaning of
     Section 1504(a) of the Code, or any other similar state, local or foreign
     law, in which the Company (or any Subsidiary of the Company) is or has ever
     been a member or any group of corporations with which the Company files,
     has filed or is or was required to file an affiliated, consolidated,
     combined, unitary or aggregate tax return; (C) "taxing authority" means any
     Federal, state, local or foreign government, any subdivision, agency,
     commission or authority thereof, or any quasi-governmental body exercising
     tax regulatory authority; and (D) "tax return" or "tax returns" means all
     returns, declarations of estimated tax payments, reports, estimates,
     information returns and statements, including any related or supporting
     information with respect to any of foregoing, filed or to be filed with any
     taxing authority in connection with the determination, assessment,
     collection or administration of any taxes.

          (o) Title to Properties. (i) Neither the Company nor any of its
     Subsidiaries owns any real property. Each of the Company and its
     Subsidiaries has good and valid leasehold or sublease interests or other
     comparable contract rights in or relating to all of its real properties and
     other tangible assets necessary for the conduct of its business as
     currently conducted and as currently proposed by its management to be
     conducted, except as have been disposed of in the ordinary course of
     business and except for defects in title, easements, restrictive covenants
     and similar encumbrances that individually or in the aggregate have not
     materially interfered with, and would not reasonably be expected to
     materially interfere with, its ability to conduct its business as presently
     conducted and as currently proposed by its management to be conducted. All
     such properties and other assets, other than properties and other assets in
     which the Company or any of its Subsidiaries has a leasehold or

                                       A-19
<PAGE>

     sublease interest or other comparable contract right, are free and clear of
     all Liens, except for Liens that individually or in the aggregate have not
     materially interfered with, and would not reasonably be expected to
     materially interfere with, the ability of the Company or any of its
     Subsidiaries to conduct their respective businesses as presently conducted
     and as currently proposed by its management to be conducted.

          (ii) Each of the Company and its Subsidiaries has complied in all
     material respects with the terms of all material leases or subleases to
     which it is a party and under which it is in occupancy, and all leases to
     which the Company is a party and under which it is in occupancy are in full
     force and effect, except for such failure to be in full force and effect
     that individually or in the aggregate has not had and would not reasonably
     be expected to have a Material Adverse Effect. Each of the Company and its
     Subsidiaries is in possession of the properties or assets purported to be
     leased under all its material leases. Neither the Company nor any of its
     Subsidiaries has received any written notice of any event or occurrence
     that has resulted or could result (with or without the giving of notice,
     the lapse of time or both) in a default with respect to any material lease
     or sublease to which it is a party.

          (p) Intellectual Property. (i) Subject to Sections 3.01(p)(ii) and
     3.01(p)(v), each of the Company and its Subsidiaries owns, or is validly
     licensed or otherwise has the right to use (without any obligation to make
     any fixed or contingent payments, including royalty payments) all patents,
     patent applications, trademarks, trademark rights, trade names, trade name
     rights, domain names, service marks, service mark rights, copyrights,
     software, technical know-how and other proprietary intellectual property
     rights and computer programs (collectively, "Intellectual Property Rights")
     which are material to the conduct of the business of the Company and its
     Subsidiaries, taken as a whole, in each case free and clear of all Liens.
     The Company has the legal power to convey the rights granted to it under
     any license for any Intellectual Property Right taken by the Company and
     its Subsidiaries. The Company is not subject to any contractual, legal or
     other restriction on the use of any Intellectual Property Rights (including
     Intellectual Property Rights with respect to the DiscoverWorks and
     Thermofluor technologies) which are owned by or licensed to the Company.

          (ii) No claims are pending or, to the Knowledge of the Company,
     threatened that the Company or any of its Subsidiaries is infringing
     (including with respect to the manufacture, use or sale by the Company or
     any of its Subsidiaries of their respective commercial products or of their
     respective Intellectual Property Rights) the rights of any person with
     regard to any Intellectual Property Right which individually or in the
     aggregate have had or would reasonably be expected to have a Material
     Adverse Effect. To the Knowledge of the Company, no person or persons are
     infringing the rights of the Company or any of its Subsidiaries with
     respect to any Intellectual Property Right in a manner which individually
     or in the aggregate has had or would reasonably be expected to have a
     Material Adverse Effect.

          (iii) No claims are pending or, to the Knowledge of the Company,
     threatened with regard to the ownership by the Company or any of its
     Subsidiaries of any of their respective Intellectual Property Rights which
     individually or in the aggregate have had or would reasonably be expected
     to have a Material Adverse Effect.

          (iv) Section 3.01(p)(iv) of the Company Disclosure Schedule sets
     forth, as of the date hereof, a complete and accurate list of all patents,
     registered trademarks and applications therefor, copyright registrations
     (if any) and, to the Knowledge of the Company, domain name registrations
     (if any), owned by or licensed to the Company or any of its Subsidiaries.
     All patents and patent applications listed in Section 3.01(p)(iv) of the
     Company Disclosure Schedule are either (a) owned by, or are subject to an
     obligation of assignment to, the Company or a Subsidiary of the Company
     free and clear of all Liens or (b) licensed to the Company or a Subsidiary
     of the Company free and clear (to the Knowledge of the Company) of all
     Liens. The patent applications listed in Section 3.01(p)(iv) of the Company
     Disclosure Schedule that are owned by the Company or any of its
     Subsidiaries are (and such applications that are licensed to the Company or
     any of its Subsidiaries are to the Company's

                                       A-20
<PAGE>

     Knowledge) pending and have not been abandoned, and have been and continue
     to be timely prosecuted. All patents, registered trademarks and
     applications therefor owned by the Company or any of its Subsidiaries have
     been (and all such patents, registered trademarks and applications licensed
     to the Company or any of its Subsidiaries have been to the Company's
     Knowledge) duly registered and/or filed with or issued by each appropriate
     Governmental Entity in the jurisdiction indicated in Section 3.01(p)(iv) of
     the Company Disclosure Schedule, all necessary affidavits of continuing use
     have been (or, with respect to licenses, to the Company's Knowledge have
     been) timely filed, and all necessary maintenance fees have been (or, with
     respect to licenses, to the Company's Knowledge have been) timely paid to
     continue all such rights in effect. None of the patents listed in Section
     3.01(p)(iv) of the Company Disclosure Schedule that are owned by the
     Company or any of its Subsidiaries has (and no such patents that are
     licensed to the Company or any of its Subsidiaries has to the Company's
     Knowledge) expired or been declared invalid, in whole or in part, by any
     Governmental Entity. There are no ongoing interferences, oppositions,
     reissues, reexaminations or other proceedings involving any of the patents
     or patent applications listed in Section 3.01(p)(iv) of the Company
     Disclosure Schedule and owned by the Company or any of its Subsidiaries (or
     to the Company's Knowledge, licensed to the Company or any of its
     Subsidiaries), including ex parte and post-grant proceedings, in the United
     States Patent and Trademark Office or in any foreign patent office or
     similar administrative agency, other than as have not had or would not
     reasonably be expected to have a Material Adverse Effect. In the Company's
     opinion, there are no published patents, patent applications, articles or
     other prior art references that could adversely affect the validity of any
     patent listed in Section 3.01(p)(iv) of the Company Disclosure Schedule in
     a material way. To the Knowledge of the Company, each of the patents and
     patent applications listed in Section 3.01(p)(iv) of the Company Disclosure
     Schedule that are owned by the Company or any of its Subsidiaries properly
     identifies (and to the Knowledge of the Company such patents and
     applications licensed to the Company or any of its Subsidiaries properly
     identify) each and every inventor of the claims thereof as determined in
     accordance with the laws of the jurisdiction in which such patent is issued
     or such patent application is pending. Each inventor named on the patents
     and patent applications listed in Section 3.01(p)(iv) of the Company
     Disclosure Schedule that are owned by the Company or any of its
     Subsidiaries has executed (and such inventors named on such patents and
     applications licensed to the Company or any of its Subsidiaries to the
     Company's Knowledge have executed) an agreement assigning his, her or its
     entire right, title and interest in and to such patent or patent
     application, and the inventions embodied and claimed therein, to the
     Company or a Subsidiary of the Company, or in the case of licensed Patents,
     to the appropriate owners. To the Knowledge of the Company, no such
     inventor has any contractual or other obligation that would preclude any
     such assignment or otherwise conflict with the obligations of such inventor
     to the Company or such Subsidiary under such agreement with the Company or
     such Subsidiary.

          (v) Section 3.01(p)(v) of the Company Disclosure Schedule sets forth a
     complete and accurate list of all options, rights, licenses or interests of
     any kind relating to Intellectual Property Rights granted (i) to the
     Company or any of its Subsidiaries (other than software licenses for
     generally available software and except pursuant to employee proprietary
     inventions agreements (or similar employee agreements), non-disclosure
     agreements and consulting agreements entered into by the Company or any of
     its Subsidiaries in the ordinary course of business), or (ii) by the
     Company or any of its Subsidiaries to any other person.

          (vi) The Company and its Subsidiaries have used reasonable efforts to
     maintain their material trade secrets in confidence, including entering
     into licenses and contracts that generally require licensees, contractors
     and other third persons with access to such trade secrets to keep such
     trade secrets confidential.

          (q) Voting Requirements. The affirmative vote of holders of a majority
     of the outstanding shares of Company Common Stock at the Stockholders'
     Meeting or any adjournment or postponement thereof to adopt this Agreement
     (the "Stockholder Approval") is the only vote of the holders of any

                                       A-21
<PAGE>

     class or series of capital stock of the Company necessary to adopt this
     Agreement and approve the transactions contemplated hereby.

          (r) State Takeover Statutes. The Board of Directors of the Company has
     unanimously approved the terms of this Agreement and the Stockholder
     Agreement and the consummation of the Merger and the other transactions
     contemplated by this Agreement and the Stockholder Agreement, and such
     approval represents all the action necessary to render inapplicable to this
     Agreement, the Stockholder Agreement, the Merger and the other transactions
     contemplated by this Agreement and the Stockholder Agreement, the
     restrictions on "business combinations" (as defined in Section 203 of the
     DGCL ("Section 203")) set forth in Section 203 to the extent, if any, such
     restrictions would otherwise be applicable to this Agreement, the
     Stockholder Agreement, the Merger and the other transactions contemplated
     by this Agreement and the Stockholder Agreement. No other state takeover
     statute or similar statute or regulation applies to this Agreement, the
     Stockholder Agreement, the Merger or the other transactions contemplated by
     this Agreement or the Stockholder Agreement.

          (s) Brokers and Other Advisors. No broker, investment banker,
     financial advisor or other person (other than Lazard, Freres & Co. LLC
     ("Lazard")), the fees and expenses of which will be paid by the Company, is
     entitled to any broker's, finder's, financial advisor's or other similar
     fee or commission in connection with the transactions contemplated by this
     Agreement based upon arrangements made by or on behalf of the Company. The
     Company has delivered to Parent complete and accurate copies of all
     agreements under which any such fees or expenses are payable and all
     indemnification and other agreements related to the engagement of the
     persons to whom such fees are payable. The fees and expenses of all
     accountants, brokers, financial advisors (including Lazard), legal counsel
     (including Morgan, Lewis & Bockius LLP, Richards, Layton & Finger and
     Sterne, Kessler, Goldstein & Fox P.L.L.C.), financial printers and other
     persons retained by the Company in connection with this Agreement or the
     Stockholder Agreement or the transactions contemplated hereby or thereby
     incurred or to be incurred by the Company will not exceed the fees and
     expenses set forth in Section 3.01(s) of the Company Disclosure Schedule.

          (t) Opinion of Financial Advisor. The Company has received the oral
     opinion of Lazard, dated the date hereof, to the effect that, as of such
     date, the Merger Consideration is fair, from a financial point of view, to
     the holders of shares of Company Common Stock (other than Parent or Sub). A
     signed copy of the written opinion confirming such oral opinion will be
     delivered to Parent promptly after delivery thereof to the Company.

          (u) Development, Distribution, Marketing, Supply and Manufacturing
     Agreements. (i) Section 3.01(u) of the Company Disclosure Schedule sets
     forth, as of the date hereof, a complete and accurate list of all Contracts
     to which the Company or any of its Subsidiaries is a party relating to (x)
     research, development, distribution, training, sale, supply, license,
     marketing or manufacturing that have a remaining value of $60,000 or more
     individually (provided that the aggregate obligations with respect to such
     Contracts not so scheduled shall not exceed $300,000) and (y) the
     distribution, in each case, by third parties of any product of the Company
     or any Subsidiary of the Company or any product or patent or other
     Intellectual Property Right licensed by the Company or any Subsidiary of
     the Company. Notwithstanding the foregoing, no consulting agreement shall
     be required to be set forth on Section 3.01(u) of the Company Disclosure
     Schedule pursuant to clause (x) of the immediately preceding sentence
     unless such consulting agreement has a remaining value of $75,000 or more
     individually (provided that the aggregate obligations with respect to such
     consulting agreements not so scheduled shall not exceed $1,000,000). The
     Company has made available to Parent a complete and accurate copy of each
     such Contract.

          (ii) Section 3.01(u)(ii) of the Company Disclosure Schedule sets forth
     a complete and accurate list of all Contracts to which the Company or any
     of its Subsidiaries is a party relating to the research, development,
     distribution, training, sale, supply, license, marketing or manufacturing
     by third parties of any product of the Company or any Subsidiary of the
     Company or any product, patent or

                                       A-22
<PAGE>

     other Intellectual Property Right licensed by the Company or any Subsidiary
     of the Company, which grant an exclusive right to such third party for the
     research, development, distribution, supply, license, marketing or
     manufacturing of any such product, patent or other Intellectual Property
     Right.

          (v) Regulatory Compliance. (i) As to each product subject to the FDCA
     and the FDA regulations promulgated thereunder or similar Legal Provisions
     in any foreign jurisdiction that are developed, manufactured, tested,
     distributed and/or marketed by the Company or any of its Subsidiaries (each
     such product, a "Medical Device", a "Biologic" or a "Drug", as the case may
     be), each such Medical Device, Biologic or Drug is being developed,
     manufactured, tested, distributed and/or marketed in compliance with all
     applicable requirements under the FDCA and similar Legal Provisions,
     including those relating to investigational use, premarket clearance or
     marketing approval to market a Medical Device, and applications or
     abbreviated applications to market a new Biologic or a new Drug, good
     manufacturing practices, labeling, advertising, record keeping, filing of
     reports and security, except for failures in compliance that individually
     or in the aggregate have not had and would not reasonably be expected to
     have a Material Adverse Effect. Neither the Company nor any of its
     Subsidiaries has received any material notice or other material
     communication from the FDA or any other Governmental Entity (A) contesting
     the premarket clearance or approval of, the uses of or the labeling and
     promotion of any products of the Company or any of its Subsidiaries or (B)
     otherwise alleging any violation applicable to any Medical Device, Biologic
     or Drug by the Company or any of its Subsidiaries of any Legal Provision.

          (ii) No Medical Device, Biologic or Drug has been recalled, withdrawn,
     suspended or discontinued by the Company or any of its Subsidiaries in the
     United States or outside the United States (whether voluntarily or
     otherwise). No proceedings in the United States or outside of the United
     States of which the Company has Knowledge (whether completed or pending)
     seeking the recall, withdrawal, suspension or seizure of any Medical
     Device, Biologic or Drug are pending against the Company or any of its
     Subsidiaries nor have any such proceedings been pending at any prior time.

          (iii) As to each Biologic or Drug of the Company or any of its
     Subsidiaries for which a biological license application, new drug
     application, investigational new drug application or similar state or
     foreign regulatory application has been approved, the Company and its
     Subsidiaries are in compliance with 21 U.S.C. Sections 355, Section 626 of
     the Public Health Service Act or 21 C.F.R. Parts 312, 314, 600 or 601 et
     seq., respectively, and similar Legal Provisions and all terms and
     conditions of such applications, except for any such failure or failures to
     be in compliance which individually or in the aggregate has not had and
     would not reasonably be expected to have a Material Adverse Effect. As to
     each such drug, the Company and any relevant Subsidiary of the Company, and
     the officers, employees or agents of the Company or such Subsidiary, have
     included in the application for such drug, where required, the
     certification described in 21 U.S.C. Section 335a(k)(1) or any similar
     Legal Provision and the list described in 21 U.S.C. Section 335a(k)(2) or
     any similar Legal Provision, and each such certification and list was true,
     complete and correct in all material respects when made. In addition, the
     Company and its Subsidiaries are in substantial compliance with all
     applicable registration and listing requirements set forth in 21 U.S.C.
     Section 360 and 21 C.F.R. Part 207 and all similar Legal Provisions.

          (iv) No article of any Biologic or Drug manufactured and/or
     distributed by the Company or any of its Subsidiaries is (A) adulterated
     within the meaning of 21 U.S.C. Section 351 (or similar Legal Provisions),
     (B) misbranded within the meaning of 21 U.S.C. Section 352 (or similar
     Legal Provisions) or (C) a product that is in violation of 21 U.S.C.
     Section 355 (or similar Legal Provisions), except for failures to be in
     compliance with the foregoing that individually or in the aggregate have
     not had and would not reasonably be expected to have a Material Adverse
     Effect.

          (v) Neither the Company nor any of its Subsidiaries, nor, to the
     Knowledge of the Company, any officer, employee or agent of the Company or
     any of its Subsidiaries, has made an untrue statement of a material fact or
     fraudulent statement to the FDA or any other Governmental Entity, failed to
     disclose a material fact required to be disclosed to the FDA or any other
     Governmental

                                       A-23
<PAGE>

     Entity, or committed an act, made a statement, or failed to make a
     statement that, at the time such disclosure was made, would reasonably be
     expected to provide a basis for the FDA or any other Governmental Entity to
     invoke its policy respecting "Fraud, Untrue Statements of Material Facts,
     Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg. 46191
     (September 10, 1991) or any similar policy. Neither the Company nor any of
     its Subsidiaries, nor, to the Knowledge of the Company, any officer,
     employee or agent of the Company or any of its Subsidiaries, has been
     convicted of any crime or engaged in any conduct for which debarment is
     mandated by 21 U.S.C. Section 335a(a) or any similar Legal Provision or
     authorized by 21 U.S.C. Section 335a(b) or any similar Legal Provision.
     Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of
     the Company, any officer, employee or agent of the Company or any of its
     Subsidiaries, has been convicted of any crime or engaged in any conduct for
     which such person or entity could be excluded from participating in the
     federal health care programs under Section 1128 of the Social Security Act
     or any similar Legal Provision.

          (vi) Neither the Company nor any of its Subsidiaries has received any
     written notice that the FDA or any other Governmental Entity has (a)
     commenced, or threatened to initiate, any action to withdraw its approval
     or request the recall of any Medical Device, Biologic or Drug, (b)
     commenced, or threatened to initiate, any action to enjoin production of
     any Medical Device, Biologic or Drug or (c) to the Company's Knowledge,
     commenced, or threatened to initiate, any action to enjoin the production
     of any medical device, biologic or drug produced at any facility where any
     Medical Device, Biologic or Drug is manufactured, tested or packaged,
     except for any such action that individually or in the aggregate has not
     had and would not reasonably be expected to have a Material Adverse Effect.

          (vii) To the Knowledge of the Company, there are no facts,
     circumstances or conditions that would reasonably be expected to form the
     basis for any investigation, suit, claim, action or proceeding against or
     affecting the Company or any of its Subsidiaries relating to or arising
     under (a) the FDCA or the regulations of the FDA promulgated thereunder or
     (b) the Social Security Act or regulations of the Office of the Inspector
     General of the Department of Health and Human Services.

          (w) Insurance. Section 3.01(w) of the Company Disclosure Schedule
     contains a complete and accurate list of all policies of fire, liability,
     workers' compensation, title and other forms of insurance owned, held by or
     applicable to the Company (or its assets or business) as of the date
     hereof, and the Company has heretofore made available to Parent a complete
     and accurate copy of all such policies, including all occurrence-based
     policies applicable to the Company (or its assets or business) for all
     periods prior to the Closing Date. All such policies (or substitute
     policies with substantially similar terms and underwritten by insurance
     carriers with substantially similar or higher ratings) are in full force
     and effect, all premiums with respect thereto covering all periods up to
     and including the Closing Date have been paid, and no notice of
     cancellation or termination has been received with respect to any such
     policy except for such policies, premiums, cancellations or terminations
     that individually or in the aggregate have not had and would not reasonably
     be expected to have a Material Adverse Effect. Such policies are
     sufficient, in the reasonable opinion of the Company, for compliance by the
     Company with (i) all requirements of applicable laws and (ii) all Contracts
     to which the Company is a party, and each of the Company and its
     Subsidiaries has complied in all material respects with the provisions of
     each such policy under which it is an insured party. The Company has not
     been refused any insurance with respect to its assets or operations by any
     insurance carrier to which it has applied for any such insurance or with
     which it has carried insurance, during the last five (5) years. There are
     no pending or, to the Knowledge of the Company, threatened claims under any
     insurance policy that individually or in the aggregate have had or would
     reasonably be expected to have a Material Adverse Effect.

                                       A-24
<PAGE>

     SECTION 3.02.  Representations and Warranties of Parent and Sub.  Parent
and Sub represent and warrant to the Company as follows:

          (a) Organization, Standing and Corporate Power. Each of Parent and Sub
     is a corporation duly organized, validly existing and in good standing
     under the laws of the jurisdiction in which it is incorporated and has all
     requisite corporate power and authority to carry on its business as now
     being conducted. Each of Parent and Sub is duly qualified or licensed to do
     business and is in good standing in each material jurisdiction in which the
     nature of its business or the ownership, leasing or operation of its
     properties makes such qualification or licensing necessary.

          (b) Authority; Noncontravention. Each of Parent and Sub has all
     requisite corporate power and authority to execute and deliver this
     Agreement and to consummate the transactions contemplated by this
     Agreement. The execution and delivery of this Agreement and the
     consummation of the transactions contemplated by this Agreement have been
     duly authorized by all necessary corporate action on the part of Parent and
     Sub and no other corporate proceedings on the part of Parent or Sub are
     necessary to authorize this Agreement or to consummate the transactions
     contemplated hereby. This Agreement and the transactions contemplated
     hereby do not require approval of the holders of any shares of capital
     stock of Parent. This Agreement has been duly executed and delivered by
     each of Parent and Sub and, assuming the due authorization, execution and
     delivery by the Company, constitutes a legal, valid and binding obligation
     of Parent and Sub, as applicable, enforceable against Parent and Sub, as
     applicable, in accordance with its terms, subject to bankruptcy,
     insolvency, moratorium, reorganization or similar laws affecting the rights
     of creditors generally and the availability of equitable remedies. The
     execution and delivery of this Agreement do not, and the consummation of
     the Merger and the other transactions contemplated by this Agreement and
     compliance with the provisions of this Agreement will not, conflict with,
     or result in any violation or breach of, or default (with or without notice
     or lapse of time, or both) under, or give rise to a right of, or result in,
     termination, cancellation or acceleration of any obligation or to the loss
     of a benefit under, or result in the creation of any Lien in or upon any of
     the properties or other assets of Parent or Sub under (x) the Restated
     Certificate of Incorporation or By-laws of Parent or the Certificate of
     Incorporation or By-laws of Sub, (y) any Contract to which Parent or Sub is
     a party or any of their respective properties or other assets is subject,
     in any way that would prevent, materially impede or materially delay the
     consummation by Parent of the Merger (including the payments required to be
     made pursuant to Article II) or the other transactions contemplated hereby
     or (z) subject to the governmental filings and other matters referred to in
     the following sentence, any (A) statute, law, ordinance, rule or regulation
     applicable to Parent or Sub or their respective properties or other assets
     or (B) order, writ, injunction, decree, judgment or stipulation, in each
     case applicable to Parent or Sub or their respective properties or other
     assets, and in each case, in any way that would prevent, materially impede
     or materially delay the consummation by Parent of the Merger (including the
     payments required to be made pursuant to Article II) or the other
     transactions contemplated hereby. No material consent, approval, order or
     authorization of, action by or in respect of, or registration, declaration
     or filing with, any Governmental Entity is required by or with respect to
     Parent or Sub in connection with the execution and delivery of this
     Agreement by Parent and Sub or the consummation by Parent and Sub of the
     Merger or the other transactions contemplated by this Agreement, except for
     (1) the filing of a premerger notification and report form by Parent under
     the HSR Act and the receipt, termination or expiration, as applicable, of
     approvals or waiting periods required under the HSR Act or any other
     applicable competition, merger control, antitrust or similar law or
     regulation and (2) the filing of the Certificate of Merger with the
     Secretary of State of the State of Delaware.

          (c) Information Supplied. None of the information supplied or to be
     supplied by or on behalf of Parent or Sub specifically for inclusion or
     incorporation by reference in the Proxy Statement will, at the date it is
     first mailed to the stockholders of the Company and at the time of the
     Stockholders' Meeting, contain any untrue statement of a material fact or
     omit to state any material fact required to

                                       A-25
<PAGE>

     be stated therein or necessary in order to make the statements therein, in
     light of the circumstances under which they are made, not misleading.

          (d) Interim Operations of Sub. Sub was formed solely for the purpose
     of engaging in the transactions contemplated hereby, has engaged in no
     other business activities and has conducted its operations only as
     contemplated hereby.

          (e) Capital Resources. Parent has sufficient cash to pay the aggregate
     Merger Consideration.

                                   ARTICLE IV

                   COVENANTS RELATING TO CONDUCT OF BUSINESS

     SECTION 4.01.  Conduct of Business.  (a) Conduct of Business by the
Company. During the period from the date of this Agreement to the Effective
Time, except as set forth in Section 4.01(a) of the Company Disclosure Schedule
or as consented to in writing in advance by Parent or as otherwise permitted
pursuant to this Section 4.01(a)(i) through (xvi), the Company shall, and shall
cause each of its Subsidiaries to, carry on its business in the ordinary course
consistent with past practice and as currently proposed by the Company to be
conducted prior to the Closing (including in respect of research and development
activities and programs) and in compliance in all material respects with all
applicable laws, rules, regulations and treaties and, to the extent consistent
therewith, use all commercially reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers, employees and consultants and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it with the intention that its goodwill and ongoing
business shall be unimpaired at the Effective Time. In addition to and without
limiting the generality of the foregoing, during the period from the date of
this Agreement to the Effective Time, except as otherwise set forth in Section
4.01(a) of the Company Disclosure Schedule, the Company shall not, and shall not
permit any of its Subsidiaries to, without Parent's prior written consent:

          (i) (x) declare, set aside or pay any dividends on, or make any other
     distributions (whether in cash, stock or property) in respect of, any of
     its capital stock, other than dividends or distributions by a direct or
     indirect wholly owned Subsidiary of the Company to its shareholders, (y)
     split, combine or reclassify any of its capital stock or issue or authorize
     the issuance of any other securities in respect of, in lieu of or in
     substitution for shares of its capital stock or (z) purchase, redeem or
     otherwise acquire any shares of its capital stock or any other securities
     thereof or any rights, warrants or options to acquire any such shares or
     other securities, except for purchases, redemptions or other acquisitions
     of capital stock or other securities required under the terms of any plans,
     arrangements or agreements existing on the date hereof between the Company
     or any of its Subsidiaries and any director or employee of the Company or
     any of its Subsidiaries (complete and accurate copies of which have been
     heretofore delivered to Parent);

          (ii) issue, deliver, sell, grant, pledge or otherwise encumber or
     subject to any Lien any shares of its capital stock, any other voting
     securities or any securities convertible into, or any rights, warrants or
     options to acquire, any such shares, voting securities or convertible
     securities, or any "phantom" stock, "phantom" stock rights, stock
     appreciation rights or stock based performance units, including pursuant to
     Contracts as in effect on the date hereof (other than the issuance of
     shares of Company Common Stock upon the exercise of Company Stock Options
     or Warrants, in each case outstanding on the date hereof in accordance with
     their terms on the date hereof);

          (iii) amend the Company Certificate or the Company By-laws or other
     comparable charter or organizational documents of any of the Company's
     Subsidiaries, except as may be required by law or the rules and regulations
     of the SEC or The Nasdaq Stock Market, Inc.;

          (iv) directly or indirectly acquire (x) by merging or consolidating
     with, or by purchasing assets of, or by any other manner, any person or
     division, business or equity interest of any person or (y) any asset or
     assets that, individually, has a purchase price in excess of $60,000 or, in
     the

                                       A-26
<PAGE>

     aggregate, have a purchase price in excess of $300,000, except for new
     capital expenditures, which shall be subject to the limitations of clause
     (vii) below, and except for purchases of components, raw materials or
     supplies in the ordinary course of business consistent with past practice;

          (v) (x) sell, lease, license, mortgage, sell and leaseback or
     otherwise encumber or subject to any Lien or otherwise dispose of any of
     its properties or other assets or any interests therein (including
     securitizations), except for sales of inventory and used equipment in the
     ordinary course of business consistent with past practice; or (y) enter
     into, modify or amend any lease of property, except for modifications or
     amendments that are not materially adverse to the Company and its
     Subsidiaries taken as a whole;

          (vi) (x) incur any indebtedness for borrowed money or guarantee any
     such indebtedness of another person, issue or sell any debt securities or
     calls, options, warrants or other rights to acquire any debt securities of
     the Company or any of its Subsidiaries, guarantee any debt securities of
     another person, enter into any "keep well" or other agreement to maintain
     any financial statement condition of another person or enter into any
     arrangement having the economic effect of any of the foregoing or (y) make
     any loans, advances or capital contributions to, or investments in, any
     other person, other than to employees in respect of travel expenses in the
     ordinary course of business consistent with past practice;

          (vii) make any new capital expenditure or expenditures which,
     individually, is in excess of $50,000 or, (x) during the period beginning
     on the date hereof and ending on April 30, 2003, in the aggregate, are in
     excess of $1,000,000, or (y) during the period beginning on May 1, 2003, in
     the aggregate, are in excess of $300,000 during any calendar month;

          (viii) except as required by law or any judgment, (v) pay, discharge,
     settle or satisfy any claims, liabilities, obligations or litigation
     (absolute, accrued, asserted or unasserted, contingent or otherwise), other
     than the payment, discharge, settlement or satisfaction in the ordinary
     course of business consistent with past practice or in accordance with
     their terms, of liabilities disclosed, reflected or reserved against in the
     most recent financial statements (or, if applicable, the notes thereto) of
     the Company included in the Filed Company SEC Documents (for amounts not in
     excess of such reserves) or incurred since the date of such financial
     statements in the ordinary course of business consistent with past
     practice, (w) cancel any indebtedness, (x) waive or assign any claims or
     rights of substantial value or (y) waive any benefits of, or agree to
     modify in any respect, or, subject to the terms hereof, fail to enforce, or
     consent to any matter with respect to which consent is required under, any
     standstill or similar agreement to which the Company or any of its
     Subsidiaries is a party or (z) waive any material benefits of, or agree to
     modify in any material respect, or, subject to the terms hereof, fail to
     enforce in any material respect, or consent to any matter with respect to
     which consent is required under, any material confidentiality or similar
     agreement to which the Company or any of its Subsidiaries is a party;

          (ix) enter into any Contracts relating to the research, clinical
     trial, development, distribution, training, sale, supply, license,
     marketing, co-promotion or manufacturing by third parties of products of
     the Company or any Subsidiary of the Company or products licensed by the
     Company or any Subsidiary of the Company, or the Intellectual Property
     Rights of the Company or any Subsidiary of the Company, which,
     individually, has a value in excess of $60,000 or, in the aggregate, have a
     value in excess of $300,000;

          (x) enter into, modify, amend or terminate any Contract or waive,
     release or assign any material rights or claims thereunder, which if so
     entered into, modified, amended, terminated, waived, released or assigned
     would reasonably be expected to (A) adversely affect in any material
     respect the Company, (B) impair in any material respect the ability of the
     Company to perform its obligations under this Agreement or (C) prevent or
     materially delay the consummation of the transactions contemplated by this
     Agreement;

                                       A-27
<PAGE>

          (xi) enter into any Contract to the extent consummation of the
     transactions contemplated by this Agreement or compliance by the Company
     with the provisions of this Agreement would reasonably be expected to
     conflict with, or result in a violation or breach of, or default (with or
     without notice or lapse of time, or both) under, or give rise to a right
     of, or result in, termination, cancellation or acceleration of any
     obligation or to the loss of a benefit under, or result in the creation of
     any Lien in or upon any of the properties or other assets of the Company or
     any of its Subsidiaries under, or give rise to any increased, additional,
     accelerated, or guaranteed right or entitlements of any third party under,
     or result in any material alteration of, any provision of such Contract;

          (xii) enter into any Contract containing any restriction on the
     ability of the Company or any of its Subsidiaries to assign its rights,
     interests or obligations thereunder, unless such restriction expressly
     excludes any assignment to Parent or any of its Subsidiaries in connection
     with or following the consummation of the Merger and the other transactions
     contemplated by this Agreement;

          (xiii) sell, transfer or license to any person or otherwise extend,
     amend or modify any rights to the Intellectual Property Rights of the
     Company or any of its Subsidiaries;

          (xiv) except as otherwise contemplated by this Agreement or as
     required to ensure that any Company Benefit Plan or Company Benefit
     Agreement is not then out of compliance with applicable law or to comply
     with any Contract or Company Benefit Agreement entered into prior to the
     date hereof (complete and accurate copies of which have been heretofore
     delivered to Parent), (A) adopt, enter into, terminate or amend (I) any
     collective bargaining agreement or Company Benefit Plan or (II) any Company
     Benefit Agreement or other agreement, plan or policy involving the Company
     or any of its Subsidiaries and one or more of their respective current or
     former directors, officers, employees or consultants, (B) increase in any
     manner the compensation, bonus or fringe or other benefits of, or pay any
     bonus of any kind or amount whatsoever to, any current or former director,
     officer, employee or consultant, except for planned salary increases and
     payment of bonuses, each as described in Section 4.01(a)(xiv) of the
     Company Disclosure Schedule, (C) pay any benefit or amount not required
     under any Company Benefit Plan or Company Benefit Agreement or any other
     benefit plan or arrangement of the Company or any of its Subsidiaries as in
     effect on the date of this Agreement, other than as contemplated in clause
     (B), (D) grant or pay any severance or termination pay or increase in any
     manner the severance or termination pay of any current or former director,
     officer, employee or consultant of the Company or any of its Subsidiaries,
     (E) grant any awards under any bonus, incentive, performance or other
     compensation plan or arrangement, Company Benefit Agreement or Company
     Benefit Plan (including the grant of Company Stock Options, Company
     Restricted Stock, "phantom" stock, stock appreciation rights, "phantom"
     stock rights, stock based or stock related awards, performance units or
     restricted stock or the removal of existing restrictions in any Company
     Benefit Agreements, Company Benefit Plans or agreements or awards made
     thereunder), other than as contemplated in clause (B), (F) amend or modify
     any Stock Option or Warrant, (G) take any action to fund or in any other
     way secure the payment of compensation or benefits under any employee plan,
     agreement, contract or arrangement or Company Benefit Plan or Company
     Benefit Agreement, (H) take any action to accelerate the vesting or payment
     of any compensation or benefit under any Company Benefit Plan or Company
     Benefit Agreement or (I) materially change any actuarial or other
     assumption used to calculate funding obligations with respect to any
     Company Pension Plan or change the manner in which contributions to any
     Company Pension Plan are made or the basis on which such contributions are
     determined;

          (xv) except as required by GAAP, revalue any material assets of the
     Company or any of its Subsidiaries or make any change in accounting
     methods, principles or practices; or

          (xvi) authorize any of, or commit, resolve, propose or agree to take
     any of, the foregoing actions.

     (b) Other Actions. The Company, Parent and Sub shall not, and shall not
permit any of their respective Subsidiaries to, take any action that would, or
that would reasonably be expected to, result in any of the conditions to the
Merger set forth in Article VI not being satisfied.

                                       A-28
<PAGE>

     (c) Advice of Changes; Filings. The Company and Parent shall promptly
advise the other party orally and in writing of (i) any representation or
warranty made by it (and, in the case of Parent, made by Sub) contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or (ii) the failure of it
(and, in the case of Parent, of Sub) to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement. The Company and Parent shall, to the extent
permitted by law, promptly provide the other with copies of all filings made by
such party with any Governmental Entity in connection with this Agreement and
the transactions contemplated hereby, other than the portions of such filings
that include confidential information not directly related to the transactions
contemplated by this Agreement.

     (d) Certain Tax Matters. During the period from the date of this Agreement
to the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, (i) timely file all tax returns ("Post-Signing Returns")
required to be filed by or on behalf of each such entity; (ii) timely pay all
taxes due and payable in respect of such Post-Signing Returns that are so filed;
(iii) accrue a reserve in the books and records and financial statements of any
such entity in accordance with past practice for all taxes payable by such
entity for which no Post-Signing Return is due prior to the Effective Time; (iv)
promptly notify Parent of any suit, claim, action, investigation, proceeding or
audit (collectively, "Actions") pending against or with respect to the Company
or any of its Subsidiaries in respect of any material amount of tax and not
settle or compromise any such Action without Parent's consent; (v) not make any
material tax election or settle or compromise any material tax liability, other
than with Parent's consent or other than in the ordinary course of business; and
(vi) cause all existing tax sharing agreements, tax indemnity obligations and
similar agreements, arrangements or practices with respect to taxes to which the
Company or any of its Subsidiaries is or may be a party or by which the Company
or any of its Subsidiaries is or may otherwise be bound to be terminated as of
the Closing Date so that after such date neither the Company nor any of its
Subsidiaries shall have any further rights or liabilities thereunder. Any tax
returns described in this Section 4.01(d) shall be complete and correct in all
material respects and shall be prepared on a basis consistent with the past
practice of the Company and in a manner that does not distort taxable income
(e.g. by deferring income or accelerating deductions), provided that no
Post-Signing Returns shall be filed with any taxing authority without Parent's
prior written consent.

     SECTION 4.02.  No Solicitation.  (a) The Company shall not, nor shall it
authorize or permit any of its Subsidiaries or any of their respective
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other advisor, agent or representative (collectively,
"Representatives") retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or knowingly encourage,
or take any other action designed to, or which would reasonably be expected to,
facilitate, any Takeover Proposal or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information, or otherwise cooperate in any way with, any Takeover
Proposal. Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative of the
Company or any of its Subsidiaries shall be a breach of this Section 4.02(a) by
the Company. The Company shall, and shall cause its Subsidiaries to, immediately
cease and cause to be terminated all existing discussions or negotiations with
any person conducted heretofore with respect to any Takeover Proposal and
request the prompt return or destruction of all confidential information
previously furnished. Notwithstanding the foregoing, at any time prior to
obtaining the Stockholder Approval, in response to a bona fide written Takeover
Proposal that the Board of Directors of the Company determines in good faith
(after consultation with outside counsel and a financial advisor of nationally
recognized reputation) constitutes or would reasonably be expected to lead to a
Superior Proposal, and which Takeover Proposal was not solicited after the date
hereof and was made after the date hereof and did not otherwise result from a
breach of this Section 4.02(a), the Company may, if its Board of Directors
determines in good faith (after consultation with outside counsel) that it is
required to do so in order to comply with its fiduciary duties to
                                       A-29
<PAGE>

the stockholders of the Company under applicable law, and subject to compliance
with Section 4.02(c), (x) furnish information with respect to the Company and
its Subsidiaries to the person making such Takeover Proposal (and its
Representatives) pursuant to a customary confidentiality agreement (which need
not restrict such person from making an unsolicited Takeover Proposal) not less
restrictive of such person than the Confidentiality Agreement, provided that all
such information has previously been provided to Parent or is provided to Parent
prior to or substantially concurrent with the time it is provided to such
person, and (y) participate in discussions or negotiations with the person
making such Takeover Proposal (and its Representatives) regarding such Takeover
Proposal.

     The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to, or that would reasonably be expected to lead to, any direct
or indirect acquisition or purchase, in one transaction or a series of
transactions, of assets or businesses that constitute 15% or more of the
revenues, net income or the assets of the Company and its Subsidiaries, taken as
a whole, or 15% or more of any class of equity securities of the Company or any
of its Subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 15% or more of any class of
equity securities of the Company or any of its Subsidiaries, or any merger,
consolidation, business combination, recapitalization, liquidation, dissolution,
joint venture, binding share exchange or similar transaction involving the
Company or any of its Subsidiaries pursuant to which any person or the
shareholders of any person would own 15% or more of any class of equity
securities of the Company or any of its Subsidiaries or of any resulting parent
company of the Company, other than the transactions contemplated by this
Agreement and the Stockholder Agreement.

     The term "Superior Proposal" means any bona fide offer made by a third
party that if consummated would result in such person (or its stockholders)
owning, directly or indirectly, all or substantially all of the shares of
Company Common Stock then outstanding (or of the surviving entity in a merger or
the direct or indirect parent of the surviving entity in a merger) or all or
substantially all the assets of the Company, which the Board of Directors of the
Company determines in good faith (after consultation with a financial advisor of
nationally recognized reputation) to be (i) more favorable to the stockholders
of the Company from a financial point of view than the Merger (taking into
account all the terms and conditions of such proposal and this Agreement
(including any changes to the financial terms of this Agreement proposed by
Parent in response to such offer or otherwise)) and (ii) reasonably capable of
being completed, taking into account all financial, legal, regulatory and other
aspects of such proposal.

     (b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) (A) withdraw (or modify in a manner adverse to Parent), or publicly
propose to withdraw (or modify in a manner adverse to Parent), the approval,
recommendation or declaration of advisability by such Board of Directors or any
such committee thereof of this Agreement, the Merger or the other transactions
contemplated by this Agreement or (B) recommend, adopt or approve, or propose
publicly to recommend, adopt or approve, any Takeover Proposal (any action
described in this clause (i) being referred to as a "Company Adverse
Recommendation Change") or (ii) approve or recommend, or propose to approve or
recommend, or allow the Company or any of its Subsidiaries to execute or enter
into, any letter of intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement constituting or
related to, or that is intended to or would reasonably be expected to lead to,
any Takeover Proposal (other than a confidentiality agreement referred to in
Section 4.02(a)) (an "Acquisition Agreement"). Notwithstanding the foregoing, at
any time prior to obtaining the Stockholder Approval, the Board of Directors of
the Company may make a Company Adverse Recommendation Change if such Board of
Directors determines in good faith (after consultation with outside counsel)
that it is required to do so in order to comply with its fiduciary duties to the
stockholders of the Company under applicable law; provided, however, that no
Company Adverse Recommendation Change may be made until after the fourth
business day following Parent's receipt of written notice (a "Notice of Adverse
Recommendation") from the Company advising Parent that the Board of Directors of
the Company intends to take such action and specifying the reasons therefor,
including the terms and conditions of any Superior Proposal that is the basis of
the proposed action by the Board of Directors (it being understood and agreed
that any

                                       A-30
<PAGE>

amendment to the financial terms or any other material term of such Superior
Proposal shall require a new Notice of Adverse Recommendation and a new four
business day period). In determining whether to make a Company Adverse
Recommendation Change, the Board of Directors of the Company shall take into
account any changes to the financial terms of this Agreement proposed by Parent
in response to a Notice of Adverse Recommendation or otherwise.

     (c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.02, the Company shall promptly advise Parent
orally and in writing of any Takeover Proposal, the material terms and
conditions of any such Takeover Proposal or inquiry (including any changes
thereto) and the identity of the person making any such Takeover Proposal or
inquiry. The Company shall (i) keep Parent fully informed of the status and
details (including any change to any material term thereof) of any such Takeover
Proposal or inquiry and (ii) provide to Parent as soon as practicable after
receipt or delivery thereof with copies of all correspondence and other written
material sent or provided to the Company or any of its Subsidiaries from any
person that describes any of the terms or conditions of any Takeover Proposal.

     (d) Nothing contained in this Section 4.02 shall prohibit the Company from
(x) taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or (y) making any disclosure to the
stockholders of the Company if, in the good faith judgment of the Board of
Directors of the Company (after consultation with outside counsel) failure to so
disclose would be inconsistent with its obligations under applicable law,
including the Board of Directors' duty of candor to the stockholders of the
Company; provided, however, that in no event shall the Company or its Board of
Directors or any committee thereof take, or agree or resolve to take, any action
prohibited by Section 4.02(b).

                                   ARTICLE V

                             ADDITIONAL AGREEMENTS

     SECTION 5.01.  Preparation of the Proxy Statement; Stockholders'
Meeting.  (a) As promptly as practicable following the date of this Agreement,
the Company and Parent shall prepare and the Company shall file with the SEC the
Proxy Statement and the Company shall use its commercially reasonable efforts to
respond as promptly as practicable to any comments of the SEC with respect
thereto and to cause the Proxy Statement to be mailed to the stockholders of the
Company as promptly as practicable following the date of this Agreement. The
Company shall promptly notify Parent upon the receipt of any comments from the
SEC or the staff of the SEC or any request from the SEC or the staff of the SEC
for amendments or supplements to the Proxy Statement and shall provide Parent
with copies of all correspondence between the Company and its Representatives,
on the one hand, and the SEC and the staff of the SEC, on the other hand.
Notwithstanding the foregoing, prior to filing or mailing the Proxy Statement
(or any amendment or supplement thereto) or responding to any comments of the
SEC or the staff of the SEC with respect thereto, the Company (i) shall provide
Parent an opportunity to review and comment on such document or response and
(ii) shall include in such document or response all comments reasonably proposed
by Parent; provided, that Parent shall use commercially reasonable efforts to
provide or cause to be provided its comments to the Company as promptly as
reasonably practicable after the Proxy Statement is transmitted to Parent for
its review.

     (b) The Company shall, as soon as practicable following the date of this
Agreement, establish a record date for, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders' Meeting") solely for the
purpose of obtaining the Stockholder Approval. Subject to Sections 4.02(b) and
4.02(d), the Company shall, through its Board of Directors, recommend to its
stockholders adoption of this Agreement and shall include such recommendation in
the Proxy Statement. Without limiting the generality of the foregoing, the
Company's obligations pursuant to the first sentence of this Section 5.01(b)
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any Takeover Proposal or (ii) the
withdrawal or modification by the Board of Directors of the Company or any
committee thereof of such Board of Directors' or such
                                       A-31
<PAGE>

committee's approval or recommendation of this Agreement, the Merger or the
other transactions contemplated by this Agreement; provided, however, that no
breach of this Section 5.01(b) shall be deemed to have occurred if the Company
adjourns or postpones the Stockholders' Meeting for a reasonable period of time,
each such period of time not to exceed ten business days, provided that (x) at
the time of such adjournment or postponement the Board of Directors shall be
prohibited by the terms of this Agreement from making a Company Adverse
Recommendation Change, and the Stockholders' Meeting is then scheduled to occur
within four business days of the time of such adjournment or postponement or (y)
at the time the Board of Directors announces a Company Adverse Recommendation
Change, the Stockholders' Meeting is then scheduled to occur no later than ten
business days from the date of such Company Adverse Recommendation Change;
provided that the Company may not adjourn or postpone the Stockholders' Meeting
pursuant to this clause (ii) more than two times or for more than fifteen
business days in the aggregate.

     SECTION 5.02.  Access to Information; Confidentiality.  The Company shall
afford to Parent, and to Parent's officers, employees, accountants, counsel,
financial advisors and other Representatives, reasonable access (including for
the purpose of coordinating integration activities and transition planning with
the employees of the Company and its Subsidiaries) during normal business hours
and upon reasonable prior notice to the Company during the period prior to the
Effective Time or the termination of this Agreement to all its and its
Subsidiaries' properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall furnish promptly to Parent (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of Federal or state securities
laws and (b) all other information concerning its and its Subsidiaries'
business, properties and personnel as Parent may reasonably request. Except for
disclosures expressly permitted by the terms of the Confidentiality Agreement
dated as of October 16, 2002, as amended December 19, 2002, between Parent and
the Company (as it may be amended from time to time, the "Confidentiality
Agreement"), Parent shall hold, and shall cause its officers, employees,
accountants, counsel, financial advisors and other Representatives to hold, all
information received from the Company, directly or indirectly, in confidence in
accordance with the Confidentiality Agreement. No investigation pursuant to this
Section 5.02 or information provided or received by any party hereto pursuant to
this Agreement will affect any of the representations or warranties of the
parties hereto contained in this Agreement or the conditions hereunder to the
obligations of the parties hereto.

     SECTION 5.03.  Commercially Reasonable Efforts.  Upon the terms and subject
to the conditions set forth in this Agreement, each of the parties agrees to use
its commercially reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement and the Stockholder Agreement,
including using commercially reasonable efforts to accomplish the following: (i)
the taking of all acts necessary to cause the conditions to Closing to be
satisfied as promptly as practicable, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity and (iii) the obtaining of all necessary
consents, approvals or waivers from third parties; provided that none of the
Company, Parent or Sub shall be required to make any payment to any such third
parties or concede anything of value to obtain such consents. In connection with
and without limiting the foregoing, the Company and Parent shall duly file with
the U.S. Federal Trade Commission and the Antitrust Division of the Department
of Justice the notification and report form (the "HSR Filing") required under
the HSR Act with respect to the transactions contemplated by this Agreement as
promptly as practicable. The HSR Filing shall be in substantial compliance with
the requirements of the HSR Act. Each party shall cooperate with the other party
to the extent necessary to assist the other party in the preparation of its HSR
Filing, to request early termination of the waiting period required by the HSR
Act and, if requested, to promptly amend or furnish additional information
thereunder. The Company and its Board of Directors shall (1) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes
                                       A-32
<PAGE>

applicable to this Agreement, the Stockholder Agreement, the Merger or any of
the other transactions contemplated by this Agreement or the Stockholder
Agreement and (2) if any state takeover statute or similar statute becomes
applicable to this Agreement, the Stockholder Agreement, the Merger or any of
the other transactions contemplated by this Agreement or the Stockholder
Agreement, take all action necessary to ensure that the Merger and the other
transactions contemplated by this Agreement and the Stockholder Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and the Stockholder Agreement and otherwise to minimize the effect of
such statute or regulation on this Agreement, the Stockholder Agreement, the
Merger and the other transactions contemplated by this Agreement and the
Stockholder Agreement. Nothing in this Agreement shall be deemed to require
Parent to agree to, or proffer to, divest or hold separate any assets or any
portion of any business of Parent, the Company or any of their respective
Subsidiaries.

     SECTION 5.04.  Company Stock Options; Warrants.  (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee thereof administering the Company Stock Plans)
shall adopt such resolutions or take such other actions as may be required to
effect the following:

          (i) adjust the terms of all outstanding Company Stock Options and
     Company Restricted Stock, whether vested or unvested, as necessary to
     provide that the restrictions on outstanding Company Restricted Stock shall
     lapse, so that the Company Restricted Stock shall become fully vested,
     before the Effective Time, the Company Stock Options will become fully
     exercisable and may be exercised before the Effective Time, and, at the
     Effective Time, each Company Stock Option outstanding immediately prior to
     the Effective Time shall be canceled and the holder thereof shall then
     become entitled to receive, as soon as practicable following the Effective
     Time, a single lump sum cash payment equal to the product of (1) the number
     of shares of Company Common Stock for which such Company Stock Option shall
     not theretofore have been exercised and (2) the excess, if any, of the
     Merger Consideration over the exercise price per share of such Company
     Stock Option; and

          (ii) make such other changes to the Company Stock Plans as the Company
     and Parent may agree are appropriate to give effect to the Merger.

     (b) As soon as practicable following the date of this Agreement, the Board
of Directors of the Company shall adopt such resolutions or take such other
actions (if any) as may be required to provide that each Warrant outstanding
immediately prior to the Effective Time shall be canceled in exchange for a lump
sum cash payment equal to (i) the product of (A) the number of shares of Company
Common Stock subject to such Warrant and (B) the Merger Consideration, minus
(ii) the product of (A) the number of shares of Company Common Stock subject to
such Warrant and (B) the per share exercise price of such Warrant (provided that
if such calculation results in a negative number, the lump sum cash payment
shall be deemed to be $0). Such payment shall be made promptly following the
Effective Time. All amounts payable pursuant to this Section 5.04(b) shall be
subject to any required withholding of taxes and shall be paid without interest.
The Company has obtained all consents of the holders of the Warrants necessary
to effectuate the foregoing.

     (c) All amounts payable to holders of the Company Stock Options pursuant to
Section 5.04(a) shall be subject to any required withholding of Taxes and shall
be paid without interest as soon as practicable following the Effective Time.

     (d) The Company shall ensure that following the Effective Time, no holder
of a Company Stock Option (or former holder of a Company Stock Option) or any
participant in any Company Stock Plan, Company Benefit Plan or Company Benefit
Agreement shall have any right thereunder to acquire any capital stock of the
Company or the Surviving Corporation or any other equity interest therein
(including "phantom" stock or stock appreciation rights).

     SECTION 5.05.  Indemnification, Advancement of Expenses, Exculpation and
Insurance.  (a) Parent shall cause the Surviving Corporation to assume the
obligations with respect to all rights to indemnification, advancement of
expenses and exculpation from liabilities for acts or omissions occurring at

                                       A-33
<PAGE>

or prior to the Effective Time now existing in favor of the current or former
directors or officers of the Company as provided in the Company Certificate, the
Company By-laws or any indemnification agreement between such directors or
officers and the Company (in each case, as in effect on the date hereof),
without further action, as of the Effective Time and such obligations shall
survive the Merger and shall continue in full force and effect in accordance
with their terms.

     (b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and other
assets to any person, then, and in each such case, Parent shall cause proper
provision to be made so that the successors and assigns of the Surviving
Corporation shall expressly assume the obligations set forth in this Section
5.05.

     (c) For six years after the Effective Time, Parent shall maintain (directly
or indirectly through the Company's existing insurance programs) in effect the
Company's current directors' and officers' liability insurance in respect of
acts or omissions occurring at or prior to the Effective Time, covering each
person currently covered by the Company's directors' and officers' liability
insurance policy (a complete and accurate copy of which has been heretofore
delivered to Parent), on terms with respect to such coverage and amounts no less
favorable than those of such policy in effect on the date hereof; provided,
however, that Parent may (i) substitute therefor policies of Parent containing
terms with respect to coverage (including as coverage relates to deductibles and
exclusions) and amount no less favorable to such directors and officers or (ii)
request that the Company obtain such extended reporting period coverage under
its existing insurance programs (to be effective as of the Effective Time);
provided further, however, that in satisfying its obligation under this Section
5.05(c), neither the Company nor Parent shall be obligated to pay more than
$3,000,000 in the aggregate to obtain such coverage. It is understood and agreed
that in the event such coverage cannot be obtained for $3,000,000 or less in the
aggregate, Parent shall be obligated to provide such coverage as may be obtained
for such $3,000,000 aggregate amount.

     (d) The provisions of this Section 5.05 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.

     SECTION 5.06.  Fees and Expenses.  (a) Except as provided in paragraph (b)
of this Section 5.06, all fees and expenses incurred in connection with this
Agreement, the Merger and the other transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.

     (b) In the event that (i) this Agreement is terminated by Parent pursuant
to Section 7.01(e) or (ii)(A) prior to the obtaining of the Stockholder
Approval, a Takeover Proposal shall have been made to the Company or shall have
been made directly to the stockholders of the Company generally or shall have
otherwise become publicly known or any person shall have publicly announced an
intention (whether or not conditional) to make a Takeover Proposal, (B)
thereafter this Agreement is terminated by either Parent or the Company pursuant
to Section 7.01(b)(i)(but only if a vote to obtain the Stockholder Approval or
the Stockholders' Meeting has not been held) or Section 7.01(b)(iii) and (C)
within 12 months after such termination, the Company enters into a definitive
agreement to consummate, or consummates, the transactions contemplated by any
Takeover Proposal, then the Company shall pay Parent a fee equal to $5,480,000
(the "Termination Fee") by wire transfer of same-day funds on the first business
day following (x) in the case of a payment required by clause (i) above, the
date of termination of this Agreement and (y) in the case of a payment required
by clause (ii) above, the date of the first to occur of the events referred to
in clause (ii)(C).

     (c) The Company and Parent acknowledge and agree that the agreements
contained in Section 5.06(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent would
not enter into this Agreement; accordingly, if the Company fails promptly to pay
the amount due pursuant to Section 5.06(b), and, in order to obtain such
payment, Parent
                                       A-34
<PAGE>

commences a suit that results in a judgment against the Company for the
Termination Fee, the Company shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the Termination Fee from the date such payment
was required to be made until the date of payment at the prime rate of Citibank,
N.A. in effect on the date such payment was required to be made.

     SECTION 5.07.  Public Announcements.  Except with respect to any Company
Adverse Recommendation Change, Parent and the Company shall consult with each
other before issuing, and give each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as such party may reasonably conclude may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system. The parties agree that all formal Company employee communication
programs or announcements with respect to the transactions contemplated by this
Agreement shall be in the forms mutually agreed to by the parties (such
agreement not to be unreasonably withheld or delayed). The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement shall be in the form heretofore agreed to by the
parties.

     SECTION 5.08.  Stockholder Litigation.  The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement or the Stockholder Agreement, and no such
settlement shall be agreed to without Parent's prior written consent.

     SECTION 5.09.  Employee Matters.  (a) Subject to applicable collective
bargaining agreements, for a period of not less than twelve months following the
Effective Time, the employees of the Company who remain in the employment of the
Surviving Corporation and its Subsidiaries (the "Continuing Employees") shall
receive employee benefits that are substantially comparable in the aggregate to
the employee benefits provided to the employees of the Company immediately prior
to the Effective Time; provided that neither Parent nor the Surviving
Corporation nor any of their Subsidiaries shall have any obligation to issue, or
adopt any plans or arrangements providing for the issuance of shares of capital
stock, warrants, options, stock appreciation rights or other rights in respect
of any shares of capital stock of any entity or any securities convertible or
exchangeable into such shares pursuant to any such plans or arrangements;
provided, further, that no plans or arrangements of the Company or any of its
Subsidiaries providing for such issuance shall be taken into account in
determining whether employee benefits are substantially comparable in the
aggregate.

     (b) For a period of not less than twelve months following the Effective
Time, the Continuing Employees shall receive immigration benefits that are
generally comparable to the immigration benefits currently provided to the
employees of the Company pursuant to the program set forth on Section 5.09(b) of
the Company Disclosure Schedule.

     (c) Nothing contained herein shall be construed as requiring Parent or the
Surviving Corporation to continue any specific plans or to continue the
employment of any specific person.

     (d) Parent shall cause the Surviving Corporation to recognize the service
of each Continuing Employee as if such service had been performed with Parent
(i) for purposes of vesting (but not benefit accrual) under Parent's defined
benefit pension plan, (ii) for purposes of eligibility for vacation under
Parent's vacation program, (iii) for purposes of eligibility and participation
under any health or welfare plan maintained by Parent (other than any
post-employment health or post-employment welfare plan) and (iv) unless covered
under another arrangement with or of the Company, for benefit accrual purposes
under Parent's severance plan (in the case of each of clauses (i), (ii), (iii)
and (iv), solely to the extent that Parent makes such plan or program available
to employees of the Surviving Corporation), but not for purposes of any other
employee benefit plan of Parent.

                                       A-35
<PAGE>

     (e) Subject to applicable collective bargaining agreements, with respect to
any welfare plan maintained by Parent in which Continuing Employees are eligible
to participate after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, (i) waive all limitations as to preexisting conditions
and exclusions with respect to participation and coverage requirements
applicable to such employees to the extent such conditions and exclusions were
satisfied or did not apply to such employees under the welfare plans of the
Company and its Subsidiaries prior to the Effective Time and (ii) provide each
Continuing Employee with credit for any co-payments and deductibles paid prior
to the Effective Time in satisfying any analogous deductible or out-of-pocket
requirements to the extent applicable under any such plan.

     SECTION 5.10.  Stockholder Agreement Legend.  The Company will inscribe
upon any Certificate representing Subject Shares that may be tendered by a
Stockholder (as such terms are defined in the Stockholder Agreement) to the
Company for such purpose the following legend: "THE SHARES OF COMMON STOCK, PAR
VALUE $.001 PER SHARE, OF 3-DIMENSIONAL PHARMACEUTICALS, INC. REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDER AGREEMENT DATED AS OF JANUARY 15,
2003, AND ARE SUBJECT TO THE TERMS THEREOF. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF 3-DIMENSIONAL PHARMACEUTICALS,
INC.".

     SECTION 5.11.  Consents and Other Action.  The Company agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
accomplish the items set forth on Section 5.11 of the Company Disclosure
Schedule.

                                   ARTICLE VI

                              CONDITIONS PRECEDENT

     SECTION 6.01.  Conditions to Each Party's Obligation to Effect the
Merger.  The respective obligation of each party to effect the Merger is subject
to the satisfaction or (to the extent permitted by law) waiver on or prior to
the Closing Date of the following conditions:

          (a) Stockholder Approval. The Stockholder Approval shall have been
     obtained.

          (b) HSR Act. The waiting period (and any extension thereof) applicable
     to the Merger under the HSR Act shall have been terminated or shall have
     expired.

          (c) No Injunctions or Restraints. No temporary restraining order,
     preliminary or permanent injunction or other judgment or order issued by
     any court of competent jurisdiction or other statute, law, rule, legal
     restraint or prohibition (collectively, "Restraints") shall be in effect
     (i) preventing the consummation of the Merger or (ii) which otherwise has
     had or would reasonably be expected to have a Material Adverse Effect.

     SECTION 6.02.  Conditions to Obligations of Parent and Sub.  The
obligations of Parent and Sub to effect the Merger are further subject to the
satisfaction or (to the extent permitted by law) waiver on or prior to the
Closing Date of the following conditions:

          (a) Representations and Warranties. The representations and warranties
     of the Company contained in this Agreement that are qualified as to
     materiality shall be true and correct, and the representations and
     warranties of the Company contained in this Agreement that are not so
     qualified shall be true and correct in all material respects, in each case
     as of the date of this Agreement and as of the Closing Date as though made
     on the Closing Date, except to the extent such representations and
     warranties expressly relate to an earlier date, in which case as of such
     earlier date. Parent shall have received a certificate signed on behalf of
     the Company by the chief executive officer and the chief financial officer
     of the Company to such effect.

                                       A-36
<PAGE>

          (b) Performance of Obligations of the Company. The Company shall have
     performed in all material respects all obligations required to be performed
     by it under this Agreement at or prior to the Closing Date, and Parent
     shall have received a certificate signed on behalf of the Company by the
     chief executive officer and the chief financial officer of the Company to
     such effect.

          (c) No Litigation. There shall not be pending or threatened any suit,
     action or proceeding by any Governmental Entity, or by any other person
     having a reasonable likelihood of prevailing in a manner contemplated in
     clauses (i), (ii) or (iii) below, (i) challenging the acquisition by Parent
     or Sub of any shares of Company Common Stock, seeking to restrain or
     prohibit the consummation of the Merger, or seeking to place limitations on
     the ownership of shares of Company Common Stock (or shares of common stock
     of the Surviving Corporation) by Parent or Sub or seeking to obtain from
     the Company, Parent or Sub any damages that are material in relation to the
     Company, (ii) seeking to prohibit or materially limit the ownership or
     operation by the Company, Parent or any of their respective Subsidiaries of
     any portion of any business or of any assets of the Company, Parent or any
     of their respective Subsidiaries, or to compel the Company, Parent or any
     of their respective Subsidiaries to divest or hold separate any portion of
     any business or of any assets of the Company, Parent or any of their
     respective Subsidiaries, as a result of the Merger, (iii) seeking to
     prohibit Parent or any of its Subsidiaries from effectively controlling in
     any material respect the business or operations of the Company or any of
     its Subsidiaries or (iv) otherwise having, or being reasonably expected to
     have, a Material Adverse Effect.

          (d) Restraints. No Restraint that would reasonably be expected to
     result, directly or indirectly, in any of the effects referred to in
     clauses (i) through (iv) of paragraph (c) of this Section 6.02 shall be in
     effect.

          (e) Certain Employees. No fewer than 80% of the employees of the
     Company listed in Section 6.02(e) of the Company Disclosure Schedule shall
     be actively employed in scientific and/or technical capacities by the
     Company on the Closing Date.

          (f) Consents. Parent shall have received evidence, in form and
     substance reasonably satisfactory to it, that Parent or the Company shall
     have obtained all consents, approvals, authorizations, qualifications and
     orders of third parties required in connection with this Agreement and the
     transactions contemplated by this Agreement including (i) those consents
     specifically identified on Section 6.02(f) of the Company Disclosure
     Schedule and (ii) those consents to assignments of material Contracts and
     material Intellectual Property Rights except for those the failure of which
     to be obtained individually or in the aggregate would not reasonably be
     expected to (A) restrain or prohibit the consummation of the Merger or (B)
     prohibit or limit in any material respect the ownership or operation or
     effective control by Parent of any portion of the business or assets of the
     Company and its Subsidiaries, taken as a whole.

     SECTION 6.03.  Conditions to Obligation of the Company.  The obligation of
the Company to effect the Merger is further subject to the satisfaction or (to
the extent permitted by law) waiver on or prior to the Closing Date of the
following conditions:

          (a) Representations and Warranties. The representations and warranties
     of Parent and Sub contained in this Agreement that are qualified as to
     materiality shall be true and correct, and the representations and
     warranties of Parent and Sub contained in this Agreement that are not so
     qualified shall be true and correct in all material respects, in each case
     as of the date of this Agreement and as of the Closing Date as though made
     on the Closing Date, except to the extent such representations and
     warranties expressly relate to an earlier date, in which case as of such
     earlier date. The Company shall have received a certificate signed on
     behalf of Parent by an executive officer of Parent to such effect.

          (b) Performance of Obligations of Parent and Sub. Parent and Sub shall
     have performed in all material respects all obligations required to be
     performed by them under this Agreement at or prior to

                                       A-37
<PAGE>

     the Closing Date, and the Company shall have received a certificate signed
     on behalf of Parent by an executive officer of Parent to such effect.

     SECTION 6.04.  Frustration of Closing Conditions.  None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to act in good faith or to use its commercially
reasonable efforts to consummate the Merger and the other transactions
contemplated by this Agreement, as required by and subject to Section 5.03.

                                  ARTICLE VII

                       TERMINATION, AMENDMENT AND WAIVER

     SECTION 7.01.  Termination.  This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the Stockholder
Approval:

          (a) by mutual written consent of Parent, Sub and the Company;

          (b) by either Parent or the Company:

             (i) if the Merger shall not have been consummated on or before June
        15, 2003; provided, however, that the right to terminate this Agreement
        under this Section 7.01(b)(i) shall not be available to any party whose
        breach of a representation or warranty in this Agreement or whose action
        or failure to act has been a principal cause of or resulted in the
        failure of the Merger to be consummated on or before such date;

             (ii) if any Restraint having any of the effects set forth in
        Section 6.01(c) shall be in effect and shall have become final and
        nonappealable; or

             (iii) if the Stockholder Approval shall not have been obtained at
        the Stockholders' Meeting duly convened therefor or at any adjournment
        or postponement thereof;

          (c) by Parent (i) if the Company shall have breached or failed to
     perform any of its representations, warranties, covenants or agreements set
     forth in this Agreement, which breach or failure to perform (A) would give
     rise to the failure of a condition set forth in Section 6.02(a) or 6.02(b)
     and (B) is incapable of being cured by the Company within 30 calendar days
     following receipt of written notice of such breach or failure to perform
     from Parent or (ii) if any Restraint having the effects referred to in
     clauses (i) through (iv) of Section 6.02(c) shall be in effect and shall
     have become final and nonappealable;

          (d) by the Company, if Parent shall have breached or failed to perform
     any of its representations, warranties, covenants or agreements set forth
     in this Agreement, which breach or failure to perform (A) would give rise
     to the failure of a condition set forth in Section 6.03(a) or 6.03(b) and
     (B) is incapable of being cured by Parent within 30 calendar days following
     receipt of written notice of such breach or failure to perform from the
     Company; or

          (e) by Parent, in the event that prior to the obtaining of the
     Stockholder Approval (i) a Company Adverse Recommendation Change shall have
     occurred or (ii) the Board of Directors of the Company fails publicly to
     reaffirm its recommendation of this Agreement, the Merger or the other
     transactions contemplated by this Agreement within ten business days of
     receipt of a written request by Parent to provide such reaffirmation
     following a Takeover Proposal.

     SECTION 7.02.  Effect of Termination.  In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of Section 3.01(s), the penultimate sentence of Section 5.02, Section
5.06, this Section 7.02 and Article VIII, which provisions shall survive such
termination, and except to the extent that such

                                       A-38
<PAGE>

termination results from the willful and material breach by a party of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.

     SECTION 7.03.  Amendment.  This Agreement may be amended by the parties
hereto at any time before or after receipt of the Stockholder Approval;
provided, however, that after such approval has been obtained, there shall be
made no amendment that by law requires further approval by the stockholders of
the Company without such approval having been obtained. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.

     SECTION 7.04.  Extension; Waiver.  At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) to the extent permitted by
law, waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso to the first sentence of Section 7.03 and to the extent permitted by
law, waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.

     SECTION 7.05.  Procedure for Termination or Amendment.  A termination of
this Agreement pursuant to Section 7.01 or an amendment of this Agreement
pursuant to Section 7.03 shall, in order to be effective, require, in the case
of Parent or the Company, action by its Board of Directors or, with respect to
any amendment of this Agreement pursuant to Section 7.03, the duly authorized
committee of its Board of Directors to the extent permitted by law.

                                  ARTICLE VIII

                               GENERAL PROVISIONS

     SECTION 8.01.  Nonsurvival of Representations and Warranties.  None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.

     SECTION 8.02.  Notices.  Except for notices that are specifically required
by the terms of this Agreement to be delivered orally, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, telecopied (which is confirmed) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

     if to Parent or Sub, to:

     Johnson & Johnson
     One Johnson & Johnson Plaza
     New Brunswick, NJ 08933
     Telecopy No.: (732) 524-2788
     Attention: John T. Crisan

     with a copy to:

     Cravath, Swaine & Moore
     Worldwide Plaza
     825 Eighth Avenue
     New York, NY 10019
     Telecopy No.: (212) 474-3700
     Attention: Robert I. Townsend, III, Esq.

                                       A-39
<PAGE>

     if to the Company, to:

     3-Dimensional Pharmaceuticals, Inc.
     Three Lower Makefield Corporate Center
     1020 Stony Hill Road, Suite 300
     Yardley, PA 19067
     Telecopy No.: (267) 757-7204
     Attention: David C. U'Prichard
                Melinda Rudolph

     with a copy to:

     Morgan, Lewis & Bockius LLP
     1111 Pennsylvania Avenue, N.W.
     Washington, D.C. 20004
     Telecopy No.: (202) 739-3001
     Attention: Linda L. Griggs, Esq.

     SECTION 8.03.  Definitions.  For purposes of this Agreement:

     (a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;

     (b) "Knowledge" of any person that is not an individual means, with respect
to any matter in question, the actual knowledge of such person's executive
officers (which in the case of the Company shall be deemed to include, for
purposes of this definition, solely those persons listed in Section 8.03(b) of
the Company Disclosure Schedule) after making due inquiry of the other
executives and managers having primary responsibility for such matter;

     (c) "Material Adverse Change" or "Material Adverse Effect" means any (i)
change, (ii) effect, (iii) event, (iv) occurrence, (v) state of facts or (vi)
development or developments which individually or in the aggregate would
reasonably be expected to result in any change or effect, that (A) is materially
adverse to the business, financial condition, properties, assets, liabilities
(contingent or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole, or (B) would reasonably be expected to prevent
or materially impede, interfere with, hinder or delay the consummation by the
Company of the Merger or the other transactions contemplated by this Agreement;
provided, that for purposes of analyzing whether any change, effect, event,
occurrence, state of facts or development constitutes a "Material Adverse
Change" or "Material Adverse Effect" under this definition, the parties agree
that (x) materiality shall be analyzed from the viewpoint of whether there is a
significant likelihood that the disclosure of such state of facts, change,
development, effect, condition or occurrence would be viewed by a reasonable
investor as having significantly altered the total mix of information about the
Company and its Subsidiaries available to such investor if the total mix of such
information consisted solely of (I) the representations and warranties of the
Company contained in this Agreement, (II) the Filed Company SEC Documents and
(III) the Company Disclosure Schedule to the extent readily apparent on its face
to be applicable to the analysis of whether a Material Adverse Change or a
Material Adverse Effect has occurred or would reasonably be expected to occur,
and (y) the analysis of materiality shall not be limited solely to the
standpoint of a long-term investor; provided, further, that none of the
following shall be deemed, either alone or in combination, to constitute, and
none of the following shall be taken into account in determining whether there
has been or will be, a Material Adverse Effect or a Material Adverse Change: (a)
any change relating to the United States economy or securities markets in
general, (b) any failure, in and of its itself, by the Company to meet any
internal or published projections, forecasts, or revenue or earnings predictions
for any period ending on or after the date of this Agreement (it being
understood that the facts or occurrences giving rise or contributing to such
failure may be deemed to constitute, or be taken into account in determining
whether there has been or will be, a Material Adverse Effect or a Material
Adverse Change) and (c) any adverse change, effect, event, occurrence, state of
facts or development reasonably attributable to conditions affecting the
industry in which the Company participates (other than
                                       A-40
<PAGE>

as may arise or result from regulatory action by a Governmental Entity), so long
as the effects do not disproportionately impact the Company;

     (d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and

     (e) a "Subsidiary" of any person means another person, an amount of the
voting securities, other voting rights or voting partnership interests of which
is sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.

     SECTION 8.04.  Interpretation.  When a reference is made in this Agreement
to an Article, a Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to "this Agreement" shall include the Company Disclosure
Schedule. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.

     SECTION 8.05.  Consents and Approvals.  For any matter under this Agreement
requiring the consent or approval of any party to be valid and binding on the
parties hereto, such consent or approval must be in writing.

     SECTION 8.06.  Counterparts.  This Agreement may be executed in one or more
counterparts (including by facsimile), all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.

     SECTION 8.07.  Entire Agreement; No Third-Party Beneficiaries.  This
Agreement, the Stockholder Agreement and the Confidentiality Agreement (a)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, the Stockholder Agreement and the
Confidentiality Agreement and (b) except for the provisions of Article II and
Section 5.05, are not intended to confer upon any person other than the parties
any legal or equitable rights or remedies.

     SECTION 8.08.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.

     SECTION 8.09.  Assignment.  Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, and any assignment without such consent shall be
null and void, except that Sub, upon prior written notice to the Company, may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned Subsidiary of Parent, but no such assignment shall relieve Parent or Sub
of any
                                       A-41
<PAGE>

of its obligations hereunder. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.

     SECTION 8.10.  Specific Enforcement; Consent to Jurisdiction.  The parties
agree that irreparable damage would occur and that the parties would not have
any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in any state court in the State of
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any Federal court located in the
State of Delaware or of any state court located in the State of Delaware in the
event any dispute arises out of this Agreement or the transactions contemplated
by this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
the transactions contemplated by this Agreement in any court other than a
Federal court located in the State of Delaware or a state court located in the
State of Delaware.

     SECTION 8.11.  Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

                                       A-42
<PAGE>

     IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers hereunto duly authorized, all as of
the date first written above.

                                          JOHNSON & JOHNSON,

                                          by
                                           -------------------------------------
                                          Name:
                                          Title:

                                          LONGBOW MERGER SUB, INC.,

                                          by
                                           -------------------------------------
                                          Name:
                                          Title:

                                          3-DIMENSIONAL PHARMACEUTICALS, INC.,

                                          by
                                           -------------------------------------
                                          Name:
                                          Title:

                                       A-43
<PAGE>

                                                                         ANNEX I
                                                         TO THE MERGER AGREEMENT

                             INDEX OF DEFINED TERMS

<Table>
<Caption>
TERM
----
<S>                                                           <C>
Acquisition Agreement.......................................    Section 4.02(b)
Actions.....................................................    Section 4.01(d)
Affiliate...................................................    Section 8.03(a)
Agreement...................................................           Preamble
Appraisal Shares............................................    Section 2.01(d)
Biologic....................................................            Section
                                                                     3.01(v)(i)
Certificate.................................................    Section 2.01(c)
Certificate of Merger.......................................       Section 1.03
Class Action Suit...........................................    Section 3.01(h)
Closing.....................................................       Section 1.02
Closing Date................................................       Section 1.02
Code........................................................    Section 2.02(h)
Commonly Controlled Entity..................................    Section 3.01(k)
Company.....................................................           Preamble
Company Adverse Recommendation Change.......................    Section 4.02(b)
Company Benefit Agreements..................................    Section 3.01(g)
Company Benefit Plans.......................................    Section 3.01(k)
Company By-laws.............................................    Section 3.01(a)
Company Certificate.........................................    Section 1.05(a)
Company Common Stock........................................           Preamble
Company Consolidated Group..................................    Section 3.01(n)
Company Disclosure Schedule.................................       Section 3.01
Company Pension Plan........................................    Section 3.01(l)
Company Preferred Stock.....................................    Section 3.01(c)
Company Restricted Stock....................................    Section 3.01(c)
Company SEC Documents.......................................    Section 3.01(e)
Company Stock-Based Awards..................................    Section 3.01(c)
Company Stock Options.......................................    Section 3.01(c)
Company Stock Plans.........................................    Section 3.01(c)
Confidentiality Agreement...................................       Section 5.02
Continuing Employees........................................    Section 5.09(a)
Contract....................................................    Section 3.01(d)
Covered Reports.............................................    Section 3.01(e)
DGCL........................................................       Section 1.01
Drug........................................................    Section 3.01(v)
Effective Time..............................................       Section 1.03
Environmental Laws..........................................    Section 3.01(j)
ERISA.......................................................    Section 3.01(j)
Exchange Act................................................    Section 3.01(d)
Exchange Fund...............................................    Section 2.02(a)
FDA.........................................................    Section 3.01(j)
FDCA........................................................    Section 3.01(j)
</Table>
<PAGE>

<Table>
<Caption>
TERM
----
<S>                                                           <C>
Filed Company SEC Documents.................................    Section 3.01(e)
GAAP........................................................    Section 3.01(e)
Governmental Entity.........................................    Section 3.01(d)
Hazardous Materials.........................................    Section 3.01(j)
HSR Act.....................................................    Section 3.01(d)
HSR Filing..................................................       Section 5.03
Intellectual Property Rights................................    Section 3.01(p)
IRS.........................................................    Section 3.01(l)
Knowledge...................................................    Section 8.03(b)
Lazard......................................................    Section 3.01(s)
Legal Provisions............................................    Section 3.01(j)
Liens.......................................................    Section 3.01(b)
Material Adverse Change.....................................    Section 8.03(c)
Material Adverse Effect.....................................    Section 8.03(c)
Medical Device..............................................    Section 3.01(v)
Merger......................................................           Preamble
Merger Consideration........................................    Section 2.01(c)
Notice of Adverse Recommendation............................    Section 4.02(b)
Parachute Grass Up Payment..................................    Section 3.01(m)
Parent......................................................           Preamble
Paying Agent................................................    Section 2.02(a)
Permits.....................................................    Section 3.01(j)
person......................................................    Section 8.03(d)
Post-Signing Returns........................................    Section 4.01(d)
Primary Company Executives..................................    Section 3.01(m)
Principal Stockholders......................................           Preamble
Proxy Statement.............................................    Section 3.01(d)
Representatives.............................................    Section 4.02(a)
Release.....................................................    Section 3.01(j)
Restraints..................................................    Section 6.01(c)
SEC.........................................................    Section 3.01(d)
Section 203.................................................    Section 3.01(r)
Section 262.................................................    Section 2.01(d)
Securities Act..............................................    Section 3.01(e)
Stockholder Agreement.......................................           Preamble
Stockholder Approval........................................    Section 3.01(q)
Stockholders' Meeting.......................................    Section 5.01(b)
Sub.........................................................           Preamble
Subsidiary..................................................    Section 8.03(e)
Superior Proposal...........................................    Section 4.02(a)
Surviving Corporation.......................................       Section 1.01
Takeover Proposal...........................................    Section 4.02(a)
taxes.......................................................    Section 3.01(n)
taxing authority............................................    Section 3.01(n)
tax returns.................................................    Section 3.01(n)
Termination Fee.............................................    Section 5.06(b)
Warrants....................................................    Section 3.01(c)
</Table>
<PAGE>

                                                                       EXHIBIT A
                                                         TO THE MERGER AGREEMENT

                     RESTATED CERTIFICATE OF INCORPORATION
                          OF THE SURVIVING CORPORATION

     FIRST:  The name of the corporation (hereinafter called the "Corporation")
is 3-Dimensional Pharmaceuticals, Inc.

     SECOND:  The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is Corporate Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle;
and the name of the registered agent of the Corporation in the State of Delaware
at such address is The Corporation Trust Company.

     THIRD:  The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

     FOURTH:  The aggregate number of shares which the Corporation shall have
authority to issue is 1,000 shares of Common Stock, par value $0.01 per share.

     FIFTH:  In furtherance and not in limitation of the powers conferred upon
it by law, the Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-laws of the Corporation.

     SIXTH:  To the fullest extent permitted by the General Corporation Law of
the State of Delaware as it now exists and as it may hereafter be amended, no
director or officer of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director or officer; provided, however, that nothing
contained in this Article SIXTH shall eliminate or limit the liability of a
director or officer (i) for any breach of the director's or officer's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the General Corporation Law of the State
of Delaware or (iv) for any transaction from which the director or officer
derived an improper personal benefit. No amendment to or repeal of this Article
SIXTH shall apply to or have any effect on the liability or alleged liability of
any director or officer of the Corporation for or with respect to any acts or
omissions of such director or officer occurring prior to such amendment or
repeal.

     SEVENTH:  The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said Section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Section. Such
indemnification shall be mandatory and not discretionary. The indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person. Any repeal or modification of
this Article SEVENTH shall not adversely affect any right to indemnification of
any persons existing at the time of such repeal or modification with respect to
any matter occurring prior to such repeal or modification.

     The Corporation shall to the fullest extent permitted by the General
Corporation Law of the State of Delaware advance all costs and expenses
(including, without limitation, attorneys' fees and expenses) incurred by any
director or officer within 15 days of the presentation of same to the
Corporation, with respect to any one or more actions, suits or proceedings,
whether civil, criminal, administrative or investigative, so long as the
Corporation receives from the director or officer an unsecured undertaking to
repay such expenses if it shall ultimately be determined that such director or
officer is not entitled to be indemnified by the Corporation under the General
Corporation Law of the State of Delaware. Such obligation to advance costs and
expenses shall be mandatory, and not discretionary, and shall include, without
limitation, costs and expenses incurred in asserting affirmative defenses,
counterclaims and cross
<PAGE>

claims. Such undertaking to repay may, if first requested in writing by the
applicable director or officer, be on behalf of (rather than by) such director
or officer, provided that in such case the Corporation shall have the right to
approve the party making such undertaking.

     EIGHTH:  Unless and except to the extent that the By-laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
<PAGE>

                                                                         ANNEX B
                                                                  EXECUTION COPY

     STOCKHOLDER AGREEMENT dated as of January 15, 2003, (this "Agreement"),
among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), and the
individuals and other parties listed on Schedule A attached hereto (each, a
"Stockholder" and, collectively, the "Stockholders").

     WHEREAS Parent, Longbow Merger Sub, Inc., a Delaware corporation and a
wholly owned Subsidiary of Parent ("Sub"), and 3-Dimensional Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), propose to enter into an Agreement
and Plan of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of Sub with and
into the Company (the "Merger"), upon the terms and subject to the conditions
set forth in the Merger Agreement;

     WHEREAS each Stockholder owns the number of shares of common stock, par
value $.001 per share, of the Company, (the "Company Common Stock"), set forth
opposite his, her or its name on Schedule A attached hereto (such shares of
Company Common Stock, together with any other shares of capital stock of the
Company acquired by the Stockholders listed under the subheading "Directors and
Officers" on Schedule A attached hereto (collectively, the "Management
Stockholders") after the date hereof and during the term of this Agreement
(including through the exercise of any stock options, warrants or similar
instruments), being collectively referred to herein as the "Subject Shares" of
such Stockholder);

     WHEREAS the Board of Directors of the Company has approved the terms of
this Agreement as set forth in the Merger Agreement; and

     WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that each Stockholder enter into this Agreement.

     NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the mutual promises
and the representations, warranties, covenants and agreements contained herein,
the parties hereto, intending to be legally bound, agree as follows:

          1.  Representations and Warranties of Each Stockholder. Each
     Stockholder hereby, severally and not jointly, represents and warrants to
     Parent as of the date hereof in respect of himself, herself or itself as
     follows:

             (a) Authority, Execution and Delivery; Enforceability. The
        Stockholder has all requisite power and authority to enter into this
        Agreement and to consummate the transactions contemplated hereby. This
        Agreement has been duly authorized, executed and delivered by the
        Stockholder and constitutes the legal, valid and binding obligation of
        the Stockholder, enforceable against the Stockholder in accordance with
        its terms. Except for the expiration or termination of the waiting
        periods under the HSR Act and informational filings with the SEC, the
        execution and delivery by the Stockholder of this Agreement do not, and
        the consummation of the transactions contemplated hereby and compliance
        with the terms hereof will not, conflict with, or result in any
        violation of, or default (with or without notice or lapse of time or
        both) under, or give rise to a right of termination, cancelation or
        acceleration of any obligation or to loss of a material benefit under,
        or result in the creation of any Lien upon any of the Subject Shares of
        the Stockholder under, (i) any trust agreement, loan or credit
        agreement, bond, note, mortgage, indenture, lease or other contract,
        agreement, obligation, commitment, arrangement, understanding or
        instrument, (collectively, "Contracts") to which the Stockholder is a
        party or by which any of the Subject Shares of the Stockholder is bound
        or (ii) subject to the filings and other matters referred to in the next
        sentence, any provision of any judgment, order or decree (collectively,
        "Judgment") or any statute, law, ordinance, rule or regulation
        (collectively, "Applicable Law") applicable to the Subject Shares of the
        Stockholder. No consent, approval, order or authorization (collectively,
        "Consent") of, action by or in respect of, or registration,
                                       B-1
<PAGE>

        declaration or filing with, any Governmental Entity is required to be
        obtained or made by or with respect to the Stockholder that is unique to
        the Stockholder in connection with the execution, delivery and
        performance of this Agreement or the consummation of the transactions
        contemplated hereby, other than (i) compliance with and filings under
        the HSR Act, if applicable to the Stockholder's receipt in the Merger of
        the Merger Consideration, (ii) such reports under Sections 13(d) and 16
        of the Exchange Act as may be required in connection with this Agreement
        and the transactions contemplated hereby and (iii) where the failure to
        obtain such Consent or action, or to make such registration, declaration
        or filing, could not reasonably be expected to prevent, materially
        impede or delay the performance by the Stockholder of its obligations
        under this Agreement. If the Stockholder is a natural person and is
        married, and the Stockholder's Subject Shares constitute community
        property or otherwise need spousal or other approval for this Agreement
        to be legal, valid and binding, this Agreement has been duly authorized,
        executed and delivered by, and constitutes a valid and binding agreement
        of, the Stockholder's spouse, enforceable against such spouse in
        accordance with its terms. No trust of which such Stockholder is a
        trustee requires the consent of any beneficiary to the execution and
        delivery of this Agreement or to the consummation of the transactions
        contemplated hereby.

             (b) The Subject Shares. The Stockholder is the record and
        beneficial owner of, or is trustee of a trust that is the record holder
        of, and whose beneficiaries are the beneficial owners of, and has good
        and marketable title to, the Subject Shares set forth opposite his, her
        or its name on Schedule A attached hereto, free and clear of any Liens.
        Each Management Stockholder does not own, of record or beneficially, any
        shares of capital stock of the Company other than the Subject Shares set
        forth opposite his, her or its name on Schedule A attached hereto. Other
        than with respect to the Note and Pledge Agreement dated as of March 15,
        2000 between David C. U'Prichard and the Company, the Stockholder has
        the sole right to vote such Subject Shares (except to the extent that
        such Subject Shares are issuable upon the exercise of options or
        Warrants that have not been exercised by such Stockholder), and, except
        as contemplated by this Agreement, none of such Subject Shares is
        subject to any voting trust or other agreement, arrangement or
        restriction with respect to the voting of such Subject Shares.

          2.  Representations and Warranties of Parent. Parent hereby represents
     and warrants to each Stockholder that Parent (i) is duly incorporated,
     validly existing and in good standing under the laws of the State of New
     Jersey, and (ii) has all requisite corporate power and authority to enter
     into this Agreement and to consummate the transactions contemplated hereby.
     This Agreement has been duly authorized. The execution and delivery by
     Parent of this Agreement and consummation of the transactions contemplated
     hereby have been duly authorized by all necessary corporate action on the
     part of Parent. Parent has duly executed and delivered this Agreement, and,
     assuming this. Agreement constitutes the legal, valid and binding
     obligation of each of the other parties hereto, this Agreement constitutes
     a valid and binding obligation of Parent enforceable against Parent in
     accordance with its terms. The execution and delivery by Parent of this
     Agreement do not, and the consummation of the transactions contemplated
     hereby and compliance with the terms hereof will not, conflict with, or
     result in any violation of, or default (with or without notice or lapse of
     time or both) under, or give rise to a right of termination, cancelation or
     acceleration of any obligation or to loss of a material benefit under, (i)
     the Certificate of Incorporation or By-laws of Parent, (ii) any Contract to
     which Parent is a party or by which any properties or assets of Parent are
     bound in any way that would prevent the consummation by Parent of the
     transactions contemplated by this Agreement or (iii) subject to the filings
     and other matters referred to in the next sentence, any provision of any
     Judgment or Applicable Law applicable to Parent or the properties or assets
     of Parent, in any way that would prevent the consummation by Parent of the
     transactions contemplated by this Agreement. No Consent of, action by or in
     respect of, or registration, declaration or filing with, any Governmental
     Entity is required to be obtained or made by or with respect to Parent in
     connection with the execution, delivery and performance of this Agreement
     or the consummation of the transactions contemplated hereby, other than
     such reports under Sections 13(d) and 16 of the Exchange Act as may be
     required in connection with this Agreement and the transactions
     contemplated hereby.
                                       B-2
<PAGE>

          3.  Covenants of each Stockholder. Each Stockholder, acting as a
     stockholder of the Company (or warrantholder of the Company with respect to
     Section 3(h)) and not as an officer or director of the Company, severally
     and not jointly, agrees as follows:

             (a) Without in any way limiting each Stockholder's right to vote
        its Subject Shares in its sole discretion with respect to any other
        matters, at any meeting of stockholders of the Company called to vote
        upon the Merger and the Merger Agreement or at any adjournment thereof
        or in any other circumstances upon which a vote, consent or other
        approval (including by written consent) with respect to the Merger and
        the Merger Agreement is sought, the Stockholder shall, including by
        executing a written consent if requested by Parent, vote (or cause to be
        voted) the Subject Shares in favor of the Merger, the adoption by the
        Company of the Merger Agreement and the approval of the terms thereof
        and each of the other transactions contemplated by the Merger Agreement.

             (b) At any meeting of stockholders of the Company or at any
        adjournment thereof or in any other circumstances upon which the
        Stockholder's vote, consent or other approval is sought, the Stockholder
        shall vote (or cause to be voted) the Subject Shares against (i) any
        merger agreement or merger (other than the Merger Agreement and the
        Merger), consolidation, combination, sale of substantial assets,
        reorganization, recapitalization, dissolution, liquidation or winding up
        of or by the Company or any other Takeover Proposal or (ii) any
        amendment of the Company's Ninth Restated Certificate of Incorporation
        or By-laws or other proposal or transaction involving the Company, which
        amendment or other proposal or transaction would in any manner impede,
        frustrate, prevent or nullify, or result in a breach of any covenant,
        representation or warranty or any other obligation of the Company under
        or with respect to, the Merger, the Merger Agreement or any of the other
        transactions contemplated by the Merger Agreement or change in any
        manner the voting rights of the Company Common Stock. The Stockholder
        shall not commit or agree to take any action inconsistent with the
        foregoing.

             (c) The Stockholder shall not (i) sell, transfer, pledge, assign or
        otherwise dispose of (including by gift) (collectively, "Transfer"),
        consent to any Transfer of, or enter into any Contract, option or other
        arrangement (including any profit sharing arrangement) with respect to
        the Transfer of, any Subject Shares (or any interest therein) to any
        person other than pursuant to the terms of the Merger or (ii) enter into
        any voting arrangement, whether by proxy, voting agreement or otherwise,
        with respect to any Subject Shares other than pursuant to this Agreement
        and shall not commit or agree to take any of the foregoing actions. The
        Stockholder shall not, nor shall such Stockholder permit any entity
        under such Stockholder's control to, deposit any Subject Shares in a
        voting trust. Nothing contained in this Section 3(c) shall prohibit any
        sale, transfer or assignment of Subject Shares by a Management
        Stockholder to members of such Management Stockholder's family, a family
        trust of such Management Stockholder or a charitable institution if the
        transferee of such Subject Shares agrees in writing to be bound by the
        terms hereof and notice of such sale, transfer or assignment, including
        the name and address of the purchaser, transferee or assignee, is
        delivered to Parent prior to such sale, transfer or assignment.

             (d) The Stockholder shall not, nor shall it authorize or permit (to
        the extent that it has the power not to permit) any employees or
        Affiliates of, or any investment banker, financial advisor, attorney,
        accountant or other advisor, agent or representative of, the Stockholder
        (collectively, the "Stockholder Representatives") to, directly or
        indirectly through any person or entity, (i) solicit, initiate or
        encourage, or take any other action designed to, or which would
        reasonably be expected to, facilitate, any inquiries or the making of
        any proposal that constitutes or would reasonably be expected to lead to
        a Takeover Proposal or (ii) enter into, continue or otherwise
        participate in any discussions or negotiations regarding, or furnish to
        any person any information with respect to any Takeover Proposal.
        Without limiting the foregoing, it is agreed that any violation of the
        restrictions set forth in the preceding sentence by any Stockholder
        Representative of such Stockholder shall be a breach of this Section
        3(d) by such Stockholder. The Stockholder
                                       B-3
<PAGE>

        shall promptly advise Parent orally and in writing of any Takeover
        Proposal or inquiry made to the Stockholder with respect to any Takeover
        Proposal.

             (e) Until the earlier of (i) the consummation of the Merger and
        (ii) termination of the Merger Agreement pursuant to its terms, the
        Stockholder shall use all reasonable efforts to take, or cause to be
        taken, all actions, and to do, or cause to be done, and to assist and
        cooperate with the other parties in doing, all things necessary, proper
        or advisable to consummate and make effective, in the most expeditious
        manner practicable, the Merger and the other transactions contemplated
        by the Merger Agreement. The Stockholder shall not issue any press
        release or make any other public statement with respect to this
        Agreement, the Merger Agreement, the Merger or any other transaction
        contemplated by this Agreement or the Merger Agreement without the prior
        written consent of Parent, except as may be required by Applicable Law.

             (f) The Stockholder, and any beneficiary of a revocable trust for
        which such Stockholder serves as trustee, shall not take any action to
        revoke or terminate such trust or take any other action which would
        restrict, limit or frustrate in any way the transactions contemplated by
        this Agreement. Each such beneficiary hereby acknowledges and agrees to
        be bound by the terms of this Agreement applicable to it.

             (g) The Stockholder hereby consents to and approves the actions
        taken by the Board of Directors of the Company in approving the Merger
        Agreement and this Agreement, the Merger and the other transactions
        contemplated by the Merger Agreement. The Stockholder hereby waives, and
        agrees not to exercise or assert, any appraisal or similar rights under
        Section 262 of the DGCL or other Applicable Law in connection with the
        Merger.

             (h) As set forth on Schedule B attached hereto, each Stockholder
        who also holds Warrants exercisable for Company Common Stock (as set
        forth opposite his, her or its name on Schedule B attached hereto)
        hereby consents to the lump sum cash payment as specified in Section
        5.04(b) of the Merger Agreement and the concurrent cancelation of such
        Warrants. The Stockholder does not own, of record or beneficially, any
        Warrants exercisable for Company Common Stock other than the Warrants
        set for opposite his, her or its name on Schedule B attached hereto.

          4.  Grant of Irrevocable Proxy; Appointment of Attorney-in-Fact.

          (a) Each Stockholder hereby irrevocably grants to, and appoints,
     Parent and Tom Heyman, Michael Jackson and John T. Crisan, in their
     respective capacities as officers or authorized representatives of Parent,
     and any individual who shall hereafter succeed to any such office of
     Parent, and each of them individually, and any individual designated in
     writing by any of them, as such Stockholder's proxy and attorney-in-fact
     (with full power of substitution), for and in the name, place and stead of
     such Stockholder, to vote such Stockholder's Subject Shares, or grant a
     consent or approval in respect of such Subject Shares (i) in favor of
     adoption of the Merger Agreement and approval of the Merger and any other
     transactions contemplated by the Merger Agreement, (ii) against any
     Takeover Proposal and (iii) against any amendment of the Company's Ninth
     Restated Certificate of Incorporation or By-laws, or other proposal or
     transaction (including any consent solicitation to remove or elect any
     directors of the Company) involving the Company, which amendment or other
     proposal or transaction would in any manner impede, frustrate, prevent or
     nullify, or result in a breach of any covenant, representation or warranty
     or any other obligation or agreement of the Company under or with respect
     to, the Merger, the Merger Agreement or any of the other transactions
     contemplated by the Merger Agreement or change in any manner the voting
     rights of the Company Common Stock. The Stockholder understands and
     acknowledges that Parent is entering into the Merger Agreement in reliance
     upon the Stockholder's execution and delivery of this Agreement.

          (b) Such Stockholder represents that any proxies heretofore given in
     respect of such Stockholder's Subject Shares are not irrevocable, and that
     all such proxies are hereby revoked.

                                       B-4
<PAGE>

          (c) Such Stockholder hereby affirms that the irrevocable proxy set
     forth in this Section 4 is given in connection with the execution of the
     Merger Agreement, and that such irrevocable proxy is given to secure the
     performance of the duties of the Stockholder under this Agreement. Such
     Stockholder hereby further affirms that the irrevocable proxy is coupled
     with an interest and may under no circumstances be revoked. Such
     Stockholder hereby ratifies and confirms all that such irrevocable proxy
     may lawfully do or cause to be done by virtue hereof. Such irrevocable
     proxy is executed and intended to be irrevocable in accordance with the
     provisions of Section 212(e) of the DGCL. The irrevocable proxy granted
     hereunder shall automatically terminate upon the termination of this
     Agreement in accordance with Section 7.

          5.  Further Assurances. Each Stockholder will, from time to time,
     execute and deliver, or cause to be executed and delivered, such additional
     or further consents, documents and other instruments as Parent may
     reasonably request for the purpose of effectively carrying out the
     transactions contemplated by this Agreement.

          6.  Additional Matters. (a) Each Stockholder agrees that this
     Agreement and the obligations hereunder shall attach to such Stockholder's
     Subject Shares and shall be binding upon any person or entity to which
     legal or beneficial ownership of such Subject Shares shall pass, whether by
     operation of law or otherwise, including such Stockholder's heirs,
     guardians, administrators or successors, and that each certificate
     representing such Subject Shares will be inscribed with a legend to such
     effect. In the event of any stock split, stock dividend, merger,
     reorganization, recapitalization or other change in the capital structure
     of the Company affecting the Company Common Stock, or the acquisition of
     additional shares of Company Common Stock or other voting securities of the
     Company by any Management Stockholder, the number of Subject Shares listed
     in Schedule A beside the name of such Stockholder shall be adjusted
     appropriately and this Agreement and the obligations hereunder shall attach
     to any additional shares of Company Common Stock or other voting securities
     of the Company issued to or acquired by such Stockholder. Notwithstanding
     any provision in this Agreement to the contrary, nothing herein shall
     require or be deemed to require the exercise of, or give any person other
     than the Stockholder the power to exercise, any option to purchase Company
     Common Stock or any Warrants held at any time by such Stockholder, it being
     understood that the foregoing shall in no way limit the provisions of
     Section 3(h) herein.

          (b) Each Stockholder agrees that such Stockholder will tender to the
     Company, within 10 business days after the date hereof (or, in the event
     Subject Shares are acquired subsequent to the date hereof within 10
     business days after the date of such acquisition), any and all certificates
     representing such Stockholder's Subject Shares in order that the Company
     may inscribe upon such certificates the legend in accordance with Section
     5.10 of the Merger Agreement.

          (c) No person executing this Agreement who is or becomes during the
     term hereof a director or officer of the Company makes (or shall be deemed
     to have made) any agreement or understanding herein in his or her capacity
     as such a director or officer of the Company. Each Stockholder signs solely
     in his, her or its capacity as the record holder and beneficial owner of,
     or the trustee of a trust whose beneficiaries are the beneficial owners of,
     such Stockholder's Subject Shares and nothing herein shall limit or affect
     any actions taken by any Stockholder or any employee or Affiliate of any
     Stockholder in his or her capacity as an officer or director of Company to
     the extent not prohibited by the Merger Agreement.

          7.  Termination. This Agreement shall terminate, and the provisions
     hereof shall be of no further force or effect, upon the earliest to occur
     of (i) the Effective Time, (ii) the termination of the Merger Agreement or
     (iii) at the option of any Stockholder, the execution or granting of any
     amendment, modification, change or waiver with respect to the Merger
     Agreement subsequent to the date of this Agreement that results in any
     decrease in the price to be paid per share for the shares of Company Common
     Stock. Nothing in this Section 7 shall relieve or otherwise limit the
     liability of any party for breach of this Agreement.

                                       B-5
<PAGE>

          8.  General Provisions. (a) Amendments. This Agreement may not be
     amended except by an instrument in writing signed by each of the parties
     hereto.

          (b) Notice. All notices and other communications hereunder shall be in
     writing and shall be deemed given if delivered personally or sent by
     overnight courier (providing proof of delivery) to Parent in accordance
     with Section 8.02 of the Merger Agreement and to the Stockholders at their
     respective addresses set forth on Schedule A attached hereto (or at such
     other address for a party as shall be specified by like notice).

          (c) Interpretation. When a reference is made in this Agreement to a
     Section, such reference shall be to a Section of this Agreement unless
     otherwise indicated. The headings contained in this Agreement are for
     reference purposes only and shall not affect in any way the meaning or
     interpretation of this Agreement. Wherever the words "include", "includes"
     or "including" are used in this Agreement, they shall be deemed to be
     followed by the words "without limitation".

          (d) Counterparts. This Agreement may be executed in one or more
     counterparts (including by facsimile), all of which shall be considered one
     and the same agreement. This Agreement shall become effective against
     Parent when one or more counterparts have been signed by Parent and
     delivered to each Stockholder. This Agreement shall become effective
     against any Stockholder when one or more counterparts have been executed by
     such Stockholder and delivered to Parent. Each party need not sign the same
     counterpart.

          (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
     (including the documents and instruments referred to herein) (i)
     constitutes the entire agreement and supersedes all prior agreements and
     understandings, both written and oral, among the parties with respect to
     the subject matter hereof and (ii) is not intended to confer upon any
     person other than the parties hereto any legal or equitable rights or
     remedies.

          (f) GOVERNING LAW; CAPITALIZED TERMS. THIS AGREEMENT SHALL BE GOVERNED
     BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
     REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
     PRINCIPLES OF CONFLICTS OF LAW THEREOF. CAPITALIZED TERMS USED BUT NOT
     DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT.

          (g) Voidability. If prior to the execution hereof, the Board of
     Directors of the Company shall not have duly and validly authorized and
     approved by all necessary corporate action, this Agreement, the Merger
     Agreement and the transactions contemplated hereby and thereby, so that by
     the execution and delivery hereof Parent or Sub would become, or could
     reasonably be expected to become an "interested stockholder" with whom the
     Company would be prevented for any period pursuant to Section 203 of the
     DGCL from engaging in any "business combination" (as such terms are defined
     in Section 203 of the DGCL), then this Agreement shall be void and
     unenforceable until such time as such authorization and approval shall have
     been duly and validly obtained.

          9.  Specific Enforcement. The parties agree that irreparable damage
     would occur and that the parties would not have any adequate remedy at law
     in the event that any of the provisions of this Agreement were not
     performed in accordance with their specific terms or were otherwise
     breached. It is accordingly agreed that the parties shall be entitled to an
     injunction or injunctions to prevent breaches of this Agreement and to
     enforce specifically the terms and provisions of this Agreement in any
     Federal court located in the State of Delaware or in any state court in the
     State of Delaware, this being in addition to any other remedy to which they
     are entitled at law or in equity. In addition, each of the parties hereto
     (i) consents to submit itself to the personal jurisdiction of any Federal
     court located in the State of Delaware or of any state court located in the
     State of Delaware in the event any dispute arises out of this Agreement or
     the transactions contemplated by this Agreement, (ii) agrees that it will
     not attempt to deny or defeat such personal jurisdiction by motion or other
     request for leave from any such court and (iii) agrees that it will not
     bring any action relating to this

                                       B-6
<PAGE>

     Agreement or the transactions contemplated by this Agreement in any court
     other than a Federal court located in the State of Delaware or a state
     court located in the State of Delaware.

          10.  Assignment. Subject to Section 3(c), neither this Agreement nor
     any of the rights, interests or obligations hereunder shall be assigned by
     any Stockholder, on the one hand, without the prior written consent of
     Parent nor by Parent, on the other hand, without the prior written consent
     of the Stockholders, and any assignment without such consent shall be null
     and void, except that Parent may assign, in its sole discretion, any or all
     of its rights, interests and obligations hereunder to any direct or
     indirect wholly owned Subsidiary of Parent. Subject to the preceding
     sentence, this Agreement will be binding upon, inure to the benefit of and
     be enforceable by the parties and their respective successors and assigns.

          11.  Severability. If any term or other provision of this Agreement is
     invalid, illegal or incapable of being enforced by any rule of law or
     public policy, all other conditions and provisions of this Agreement shall
     nevertheless remain in full force and effect. Upon such determination that
     any term or other provision is invalid, illegal or incapable of being
     enforced, the parties hereto shall negotiate in good faith to modify this
     Agreement so as to effect the original intent of the parties as closely as
     possible to the fullest extent permitted by Applicable Law in an acceptable
     manner to the end that the transactions contemplated hereby are fulfilled
     to the extent possible.

                                       B-7
<PAGE>

     IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.

                                          JOHNSON & JOHNSON,

                                          By:
                                          --------------------------------------
                                              Name:
                                              Title:

                  [Signature pages of the Stockholders follow]

                                       B-8
<PAGE>

                                          HEALTHCARE VENTURES III, L.P.

                                          By:
                                          --------------------------------------
                                              Name:
                                              Title:

                                          HEALTHCARE VENTURES IV, L.P.

                                          By:
                                          --------------------------------------
                                              Name:
                                              Title:

                                          HEALTHCARE VENTURES V, L.P.

                                          By:
                                          --------------------------------------
                                              Name:
                                              Title:

                                          HEALTHCARE VENTURES VI, L.P.

                                          By:
                                          --------------------------------------
                                              Name:
                                              Title:

                                          RHO MANAGEMENT TRUST II

                                          By: Rho Capital Partners, Inc.,
                                              Investment Advisor

                                          By:
                                          --------------------------------------
                                              Name:
                                              Title:

                                       B-9
<PAGE>

                                          DAVID C. U'PRICHARD



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

                                          F. RAYMOND SALEMME



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

                                          JOHN M. GILL



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

                                          ROGER F. BONE



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

                                          SCOTT M. HORVITZ



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

                                          BRIAN R. MACDONALD



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

                                       B-10
<PAGE>

                                          KATHY A. QUAY



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

                                          MELINDA P. RUDOLPH



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

                                       B-11
<PAGE>

                                   SCHEDULE A

<Table>
<Caption>
                                                              NUMBER OF SHARES
                                                              OF COMMON STOCK
NAME AND ADDRESS OF STOCKHOLDER                               OWNED OF RECORD
-------------------------------                               ----------------
<S>                                                           <C>
Healthcare Ventures III, L.P. ..............................     2,706,453
44 Nassau Street Princeton, NJ 08542-4511
Attn: James Cavanaugh
Healthcare Ventures IV, L.P. ...............................       794,780
44 Nassau Street
Princeton, NJ 08542-4511
Attn: James Cavanaugh
Healthcare Ventures V, L.P. ................................       310,497
44 Nassau Street Princeton, NJ 08542-4511
Attn: James Cavanaugh
Healthcare Ventures VI, L.P. ...............................       697,039
44 Nassau Street
Princeton, NJ 08542-4511
Attn: James Cavanaugh
Rho Management Trust II.....................................     2,285,283
c/o Rho Capital Partners, Inc.
Carnegie Hall Tower
152 West 57th Street
23rd Floor
New York, NY 10019
Attn: Joshua Ruch
Directors and Officers
  Roger F. Bone.............................................        55,179
  797 Garfield Avenue
  Bridgewater, NJ 08807
  John M. Gill..............................................             0
  409 Chester Road
  Devon, PA 19333
  Scott M. Horvitz..........................................        53,571
  7 Timber Knoll Drive
  Washington Crossing, PA 18977
  Brian R. MacDonald........................................             0
  280 South Roberts Road
  Bryn Mawr, PA 19010
  Kathy A. Quay.............................................             0
  1112 Bodine Road
  Chester Springs, PA 19425
  Melinda P. Rudolph........................................             0
  667 Washington Avenue
  Haddonfield, NJ 08033-3435
  F. Raymond Salemme........................................       299,014
  1970 Timber Lakes Drive
  Yardley, PA 19067
  David C. U'Prichard.......................................       254,784
  121 Pine Street
  Philadelphia, PA 19106
                                                                 ---------
          Total.............................................     7,456,600
</Table>
<PAGE>

                                   SCHEDULE B

<Table>
<Caption>
                                                                         NUMBER OF SHARES
                                                               NUMBER    OF COMMON STOCK
                                                                 OF       UNDERLYING THE
NAME OF STOCKHOLDER                                           WARRANTS       WARRANTS
-------------------                                           --------   ----------------
<S>                                                           <C>        <C>
Rho Management Trust II.....................................  101,829        101,829
</Table>
<PAGE>

                                                                         ANNEX C

                                                                January 15, 2003

The Board of Directors
3-Dimensional Pharmaceuticals, Inc.
665 Stockton Drive, Suite 104
Exton, PA 19341-1151

Dear Members of the Board:

     We understand that 3-Dimensional Pharmaceuticals, Inc. (the "Company"),
Johnson & Johnson (the "Parent") and Longbow Merger Sub, Inc., a wholly-owned
subsidiary of the Parent ("Sub"), have entered into an Agreement and Plan of
Merger, dated as of January 15, 2003 (the "Agreement"), pursuant to which Sub
will merge with and into the Company (the "Merger"). Pursuant to the Merger, the
shares of common stock of the Company, par value $.001 per share (the "Company
Common Stock"), issued and outstanding immediately prior to the effective time
of the Merger, other than shares of the Company Common Stock held in the
treasury of the Company, shares of the Company Common Stock held by the Parent
or Sub and shares of the Company Common Stock held by any holder who is entitled
to demand and properly demands appraisal of such shares ("Dissenting Shares"),
will be converted into the right to receive $5.74 per share in cash (the "Merger
Consideration"). The terms and condition of the Merger are set out more fully in
the Agreement.

     You have requested our opinion as to the fairness as of the date hereof,
from a financial point of view, to the Holders of the Company Common Stock (as
defined below) of the Merger Consideration to be received by such Holders of the
Company Common Stock. The "Holders of the Company Common Stock" shall be defined
as all holders of the Company Common Stock other than the Company, the Parent,
Sub, any affiliates of the Parent or Sub or any holders of Dissenting Shares. In
connection with this opinion, we have:

          (i) Reviewed the financial terms and conditions of the Agreement;

          (ii) Analyzed certain historical business and financial information
     relating to the Company;

          (iii) Reviewed various financial forecasts and other data provided to
     us by the management of the Company relating to its business and publicly
     available forecasts prepared by nationally recognized research analysts who
     report on the Company;

          (iv) Held discussions with members of the senior management of the
     Company with respect to the business and prospects of the Company and the
     strategic objectives of the Company;

          (v) Reviewed public information with respect to certain other
     companies in lines of business we believe to be generally comparable to the
     business of the Company;

          (vi) Reviewed the financial terms of certain business combinations
     involving companies in lines of business we believe to be generally
     comparable to that of the Company;

          (vii) Reviewed the historical stock prices and trading volumes of the
     Company Common Stock; and

          (viii) Conducted such other financial studies, analyses and
     investigations as we deemed appropriate.

     We have relied upon the accuracy and completeness of the foregoing
information and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of the Company or concerning the solvency or
fair value of the Company. With respect to financial forecasts provided to us by
the Company, we have

                                       C-1
<PAGE>

assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of management of the Company as to
the future financial performance of the Company. We assume no responsibility for
and express no view as to such forecasts or the assumptions on which they are
based.

     Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. In rendering our opinion, we are not opining as to the
prices at which the Company Common Stock will trade before the consummation of
the Merger.

     In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company and that obtaining the necessary
regulatory approvals for the Merger will not have an adverse effect on the
Merger.

     Though we discussed a variety of strategic possibilities with the Company
and had certain conversations with third parties regarding their possible
interest in a strategic transaction or relationship with the Company, we did not
initiate or complete a process to solicit third party indications of interest in
a sale transaction.

     Lazard Freres & Co. LLC is acting as investment banker to the Company in
connection with the Merger and will receive a fee for our services, a
substantial portion of which is contingent upon the consummation of the Merger.
We have in the past provided investment banking services to the Company for
which we have received customary fees. In addition, in the ordinary course of
our business, we may actively trade shares of the Company Common Stock and the
common stock of the Parent and other securities of the Company and the Parent
for our own account and for the accounts of our customers and, accordingly, may
at any time hold a long or short position in such securities.

     Our engagement and the opinion expressed herein are for the benefit of the
Company's Board of Directors, and our opinion is rendered to the Company's Board
of Directors in connection with its consideration of the Merger. This opinion
does not address the merits of the underlying decision by the Company to engage
in the Merger and is not intended to and does not constitute a recommendation to
any holder of the Company Common Stock as to how such holder should vote with
respect to the Merger or any matter relating thereto. It is understood that this
letter may not be disclosed or otherwise referred to without our prior consent,
except as may otherwise be required by law or by a court of competent
jurisdiction.

     Based on and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration to be received by the Holders of the
Company Common Stock is fair to the Holders of the Company Common Stock from a
financial point of view.

                                          Very truly yours,

                                          LAZARD FRERES & CO. LLC

                                          By
                                            ------------------------------------
                                             Stephen Sands
                                             Managing Director

                                       C-2
<PAGE>

                                                                         ANNEX D

                GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

SECTION 262.  APPRAISAL RIGHTS.

     (a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.

     (b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:

          (1) Provided, however, that no appraisal rights under this section
     shall be available for the shares of any class or series of stock, which
     stock, or depository receipts in respect thereof, at the record date fixed
     to determine the stockholders entitled to receive notice of and to vote at
     the meeting of stockholders to act upon the agreement of merger or
     consolidation, were either (i) listed on a national securities exchange or
     designated as a national market system security on an interdealer quotation
     system by the National Association of Securities Dealers, Inc. or (ii) held
     of record by more than 2,000 holders; and further provided that no
     appraisal rights shall be available for any shares of stock of the
     constituent corporation surviving a merger if the merger did not require
     for its approval the vote of the stockholders of the surviving corporation
     as provided in subsection (f) of Section 251 of this title.

          (2) Notwithstanding paragraph (1) of this subsection, appraisal rights
     under this section shall be available for the shares of any class or series
     of stock of a constituent corporation if the holders thereof are required
     by the terms of an agreement of merger or consolidation pursuant to
     Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
     such stock anything except:

             a.  Shares of stock of the corporation surviving or resulting from
        such merger or consolidation, or depository receipts in respect thereof;

             b.  Shares of stock of any other corporation, or depository
        receipts in respect thereof, which shares of stock (or depository
        receipts in respect thereof) or depository receipts at the effective
        date of the merger or consolidation will be either listed on a national
        securities exchange or designated as a national market system security
        on an interdealer quotation system by the National Association of
        Securities Dealers, Inc. or held of record by more than 2,000 holders;

             c.  Cash in lieu of fractional shares or fractional depository
        receipts described in the foregoing subparagraphs a. and b. of this
        paragraph; or

             d.  Any combination of the shares of stock, depository receipts and
        cash in lieu of fractional shares or fractional depository receipts
        described in the foregoing subparagraphs a., b. and c. of this
        paragraph.

                                       D-1
<PAGE>

          (3) In the event all of the stock of a subsidiary Delaware corporation
     party to a merger effected under Section 253 of this title is not owned by
     the parent corporation immediately prior to the merger, appraisal rights
     shall be available for the shares of the subsidiary Delaware corporation.

     (c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.

     (d) Appraisal rights shall be perfected as follows:

          (1) If a proposed merger or consolidation for which appraisal rights
     are provided under this section is to be submitted for approval at a
     meeting of stockholders, the corporation, not less than 20 days prior to
     the meeting, shall notify each of its stockholders who was such on the
     record date for such meeting with respect to shares for which appraisal
     rights are available pursuant to subsection (b) or (c) hereof that
     appraisal rights are available for any or all of the shares of the
     constituent corporations, and shall include in such notice a copy of this
     section. Each stockholder electing to demand the appraisal of such
     stockholder's shares shall deliver to the corporation, before the taking of
     the vote on the merger or consolidation, a written demand for appraisal of
     such stockholder's shares. Such demand will be sufficient if it reasonably
     informs the corporation of the identity of the stockholder and that the
     stockholder intends thereby to demand the appraisal of such stockholder's
     shares. A proxy or vote against the merger or consolidation shall not
     constitute such a demand. A stockholder electing to take such action must
     do so by a separate written demand as herein provided. Within 10 days after
     the effective date of such merger or consolidation, the surviving or
     resulting corporation shall notify each stockholder of each constituent
     corporation who has complied with this subsection and has not voted in
     favor of or consented to the merger or consolidation of the date that the
     merger or consolidation has become effective; or

          (2) If the merger or consolidation was approved pursuant to Section
     228 or Section 253 of this title, then, either a constituent corporation
     before the effective date of the merger or consolidation, or the surviving
     or resulting corporation within ten days thereafter, shall notify each of
     the holders of any class or series of stock of such constituent corporation
     who are entitled to appraisal rights of the approval of the merger or
     consolidation and that appraisal rights are available for any or all shares
     of such class or series of stock of such constituent corporation, and shall
     include in such notice a copy of this section. Such notice may, and, if
     given on or after the effective date of the merger or consolidation, shall,
     also notify such stockholders of the effective date of the merger or
     consolidation. Any stockholder entitled to appraisal rights may, within 20
     days after the date of mailing of such notice, demand in writing from the
     surviving or resulting corporation the appraisal of such holder's shares.
     Such demand will be sufficient if it reasonably informs the corporation of
     the identity of the stockholder and that the stockholder intends thereby to
     demand the appraisal of such holder's shares. If such notice did not notify
     stockholders of the effective date of the merger or consolidation, either
     (i) each such constituent corporation shall send a second notice before the
     effective date of the merger or consolidation notifying each of the holders
     of any class or series of stock of such constituent corporation that are
     entitled to appraisal rights of the effective date of the merger or
     consolidation or (ii) the surviving or resulting corporation shall send
     such a second notice to all such holders on or within 10 days after such
     effective date; provided, however, that if such second notice is sent more
     than 20 days following the sending of the first notice, such second notice
     need only be sent to each stockholder who is entitled to appraisal rights
     and who has demanded appraisal of such holder's shares in accordance with
     this subsection. An affidavit of the secretary or assistant secretary or of
     the transfer agent of the corporation that is required to give either
     notice that such notice has been given shall, in the absence of fraud, be
     prima facie evidence of the facts stated therein. For purposes of
     determining the stockholders entitled to receive either notice, each
     constituent corporation may fix, in advance, a record date that shall be
     not more than 10 days prior to the date the notice is given,
                                       D-2
<PAGE>

     provided, that if the notice is given on or after the effective date of the
     merger or consolidation, the record date shall be such effective date. If
     no record date is fixed and the notice is given prior to the effective
     date, the record date shall be the close of business on the day next
     preceding the day on which the notice is given.

     (e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

     (f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

     (g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

     (h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may

                                       D-3
<PAGE>

participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.

     (i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

     (j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

     (k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

     (l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

                                       D-4
<PAGE>

PROXY                                                                      PROXY
                        SPECIAL MEETING OF STOCKHOLDERS

                                       OF

                      3-DIMENSIONAL PHARMACEUTICALS, INC.


                                 MARCH 27, 2003


    THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF 3-DIMENSIONAL
                             PHARMACEUTICALS, INC.


    The undersigned, having read the Notice of Special Meeting of Stockholders
and the Proxy Statement dated February 27, 2003, receipt of which are hereby
acknowledged, hereby appoint(s) David U'Prichard, Ph.D. and Scott M. Horvitz and
each of them, with full power and authority to act without the other and with
full power of substitution, as proxies to represent and vote, as directed
herein, all shares the undersigned is entitled to vote at the special meeting of
stockholders of 3-Dimensional Pharmaceuticals, Inc. to be held at its corporate
headquarters, Three Lower Makefield Corporate Center, 1020 Stony Hill Road,
Suite 300, Yardley, PA 19067 on March 27, 2003 at 10:00 a.m., local time (the
"Special Meeting"), and all continuations, adjournments or postponements
thereof.


    You are encouraged to specify your choices by marking the appropriate boxes.
Unless otherwise marked, the proxies are appointed with the power and authority
to vote the undersigned's shares "FOR" the proposals described on the reverse
side of this proxy card. Please complete your voting selection, date, sign and
mail your proxy card in the envelope provided as soon as possible. The Board of
Directors recommends a vote FOR:

        1.  Adoption and approval of the Agreement and Plan of Merger, dated as
    of January 15, 2003 among Johnson & Johnson, Longbow Merger Sub, Inc., a
    wholly owned subsidiary of Johnson & Johnson, and 3-Dimensional
    Pharmaceuticals, Inc.

             FOR [ ]            AGAINST [ ]            ABSTAIN [ ]

            (CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE)
<PAGE>

                                              IN THEIR DISCRETION THE PROXIES
                                              ARE AUTHORIZED AND EMPOWERED TO
                                              VOTE UPON OTHER MATTERS THAT MAY
                                              PROPERLY COME BEFORE THE SPECIAL
                                              MEETING AND ALL CONTINUATIONS,
                                              ADJOURNMENTS OR POSTPONEMENTS
                                              THEREOF, INCLUDING, IF SUBMITTED
                                              TO A VOTE OF THE STOCKHOLDERS, A
                                              MOTION TO ADJOURN THE SPECIAL
                                              MEETING TO ANOTHER TIME OR PLACE
                                              FOR THE PURPOSE OF SOLICITING
                                              ADDITIONAL PROXIES.

                                              NAME(S):
                                              ----------------------------------

                                              DATE:
                                              ----------------------------------

                                              NOTE:  Please sign your name
                                              exactly as it appears on your
                                              stock certificate(s). Joint owners
                                              should each sign. When signing as
                                              attorney, executor, administrator,
                                              trustee or guardian, please give
                                              full title as such. If a
                                              corporation, partnership or other
                                              entity, please sign in full.

</TEXT>
</DOCUMENT>
</SUBMISSION>
