In the Load() event of your Form, modify the Region() property of pic3
so that it becomes circular instead of rectangular. This can be done by construction a GraphicsPath and adding an Ellipse to it. If this doesn't line up properly with your image, then manually determine the correct bounding box for the ellipse and use that instead:
private void Form1_Load(object sender, EventArgs e)
{
System.Drawing.Drawing2D.GraphicsPath GP = new System.Drawing.Drawing2D.GraphicsPath();
GP.AddEllipse(pic3.ClientRectangle);
pic3.Region = new Region(GP);
}