-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LOc82l0z9GwwltfdUOvbQ2z5dZ7sG+YhxUjFJy+r+7kVeLT2xpjltZPtq4y/KwTm wdfqcyjDw9qXYuXhV2JMWg== 0000950135-06-003518.txt : 20060515 0000950135-06-003518.hdr.sgml : 20060515 20060515172711 ACCESSION NUMBER: 0000950135-06-003518 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20060515 DATE AS OF CHANGE: 20060515 GROUP MEMBERS: DAVID E. COHEN GROUP MEMBERS: MIDWOOD CAPITAL MANAGEMENT LLC GROUP MEMBERS: MIDWOOD CAPITAL PARTNERS QP, L.P. GROUP MEMBERS: MIDWOOD CAPITAL PARTNERS, L.P. GROUP MEMBERS: ROSS D. DEMONT SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TRIPOS INC CENTRAL INDEX KEY: 0000920691 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 431454986 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-43843 FILM NUMBER: 06843037 BUSINESS ADDRESS: STREET 1: 1699 SOUTH HANLEY RD STREET 2: STE 303 CITY: ST LOUIS STATE: MO ZIP: 63144 BUSINESS PHONE: 3146471099 MAIL ADDRESS: STREET 1: 1699 SOUTH HANLEY RD STREET 2: STE 303 CITY: ST LOUIS STATE: MO ZIP: 63144 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MIDWOOD CAPITAL MANAGEMENT LLC CENTRAL INDEX KEY: 0001273663 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 45 FAIRFIELD STREET STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6172262609 SC 13D 1 b60964mcsc13d.txt MIDWOOD CAPITAL MANAGEMENT LLC OMB APPROVAL OMB Number: 3235-0145 Expires: February 28, 2009 Estimated average burden hours per response. . . 14.5 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )* Tripos, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 896928108 - -------------------------------------------------------------------------------- (CUSIP Number) Midwood Capital Management LLC Attn: David E. Cohen 575 Boylston St. 4th Floor Boston, MA 02116 617-224-1751 With a copy to: Peter M. Rosenblum, Esq. Foley Hoag LLP 155 Seaport Blvd. Boston, MA 02210 617-832-1151 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 4, 2006 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7 for other parties to whom copies are sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). PERSONS WHO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER. SEC 1746 (1-06) - -------------------------------------------------------------------------------- CUSIP NO. 896928108 13D PAGE 2 OF 13 PAGES - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). David E. Cohen - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization USA - -------------------------------------------------------------------------------- 7. Sole Voting Power -------------------------------------------------------------- 8. Shared Voting Power 1,833,333 shares of Series C Number of Preferred Stock, $.01 par value per share (the "Series C Shares Preferred Stock") and Warrants to purchase 550,000 Beneficially shares of Common Stock, $.01 par value per share (the Owned by "Warrants"); each subject to a 9.99% limitation on Each conversion/exercise Reporting -------------------------------------------------------------- Person With 9. Sole Dispositive Power -------------------------------------------------------------- 10. Shared Dispositive Power 1,833,333 shares of Series C Preferred Stock and 550,000 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,833,333 shares of Series C Preferred Stock and 550,000 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 19.0%** - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP NO. 896928108 13D PAGE 3 OF 13 PAGES - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Ross D. DeMont - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization USA - -------------------------------------------------------------------------------- 7. Sole Voting Power -------------------------------------------------------------- Number of 8. Shared Voting Power 1,833,333 shares of Series C Shares Preferred Stock and 550,000 Warrants; each subject to a Beneficially 9.99% limitation on conversion/exercise Owned by -------------------------------------------------------------- Each 9. Sole Dispositive Power Reporting Person With -------------------------------------------------------------- 10. Shared Dispositive Power 1,833,333 shares of Series C Preferred Stock and 550,000 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,833,333 shares of Series C Preferred Stock and 550,000 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 19.0%** - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP NO. 896928108 13D PAGE 4 OF 13 PAGES - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Midwood Capital Management LLC I.R.S. Identification No. 14-1885029 - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Sole Voting Power 1,833,333 shares of Series C Preferred Stock and 550,000 Warrants; each subject to a 9.99% Number of limitation on conversion/exercise Shares -------------------------------------------------------------- Beneficially 8. Shared Voting Power Owned by Each -------------------------------------------------------------- Reporting 9. Sole Dispositive Power 1,833,333 shares of Series C Person With Preferred Stock and 550,000 Warrants; each subject to a 9.99% limitation on conversion/exercise -------------------------------------------------------------- 10. Shared Dispositive Power - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,833,333 shares of Series C Preferred Stock and 550,000 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 19.0%** - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IA - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP NO. 896928108 13D PAGE 5 OF 13 PAGES - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Midwood Capital Partners, L.P. I.R.S. Identification No. 27-0060548 - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Sole Voting Power 815,742 shares of Series C Preferred Stock and 244,723 Warrants; each subject to a 9.99% Number of limitation on conversion/exercise Shares -------------------------------------------------------------- Beneficially 8. Shared Voting Power Owned by Each -------------------------------------------------------------- Reporting 9. Sole Dispositive Power 815,742 shares of Series C Person With Preferred Stock and 244,723 Warrants; each subject to a 9.99% limitation on conversion/exercise -------------------------------------------------------------- 10. Shared Dispositive Power - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 815,742 shares of Series C Preferred Stock and 244,723 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 8.4%** - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) PN - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP NO. 896928108 13D PAGE 6 OF 13 PAGES - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Midwood Capital Partners QP, L.P. I.R.S. Identification No. 42-1657728 - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Sole Voting Power 1,017,591 shares of Series C Preferred Stock and 305,277 Warrants; each subject to a 9.99% Number of limitation on conversion/exercise Shares -------------------------------------------------------------- Beneficially 8. Shared Voting Power Owned by Each -------------------------------------------------------------- Reporting 9. Sole Dispositive Power 1,017,591 shares of Series C Person With Preferred Stock and 305,277 Warrants; each subject to a 9.99% limitation on conversion/exercise -------------------------------------------------------------- 10. Shared Dispositive Power - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 1,017,591 shares of Series C Preferred Stock and 305,277 Warrants; each subject to a 9.99% limitation on conversion/exercise - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 10.5%** - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) PN - -------------------------------------------------------------------------------- CUSIP NO. 896928108 Page 7 of 13 **Limitations on Conversion/Exercise - If the Series C Preferred Stock were converted and the Warrants were exercised, the reporting persons would, in the aggregate, hold approximately 19.0% of the Common Stock upon such exercise/conversion. Notwithstanding the foregoing, the Series C Preferred Stock and Warrants both provide limitations on the conversion of such Series C Preferred shares of the exercise of such Warrants, such that the number of shares of Common Stock that may be acquired by the holder upon conversion of Series C Preferred Stock and exercise of the Warrants shall be limited to the extent necessary to ensure that following such exercise and conversion the total number of shares of Common Stock then beneficially owned by such holder does not exceed 9.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise) for the purposes of Section 13(d) of the Exchange Act. ITEM 1. SECURITY AND ISSUER This joint statement on Schedule 13D relates to the common stock, par value $.01 per share (the "Common Stock") of Tripos, Inc., a Utah corporation (the "Issuer"). The address of the Issuer's principal executive offices is 1699 S. Hanley Road, St. Louis, MO 63144. ITEM 2. IDENTITY AND BACKGROUND This joint statement on Schedule 13D is being filed by David E. Cohen, Ross D. DeMont, Midwood Capital Management LLC, Midwood Capital Partners, L.P. and Midwood Capital Partners QP, L.P., who are collectively referred to as the "Reporting Persons." Messrs. Cohen and DeMont (the "Managers") are the managers of Midwood Capital Management LLC ("Capital"), which is the sole general partner of each of Midwood Capital Partners, L.P. ("LP") and Midwood Capital Partners QP, L.P. ("QP" and together with LP, the "Funds"). By virtue of their positions, each of the Managers has the power to vote and dispose of the shares of Common Stock held by each of the Funds. Information with respect to each of the Reporting Persons is as follows: (1) (a) David E. Cohen (b) 575 Boylston St., 4th Floor, Boston, MA 02116 (c) Mr. Cohen is a manager of Capital (d) No (e) No (f) United States (2) (a) Ross D. DeMont (b) 575 Boylston St., 4th Floor, Boston, MA 02116 (c) Mr. DeMont is a manager of Capital CUSIP NO. 896928108 (d) No (e) No (f) United States (3) (a) Midwood Capital Management LLC, a Delaware limited liability company (b) 575 Boylston St., 4th Floor, Boston, MA 02116 (c) Capital is the sole general partner of, and manages and provides investment advice to, each of the Funds (d) No (e) No (4) (a) Midwood Capital Partners, L.P., a Delaware limited partnership (b) c/o Midwood Capital Management LLC, 575 Boylston St., 4th Floor, Boston, MA 02116 (c) LP is a private investment fund engaged in the business of investing in securities. (d) No (e) No (5) (a) Midwood Capital Partners QP, L.P., a Delaware limited partnership (b) c/o Midwood Capital Management LLC, 575 Boylston St., 4th Floor, Boston, MA 02116 (c) QP is a private investment fund engaged in the business of investing in securities. (d) No (e) No ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The Series C Preferred Stock and Warrants reported in this Schedule 13D were purchased using cash from the Funds. ITEM 4. PURPOSE OF TRANSACTION The Reporting Persons acquired shares of the Common Stock of the Issuer based on their belief that the Issuer's stock is undervalued and represents an attractive investment opportunity. The Reporting Persons may wish to engage in a constructive dialogue with management of the Issuer CUSIP NO. 896928108 ("Management"), as well as with other stockholders of the Issuer and the Issuer's Board of Directors (the "Board of Directors"), regarding the Issuer's business operations and new strategies to create and maximize value for the Issuer's stockholders. The Reporting Persons intend to review continuously their equity interest in the Issuer. Depending upon their evaluation of the factors described below, one or more of the Reporting Persons may from time to time, subject to regulatory or other restrictions on their ability to do so, purchase additional securities of the Issuer, dispose of all or a portion of the securities then held by such Reporting Person, or cease buying or selling such securities. Any such additional purchases or sales of securities of the Issuer may be in the open market or privately negotiated transactions or otherwise. The factors which the Reporting Persons may consider in evaluating their equity interest in the Issuer's business include the following: (i) the Issuer's business and prospects; (ii) the business strategy and actions of Management and the Board of Directors to enhance the Issuer's value to its stockholders; (iii) the performance of the Common Stock and the availability of the Common Stock for purchase at particular price levels; (iv) the availability and nature of opportunities to dispose of the Reporting Persons' interests; (v) general economic conditions; (vi) stock market and money market conditions; (vii) other business and investment opportunities available to the Reporting Persons; and (viii) other plans and requirements of the Reporting Persons. Depending on their assessment of the foregoing factors, the Reporting Persons may, from time to time, modify their present intention as stated in this item 4. Except as set forth above, the Reporting Persons do not have at this time any specific plans which would result in (a) the acquisition of additional securities of the Issuer or the disposition of securities of the Issuer; (b) any extraordinary corporate transactions such as a merger, reorganization or liquidation involving the Issuer or any of its subsidiaries; (c) any sale or transfer of a material amount of the assets of the Issuer or of any of its subsidiaries; (d) any change in the present Management or Board of Directors, including any plans or proposals to change the number of term of directors or to fill any existing vacancies on the Board of Directors; (e) any material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer's business or corporate structure; (g) any change in the Issuer's charter or by-laws which may impede the acquisition of control of the Issuer by any person; (h) the Issuer's Common Stock being delisted from a national securities exchange or ceasing to be authorized to be quoted in an inter-dealer quotation system or a registered national securities association; (i) causing a class of equity securities of the Issuer to become eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or (j) any action similar to those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) In the aggregate, assuming full conversion of all shares of Series C Preferred Stock and exercise of all warrants, the Reporting Persons beneficially own 2,383,333 shares of the Common Stock of the Issuer, representing approximately 19.0% of such class of securities. The beneficial ownership of each Reporting Person is as follows: (i) LP beneficially owns 1,060,465 shares of the Common Stock, representing approximately 8.4% of the class, (ii) QP beneficially owns 1,322,868 shares of the Common Stock, representing approximately 10.5% of the class, and (iii) Capital, as the sole general partner of each Fund, and Messrs. Cohen and DeMont, as the managers of Capital, each beneficially own 2,383,333 shares of the Common Stock of the Issuer CUSIP NO. 896928108 representing approximately 19.0% of the class. The percentage of the Common Stock beneficially owned by each Reporting Person is based on a total of 10,189,593 shares of the Common Stock of the Issuer outstanding as of March 30, 2006, as reported in the most recent annual report of the Issuer on Form 10-K for the fiscal year ended December 31, 2005, and includes all shares of Common Stock that would be issued upon conversion of the Series C Preferred Stock and exercise of the Warrants. The above stated percentages are subject to the qualification that both the Series C Preferred Stock and the Warrants are subject to limitations on conversion/exercise, such that the number of shares of Common Stock that may be acquired by the holder upon conversion of Series C Preferred Stock and exercise of the Warrants shall be limited to the extent necessary to ensure that following such exercise and conversion the total number of shares of Common Stock then beneficially owned by such holder does not exceed 9.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise) for the purposes of Section 13(d) of the Exchange Act. (b) By virtue of their positions as managers of Capital, each of the Managers has the shared authority to vote and dispose of the shares of Series C Preferred Stock and Warrants reported in this joint statement Schedule 13D on behalf of the Funds. (c) All of the shares of Series C Preferred Stock and Warrants being reported pursuant to this Schedule 13D were acquired on May 4, 2006 for an aggregate purchase price of $5,500,000.00 or $3.00 per share of Series C Preferred Stock and associated fractional Warrant. The purchase and sale of the Series C Preferred Stock and Warrants was conducted pursuant to a Stock Purchase Agreement dated May 4, 2006 between the Funds and the Issuer. (d) N/A (e) N/A ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The terms of the Series C Preferred Stock, Warrants and shares of Common Stock issuable upon the conversion or exercise of Series C Preferred Stock or Warrants are subject to terms and provisions of the Issuer's Articles of Incorporation, as amended, the Warrants issued to each of the Funds, a Stock Purchase Agreement between the Funds and the Issuer dated May 4, 2006 and a Registration Rights Agreement between the Funds and the Issuer dated May 4, 2006, each as described in items 1.01, 3.02, 3.03, 5.03, and 9.01 of the Issuer's current report on Form 8-k dated May 5, 2006. Copies of the above referenced agreements are attached as Exhibits 2 through 6 hereto. Except as described above or otherwise in this Schedule 13D, including the Exhibits attached hereto, there are no contracts, arrangements, understandings, or relationships (legal or otherwise) among the Reporting Persons, or between any Reporting Person(s) and any third party, with respect to any securities of the Issuer, including, but not limited to, transfer or voting any of the securities, finder's fees, joint ventures, loan or option arrangements, put or calls, guarantees of profits, division of profits or losses, or the giving or withholding of proxies. CUSIP NO. 896928108 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 - Joint Filing Agreement by and among David E. Cohen, Ross D. DeMont, Midwood Capital Management, LLC, Midwood Capital Partners, L.P. and Midwood Capital Partners QP, L.P. dated May 15, 2006. Exhibit 2 - Amendment to the Articles of Incorporation of Tripos, Inc. dated May 2, 2006 Exhibit 3 - Stock Purchase Agreement dated May 4, 2006 by and among Midwood Capital Partners, L.P., Midwood Capital Partners QP, L.P. and Tripos, Inc. Exhibit 4 - Form of Warrant issued by Tripos, Inc. to Midwood Capital Partners, L.P. Exhibit 5 - Form of Warrant issued by Tripos, Inc. to Midwood Capital Partners QP, L.P. Exhibit 6 - Registration Rights Agreement dated May 4, 2006 by and among Midwood Capital Partners, L.P., Midwood Capital Partners QP, L.P. and Tripos, Inc. CUSIP NO. 896928108 Page 12 of 13 Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: May 15, 2006 -------------------- MIDWOOD CAPITAL PARTNERS, L.P. By: Midwood Capital Management, LLC General Partner By: /s/ David E. Cohen ----------------------------------- David E. Cohen Manager MIDWOOD CAPITAL PARTNERS QP, L.P. By: Midwood Capital Management, LLC General Partner By: /s/ David E. Cohen ----------------------------------- David E. Cohen Manager MIDWOOD CAPITAL MANAGEMENT, LLC By: /s/ David E. Cohen ----------------------------------- David E. Cohen Manager CUSIP NO. 896928108 Page 13 of 13 DAVID E. COHEN By: /s/ David E. Cohen ----------------------------------- David E. Cohen ROSS D. DEMONT By: /s/ Ross D. DeMont ----------------------------------- Ross D. DeMont CUSIP NO. 896928108 Exhibit 1 JOINT FILING AGREEMENT Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree, as of May 15, 2006, that only one statement containing the information required by Schedule 13D, and each amendment thereto, need be filed with respect to the ownership by each of the undersigned of shares of common stock of Tripos, Inc., and such statement to which this Joint Filing Agreement is attached as Exhibit 1 is filed on behalf of each of the undersigned. MIDWOOD CAPITAL PARTNERS, L.P. By: Midwood Capital Management, LLC General Partner By: /s/ David E. Cohen ----------------------------------- David E. Cohen Manager MIDWOOD CAPITAL PARTNERS QP, L.P. By: Midwood Capital Management, LLC General Partner By: /s/ David E. Cohen ----------------------------------- David E. Cohen Manager MIDWOOD CAPITAL MANAGEMENT, LLC By: /s/ David E. Cohen ----------------------------------- David E. Cohen Manager CUSIP NO. 896928108 DAVID E. COHEN By: /s/ David E. Cohen ----------------------------------- David E. Cohen ROSS D. DEMONT By: /s/ Ross D. DeMont ----------------------------------- Ross D. DeMont EX-99.2 2 b60964mcexv99w2.txt EX-99.2 EXHIBIT 2 - AMENDMENT TO THE ARTICLES OF INCORPORATION OF TRIPOS, INC. DATED MAY 2, 2006 Exhibit 2 ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION OF TRIPOS, INC. Pursuant to the authority vested in the Board of Directors of TRIPOS, INC., a Utah corporation (the "Corporation"), by and through the Articles of Incorporation of the Corporation, and as permitted by Sections 602, 1002 and 1006 of the Utah Revised Business Corporation Act, the Board of Directors of the Corporation has adopted the following amendments to the Articles of Incorporation of the Corporation, without shareholder action, dated effective as of April 26, 2006 (shareholder action was not required): RESOLVED: That Article III, Section 2 of the Articles of Incorporation of the Corporation be and hereby are amended by adding the following to the end of such Section, following the Designation of Rights and Preferences of TRIPOS, INC. Series C Convertible Preferred Stock, as set forth in the Articles of Amendment to the Corporation's Articles of Incorporation, filed with the Utah Department of Commerce, Division of Corporations and Commercial Code, effective as of February 4, 2000: DESIGNATION OF RIGHTS AND PREFERENCES OF TRIPOS, INC. SERIES C CONVERTIBLE PREFERRED STOCK Section 1. Designation and Amount. One million eight hundred thirty-three thousand three hundred thirty-three (1,833,333) of the authorized and previously undesignated shares of Preferred Stock are designated as "Series C Convertible Preferred Stock" (the "Series C Preferred Stock"), with par value of $.01 per share. Section 2. Dividends. (a) General. The holders of the Series C Preferred Stock shall be entitled to receive, out of funds legally available therefor, dividends at the same rate as dividends (other than dividends paid in additional shares of the Corporation's Common Stock ("Common Stock")) are paid with respect to the Common Stock (treating each share of Series C Preferred Stock as being equal to the number of shares of Common Stock (including fractions of a share) into which each share of Series C Preferred Stock is then convertible). The holders of the Series C Preferred Stock shall be entitled to receive, out of funds legally available therefor, dividends at the same rate as dividends (other than dividends paid in additional shares of Series C Preferred Stock) are paid with respect to any other series or class of Preferred Stock (treating each share of Preferred Stock as being equal to the number of shares of Common Stock (including fractions of a share) into which each share of Preferred Stock is then convertible). Subject to the foregoing restrictions, dividends may be declared and paid on Series C Preferred Stock from funds lawfully available therefor if, as and when, determined by the Board of Directors of the Corporation (the "Board"). (b) Quarterly Dividends. In addition to the foregoing, the holders of shares of Series C Preferred Stock shall be entitled to receive, prior and in preference to the declaration or payment of any dividend or distribution to the holders of shares of Common Stock or of any other shares or securities of the Corporation ranking junior to such Series C Preferred Stock with respect to the payment of dividends, a dividend in an amount of 10.5% per annum, payable quarterly on the last day of March, June, September and December in each year, commencing on June 30, 2006 ("Quarterly Dividend Date"). Dividends on each share of Series C Preferred Stock shall be cumulative and accrue from the date of the original issuance of such share of Series C Preferred Stock (the "Series C Original Issue Date"); provided, that the amount of dividends on the first quarterly dividend date after the Series C Original Issue Date for any share of Series C Preferred Stock shall equal the applicable Dividend Rate (as that term is defined in Section 2(c) below) multiplied by a fraction (A) the numerator of which shall equal the number of days from and including the Series C Original Issue Date for such share to and including such first quarterly dividend, and (B) the denominator of which is ninety (90). (c) Payment of Dividends. Dividends with respect to the Series C Preferred Stock shall be paid quarterly in cash. The Corporation shall be obligated to declare and pay each quarterly dividend as set forth above so long as the Corporation has funds that may be paid out as dividends without violating any law, rule or regulation by which the Corporation or its directors are bound. If the Corporation fails to declare or pay a cash dividend equal to the full accruing dividend required by Section 2(b) above for any reason, such unpaid cash dividends shall accrue interest at 18% per annum, compounded annually. Any accrued but unpaid dividends, and all interest thereon, shall be paid immediately prior to, an Event (as defined in Section 3(c) below), or a conversion or redemption of any such holder's Series C Preferred Stock pursuant to Section 5, 6 or 7 hereof. In addition, notwithstanding the foregoing, if an Event occurs, the Corporation shall declare and pay an additional dividend on the Series C Preferred Stock in an aggregate amount equal to the Minimum Dividend (as defined below) minus the aggregate amount of dividends accrued to the holders of the Series C Preferred Stock pursuant to Section 2(b) above (whether paid or unpaid) prior to the date of the Event. The "Minimum Dividend" shall equal either (i) nine hundred fifty-eight thousand three hundred thirty-three dollars ($958,333) if the Event occurs prior to January 26, 2007 (the "Key Date") or (ii) one million one hundred fifty-five thousand dollars ($1,155,000) if the Event occurs after the Key Date. Section 3. Liquidation, Dissolution or Winding-Up; Certain Mergers, Consolidations and Asset Sales. (a) Payment Upon Liquidation. (i) Series C Preferred Stock. Upon any liquidation, dissolution or winding-up of the Corporation or a Deemed Liquidation (as defined in Section 3(c) below), whether voluntary or involuntary, the holders of each share of Series C Preferred Stock shall be entitled to receive prior and in preference to any distribution to the holders of any other 2 series or class of Preferred Stock or Common Stock by reason of their ownership thereof, an amount, to be paid first out of the assets of the Corporation available for distribution to holders of the capital stock of all classes, equal to the greater of (A) $3.00 per share (which amount shall be subject to equitable adjustment whenever there shall occur a stock dividend, distribution, stock split, combination of shares, reclassification or other similar event with respect to the Series C Preferred Stock) plus any declared but unpaid or accrued but unpaid dividends thereon, and any accrued but unpaid interest thereon, to and including the date full payment shall be tendered to the holders of Series C Preferred Stock with respect to such liquidation, dissolution or winding-up and (B) such amount per share as would have been payable had each such share been converted into Common Stock pursuant to Section 5 (without regard to the restrictions set forth in Section 5(b)) immediately prior to such liquidation, dissolution or winding up. If the assets of the Corporation shall be insufficient to permit the payment in full to the holders of the Series C Preferred Stock of all amounts distributable to them under the foregoing sentence, then the entire assets of the Corporation available for such distribution shall be distributed ratably among the holders of the Series C Preferred Stock on a pari passu basis in proportion to the full preferential amount each such holder is otherwise entitled to receive. (ii) Common Stock and Other Preferred Stock. After such payments shall have been made in full to the holders of the Series C Preferred Stock or funds necessary for such payments shall have been set aside by the Corporation in trust for the account of holders of Series C Preferred Stock so as to be available for such payments, the remaining assets available for distribution shall be distributed among the holders of the Common Stock and any other class or series of Preferred Stock . Upon conversion of shares of Series C Preferred Stock into shares of Common Stock pursuant to Section 5 below, the holder of such Common Stock shall not be entitled to any preferential payment or distribution in case of any liquidation, dissolution or winding-up of the Corporation, but shall share ratably in any distribution of the assets of the Corporation to all the holders of Common Stock. (b) Distributions Other than Cash. Whenever the distribution provided for in this Section 3 shall be payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Board. (c) Merger as Liquidation, etc. In the event of (i) a consolidation or merger of the Corporation into or with any other entity or entities that results in the exchange of outstanding shares of the Corporation for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof (except a consolidation or merger into a wholly owned subsidiary or merger in which the Corporation is the surviving Corporation and, in either case, the holders of the Corporation's voting stock outstanding immediately prior to the transaction constitute a majority of the holders of voting stock outstanding immediately following the transaction), (ii) the sale or transfer by the Corporation of all or substantially all its assets in one or a series of related transactions, or (iii) the sale or transfer by the Corporation's stockholders of capital stock representing a majority of the voting 3 power at elections of directors of the Corporation (each, an "Event"), such Event shall be deemed to be a liquidation within the meaning of the provisions of this Section 2 (a "Deemed Liquidation") unless the holders of the Series C Preferred Stock at the time of the Event elect not to treat such Event as a Deemed Liquidation by a vote of a majority of the then outstanding shares of Series C Preferred Stock and by giving written notice thereof to the Corporation at least seven days before the effective date of the Event. The amount deemed distributed to the holders of Series C Preferred Stock upon any such Deemed Liquidation shall be the cash or the value of the property, rights or securities distributed to such holders by the acquiring person, firm or other entity. The value of such property, rights or other securities shall be determined in good faith by the Board. (d) Notice and Opportunity to Exercise Conversion Rights. Notwithstanding anything to the contrary that may be inferred from the provisions of this Section 3, each holder of shares of Series C Preferred Stock shall be entitled to receive notice from the Corporation pursuant to Section 5(k) hereof of any proposed Event or liquidation, dissolution or winding-up of the Corporation at least 10 days prior to the date on which any such liquidation, dissolution or winding-up of the Corporation is scheduled to occur and, at any time prior to any such liquidation, dissolution or winding-up of the Corporation, to convert any or all of such holder's shares of Series C Preferred Stock into shares of Common Stock pursuant to and subject to the restrictions of Section 5 hereof. Section 4. Voting Rights. (a) General. Holders of Series C Preferred Stock shall be entitled to notice of any stockholders' meeting. Except as otherwise required by law, these Articles of Incorporation or as otherwise limited by applicable rules, regulations and interpretations of Nasdaq or the NASD, as determined in good faith by the Board, at any annual or special meeting of the Corporation's stockholders, or in connection with any written consent in lieu of any such meeting, each outstanding share of Series C Preferred Stock shall be entitled to the number of votes equal to the number of full shares of Common Stock into which such share of Series C Preferred Stock are convertible on the date of issuance of such shares of Series C Preferred Stock (calculated by rounding any fractional share down to the nearest whole number) as adjusted from time to time pursuant to paragraphs (e) and (f) of Section 5 hereof. Except as otherwise required by law, these Articles of Incorporation or as otherwise limited by applicable rules, regulations and interpretations of Nasdaq or the NASD, as determined in good faith by the Board, the Series C Preferred Stock and the Common Stock shall vote together on each matter submitted to the stockholders, and not by separate class or series. (b) Restricted Actions. In addition to any other rights provided by law, for so long as any shares of Series C Preferred Stock remain outstanding, the Corporation shall not (by amendment, merger, consolidation or otherwise), without first obtaining the affirmative vote or written consent of the holders of a majority of the then outstanding shares of Series C Preferred Stock voting together as a separate class: (i) amend the preferences, rights or privileges of the Series C Preferred Stock; 4 (ii) authorize or designate any class or series of capital stock having rights senior to or on a parity with the Series C Preferred Stock as to dividends, liquidation, voting or otherwise; or (iii) amend its Articles of Incorporation so as to adversely affect the rights or privileges granted to the Series C Preferred Stock. Section 5. Optional Conversion. The holders of the Series C Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $3.00 by the Conversion Price (as defined below) in effect at the time of conversion. The Conversion Price shall initially be $3.00 for the Series C Preferred Stock (the "Conversion Price"). Such initial Conversion Price, and the rate at which shares of Series C Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below. In the event of a notice of redemption of any shares of Series C Preferred Stock pursuant to Section 7 hereof, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the first full day preceding the date fixed for redemption, unless the redemption price is not paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. (b) Conversion Restrictions. In no event shall any holder be entitled to convert Series C Preferred Shares if such conversion would cause the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates (including, but not limited to, any person who may be deemed an affiliate for purposes of aggregation under Rule 144(e) promulgated under the Securities Act of 1933, as amended) to exceed 9.999% of the outstanding shares of Common Stock following such conversion. For purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. (c) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series C Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. (d) Mechanics of Conversion. (i) In order for a holder of Series C Preferred Stock to convert shares of Series C Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series C Preferred Stock, at the office of the transfer agent for the Series C Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of Series C Preferred Stock represented by such certificate or certificates. Such notice shall state 5 such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his or its attorney duly authorized in writing. The date of receipt of such certificates and notice by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date ("Conversion Date"), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Series C Preferred Stock, or to his or its nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. (ii) The Corporation shall at all times when any Series C Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series C Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series C Preferred Stock. Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of Series C Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price. (iii) Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Series C Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion. (iv) All shares of Series C Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor and payment of any dividends declared but unpaid or accrued but unpaid thereon and any accrued but unpaid interest with respect to such dividends. Any shares of Series C Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Corporation (without the need for stockholder action) may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series C Preferred Stock accordingly. (v) The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series C Preferred Stock pursuant to this Section 5. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series C Preferred Stock so converted 6 were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (e) Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series C Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Prices then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Series C Original Issue Date combine the outstanding shares of Common Stock, the Conversion Prices then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (f) Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time, or from time to time after the date hereof shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Prices then in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Prices then in effect by a fraction: (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Prices shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Prices shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions; and provided further, however, that no such adjustment shall be made if the holders of Series C Preferred Stock simultaneously receive (i) a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series C Preferred Stock had been converted into Common Stock on the date of such event or (ii) a dividend or other distribution of shares of Series C Preferred Stock which are convertible, as of the date of such event, into such number of shares of Common Stock as is equal to the number of additional shares of Common Stock being issued with respect to each share of Common Stock in such dividend or distribution. (g) Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series C Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, 7 a dividend or other distribution payable in securities of the Corporation (other than shares of Common Stock) or in cash or other property (other than cash out of earnings or earned surplus, determined in accordance with generally accepted accounting principles), then and in each such event provision shall be made so that the holders of the Series C Preferred Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had the Series C Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Series C Preferred Stock; and provided further, however, that no such adjustment shall be made if the holders of Series C Preferred Stock simultaneously receive a dividend or other distribution of such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of Series C Preferred Stock had been converted into Common Stock on the date of such event. (h) Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 3(c), if there shall occur any reorganization, recapitalization, consolidation or merger involving the Corporation in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by paragraphs (e), (f) or (g) of this Section 5 or a transaction covered by Section 3 hereof), then, following any such reorganization, recapitalization, consolidation or merger, each share of Series C Preferred Stock shall be convertible into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series C Preferred Stock immediately prior to such reorganization, recapitalization, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 5 set forth with respect to the rights and interest thereafter of the holders of the Series C Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Series C Preferred Stock. (i) No Impairment. The Corporation will not, other than by amendment of its Articles of Incorporation as permitted by law, through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series C Preferred Stock against impairment. (j) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of any Conversion Price pursuant to this Section 5, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of any applicable series of Series C Preferred Stock a certificate setting 8 forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series C Preferred Stock, furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Series C Preferred Stock. (k) Notice of Record Date. In the event: (i) the Corporation shall take a record of the holders of its Common Stock (or other stock or securities at the time issuable upon conversion of the Series C Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for a purchase any shares of stock of any class or any other securities, or to receive any other right; or (i) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, any consolidation or merger of the Corporation with or into another corporation (other than a consolidation or merger in which the Corporation is the surviving entity and its Common Stock is not converted into or exchanged for any other securities or property), or any transfer of all or substantially all of the assets of the Corporation; or (ii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation, then, and in each such case, the Corporation will mail or cause to be mailed to the holders of the Series C Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time issuable upon the conversion of the Series C Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least 10 days prior to the record date or effective date for the event specified in such notice. (l) No Re-issuance. Upon any conversion, redemption or repurchase of Series C Preferred Stock, whether pursuant to the Articles of Incorporation or otherwise, such converted, redeemed or repurchased Series C Preferred Stock may not be reissued by the Corporation, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series C Preferred Stock accordingly. Section 6. Involuntary Conversion. (a) Terms. In any ninety day period following the first anniversary of the Series C Original Issue Date, the Corporation, by way of written notice (an "Involuntary 9 Conversion Notice") to the holders of Series C Preferred Stock shall have the right to convert, and to declare to be so converted, a percentage of the shares of Series C Preferred Stock into fully paid and non-assessable shares of Common Stock at the then-applicable Conversion Price for Series C Preferred Stock that is equal to the quotient of (A) the average trading volume of the Common Stock for the twenty (20) trading days immediately preceding the date of the Involuntary Conversion Notice as reported on the Nasdaq National Market or such other principal exchange and (B) 250,000 (appropriately adjusted to take account of any stock split, stock dividend, combination of shares or the like), so long as (i) the volume weighted average trading price of the Common Stock for the twenty (20) trading days immediately preceding the date of the Involuntary Conversion Notice as reported on the Nasdaq National Market or such other principal exchange is greater than two times the Conversion Price of the Series C Preferred Stock, (ii) the Common Stock issued upon conversion of the Series C Preferred Stock hereunder may be sold immediately pursuant to an effective registration statement registering the resale of the shares and (iii) the average trading volume of the Common Stock for the twenty (20) trading days immediately preceding the date of the Involuntary Conversion Notice as reported on the Nasdaq National Market or such other principal exchange is greater than 50,000 shares (appropriately adjusted to take account of any stock split, stock dividend, combination of shares or the like). (b) Procedure. Such conversions shall be deemed to have been made immediately prior to the close of business on the day of the mailing of the Involuntary Conversion Notice, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversions shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. The holders of Series C Preferred Stock shall, within five (5) business days of receiving the Involuntary Conversion Notice, surrender all certificates representing Series C Preferred Stock to be converted; and, upon receipt by the Corporation of such surrendered certificate or certificates with any appropriate endorsement thereon as may be prescribed by the Board, the Corporation shall issue and deliver to such holder a certificate or certificates representing the shares of Common Stock into which such shares of Series C Preferred Stock are convertible. Section 7. Redemption. (a) At the written election (the "Redemption Election") of holders of a majority in voting power of the outstanding shares of Series C Preferred Stock made at any time on or after April 25, 2008, the Corporation shall be required to redeem all, but not less than all, of the outstanding shares of Series C Preferred Stock upon the terms set forth in this Section 7. Such redemption (the "Redemption Date") shall occur on a date specified in the Redemption Election, which shall be not less than 90 days after the date of the Redemption Election. On the Redemption Date, the holders shall surrender the certificate or certificates for the shares to be redeemed duly endorsed for transfer or with duly executed stock transfer powers sufficient to permit transfer attached, at the offices of the Corporation or of any transfer agent for the Series C Preferred Stock. The Corporation shall, as soon as practicable thereafter, issue and deliver to each holder a certificate or certificates for the balance of the shares not being redeemed. The redemption price per share of Series C Preferred Stock shall be equal to $3.00 per share of Series C Preferred Stock (which amount shall be subject to equitable adjustment whenever there shall occur a stock dividend, stock split, combination of shares, reclassification or similar event with 10 respect to the Series C Preferred Stock) plus all dividends declared but unpaid or accrued but unpaid, and any accrued but unpaid interest with respect to such dividends, on, and any and all other amounts owing with respect to, such share on the redemption date. (b) Notice of redemption shall be sent by first class mail, postage prepaid, to each holder of record of Series C Preferred Stock, not less than thirty days nor more than sixty days prior to the Redemption Date at the address of such holder as it appears on the books of the Corporation. Such notice shall set forth (i) the Redemption Date and the place of redemption; and (ii) the redemption price. The Corporation shall be obligated to redeem the Series C Preferred Stock on the dates and in the amounts set forth in the notice; provided, however, that any holder of Series C Preferred Stock who is not party to the Redemption Election may convert any or all of the shares owned by such holder into Common Stock in accordance with Section 5 at any time prior to the date of redemption of such shares. The Corporation, if advised before the close of business on the Redemption Date by written notice from any holder of record of Series C Preferred Stock to be redeemed, shall credit against the number of shares of Series C Preferred Stock required to be redeemed from such holder, and shall not redeem, the number of shares of Series C Preferred Stock which had been converted by such holder on or before such date and which had not previously been credited against any redemption. (c) If, on or before the Redemption Date, the funds necessary for such redemption shall have been set aside by the Corporation and deposited with a bank or trust company, in trust for the pro rata benefit of the holders of the Series C Preferred Stock that has been called for redemption, then, notwithstanding that any certificates for shares that have been called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding from and after the Redemption Date, and all rights of holders of such shares so called for redemption shall forthwith, after such redemption date, cease and terminate with respect to such shares, excepting only the right to receive the redemption funds therefor to which they are entitled. Any interest accrued on funds so deposited and unclaimed by stockholders entitled thereto shall be paid to such stockholders at the time their shares are redeemed or to the Corporation at the time unclaimed amounts are paid to it. In case the holders of Series C Preferred Stock which shall have been called for redemption shall not, within six years after the Redemption Date, claim the amounts so deposited with respect to the redemption thereof, any such bank or trust company shall, upon demand, pay over to the Corporation such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof to such holder and such holder shall look only to the Corporation for the payment thereof. Any funds so deposited with a bank or trust company which shall not be required for such redemption by reason of the exercise subsequent to the date of such deposit of the right of conversion of any shares or otherwise shall be returned to the Corporation forthwith. (d) If the Corporation for any reason fails to redeem any of the shares of Series C Preferred Stock in accordance with Section 7(a) on or prior to the Redemption Date, then, notwithstanding anything to the contrary contained in the Articles of Incorporation, as amended: (i) Neither the Corporation nor any of its subsidiaries may incur any indebtedness for money borrowed (unless the proceeds of such incurrence of indebtedness are 11 used to make all overdue redemptions) or borrow or reborrow any amounts under any lines of credit which they may then have outstanding without the prior written consent of the holders of not less than a majority of the then outstanding shares of Series C Preferred Stock; and (ii) The Corporation shall be deemed to accrue on each share of Series C Preferred Stock an annual cumulative dividend of $0.54 (subject to equitable adjustment in the event of any stock dividend, stock split, combination, reclassification of shares or other similar event), and such dividend shall accrue on each share of Series C Preferred Stock from the date of a default under this Section 7. (e) If the funds of the Corporation legally available for redemption of shares of Series C Preferred Stock on the Redemption Date are insufficient to redeem the total number of shares of Series C Preferred Stock, those funds which are legally available will be used to redeem the maximum possible number of whole shares ratably among the holders of such shares. The shares of Series C Preferred Stock not redeemed shall remain outstanding and entitled to all rights and preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of such shares of Series C Preferred Stock, such funds will be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are then legally available. IN WITNESS WHEREOF, these Articles of Amendment are hereby executed as of this Second day of May, 2006. TRIPOS, INC. By: /s/ John Yingling ----------------------------- Title: Vice President 12 EX-99.3 3 b60964mcexv99w3.txt EX-99.3 EXHIBIT 3 - STOCK PURCHASE AGREEMENT DATED MAY 4, 2006 BY AND AMONG MIDWOOD CAPITAL PARTNERS, L.P., MIDWOOD CAPITAL PARTNERS QP, L.P. AND TRIPOS, INC. Exhibit 3 SECURITIES PURCHASE AGREEMENT This Securities Purchase Agreement (this "AGREEMENT") is dated as of May 4, 2006, between TRIPOS, INC., a Utah corporation (the "COMPANY"), and the investors identified on the signature pages hereto (each an "INVESTOR" and, collectively, the "INVESTORS"). WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Investors and the Investors desire to purchase from the Company securities of the Company as more fully described in this Agreement, all pursuant to the terms set forth herein; NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows: ARTICLE I. DEFINITIONS 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1: "ACTION" means any action, suit, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing against or affecting the Company, any Subsidiary or any of their properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility. "AFFILIATE" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144. "ARTICLES OF AMENDMENT" has the meaning set forth in Section 2.2(a). "BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan and which is maintained or otherwise contributed to by the Company. "BENEFIT PLAN" has the meaning set forth in Section 3.1(y)(ii). "BUSINESS DAY" means any day except Saturday, Sunday and any day that is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close. "CLOSING" means the closing of the purchase and sale of the Securities pursuant to Article II. "CLOSING DATE" means the Business Day immediately following the date on which all of the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the common stock of the Company, par value $.01 per share, and any securities into which such common stock may hereafter be reclassified. "COMMON STOCK EQUIVALENTS" means any securities of the Company or any Subsidiary which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock. "COMPANY COUNSEL" means Snell & Willmer LLP and Hogan & Hartson LLP. "COMPANY DELIVERABLES" has the meaning set forth in Section 2.2(a). "CONTINGENT LIABILITY" means, as to any Person, any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Debt or obligation of any other Person in any manner, whether directly or indirectly, including without limitation any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (b) to purchase property or services for the purpose of assuring the owner of such Debt of its payment, or (c) to maintain the solvency, working capital, equity, cash flow, fixed charge or other coverage ratio, or any other financial condition of the primary obligor so as to enable the primary obligor to pay any Debt or to comply with any agreement relating to any Debt or obligation. "DEBT" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments issued by such Person, (iii) all obligations of such Person as lessee which (a) are capitalized in accordance with GAAP or (b) arise pursuant to sale-leaseback transactions, (iv) all reimbursement obligations of such Person in respect of letters of credit or other similar instruments, (v) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person and (vi) all Debt of others guaranteed by such Person. 2 "DISCLOSURE MATERIALS" has the meaning set forth in Section 3.1(h). "EFFECTIVE DATE" means the date that the Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA GROUP" means the Company and each Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under the Code. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "GAAP" means U.S. generally accepted accounting principles. "INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section 3.1(p). "INVESTOR DELIVERABLES" has the meaning set forth in Section 2.2(b). "INVESTOR PARTY" has the meaning set forth in Section 4.6. "LIEN" means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind. "LOSSES" has the meaning set forth in Section 4.6. "MATERIAL ADVERSE EFFECT" means any of (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, or (ii) a material and adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a whole. "NEW YORK COURTS" means the state and federal courts sitting in the City of New York, Borough of Manhattan. "PBGC" means the Pension Benefit Guarantee Corporation or any entity succeeding to any or all of its functions under ERISA. "PERMITTED LIENS" means: (a) liens for taxes, assessments or governmental charges not delinquent or being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with GAAP are maintained on the books of the Company or the applicable Subsidiary; (b) liens arising out of deposits in connection with workers' compensation, unemployment insurance, old age pensions or other social security or retirement 3 benefits legislation; (c) deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds, and other obligations of like nature arising in the ordinary course of business of the Company or a Subsidiary; (d) liens imposed by law, such as mechanics', workers', materialmens', carriers' or other like liens arising in the ordinary course of business of the Company or a Subsidiary which secure the payment of obligations which are not past due or which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP are maintained on the books of the Company or the applicable Subsidiary; (e) liens existing on the Closing Date, and described on Schedule 3.1(o); (f) purchase money security interests or liens for the purchase of fixed assets to be used in the business of the Company or a Subsidiary, securing solely the fixed assets so purchased and the proceeds thereof; (g) capitalized leases which do not violate any provision of this Agreement; (h) liens of commercial depository institutions, arising in the ordinary course of business, constituting a statutory or common law right of setoff against amounts on deposit with such institution; and (i) rights of way, zoning restrictions, easements and similar encumbrances affecting the Company's real property which do not materially interfere with the use of such property. "PERSON" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "PLAN" means at any time an employee pension plan benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under the Code and either (i) is maintained, or contributed to, by any member of the ERISA group for employees of any member of the ERISA group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA group. "PREFERRED SHARES" means shares of the Series C Preferred Stock of the Company, par value $.01 per share "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "REGISTRATION STATEMENT" means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Investors of the Underlying Shares and the Warrant Shares. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and the Investors, in the form of Exhibit C hereto. "REQUIRED MINIMUM" means, as of any date, the aggregate number of shares of 4 Common Stock then issuable pursuant to the Transaction Documents; provided, however, that for so long as the Preferred Shares or Warrants remain outstanding, the Required Minimum shall not be fewer than 2,502,500 less the aggregate number of Underlying Shares and Warrant Shares issued from time to time hereunder. "RESTRICTED PAYMENT" means, with respect to any Person, (a) payments made in redemption of the securities of such Person and (b) any management, consulting or other similar fees, or any interest thereon, payable by such Person to any affiliate of such Person (other than the Company) or to any other Person other than an unrelated third party, other than pursuant to agreements in existence on the date hereof; provided, however, that Restricted Payments shall not include any management, consulting or other similar fees, or any interest thereon, payable pursuant to consulting agreements with consultants of the Company entered into after the date hereof which are approved by the Board of Directors of the Company. "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SEC REPORTS" has the meaning set forth in Section 3.1(h). "SECURITIES" means the Preferred Shares and the Warrants. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SUBSEQUENT PLACEMENT" has the meaning set forth in the Section 4.3. "SUBSEQUENT PLACEMENT NOTICE" has the meaning set forth in the Section 4.3. "SUBSIDIARY" means any subsidiary of the Company included in the SEC Reports. "TRADING DAY" means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, (iii) if the Common Stock is not quoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices), or (iv) in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day. "TRADING MARKET" means whichever of the New York Stock Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market, 5 OTC Bulletin Board, or "pink sheets" on which the Common Stock is listed or quoted for trading on the date in question. "TRANSACTION DOCUMENTS" means this Agreement, the Registration Rights Agreement, the Warrants and any other documents or agreements executed in connection with the transactions contemplated hereunder. "UNDERLYING SHARES" means the shares of Common Stock issuable upon conversion of the Preferred Shares. "WARRANTS" means the Common Stock purchase warrant in the form of Exhibit D which is issuable to each Investor at the Closing. "WARRANT SHARES" means the shares of Common Stock issuable upon exercise of the Warrants. ARTICLE II. PURCHASE AND SALE 2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, the number of Preferred Shares set forth opposite each Purchaser's name on Exhibit A hereto at a purchase price of $3.00 per share. In consideration of such purchase, each Purchaser shall also receive a Warrant to purchase the number of shares set forth opposite such Purchaser's name on Exhibit A hereto. The Closing shall take place at the offices of Foley Hoag LLP, counsel for the Investor, World Trade Center West, Boston, MA 02216 on the Closing Date or at such other location or time as the parties may agree. 2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or cause to be delivered to each Investor the following (the "COMPANY DELIVERABLES"): (i) a certified copy of the Articles of Amendment authorizing the Preferred Shares in the form of Exhibit B hereto (the "ARTICLES OF AMENDMENT") filed with the Utah Department of Commerce, Division of Corporations and Commercial Code; (ii) a certificate for the Preferred Shares registered in the name of the Investor; (iii) a Warrant registered in the name of the Investor; (iv) the legal opinion of Company Counsel, in agreed form, addressed to the Investors; 6 (v) the Registration Rights Agreement, duly executed by the Company; and (vi) any other documents reasonably requested by such Investor. (b) At the Closing, each Investor shall deliver or cause to be delivered to the Company the following (the "INVESTOR DELIVERABLES"): (i) the purchase price for its Securities in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose; and (ii) the Registration Rights Agreement, duly executed by the Investor. ARTICLE III. REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Investor: (a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than as specified in the SEC Reports. Except as disclosed in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. (b) Organization and Qualification. The Company and each Subsidiary are duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation in any material respect of any of the provisions of its certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each Subsidiary are each duly qualified to conduct its business and are in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on 7 the part of the Company and no further action is required by the Company in connection therewith. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (d) No Conflicts. Except as disclosed in Schedule 3.1(d), the execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of clause (iii), such as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. (e) Filings, Consents and Approvals. Except as disclosed in Schedule 3.1(e), the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing with the Commission of one or more Registration Statements in accordance with the requirements of the Registration Rights Agreement, (ii) filings required by state securities laws, (iii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, (iv) the filings required in accordance with Sections 4.6 and 4.9, and (iv) those that have been made or obtained prior to the date of this Agreement. (f) Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock initially issuable upon conversion of the Preferred Shares and upon exercise of the Warrants, which 8 number of reserved shares is not less than the Required Minimum calculated as of the date hereof. (g) Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company's various option and incentive plans, is specified in Schedule 3.1(g). Except as specified in Schedule 3.1(g), no securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as specified in Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. The issue and sale of the Securities will not, immediately or with the passage of time, obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. (h) SEC Reports; Financial Statements. Except as disclosed in Schedule 3.1(h), the Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof (or such shorter period as the Company was required by law to file such reports) (the foregoing materials being collectively referred to herein as the "SEC REPORTS" and, together with the Schedules to this Agreement (if any), the "DISCLOSURE MATERIALS") on a timely basis or has timely filed a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their dates (as amended, where applicable), the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports 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. The financial statements of the Company included in the SEC Reports (as amended, where applicable) comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments. 9 (i) Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans and other equity compensation arrangements. The Company does not have pending before the Commission any request for confidential treatment of information. (j) Litigation. Except as disclosed in Schedule 3.1(j), to the knowledge of the Company, there is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as specifically disclosed in the SEC Reports, would, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. There is no Action in the name of or on behalf of the Company's stockholders. Neither the Company nor any Subsidiary, nor, to the knowledge of the Company, any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty, except as specifically disclosed in the SEC Reports. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. (k) Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company. (l) Compliance. Except as disclosed in Schedule 3.1(l) or in the SEC Reports, neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and 10 employment and labor matters, except in each case as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance would not have or reasonably be expected to result in a Material Adverse Effect. (m) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their businesses as described in the SEC Reports, except where the failure to possess such permits would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such permits. (n) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to their businesses and good and valid title in all personal property owned by them that is material to their businesses, in each case free and clear of all Liens, except for Permitted Liens and Liens that do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance, except as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. A list of existing Liens is provided on Schedule 3.1(n) hereto (which shall constitute "Permitted Liens" under clause (e) of the definition of such term). (o) Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their businesses as described in the SEC Reports and which the failure to so have would, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect (collectively, the "INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. (p) Transactions With Affiliates and Employees. Except as set forth in the SEC Reports or disclosed in Schedule 3.1(p), none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is currently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement 11 providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. (q) Internal Accounting Controls. Except as set forth in the SEC Reports or disclosed in Schedule 3.1(q), the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act rules 13a-14 and 15d-14) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company's Form 10-K or 10-Q, as the case may be, is being prepared. The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures in accordance with Item 307 of Regulation S-K under the Exchange Act for the Company's most recently ended fiscal quarter or fiscal year-end (such date, the "EVALUATION DATE"). The Company presented in its most recently filed Form 10-K or Form 10-Q the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the Company's internal controls that would be required to be disclosed pursuant to Item 308(c) of Regulation S-K under the Exchange Act or, to the Company's knowledge, in other factors that would reasonably be expected to have a Material Adverse Effect on the Company's internal controls. (r) Certain Fees. Except as specified in Schedule 3.1(r), no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Investors shall have no obligation with respect to any fees or with respect to any claims (other than such fees or commissions owed by a Investor pursuant to written agreements executed by such Investor which fees or commissions shall be the sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. (s) Certain Registration Matters. Assuming the accuracy of the Investors' representations and warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required for the offer and sale of the Preferred Shares and Warrants by the Company to the Investors under the Transaction Documents. Except as disclosed in Schedule 3.1(s), the 12 Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied. (t) Listing and Maintenance Requirements. Except as specified in the SEC Reports, the Company has not, in the two years preceding the date hereof, received notice from any Trading Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof. Except as specified in Schedule 3.1(t), the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements for continued listing of the Common Stock on the Trading Market on which the Common Stock is currently listed or quoted. Except as specified in Schedule 3.1(t), the issuance and sale of the Securities under the Transaction Documents does not contravene the rules and regulations of the Trading Market on which the Common Stock is currently listed or quoted, and no approval of the shareholders of the Company thereunder is required for the Company to issue and deliver to the Investors the Securities contemplated by Transaction Documents. (u) Investment Company. The Company is not, and is not an Affiliate of, and immediately upon receipt and application of the purchase price for the Securities at Closing will not have become, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (v) Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Investors as a result of actions by the Investors and the Company to fulfill their obligations or exercise their rights under the Transaction Documents, including without limitation the Company's issuance of the Securities and the Investors' ownership of the Securities. (w) Disclosure. The Company has provided the Investors with all applicable or relevant documents and information that the Investors have requested in writing. True and complete copies of all documents listed in the Schedules to this Agreement have been made available or provided to the Investors. No representation or warranty of the Company in this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they are made, not misleading. (x) Compliance with ERISA. (i) Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Code with respect to each Plan. No member of the ERISA Group 13 has (i) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Plan, (ii) failed to make any required contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. (ii) The benefit plans not covered under clause (a) above (including profit sharing, deferred compensation, stock option, employee stock purchase, bonus, retirement, health or insurance plans, collectively the "Benefit Plans") relating to the employees of the Company are duly registered where required by, and are in good standing in all material respects under, all applicable laws. All required employer and employee contributions and premiums under the Benefit Plans to the date hereof have been made, the fund or funds established under the Benefit Plans are funded in accordance with applicable laws, and no past service funding liabilities exist thereunder. (iii) No Benefit Plans have any unfunded liabilities, either on a "going concern" or "winding up" basis and determined in accordance with all applicable laws and actuarial practices and using actuarial assumptions and methods that are reasonable in the circumstances. No event has occurred and no condition exists with respect to any Benefit Plans that has resulted or would reasonably be expected to result in any pension plan having its registration revoked or wound up (in whole or in part) or refused for the purposes of any applicable laws or being placed under the administration of any relevant pension benefits regulatory authority or being required to pay any taxes or penalties (in any material amounts) under any applicable laws. (y) Absence of Any Undisclosed Financial Liabilities. Except for (i) those liabilities provided for in the Company's financial statements (including footnotes thereto), (ii) liabilities disclosed on Schedule 6.2(c) and (ii) other indebtedness incurred in the ordinary course of business since the date of its most recent SEC Report, the Company has no indebtedness or other financial liabilities of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, except as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. 3.2 Representations and Warranties of the Investor. The Investor hereby represents and warrants to the Company as follows: (a) Organization; Authority. The Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations thereunder. The purchase of the Securities by such Investor has been duly 14 authorized by such Investor. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (b) Investment Intent. Such Investor is acquiring the Securities as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Investor's right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities. (c) Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises the Warrant it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Such Investor is not a registered broker-dealer under Section 15 of the Exchange Act. (d) General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. (e) Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Subsidiaries and their financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor's right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company's representations and warranties contained in the Transaction Documents. 15 The Company acknowledges and agrees that no Investor has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2. ARTICLE IV. OTHER AGREEMENTS OF THE PARTIES 4.1 Transfer Restrictions. (a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. (b) Certificates evidencing the Securities will contain the following legend, until such time as they are not required under Section 4.1(c): [NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement in connection with a bona fide margin account and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or 16 pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the pledge. No notice shall be required of such pledge. At the appropriate Investor's expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder. (c) At the request of an Investor, the Company shall use its reasonable best efforts to cause certificates evidencing Underlying Shares and Warrant Shares not to contain any legend (including the legend set forth in Section 4.1(b)): (i) while a registration statement (including the Registration Statement) covering such Underlying Shares or Warrant Shares is then effective, or (ii) following a sale or transfer of such securities pursuant to Rule 144 (assuming the transferor is not an Affiliate of the Company), or (iii) while such securities are eligible for sale under Rule 144(k). 4.2 Furnishing of Information. As long as any Investor owns Securities, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Investor owns Securities, if the Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Investors and make publicly available in accordance with Rule 144(c) such information as is required for the Investors to sell the Underlying Shares and Warrant Shares under Rule 144. The Company further covenants that it will take such further action as any holder of Securities may reasonably request, all to the extent required from time to time to enable such Person to sell the Underlying Shares and Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. 4.3 Subsequent Securities Offerings. (a) Prior to (i) the first year anniversary of the Effective Date, (ii) the date that the Preferred Shares have been converted entirely into Common Stock, or (iii) consummation of an Event, as defined in Section 3(c) of the Articles of Amendment, whichever is first to occur, in the event the Company, directly or indirectly, offers, sells, grants any option to purchase, or otherwise disposes of (or announces any offer, sale, grant or any option to purchase or other disposition of) any Common Stock or Common Stock Equivalents or any of its Subsidiaries' equity or Common Stock Equivalents in exchange for cash or cash equivalents in a capital-raising transaction (such offer, sale, grant, disposition or announcement being referred to as "SUBSEQUENT PLACEMENT"), the Company shall deliver to each Investor a written notice (each, a "SUBSEQUENT PLACEMENT NOTICE") of its intention to effect such Subsequent Placement, which specifies in reasonable detail all of the material terms of such Subsequent Placement, the amount of proceeds intended to be raised thereunder, the names of the investors (including the 17 investment manager of such investors, if any) and the investment bankers, if any, with whom such Subsequent Placement is proposed to be effected, and attached to which shall be a term sheet or similar document. Each Investor shall have until 6:30 p.m. (New York City time) on the fifth Trading Day after its receipt of the Subsequent Placement Notice to notify Company of its intention to provide, subject to completion of mutually acceptable documentation, all of such financing on the same terms as set forth in the Subsequent Placement Notice. In the event that the Investors do not timely elect to provide the entire financing subject to the Subsequent Placement Notice and the Company shall not have consummated the portion of the Subsequent Placement for which such elections shall not have been so made on the terms and to the Persons specified in the Subsequent Placement Notice within 90 days following the expiration of the time to so elect, the Company shall provide each Investor with a second Subsequent Placement Notice and each Investor will again have the right of first refusal set forth in this Section. If the Investors indicate in the aggregate a willingness to provide financing in excess of the amount set forth in the Subsequent Placement Notice, then each Investor will be entitled to provide financing pursuant to such Subsequent Placement Notice up to an amount of all such proceeds equal to such Investor's pro rata portion of all Preferred Shares purchased hereunder. (b) The Company's obligations under this Section 4.3 shall not apply to any grant or issuance by the Company of any of the following: (i) the issuance of securities upon the exercise or conversion of any Common Stock Equivalents issued by the Company prior to the date of this Agreement, (ii) the issuance of Common Stock or the grant of options or warrants for Common Stock under any duly authorized Company stock option, restricted stock plan or stock purchase plan whether now existing or approved by the Company and its stockholders in the future, (iii) the issuance of Common Stock Equivalents in connection with a merger, acquisition or other business combination or strategic partnering or joint venture transaction or the exercise or conversion of such securities, (iv) the issuance of Common Stock Equivalents in connection with the settlement of claims which are the subject of law suits, arbitrations and similar proceedings or the conversion or exercise of such securities, or (v) the issuance of warrants for Common Stock to equipment lessors in connection with capital lease transactions or the exercise of such warrants. 4.4 Integration. The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market in a manner that would require stockholder approval of the sale of the securities to the Investors. 4.5 Reservation of Shares. The Company shall maintain a reserve from its duly authorized shares of Common Stock to comply with its conversion obligations under the Preferred Shares and its exercise obligations under the Warrants. If on any date the Company would be, if notice of conversion were to be delivered on such date, precluded from issuing the 18 number of (i) Underlying Shares, as the case may be, issuable upon conversion in full of the Preferred Shares or (ii) Warrant Shares, as the case may be, issuable upon exercise in full of the Warrants, due to the unavailability of a sufficient number of authorized but unissued or reserved shares of Common Stock, then the Board of Directors of the Company shall promptly prepare and mail to the stockholders of the Company proxy materials or other applicable materials requesting authorization to amend the Company's articles of incorporation or other organizational document to increase the number of shares of Common Stock which the Company is authorized to issue so as to provide enough shares for issuance of the Underlying Shares and Warrant Shares. In connection therewith, the Board of Directors shall (a) adopt proper resolutions authorizing such increase, (b) recommend to and otherwise use its best efforts to promptly and duly obtain stockholder approval to carry out such resolutions (and hold a special meeting of the stockholders as soon as practicable, but in any event not later than the 60th day after delivery of the proxy or other applicable materials relating to such meeting) and (c) within five Business Days of obtaining such stockholder authorization, file an appropriate amendment to the Company's articles of incorporation or other organizational document to evidence such increase. 4.6 Indemnification of Investors. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold the Investors and their directors, officers, shareholders, partners, employees and agents (each, an "INVESTOR PARTY") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation (collectively, "LOSSES") that any such Investor Party may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by the Company in any Transaction Document. In addition to the indemnity contained herein, the Company will reimburse each Investor Party for its reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. Notwithstanding the foregoing, the Company's aggregate obligations under this Section 4.6 shall not exceed the sum of $5,500,000. 4.7 Non-Public Information. The Company agrees to make management available to the Investors for periodic updates on progress with respect to material transactions provided the Investors shall have executed a written agreement regarding the confidentiality and use of such information, and, provided further, that the Investors may at any time waive the right to receive such periodic updates. 4.8 Listing of Securities. The Company agrees, (i) if the Company applies to have the Common Stock traded on any other Trading Market, it will include in such application the Underlying Shares and Warrant Shares, and will take such other action as is necessary to cause the Underlying Shares and Warrant Shares to be listed on such other Trading Market as promptly as possible, and (ii) it will take all action reasonably necessary to continue the listing and trading of its Common Stock on a Trading Market and will comply in all material respects with the 19 Company's reporting, filing and other obligations under the bylaws or rules of the Trading Market. 4.9 Use of Proceeds. The Company will use the net proceeds from the sale of the Securities hereunder for working capital purposes and not to redeem any Common Stock or Common Stock Equivalents. 4.10 Board Observer Rights. If a "Deemed Liquidation" as defined in the Articles of Amendment shall not have occurred by the first anniversary of the Closing Date, the Investors shall collectively be entitled to designate one person to attend all meetings of the Company's Board of Directors, the Audit Committee (excluding, however, executive sessions of the Audit Committee) of the Board of Directors and any Executive Committee of the Board of Directors that may hereafter be created in a nonvoting observer capacity and, in this respect, the Company shall give such designee copies of all notices, minutes, consents, and other materials that it provides to its directors at the same time and in the same manner as provided to such directors; provided, however, that such designee shall enter into a written confidentiality agreement and agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such designee from any meeting or portion thereof if access to such information or attendance at such meeting could, in the reasonable determination of the Chairman or the applicable Committee Chair, adversely affect the availability of any attorney-client privilege, result in disclosure of trade secrets or result in a conflict of interest with the Investors. The designee may at any time waive the right to attend the meetings and receive the materials specified in this Section 4.10. ARTICLE V. CONDITIONS PRECEDENT TO CLOSING 5.1 Conditions Precedent to the Obligations of an Investor to Purchase Securities. The obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct as of the date when made and as of the Closing as though made on and as of such date; (b) Performance. The Company shall have performed, satisfied and complied with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing; (c) Officer's Certificate. A certificate executed by a duly authorized officer of the Company certifying that all representations and warranties made by the Company and information furnished by the Company in any schedules to this Agreement, are true and correct in all material respects as of the Closing Date, and all covenants, agreements and obligations 20 required by this Agreement to be performed or complied with by the Company, prior to or at the Closing, have been performed or complied with in all material respects; (d) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents; (e) Adverse Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that has had or would reasonably be expected to result in a Material Adverse Effect; (f) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock shall not have been suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market; and (g) Company Deliverables. The Company shall have delivered the Company Deliverables in accordance with Section 2.2(a). 5.2 Conditions Precedent to the Obligations of the Company to sell Securities. The obligation of the Company to sell Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions: (a) Representations and Warranties. The representations and warranties of each Investor contained herein shall be true and correct as of the date when made and as of the Closing Date as though made on and as of such date; (b) Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing; (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents; and (d) Investors Deliverables. Each Investor shall have delivered its Investor Deliverables in accordance with Section 2.2(b). 21 ARTICLE VI. NEGATIVE COVENANTS OF THE COMPANY The Company hereby agrees that, from and after the date hereof until the date that the Securities shall no longer be outstanding, the Company shall be bound according to the restrictions set forth in each of following negative covenants unless any such restriction shall have been expressly waived in writing by the Investors: 6.1 Restricted Payments and Dividends. The Company shall not make any Restricted Payment. So long as any of the Securities are outstanding, the Company shall not declare, pay or make any provision for any cash dividend or cash distribution with respect to the Common Stock or preferred stock of the Company, without first obtaining the approval of the Investors. 6.2 Debt. Neither the Company nor any Subsidiary shall create, incur, assume, become or be liable in any manner in respect of, or suffer to exist, any Debt aggregating in excess of $1,500.000 except (a) Debt in an aggregate amount equal to the sum of the amount outstanding and the amount available to the Company under its existing credit facilities, as shown on Schedule 6.2(a), (b) trade payables incurred and paid in the ordinary course of business, (c) Contingent Liabilities in existence on the date hereof, as shown on Schedule 6.2(c), (d) Contingent Liabilities resulting from the endorsement of negotiable instruments for collection in the ordinary course of business, and (e) Debt incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, capital lease obligation or otherwise), provided that such Debt is incurred simultaneously with such acquisition. 6.3 Amendment of Organizational Documents. The Company shall not permit any amendment to its articles of incorporation so as to adversely affect the rights or privileges granted under the Preferred Shares. 6.4 Transactions with Affiliates. The Company shall not, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect any transaction in connection with any joint enterprise or other joint arrangement with, any Affiliate, except on terms no less favorable than terms that could be obtained by the Company from a Person that is not an Affiliate of the Company upon negotiation at arms' length, as determined in good faith by the Board; provided that no determination of the Board of Directors shall be required with respect to any such transactions entered into in the ordinary course of business. ARTICLE VII. MISCELLANEOUS 7.1 Fees and Expenses. At the Closing, the Company shall pay to the Investors an amount equal to its aggregate expenses for legal services, travel and third party research services 22 incurred in connection with the Transaction Documents, not to exceed $50,000 in the aggregate without the prior written consent of the Company. Except as specified in the immediately preceding sentence, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Preferred Shares and Warrants. 7.2 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 7.3 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: If to the Company: Tripos, Inc. 1699 South Hanley Road St. Louis, Missouri 63144-2319 Facsimile: (314) 647-8108 Attention: Chief Financial Officer With a copy to: Hogan & Hartson LLP 111 South Calvert Street Baltimore, Maryland 21202 Facsimile: (410) 539-6981 Attention: Henry D. Kahn, Esq. If to an Investor: Midwood Capital Management, LLC 575 Boylston Street, 4th Floor Boston, Massachusetts 02116 With a copy to: Foley Hoag LLP 23 155 Seaport Boulevard Boston, Massachusetts 02210 Facsimile: (617) 832-7000 Attention: Peter M. Rosenblum, Esq. or such other address as may be designated in writing hereafter, in the same manner, by such Person. 7.4 Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and all Investors. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. 7.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents. 7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the "Investors." 7.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.6 (as to each Investor Party). 7.8 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its Affiliates, employees or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or 24 discussed herein (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding. 7.9 Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Securities for a period of two years. 7.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof. 7.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement. 7.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights. 25 7.13 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement. 7.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence. 7.15 Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 7.16 Limitation of Liability. Notwithstanding anything herein to the contrary, the Company acknowledges and agrees that the liability of an Investor arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Investor, and that no trustee, officer, other investment vehicle or any other Affiliate of such Investor or any investor, shareholder or holder of shares of beneficial interest of such a Investor shall be personally liable for any liabilities of such Investor. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOW] 26 IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be duly executed by their authorized signatories as of the date first indicated above. TRIPOS, INC. By: /s/ John D. Yingling ----------------------------- Name: John D. Yingling Title: Vice President, Chief Accounting Officer [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOR INVESTORS FOLLOW] 27 IN WITNESS WHEREOF, the parties hereto have caused this Purchase Agreement to be duly executed by their authorized signatories as of the date first indicated above. MIDWOOD CAPITAL PARTNERS, L.P. By Midwood Capital Management LLC, its general partner By: /s/ Ross DeMont ----------------------------------- Name: Ross DeMont Title: Manager MIDWOOD CAPITAL PARTNERS QP, L.P. By Midwood Capital Management LLC, its general partner By: /s/ Ross DeMont ----------------------------------- Name: Ross DeMont Title: Manager 28 EXHIBIT A Schedule of Investors
Investor Preferred Shares - -------- ---------------- MIDWOOD CAPITAL PARTNERS, L.P. 815,742 MIDWOOD CAPITAL PARTNERS QP, L.P. 1,017,591
Warrant Holder Shares Underlying Warrant - -------------- ------------------------- MIDWOOD CAPITAL PARTNERS, L.P. 244,723 MIDWOOD CAPITAL PARTNERS QP, L.P. 305,277
29 EX-99.4 4 b60964mcexv99w4.txt EX-99.4 EXHIBIT 4 - FORM OF WARRANT ISSUED BY TRIPOS, INC. TO MIDWOOD CAPITAL PARTNERS, L.P. Exhibit 4 THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION HEREOF OR OF THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SALE OF THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO TRIPOS, INC. AS TO AN EXEMPTION THEREFROM. Warrant to Subscribe for 244,723 Shares STOCK PURCHASE WARRANT To Subscribe for and Purchase Stock of TRIPOS, INC. Warrant No. 1 Original Issue Date: May 4, 2006 1. Issue; Number of Shares Subject to Warrant. THIS CERTIFIES that, for value received, Midwood Capital Partners, L.P. or its registered assigns is entitled to subscribe for and purchase from TRIPOS, INC., a Utah corporation (the "Company"), at the Purchase Price (as hereinafter defined) at any time during the period from the Original Issue Date to and including the close of business on May 4, 2011 up to Two Hundred Forty Four Thousand Seven Hundred Twenty Three (244,723) fully paid and nonassessable shares (the "Common Shares") of the Common Stock, $.01, par value per share ("Common Stock"), of the Company for $3.50 per share (the "Purchase Price"); subject, however, to the provisions and upon the terms and conditions hereinafter set forth. 2. Exercise; Issue Date; Delivery of Common Shares; Unexercised Portion. (a) The rights represented by this Warrant may be exercised by the holder hereof, in whole or in part (but not as to a fractional Common Share), by the surrender of this Warrant (properly endorsed if required) at the principal office of the Company, at 1699 South Hanley Road, St. Louis, Missouri 63144-2319 (or such other office or agency of the Company, as it may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company) solely by cashless exercise in accordance with Section 2(b) below. The Company agrees that the Common Shares so purchased shall be deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Common Shares ("Exercise Date"). Certificates for the Common Shares so purchased shall be delivered to the holder hereof within a reasonable time, not exceeding five (5) trading days, after the rights represented by this Warrant shall have been so exercised, and unless this Warrant has expired, a new Warrant exercisable for the number of Common Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such time. (b) Upon the holder's notice to the Company of its election to exercise this Warrant, the Company shall issue to the holder the number of Common Shares determined as follows: X = Y [(A-B)/A] where: X = the number of Common Shares to be issued to the holder. Y = the number of Common Shares with respect to which this Warrant is being exercised. A = the average of the closing prices for the five trading days immediately prior to (but not including) the Exercise Date. B = the Purchase Price. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Common Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the holder, and the holding period for the Common Shares shall be deemed to have commenced, on the date this Warrant was originally issued. (c) Notwithstanding the provisions of this Warrant, in no event shall the holder be entitled to exercise this Warrant, nor shall the Company have the obligation to issue shares upon such exercise of all or any portion of this Warrant to the extent that, after such exercise the sum of (1) the number of shares of Common Stock beneficially owned by the holder and its affiliates (other than Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of the Warrants), and (2) the number of shares of Common Stock issuable upon the exercise of the Warrants with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 9.99% of the then outstanding shares of Common Stock (after taking into account the shares to be issued to the holder upon exercise). For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder. (d) Notwithstanding any other provision herein, the Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant if and to the extent the issuance of such shares of Common Stock would exceed the number of shares (the "EXCHANGE CAP") then permitted to be issued without stockholder approval in violation of the rules, regulations and interpretations of Nasdaq National Market (as determined in good faith by the Company's Board of Directors), except that such limitation shall not apply in the event that the Corporation obtains the approval of its stockholders as required by then applicable rules, regulations and interpretations of Nasdaq National Market or the NASD for issuances of -2- Common Stock in excess of the Exchange Cap. If and to the extent the Exchange Cap applies, no holder of this Warrant shall be issued, upon exercise of this Warrant, shares of Common Stock in an amount greater than the product of (x) the Exchange Cap amount multiplied by (y) a fraction, the numerator of which is the number of shares of Common Stock issuable to such holder upon the requested exercise at the original Purchase Price, and the denominator of which is the aggregate number of shares of Common Stock issuable to holders of all warrants issued pursuant to that certain Securities Purchase Agreement dated as of May 4, 2006, by and among the Company and the investors named therein at the original Purchase Price (the "CAP ALLOCATION AMOUNT"). 3. Common Shares Fully Paid; Reservation of Common Shares; Listing. The Company covenants and agrees that all Common Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved, a sufficient number of Common Shares to provide for the exercise of the rights represented by this Warrant, and will at its expense expeditiously upon each such issuance of shares use its best efforts to procure the listing thereof (subject to issuance or notice of issuance) on all public trading markets on which the Common Stock of the Company is then listed. 4. Taxes. The issue of stock certificates on any exercise of this Warrant shall be made without charge to the holder of the Warrant for any documentary stamp tax in respect of the issue thereof. The Company shall not, however, be required to pay any documentary stamp tax which may be payable in respect of any transfer involved in the issue and delivery of stock in any name other than that of the holder of the Warrant and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. 5. Fractional Shares. The Company shall not be required to issue certificates representing fractions of shares of Common Stock upon the exercise of the Warrant, but in respect of any fraction of a share of Common Stock, it will make a payment in cash based on the then excess of the Fair Market Value (as hereinafter defined) of a share of Common Stock over the warrant Purchase Price. "Fair Market Value" means the last reported closing price of the Common Stock on the NASDAQ Stock Market or any national securities exchange on which the Common Stock is traded on the date of exercise of this Warrant, or, if the Common Stock is not traded on the NASDAQ Stock Market or a national securities exchange, the mean of the reported high bid and low asked prices of the Common Stock in the over-the-counter bulletin board on the date of exercise of this Warrant, or, if not so traded, as determined in good faith by, or at the direction of, the Board of Directors of the Company. -3- 5A. Fundamental Transaction. For purposes of this Warrant, a "Fundamental Transaction" shall mean any of the following: (i) a consolidation or merger of the Company into or with any other entity or entities that results in the exchange of outstanding shares of the Company for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof (except a consolidation or merger into a wholly owned subsidiary or merger in which the Company is the surviving corporation and, in either case, the holders of the Company's voting stock outstanding immediately prior to the transaction constitute a majority of the holders of voting stock outstanding immediately following the transaction), (ii) the sale of all or substantially all of the Company's assets in one or a series of related transactions, (iii) the completion of any tender offer or exchange offer (whether by the Company or another Person) pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (iv) the reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property or (v) the consummation of the sale, whether of the stock or assets, of all or substantially all of the Company's "Discovery Informatics" business based in the United States. If the Company, in any transaction or series of transactions, effects a Fundamental Transaction, the Company shall provide written notice to the Holder no less than 15 days prior to the date on which the Fundamental Transaction is to take place (the "TRANSACTION DATE"). The notice shall contain a brief description of the proposed action and shall state (x) the amount of cash or value of securities or other property (as reasonably determined in good faith by the Company's Board of Directors) that a holder of a share of Common Stock shall receive upon consummation of the Fundamental Transaction (the "CONSIDERATION VALUE"), (y) the date on which the Fundamental Transaction is to take place and (z) the date, if any is to be fixed, as of which the holders of the Company's capital stock shall receive cash or other property deliverable upon consummation of the Fundamental Transaction. The Holder shall thereupon deliver written notice to the Company indicating whether it intends to exercise this Warrant. If the Holder does not provide such notice prior to the Transaction Date, the successor entity in the Fundamental Transaction shall assume the obligations of the Company under this Warrant, and this Warrant shall be exercisable for the same securities, cash and property as would be payable for the shares issuable upon the exercise of the unexercised portion of this Warrant as if such shares were outstanding on the record date for the Fundamental Transaction; provided, however, that the successor entity may elect in lieu thereof to redeem this Warrant for cash in an amount equal to the Consideration Value minus the Purchase Price, if greater than zero, multiplied by the number of Shares represented by this Warrant and to the extent such amount is equal to or less than zero, this Warrant may be canceled at the election of the Company or the successor entity upon consummation of the Fundamental Transaction. 6. Adjustments to Purchase Price. The above provisions are, however, subject to the following: (a) The Purchase Price shall be subject to adjustment from time to time as hereinafter provided. The term "Purchase Price" shall mean, unless and until any such adjustment shall occur, the Purchase Price resulting from such adjustment and any other previous adjustments. -4- Upon each adjustment of the Purchase Price resulting from (i) the declaration of a dividend upon, or the making of any distribution in respect of, any stock of the Company payable in Common Stock (and subject to the provisions of paragraph (d) below) or any stock or other securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being herein called "Convertible Securities"), or (ii) the reclassification, subdivision or combination of the Common Stock into a greater or smaller number of shares (and subject to the provisions of paragraph (e) below), the holder of this Warrant shall thereafter be entitled to purchase, at the Purchase Price resulting from such adjustment, the number of shares obtained by multiplying the Purchase Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Purchase Price resulting from such adjustment. (b) If and whenever the Company shall issue or sell any shares of its Common Stock (except for Excluded Shares (as hereinafter defined)) for a consideration per share less than the Purchase Price in effect immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the Purchase Price shall be reduced to a price (calculated to the nearest cent) determined by dividing (1) an amount equal to the sum of (aa) the number of shares of Common Stock outstanding, on a fully diluted basis, immediately prior to such issue or sale multiplied by the then existing warrant price, and (bb) the consideration, if any, received by the Company upon such issue or sale, by (2) the total number of shares of Common Stock outstanding, on a fully diluted basis, immediately after such issue or sale. No adjustment of the Purchase Price however shall be made in an amount less than $.05 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to $.05 per share or more. For the purposed of this paragraph (b), the following provisions (i) to (vi), inclusive, shall also be applicable. (i) In case at any time after the date hereof the Company shall in any manner grant any rights to subscribe for or purchase, or any options (other than as provided in paragraph (b) above), rights, or warrants to subscribe for, purchase or otherwise acquire Common Stock ("Options"), whether or not any such Options are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options (determined by dividing ((1) the total amount, if any, received or receivable by the Company as consideration for the grant, issue or sale of such Options, plus the minimum aggregated amount of additional consideration payable to the Company upon the exercise of such Options, plus the minimum aggregate amount of additional consideration, if any, payable upon the conversion or exchange thereof, by (2) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the exercise, conversion or exchange of all exercisable, convertible, or exchangeable securities issuable upon the exercise of such Options) shall be less than the Purchase Price in effect immediately prior to the time of the granting of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon exercise, conversion or exchange of the total maximum amount of such exercisable, convertible or exchangeable securities issuable upon the exercise of such Options -5- shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued for such price per share. No further adjustments of the Purchase Price shall be made upon the actual issue of such Common Stock or upon exercise of such Options, except as otherwise provided in provision (iii) below. (ii) In case at any time after the date hereof the Company shall in any manner grant, issue, or sell any evidences of indebtedness, shares of capital stock, or other securities, directly or indirectly, exercisable for, convertible into, or exchangeable for Common Stock ("Convertible Securities"), whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (1) the total amount received or receivable by the Company as consideration for the grant, issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (2) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Purchase Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share; provided that, except as otherwise specified in provision (iii) below, (aa) no further adjustments of the Purchase Price shall be made upon the actual issue of such Common Stock upon exercise, conversion or exchange of such Convertible Securities, and (bb) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Purchase Price have been or are to be made pursuant to provision (i) above, no further adjustment of the Purchase Price shall be made by reason of such issue or sale. (iii) Upon the happening of any of the following events, namely, if the purchase price provided for in any rights or options referred to in provision (i) above, the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in provisions (i) or (ii) above or the rate at which any Convertible Securities referred to in provisions (i) or (ii) above are convertible into or exchangeable for Common Stock shall change (other than under or by reason of provisions designed to protect against dilution), the Purchase Price in effect at the time of such event shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such Options or Convertible Securities still outstanding at such time been initially granted, issued or sold and the Purchase Price initially adjusted as provided in provisions (i) or (ii) above, whichever was applicable, except that the minimum amount of additional consideration payable and the total maximum number of shares issuable shall be determined after giving effect to such event (and any prior event or events); and on the expiration, without exercise, of any such Option or the -6- termination, without exercise, of any such right to exercise, convert or exchange such Convertible Securities, the Purchase Price then in effect hereunder shall forthwith be increased to the Purchase Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities never been issued. (iv) In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in Common Stock, Options, or Convertible Securities, any Common Stock, Options, or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (v) In case any shares of Common Stock, Options, or Convertible Securities or any rights or options to purchase any such Common Stock, Options, or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor, without deduction therefrom of any expenses incurred, or any underwriting commissions or concessions paid or allowed, by the Company in connection therewith. In case any shares of Common Stock, Options, or Convertible securities or any rights or options to purchase any such Common Stock, Options, or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Company, without deduction of any expenses incurred, or any underwriting commissions or concessions paid or allowed, by the company in connection therewith. (vi) In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options, or in Convertible Securities, or (b) to subscribe for or purchase Common Stock, Options, or Convertible securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vii) The number of shares of Common Stock outstanding at any given time shall not include issued shares owned or held by or for the account of the Company, and the disposition of any such shares so owned or held shall be considered an issue or sale of Common Stock for the purposes of this paragraph (b). (viii) The term "Excluded Shares" shall mean: (A) Common Stock issued pursuant to a transaction of the nature described in the second paragraph of paragraph (a) hereof, -7- (B) Common Stock (or Options with respect thereto) issued or issuable to employees or directors of, or consultants to, the Corporation pursuant to a plan or arrangement approved by the Board of Directors of the Company, (C) shares of Common Stock issuable upon exercise of Options or Convertible Securities of the Corporation issued on or outstanding on the Original Issue Date, (D) Shares of Common Stock issued or issuable upon conversion of shares of Series C Preferred Stock, (E) shares of Common Stock issued or issuable as a dividend or distribution on Series C Preferred Stock, or (F) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock covered by Section 5(e) or 5(f) of the Designation of Rights and Preferences of the Company's Series C Convertible Preferred Stock. (c) In case the Company shall declare a dividend upon the Common Stock payable otherwise than out of earnings or surplus (other than paid-in surplus) or otherwise than in Common Stock or Convertible Securities, the Warrant Purchase Price per share of the Common Stock shall be adjusted as determined in good faith by the Board of Directors of the Company. For the purposes of the foregoing a dividend other than in cash shall be considered payable out of earnings or surplus (other than paid-in surplus) only to the extent that such earnings or surplus are charged an amount equal to the fair value of such dividend as determined in good faith by the Board of Directors of the Company. Such reductions shall take effect as of the date on which a record is taken for the purpose of such dividend, or, if a record is not taken, the date as of which the holders of Common Stock of record entitled to such dividend are to be determined. (d) In case the Company shall at any time issue shares of Common Stock in a stock dividend, stock distribution, or subdivision, the Purchase Price in effect immediately prior to such issuance shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined or consolidated into a smaller number of shares by reclassification or otherwise, the Purchase Price in effect immediately prior to such combination shall be proportionately increased. (e) In the event that an adjustment to the Purchase Price shall occur by means of a Fundamental Transaction in which this Warrant is assumed, then as a condition of such Fundamental Transaction, lawful and adequate provision shall be made whereby the Holder of this Warrant shall thereafter have the rights to acquire and receive upon exercise of this Warrant, such same securities, cash and property as would be payable for the shares issuable upon the exercise of the unexercised portion of this Warrant as if such shares were outstanding on the record date for the Fundamental Transaction and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Warrant such that the provisions hereof (including without limitation provisions for adjustments of the Purchase Price and of the number and kind of shares of capital stock acquirable and receivable upon the exercise -8- of the Warrant) shall be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of this Warrant. (f) Notwithstanding the provisions of paragraphs (a) through (e) of this Section 6, if application of the provisions of this Section 6 would result in a Purchase Price less than $2.89, then the Purchase Price will instead be fixed at $2.89. (g) Upon any adjustment of the Purchase Price or the number of shares of Common Stock purchasable pursuant to this Warrant, then and in each such case the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the registered holder of this Warrant at the address of such holder as shown on the books of the Company, which notice shall state the warrant purchase price resulting from such adjustment and or the increase or decrease, if any, in the number of shares purchasable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (h) In case at any time: (1) The Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends out of earned surplus) to the holders of its Common Stock; (2) The Company shall offer for subscription pro rata to the holders of its Common stock any additional shares of stock of any class or other rights; (3) There shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger or amalgamation of the Company with, or sale of all or substantially all of its assets to, another corporation; or (4) There shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases, the Company shall give to the holder of this Warrant (aa) at least twenty days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, amalgamation, dissolution, liquidation or winding up, and (bb) in the case of any such reorganization, reclassification, consolidation, merger, amalgamation, sale, dissolution, liquidation or winding up, at least twenty days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (aa) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (bb) shall also specify the date on which the holders of Common stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, amalgamation, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first -9- class mail, postage prepaid, addressed to the holder of this Warrant at the address of such holder as shown on the books of the Company. 7. No Rights as a Stockholder. The Warrant shall not entitle the holder hereof to any rights as a stockholder of the Company, including, without limitation, voting rights. This Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company referred to in the second paragraph hereof by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when so endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purposes and as the person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until each transfer on such books, the Company may treat the registered holder hereof as the owner hereof for all purposes. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at such office or agency of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by such holder hereof at the time of such surrender. [Remainder of page intentionally left blank.] -10- IN WITNESS WHEREOF, TRIPOS, INC. has caused this Warrant to be signed by its duly authorized officers under its corporate seal, as of the Original Issue Date. ATTEST: TRIPOS, INC. By: ------------------------------------- Vice President Name: John D. Yingling Title: Vice President, Chief Accounting Officer -11- SUBSCRIPTION AGREEMENT Date --------------- To The undersigned, pursuant to the provisions set forth in the within Warrant, hereby agrees to subscribe for and purchase ______________ Common Shares covered by such Warrant, and makes payment herewith in full therefor at the price per share provided by this Warrant by means of cashless exercise of this Warrant as provided in this Warrant. Signature ------------------------------ Address -------------------------------- ------------------ ASSIGNMENT FOR VALUE RECEIVED ___________________ hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of Common Shares Thereby covered set forth hereinbelow unto: Name of Assignees Address No. of Shares ----------------- ------- ------------- Dated: ________________, 20__ Signature ------------------------------ Address -------------------------------- EX-99.5 5 b60964mcexv99w5.txt EX-99.5 EXHIBIT 5 - FORM OF WARRANT ISSUED BY TRIPOS, INC. TO MIDWOOD CAPITAL PARTNERS QP, L.P. Exhibit 5 THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION HEREOF OR OF THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SALE OF THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR UPON RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO TRIPOS, INC. AS TO AN EXEMPTION THEREFROM. Warrant to Subscribe for 305,277 Shares STOCK PURCHASE WARRANT To Subscribe for and Purchase Stock of TRIPOS, INC. Warrant No. 2 Original Issue Date: May 4, 2006 1. Issue; Number of Shares Subject to Warrant. THIS CERTIFIES that, for value received, Midwood Capital Partners QP, L.P. or its registered assigns is entitled to subscribe for and purchase from TRIPOS, INC., a Utah corporation (the "Company"), at the Purchase Price (as hereinafter defined) at any time during the period from the Original Issue Date to and including the close of business on May 4, 2011 up to Three Hundred Five Thousand Two Hundred Seventy Seven (305,277) fully paid and nonassessable shares (the "Common Shares") of the Common Stock, $.01, par value per share ("Common Stock"), of the Company for $3.50 per share (the "Purchase Price"); subject, however, to the provisions and upon the terms and conditions hereinafter set forth. 2. Exercise; Issue Date; Delivery of Common Shares; Unexercised Portion. (a) The rights represented by this Warrant may be exercised by the holder hereof, in whole or in part (but not as to a fractional Common Share), by the surrender of this Warrant (properly endorsed if required) at the principal office of the Company, at 1699 South Hanley Road, St. Louis, Missouri 63144-2319 (or such other office or agency of the Company, as it may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company) solely by cashless exercise in accordance with Section 2(b) below. The Company agrees that the Common Shares so purchased shall be deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such Common Shares ("Exercise Date"). Certificates for the Common Shares so purchased shall be delivered to the holder hereof within a reasonable time, not exceeding five (5) trading days, after the rights represented by this Warrant shall have been so exercised, and unless this Warrant has expired, a new Warrant exercisable for the number of Common Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such time. (b) Upon the holder's notice to the Company of its election to exercise this Warrant, the Company shall issue to the holder the number of Common Shares determined as follows: X = Y [(A-B)/A] where: X = the number of Common Shares to be issued to the holder. Y = the number of Common Shares with respect to which this Warrant is being exercised. A = the average of the closing prices for the five trading days immediately prior to (but not including) the Exercise Date. B = the Purchase Price. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Common Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the holder, and the holding period for the Common Shares shall be deemed to have commenced, on the date this Warrant was originally issued. (c) Notwithstanding the provisions of this Warrant, in no event shall the holder be entitled to exercise this Warrant, nor shall the Company have the obligation to issue shares upon such exercise of all or any portion of this Warrant to the extent that, after such exercise the sum of (1) the number of shares of Common Stock beneficially owned by the holder and its affiliates (other than Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of the Warrants), and (2) the number of shares of Common Stock issuable upon the exercise of the Warrants with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 9.99% of the then outstanding shares of Common Stock (after taking into account the shares to be issued to the holder upon exercise). For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder. (d) Notwithstanding any other provision herein, the Company shall not be obligated to issue any shares of Common Stock upon exercise of this Warrant if and to the extent the issuance of such shares of Common Stock would exceed the number of shares (the "EXCHANGE CAP") then permitted to be issued without stockholder approval in violation of the rules, regulations and interpretations of Nasdaq National Market (as determined in good faith by the Company's Board of Directors), except that such limitation shall not apply in the event that the Corporation obtains the approval of its stockholders as required by then applicable rules, regulations and interpretations of Nasdaq National Market or the NASD for issuances of - 2 - Common Stock in excess of the Exchange Cap. If and to the extent the Exchange Cap applies, no holder of this Warrant shall be issued, upon exercise of this Warrant, shares of Common Stock in an amount greater than the product of (x) the Exchange Cap amount multiplied by (y) a fraction, the numerator of which is the number of shares of Common Stock issuable to such holder upon the requested exercise at the original Purchase Price, and the denominator of which is the aggregate number of shares of Common Stock issuable to holders of all warrants issued pursuant to that certain Securities Purchase Agreement dated as of May 4, 2006, by and among the Company and the investors named therein at the original Purchase Price (the "CAP ALLOCATION AMOUNT"). 3. Common Shares Fully Paid; Reservation of Common Shares; Listing. The Company covenants and agrees that all Common Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved, a sufficient number of Common Shares to provide for the exercise of the rights represented by this Warrant, and will at its expense expeditiously upon each such issuance of shares use its best efforts to procure the listing thereof (subject to issuance or notice of issuance) on all public trading markets on which the Common Stock of the Company is then listed. 4. Taxes. The issue of stock certificates on any exercise of this Warrant shall be made without charge to the holder of the Warrant for any documentary stamp tax in respect of the issue thereof. The Company shall not, however, be required to pay any documentary stamp tax which may be payable in respect of any transfer involved in the issue and delivery of stock in any name other than that of the holder of the Warrant and the Company shall not be required to issue or deliver any such stock certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount of such tax or shall have established to the reasonable satisfaction of the Company that such tax has been paid. 5. Fractional Shares. The Company shall not be required to issue certificates representing fractions of shares of Common Stock upon the exercise of the Warrant, but in respect of any fraction of a share of Common Stock, it will make a payment in cash based on the then excess of the Fair Market Value (as hereinafter defined) of a share of Common Stock over the warrant Purchase Price. "Fair Market Value" means the last reported closing price of the Common Stock on the NASDAQ Stock Market or any national securities exchange on which the Common Stock is traded on the date of exercise of this Warrant, or, if the Common Stock is not traded on the NASDAQ Stock Market or a national securities exchange, the mean of the reported high bid and low asked prices of the Common Stock in the over-the-counter bulletin board on the date of exercise of this Warrant, or, if not so traded, as determined in good faith by, or at the direction of, the Board of Directors of the Company. - 3 - 5A. Fundamental Transaction. For purposes of this Warrant, a "Fundamental Transaction" shall mean any of the following: (i) a consolidation or merger of the Company into or with any other entity or entities that results in the exchange of outstanding shares of the Company for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof (except a consolidation or merger into a wholly owned subsidiary or merger in which the Company is the surviving corporation and, in either case, the holders of the Company's voting stock outstanding immediately prior to the transaction constitute a majority of the holders of voting stock outstanding immediately following the transaction), (ii) the sale of all or substantially all of the Company's assets in one or a series of related transactions, (iii) the completion of any tender offer or exchange offer (whether by the Company or another Person) pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (iv) the reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property or (v) the consummation of the sale, whether of the stock or assets, of all or substantially all of the Company's "Discovery Informatics" business based in the United States. If the Company, in any transaction or series of transactions, effects a Fundamental Transaction, the Company shall provide written notice to the Holder no less than 15 days prior to the date on which the Fundamental Transaction is to take place (the "TRANSACTION DATE"). The notice shall contain a brief description of the proposed action and shall state (x) the amount of cash or value of securities or other property (as reasonably determined in good faith by the Company's Board of Directors) that a holder of a share of Common Stock shall receive upon consummation of the Fundamental Transaction (the "CONSIDERATION VALUE"), (y) the date on which the Fundamental Transaction is to take place and (z) the date, if any is to be fixed, as of which the holders of the Company's capital stock shall receive cash or other property deliverable upon consummation of the Fundamental Transaction. The Holder shall thereupon deliver written notice to the Company indicating whether it intends to exercise this Warrant. If the Holder does not provide such notice prior to the Transaction Date, the successor entity in the Fundamental Transaction shall assume the obligations of the Company under this Warrant, and this Warrant shall be exercisable for the same securities, cash and property as would be payable for the shares issuable upon the exercise of the unexercised portion of this Warrant as if such shares were outstanding on the record date for the Fundamental Transaction; provided, however, that the successor entity may elect in lieu thereof to redeem this Warrant for cash in an amount equal to the Consideration Value minus the Purchase Price, if greater than zero, multiplied by the number of Shares represented by this Warrant and to the extent such amount is equal to or less than zero, this Warrant may be canceled at the election of the Company or the successor entity upon consummation of the Fundamental Transaction. 6. Adjustments to Purchase Price. The above provisions are, however, subject to the following: (a) The Purchase Price shall be subject to adjustment from time to time as hereinafter provided. The term "Purchase Price" shall mean, unless and until any such adjustment shall occur, the Purchase Price resulting from such adjustment and any other previous adjustments. - 4 - Upon each adjustment of the Purchase Price resulting from (i) the declaration of a dividend upon, or the making of any distribution in respect of, any stock of the Company payable in Common Stock (and subject to the provisions of paragraph (d) below) or any stock or other securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being herein called "Convertible Securities"), or (ii) the reclassification, subdivision or combination of the Common Stock into a greater or smaller number of shares (and subject to the provisions of paragraph (e) below), the holder of this Warrant shall thereafter be entitled to purchase, at the Purchase Price resulting from such adjustment, the number of shares obtained by multiplying the Purchase Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment and dividing the product thereof by the Purchase Price resulting from such adjustment. (b) If and whenever the Company shall issue or sell any shares of its Common Stock (except for Excluded Shares (as hereinafter defined)) for a consideration per share less than the Purchase Price in effect immediately prior to the time of such issue or sale, then, forthwith upon such issue or sale, the Purchase Price shall be reduced to a price (calculated to the nearest cent) determined by dividing (1) an amount equal to the sum of (aa) the number of shares of Common Stock outstanding, on a fully diluted basis, immediately prior to such issue or sale multiplied by the then existing warrant price, and (bb) the consideration, if any, received by the Company upon such issue or sale, by (2) the total number of shares of Common Stock outstanding, on a fully diluted basis, immediately after such issue or sale. No adjustment of the Purchase Price however shall be made in an amount less than $.05 per share, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to $.05 per share or more. For the purposed of this paragraph (b), the following provisions (i) to (vi), inclusive, shall also be applicable. (i) In case at any time after the date hereof the Company shall in any manner grant any rights to subscribe for or purchase, or any options (other than as provided in paragraph (b) above), rights, or warrants to subscribe for, purchase or otherwise acquire Common Stock ("Options"), whether or not any such Options are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options (determined by dividing ((1) the total amount, if any, received or receivable by the Company as consideration for the grant, issue or sale of such Options, plus the minimum aggregated amount of additional consideration payable to the Company upon the exercise of such Options, plus the minimum aggregate amount of additional consideration, if any, payable upon the conversion or exchange thereof, by (2) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the exercise, conversion or exchange of all exercisable, convertible, or exchangeable securities issuable upon the exercise of such Options) shall be less than the Purchase Price in effect immediately prior to the time of the granting of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon exercise, conversion or exchange of the total maximum amount of such exercisable, convertible or exchangeable securities issuable upon the exercise of such Options - 5 - shall (as of the date of granting of such Options) be deemed to be outstanding and to have been issued for such price per share. No further adjustments of the Purchase Price shall be made upon the actual issue of such Common Stock or upon exercise of such Options, except as otherwise provided in provision (iii) below. (ii) In case at any time after the date hereof the Company shall in any manner grant, issue, or sell any evidences of indebtedness, shares of capital stock, or other securities, directly or indirectly, exercisable for, convertible into, or exchangeable for Common Stock ("Convertible Securities"), whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (1) the total amount received or receivable by the Company as consideration for the grant, issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (2) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Purchase Price in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall (as of the date of the issue or sale of such Convertible Securities) be deemed to be outstanding and to have been issued for such price per share; provided that, except as otherwise specified in provision (iii) below, (aa) no further adjustments of the Purchase Price shall be made upon the actual issue of such Common Stock upon exercise, conversion or exchange of such Convertible Securities, and (bb) if any such issue or sale of such Convertible Securities is made upon exercise of any rights to subscribe for or to purchase or any option to purchase any such Convertible Securities for which adjustments of the Purchase Price have been or are to be made pursuant to provision (i) above, no further adjustment of the Purchase Price shall be made by reason of such issue or sale. (iii) Upon the happening of any of the following events, namely, if the purchase price provided for in any rights or options referred to in provision (i) above, the additional consideration, if any, payable upon the conversion or exchange of Convertible Securities referred to in provisions (i) or (ii) above or the rate at which any Convertible Securities referred to in provisions (i) or (ii) above are convertible into or exchangeable for Common Stock shall change (other than under or by reason of provisions designed to protect against dilution), the Purchase Price in effect at the time of such event shall forthwith be readjusted to the Purchase Price which would have been in effect at such time had such Options or Convertible Securities still outstanding at such time been initially granted, issued or sold and the Purchase Price initially adjusted as provided in provisions (i) or (ii) above, whichever was applicable, except that the minimum amount of additional consideration payable and the total maximum number of shares issuable shall be determined after giving effect to such event (and any prior event or events); and on the expiration, without exercise, of any such Option or the - 6 - termination, without exercise, of any such right to exercise, convert or exchange such Convertible Securities, the Purchase Price then in effect hereunder shall forthwith be increased to the Purchase Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities never been issued. (iv) In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in Common Stock, Options, or Convertible Securities, any Common Stock, Options, or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (v) In case any shares of Common Stock, Options, or Convertible Securities or any rights or options to purchase any such Common Stock, Options, or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor, without deduction therefrom of any expenses incurred, or any underwriting commissions or concessions paid or allowed, by the Company in connection therewith. In case any shares of Common Stock, Options, or Convertible securities or any rights or options to purchase any such Common Stock, Options, or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Company, without deduction of any expenses incurred, or any underwriting commissions or concessions paid or allowed, by the company in connection therewith. (vi) In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock, Options, or in Convertible Securities, or (b) to subscribe for or purchase Common Stock, Options, or Convertible securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (vii) The number of shares of Common Stock outstanding at any given time shall not include issued shares owned or held by or for the account of the Company, and the disposition of any such shares so owned or held shall be considered an issue or sale of Common Stock for the purposes of this paragraph (b). (viii) The term "Excluded Shares" shall mean: (A) Common Stock issued pursuant to a transaction of the nature described in the second paragraph of paragraph (a) hereof, - 7 - (B) Common Stock (or Options with respect thereto) issued or issuable to employees or directors of, or consultants to, the Corporation pursuant to a plan or arrangement approved by the Board of Directors of the Company, (C) shares of Common Stock issuable upon exercise of Options or Convertible Securities of the Corporation issued on or outstanding on the Original Issue Date, (D) Shares of Common Stock issued or issuable upon conversion of shares of Series C Preferred Stock, (E) shares of Common Stock issued or issuable as a dividend or distribution on Series C Preferred Stock, or (F) shares of Common Stock issued or issuable by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock covered by Section 5(e) or 5(f) of the Designation of Rights and Preferences of the Company's Series C Convertible Preferred Stock. (c) In case the Company shall declare a dividend upon the Common Stock payable otherwise than out of earnings or surplus (other than paid-in surplus) or otherwise than in Common Stock or Convertible Securities, the Warrant Purchase Price per share of the Common Stock shall be adjusted as determined in good faith by the Board of Directors of the Company. For the purposes of the foregoing a dividend other than in cash shall be considered payable out of earnings or surplus (other than paid-in surplus) only to the extent that such earnings or surplus are charged an amount equal to the fair value of such dividend as determined in good faith by the Board of Directors of the Company. Such reductions shall take effect as of the date on which a record is taken for the purpose of such dividend, or, if a record is not taken, the date as of which the holders of Common Stock of record entitled to such dividend are to be determined. (d) In case the Company shall at any time issue shares of Common Stock in a stock dividend, stock distribution, or subdivision, the Purchase Price in effect immediately prior to such issuance shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined or consolidated into a smaller number of shares by reclassification or otherwise, the Purchase Price in effect immediately prior to such combination shall be proportionately increased. (e) In the event that an adjustment to the Purchase Price shall occur by means of a Fundamental Transaction in which this Warrant is assumed, then as a condition of such Fundamental Transaction, lawful and adequate provision shall be made whereby the Holder of this Warrant shall thereafter have the rights to acquire and receive upon exercise of this Warrant, such same securities, cash and property as would be payable for the shares issuable upon the exercise of the unexercised portion of this Warrant as if such shares were outstanding on the record date for the Fundamental Transaction and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Warrant such that the provisions hereof (including without limitation provisions for adjustments of the Purchase Price and of the number and kind of shares of capital stock acquirable and receivable upon the exercise - 8 - of the Warrant) shall be applicable, in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of this Warrant. (f) Notwithstanding the provisions of paragraphs (a) through (e) of this Section 6, if application of the provisions of this Section 6 would result in a Purchase Price less than $2.89, then the Purchase Price will instead be fixed at $2.89. (g) Upon any adjustment of the Purchase Price or the number of shares of Common Stock purchasable pursuant to this Warrant, then and in each such case the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the registered holder of this Warrant at the address of such holder as shown on the books of the Company, which notice shall state the warrant purchase price resulting from such adjustment and or the increase or decrease, if any, in the number of shares purchasable upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. (h) In case at any time: (1) The Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends out of earned surplus) to the holders of its Common Stock; (2) The Company shall offer for subscription pro rata to the holders of its Common stock any additional shares of stock of any class or other rights; (3) There shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger or amalgamation of the Company with, or sale of all or substantially all of its assets to, another corporation; or (4) There shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases, the Company shall give to the holder of this Warrant (aa) at least twenty days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, amalgamation, dissolution, liquidation or winding up, and (bb) in the case of any such reorganization, reclassification, consolidation, merger, amalgamation, sale, dissolution, liquidation or winding up, at least twenty days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (aa) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto, and such notice in accordance with the foregoing clause (bb) shall also specify the date on which the holders of Common stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, amalgamation, sale, dissolution, liquidation or winding up, as the case may be. Each such written notice shall be given by first - 9 - class mail, postage prepaid, addressed to the holder of this Warrant at the address of such holder as shown on the books of the Company. 7. No Rights as a Stockholder. The Warrant shall not entitle the holder hereof to any rights as a stockholder of the Company, including, without limitation, voting rights. This Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company referred to in the second paragraph hereof by the holder hereof in person or by duly authorized attorney, upon surrender of this Warrant properly endorsed. Each taker and holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when so endorsed, may be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purposes and as the person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; but until each transfer on such books, the Company may treat the registered holder hereof as the owner hereof for all purposes. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at such office or agency of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by such holder hereof at the time of such surrender. [Remainder of page intentionally left blank.] - 10 - IN WITNESS WHEREOF, TRIPOS, INC. has caused this Warrant to be signed by its duly authorized officers under its corporate seal, as of the Original Issue Date. ATTEST: TRIPOS, INC. ___________________________ By: ___________________________ Vice President Name: John D. Yingling Title: Vice President, Chief Accounting Officer - 11 - SUBSCRIPTION AGREEMENT Date _____________ To The undersigned, pursuant to the provisions set forth in the within Warrant, hereby agrees to subscribe for and purchase ______________ Common Shares covered by such Warrant, and makes payment herewith in full therefor at the price per share provided by this Warrant by means of cashless exercise of this Warrant as provided in this Warrant. Signature________________ Address__________________ ------------------ ASSIGNMENT FOR VALUE RECEIVED ___________________ hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of Common Shares Thereby covered set forth hereinbelow unto:
Name of Assignees Address No. of Shares ----------------- ------- -------------
Dated:____________, 20__ Signature________________ Address__________________ - 12 - EX-99.6 6 b60964mcexv99w6.txt EX-99.6 EXHIBIT 6 - REGISTRATION RIGHTS AGREEMENT DATED MAY 4, 2006 BY AND AMONG MIDWOOD CAPITAL PARTNERS, L.P., MIDWOOD CAPITAL PARTNERS QP, L.P. AND TRIPOS, INC. Exhibit 6 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of May 4, 2006, by and between Tripos, Inc., a Utah corporation (the "COMPANY"), and the investors signatory hereto (each an "INVESTOR" and collectively, the "INVESTORS"). This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and the Investors (the "PURCHASE AGREEMENT"). The Company and the Investors hereby agree as follows: 1. Definitions. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN THAT ARE DEFINED IN THE PURCHASE AGREEMENT SHALL HAVE THE MEANINGS GIVEN SUCH TERMS IN THE PURCHASE AGREEMENT. As used in this Agreement, the following terms shall have the meanings set forth in this Section 1: "COMMON STOCK" means the Company's Common Stock, par value $.01 per share. "EFFECTIVE DATE" means, with respect to any Registration Statement, the date that the Commission first declares effective such Registration Statement. "EFFECTIVENESS DATE" means: (a) with respect to the First Registration Statement, the earlier of: (i) the 120th day following the Closing Date and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that such Registration Statement will not be reviewed or is no longer subject to further review and comments and (b) with respect to any additional Registration Statements that may be required pursuant to Section 2(b) hereof, the earlier of: (i) the 120th day following the date on which the Company first knows, or reasonably should have known, that such additional Registration Statement is required under Section 2(b) and (ii) the fifth Trading Day following the date on which the Company is notified by the Commission that such additional Registration Statement will not be reviewed or is no longer subject to further review and comments. "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FILING DATE" means (a) with respect to the First Registration Statement, the 30th day following the Closing Date, and (b) with respect to any additional Registration Statements that may be required pursuant to Section 2(b), the 30th day following the date on which the Company first knows, or reasonably should have known, that such additional Registration Statement is required under Section 2(b). 1 "FIRST REGISTRATION STATEMENT" means a registration statement filed pursuant to the terms hereof and which covers the sale by the Investors of: (i) the Common Stock issuable upon conversion of the Series C Preferred Stock and (ii) the Warrant Shares. "HOLDER" or "HOLDERS" means the holder or holders, as the case may be, from time to time of Registrable Securities. "INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(c). "INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(c). "LOSSES" shall have the meaning set forth in Section 5(a). "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. "PROSPECTUS" means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. "REGISTRABLE SECURITIES" means the (a) Common Shares issuable upon conversion of the Series C Preferred Stock and (b) Warrant Shares. "REGISTRATION STATEMENT" means, collectively, the First Registration Statement and any additional Registration Statement contemplated by Section 2(b), including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "RULE 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "RULE 415" means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or 2 regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "RULE 424" means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SERIES C PREFERRED STOCK" means the Company's Series C Preferred Stock issued pursuant to the Purchase Agreement. 2. Registration. (a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form for such purpose) and shall contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement) the "Plan of Distribution" substantially in the form attached hereto as Annex A. The Company shall cause each Registration Statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than its Effectiveness Date, and shall use its reasonable best efforts to keep each Registration Statement continuously effective under the Securities Act until the second year after the date that the Registration Statement is declared effective by the Commission or such earlier date when all Registrable Securities covered by the Registration Statement have been sold or may be sold without volume restrictions pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company's transfer agent and the affected Holders (the "EFFECTIVENESS PERIOD"). The initial Registration Statement shall include a number of Registrable Securities equal to the sum of (a) the number of Common Shares issuable upon an assumed conversion in full of the Series C Preferred Stock and (b) the number of shares of Common Stock issuable upon exercise in full of the Warrants. (b) If for any reason the Commission does not permit all of the Registrable Securities to be included in the Registration Statement filed pursuant to Section 2(a) or for any other reason all Registrable Securities then outstanding are not then included in an effective Registration Statement, then the Company shall prepare and file as soon as possible after the date on which the Commission shall indicate as being the first date or time that such filing may be made, but in any event by the Filing Date therefor, an additional Registration Statement covering the resale of all Registrable Securities not already covered by an existing and effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415, on Form S-3 (except if 3 the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form for such purpose). Each such Registration Statement shall contain (except if otherwise required pursuant to written comments received from the Commission upon a review of such Registration Statement) the "Plan of Distribution" attached hereto as Annex A. The Company shall cause each such Registration Statement to be declared effective under the Securities Act as soon as possible but, in any event, no later than its Effective Date, and shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act during the entire Effectiveness Period. (c) Subject to the provisions of Section 4, if: (i) a Registration Statement is not filed on or prior to its Filing Date (if the Company files a Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) hereof, the Company shall not be deemed to have satisfied this clause (i)), or (ii) a Registration Statement is not declared effective by the Commission on or prior to its required Effectiveness Date, or (iii) after its Effective Date, without regard for the reason thereunder or efforts therefor, such Registration Statement ceases for any reason to be effective and available to the Holders as to all Registrable Securities registered under such Registration Statement at any time prior to the expiration of its Effectiveness Period (any such failure or breach being referred to as an "EVENT," and the date on which such Event occurs being referred to as an "EVENT DATE"), then in addition to any other rights the Holders may have under the Transaction Documents or under applicable law or at equity: on each such Event Date, and on the same day as such Event Date in each subsequent month until the applicable Event is cured (the Event Date and each such subsequent date, a "PAYMENT DATE") the Company shall pay to each Holder an amount, as partial liquidated damages and not as a penalty, equal to 1.5% of the aggregate amount of the redemption price of the Shares under the Company's Articles of Incorporation, as amended. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 10% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro-rata basis for any portion of a month prior to the cure of an Event, except in the case of the first Event Date. (d) Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex B (a "Selling Holder Questionnaire"). The Company shall not be required to include the Registrable Securities of a Holder in a Registration Statement and shall not be required to pay any liquidated or other damages under Section 2(c) to any Holder who fails to furnish to the Company a fully completed Selling Holder Questionnaire at least two Trading Days prior to the Filing Date (subject to the requirements set forth in Section 3(a) or fails to deliver comments in accordance with Section 3(a)). 4 3. Registration Procedures. In connection with the Company's registration obligations hereunder, the Company shall: (a) Not less than six Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall furnish to each Holder copies of the "Selling Stockholders" section of such document, the "Plan of Distribution" and any risk factor contained in such document that addresses specifically this transaction or the Holders, as proposed to be filed which documents will be subject to the review of such Holder. Each Holder shall provide comments within four Trading Days after the date such materials are provided. The Company shall not file a Registration Statement, any Prospectus or any amendments or supplements thereto in which the "Selling Stockholder" section thereof differs from the disclosure received from a Holder in its Selling Holder Questionnaire (as amended or supplemented). (b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities for its Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that would not result in the disclosure to the Holders of material and non-public information concerning the Company; and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement. (c) Notify the Holders as promptly as reasonably possible (and, in the case of (i)(A) below, not less than three Trading Days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Company whether there will be a "review" of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (the Company shall provide true and complete copies of any such comments and all written responses thereto to each Holder that pertains to such Holder as a Selling Shareholder or to the Plan of Distribution, but not information which the Company believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state 5 governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (d) Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. (e) Furnish to each Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Person (excluding those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission. (f) Promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto. (g) Prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of all jurisdictions within the United States, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statements; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or subject the Company to any material tax in any such jurisdiction where it is not then so subject. 6 (h) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statements, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request. (i) Upon the occurrence of any event contemplated by Section 3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4. Allowable Suspensions of Prospectus. (a) Notwithstanding the foregoing, for not more than thirty (30) consecutive days or for a total of not more than seventy-five (75) days in any twelve (12) month period, the Company may, without incurring any penalties or breaches pursuant to Section 2(c) or any other provision of this agreement, delay the disclosure of material non-public information concerning the Company, by suspending the use of any Prospectus included in any registration contemplated by Section 2 or by delaying any post-effective amendment to the affected Registration Statement, if such disclosure at the time is not, in the good faith opinion of the Board of Directors of the Company, in the best interests of the Company (an "Allowed Delay"); provided, that the Company shall promptly (a) notify the Holders in writing of the existence of an Allowed Delay, (b) advise the Holders in writing to cease all sales under the affected Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable. (b) Each Holder agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to this Section 4 or (ii) the happening of an event pursuant to Section 3(c)(v) hereof, such Holder will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Holder is advised by the Company that a supplemented or amended prospectus has been filed with the SEC and until any related post-effective amendment is declared effective and, if so directed by the Company, the Holder shall deliver to the Company or destroy (and deliver to the Company a certificate of destruction) all copies in the Holder's possession of the Prospectus covering the Registrable Securities current at the time of receipt of such notice. 5. Registration Expenses. All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company 7 whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (B) in compliance with applicable state securities or Blue Sky laws), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) fees and disbursements of one counsel for the Holders, (vi) Securities Act liability insurance, if the Company so desires such insurance, and (vii) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. 6. Indemnification. (a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, agents, investment advisors, partners, members, shareholders and employees of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and reasonable attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder 8 of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of an Advice or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. (b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon: (x) such Holder's failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent that, (1) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder's proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (2) in the case of an occurrence of an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of an Advice or an amended or supplemented Prospectus, but only if and to the extent that following the receipt of the Advice or the amended or supplemented Prospectus the misstatement or omission giving rise to such Loss would have been corrected. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally 9 determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding, the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and there is no finding or admission of any violation of law or any violation of the rights of any person and no effect on any other claim that may be made against the Indemnified Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding; (3) the Proceeding involves a claim for injunctive relief or a criminal action or (4) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). Notwithstanding the foregoing, the Indemnifying Party shall not be responsible for the fees and expenses of more than one counsel for the Indemnified Party in any single Proceeding. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or 10 expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties. 7. Miscellaneous. (a) Remedies. In the event of a breach by the Company or by a Holder, of any of their obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (b) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in a Registration Statement other than the Registrable Securities, and the Company shall not during the Registration Period enter into any agreement providing any such right to any of its security holders. (c) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. (d) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder's receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed 11 to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph. (e) Piggy-Back Registrations. If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall send to each Holder written notice of such determination and, if within 15 days after receipt of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such holder requests to be registered, subject to customary underwriter cutbacks applicable to all holders of registration rights. (f) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of all of the then outstanding Registrable Securities. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority of the Registrable Securities to which such waiver or consent relates, provided, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence. (g) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Agreement later than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows: 12 If to the Company: Tripos, Inc. 1699 South Hanley Road St. Louis, Missouri 63144-2319 Facsimile No.: Attn: Chief Financial Officer With a copy to: Hogan & Hartson LLP 111 South Calvert Street Baltimore, Maryland 21202 Facsimile: (410) 539-6981 Attention: Henry D. Kahn, Esq. If to an Investor: Midwood Capital Management, LLC 575 Boylston Street, 4th Floor Boston, MA 02116 With a copy to: Foley Hoag LLP 155 Seaport Boulevard Boston, Massachusetts 02210 Facsimile: (617) 832-7000 Attention: Peter M. Rosenblum, Esq. If to any other Person who is then the registered Holder: To the address of such Holder as it appears in the stock transfer books of the Company or such other address as may be designated in writing hereafter, in the same manner, by such Person. (h) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder. Each Holder may assign its respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement so long as such assignment complies with the Purchaser Agreement. (i) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof. (j) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and 13 construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan (the "New York Courts"). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of this Agreement, then the prevailing party in such Proceeding shall be reimbursed by the other party for its attorney's fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding. (k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. (l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (m) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES TO FOLLOW] 14 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. TRIPOS, INC. By: /s/ John D. Yingling --------------------------------- Name: John D. Yingling Title: Vice President, Chief Accounting Officer [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES OF INVESTORS TO FOLLOW] 15 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. MIDWOOD CAPITAL PARTNERS, L.P. By Midwood Capital Management LLC, its general partner By: /s/ Ross DeMont --------------------------------------- Name: Ross DeMont Title: Manager MIDWOOD CAPITAL PARTNERS QP, L.P. By Midwood Capital Management LLC, its general partner By: /s/ Ross DeMont --------------------------------------- Name: Ross DeMont Title: Manager 16 Annex A Plan of Distribution The Investors and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Investors may use any one or more of the following methods when selling shares: - - ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors; - - block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; - - purchases by a broker-dealer as principal and resale by the broker-dealer for its account; - - an exchange distribution in accordance with the rules of the applicable exchange; - - privately negotiated transactions; - - to cover short sales made after the date that this Registration Statement is declared effective by the Commission; - - broker-dealers may agree with the Investors to sell a specified number of such shares at a stipulated price per share; - - a combination of any such methods of sale; and - - any other method permitted pursuant to applicable law. The Investors may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. Broker-dealers engaged by the Investors may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Investors (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Investors do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. The Investors may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of Common Stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the 17 list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. Upon the Company's being notified in writing by a Selling Stockholder that any material arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such Selling Stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of Common Stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a Selling Stockholder that a donee or pledge intends to sell more than 500 shares of Common Stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law. The Investors also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus. The Investors and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Securities will be paid by the Selling Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such Selling Stockholder's business and, at the time of its purchase of such securities such Selling Stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities. The Company has advised each Selling Stockholder that it may not use shares registered on this Registration Statement to cover short sales of Common Stock made prior to the date on which this Registration Statement shall have been declared effective by the Commission. If a Selling Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Investors will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Investors in connection with resales of their respective shares under this Registration Statement. 18 The Company is required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the Investors against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. 19 Annex B TRIPOS, INC. SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE The undersigned beneficial owner of common stock (the "COMMON STOCK"), of TRIPOS, INC. (the "COMPANY") understands that the Company has filed or intends to file with the Securities and Exchange Commission (the "COMMISSION") a Registration Statement for the registration and resale of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement, dated as of May 4, 2006 (the "REGISTRATION RIGHTS AGREEMENT"), among the Company and the Investors named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement. The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate: QUESTIONNAIRE 1. NAME. (a) Full Legal Name of Selling Securityholder -------------------------------------------------------------------- (b) Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities Listed in Item 3 below are held: -------------------------------------------------------------------- (c) Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire): -------------------------------------------------------------------- 2. ADDRESS FOR NOTICES TO SELLING SECURITYHOLDER: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Telephone: ---------------------------------------------------------------------- 20 Fax: ---------------------------------------------------------------------- Contact Person: -------------------------------------------------------------- 3. BENEFICIAL OWNERSHIP OF REGISTRABLE SECURITIES: (a) Type and Principal Amount of Registrable Securities beneficially owned: ------------------------------------------------------------------- ------------------------------------------------------------------- ------------------------------------------------------------------- 4. BROKER-DEALER STATUS: (a) Are you a broker-dealer? Yes [ ] No [ ] Note: If yes, the Commission's staff has indicated that you should be identified as an underwriter in the Registration Statement. (b) Are you an affiliate of a broker-dealer? Yes [ ] No [ ] (c) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities? Yes [ ] No [ ] Note: If no, the Commission's staff has indicated that you should be identified as an underwriter in the Registration Statement. 5. BENEFICIAL OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED BY THE SELLING SECURITYHOLDER. Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item 3. (a) Type and Amount of Other Securities beneficially owned by the Selling Securityholder: ------------------------------------------------------------------- 21 ------------------------------------------------------------------- ------------------------------------------------------------------- 6. RELATIONSHIPS WITH THE COMPANY: Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: ------------------------------------------------------------------------- ------------------------------------------------------------------------- The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the Effective Date for the Registration Statement. By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 6 and the inclusion of such information in the Registration Statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus. IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: Beneficial Owner: ----------------------- ----------------------- By: ---------------------------------------- Name: Title: PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO: Tripos, Inc. With a copy to: 1699 South Hanley Road Henry D. Kahn St. Louis, Missouri 63144-2319 Hogan & Hartson L.L.P. Facsimile No.: 111 S. Calvert Street, Suite 1600 Attn: Chief Financial Officer Baltimore, Maryland 21202 Facsimile: (410) 529-6981 22 -----END PRIVACY-ENHANCED MESSAGE-----