Exhibit 10.1
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this “Agreement”), dated as of May 20, 2009 by and between
PolyMedix, Inc., a Delaware corporation (the “Company”), and Dutchess Equity
Fund, LP, a Delaware Limited Partnership (the “Investor”).
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Investor shall invest up to ten million dollars
($10,000,000) to purchase the Company’s common stock, $.001 par value per share
(the “Common Stock”);
WHEREAS, such investments will be made in reliance upon Section 4(2) of the
Securities Act of 1933, as amended (the “1933 Act”), and the rules and
regulations promulgated thereunder, and/or upon such other exemption from the
registration requirements of the 1933 Act as may be available with respect to
any or all of the investments in Common Stock to be made hereunder; and
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto (the “Registration Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW THEREFORE, in consideration of the foregoing recitals, which shall be
considered an integral part of this Agreement, the covenants and agreements set
forth hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings
specified or indicated below, and such meanings shall be equally applicable to
the singular and plural forms of such defined terms.
“1933 Act” shall have the meaning set forth in the recitals, above.
“1934 Act” shall mean the Securities Exchange Act of 1934, as amended.
“AAA” shall have the meaning specified in Section 12(A).
“Agreement” shall have the meaning specified in the preamble, above.
“By-laws” shall have the meaning specified in Section 4(C).
“Certificate of Incorporation” shall have the meaning specified in Section 4(C).
“Closing” shall have the meaning specified in Section 2(G).
“Closing Date” shall have the meaning specified in Section 2(G).
“Common Stock” shall have the meaning set forth in the recitals, above.
“Company” shall have the meaning specified in the preamble, above.
“DTC” shall have the meaning specified in Section 2(G).
“DWAC” shall have the meaning specified in Section 2(G).
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

 

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“Effective Date” shall mean the date the Registration Statement is declared
effective by the SEC.
“Environmental Laws” shall have the meaning specified in Section 4(M).
“Equity Line Transaction Documents” shall mean this Agreement and the
Registration Rights Agreement.
“Execution Date” shall mean the date indicated in the preamble, above.
“FAST” shall have the meaning specified in Section 2(G).
“Indemnified Liabilities” shall have the meaning specified in Section 11.
“Indemnitees” shall have the meaning specified in Section 11.
“Indemnitor” shall have the meaning specified in Section 11.
“Investor” shall have the meaning indicated in the preamble, above.
“knowledge of the Company” shall mean the actual knowledge of the principal
executive officer and principal financial officer of the Company.
“Market Price” shall mean the VWAP of the Common Stock during the applicable
Pricing Period. Any Trading Days during the Pricing Period where the daily VWAP
is ten percent (10%) above or ten percent (10%) below the VWAP for the entire
Pricing Period, and any Trading Days for which the Company has withdrawn a
portion of a Put Amount pursuant to Section 2(C), will be omitted from this
calculation.
“Material Adverse Effect” shall have the meaning specified in Section 4(A).
“Maximum Common Stock Issuance” shall have the meaning specified in
Section 2(H).
“Minimum Acceptable Price” with respect to any Put shall be the price set forth
by the Company in the applicable Put Notice.
“Open Market Adjustment Amount” shall have the meaning specified in
Section 2(I).
“Open Market Purchase” shall have the meaning specified in Section 2(I)
“Open Period” shall mean the period beginning on and including the Trading Day
immediately following the Effective Date and ending on the earlier to occur of
(i) the date which is thirty-six (36) months from the Effective Date; or (ii)
termination of the Agreement in accordance with Section 9, below.
“PCAOB” shall have the meaning specified in Section 4(F).
“Pricing Period” shall mean the five-Trading Day period beginning on the Put
Notice Date and ending on and including the date that is four (4) Trading Days
after such Put Notice Date.
“Principal Market” means the Nasdaq Capital Market, the NYSE Amex, the New York
Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the
OTC Bulletin Board, whichever is the principal market on which the Common Stock
of the Company is listed or quoted.
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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“prospectus” shall mean any prospectus, preliminary prospectus and supplemental
prospectus used in connection with the Registration Statement.
“Purchase Price” shall mean ninety-five percent (95%) of the Market Price during
the Pricing Period.
“Put” shall have the meaning set forth in Section 2(B) hereof.
“Put Amount” shall have the meaning set forth in Section 2(B) hereof.
“Put Notice” shall mean a written notice, in the form of Exhibit C attached
hereto, sent to the Investor by the Company stating the Put Amount in U.S.
dollars the Company intends to sell to the Investor pursuant to the terms of the
Agreement and stating the current number of Shares issued and outstanding on
such date.
“Put Notice Date” shall mean the Trading Day immediately following the day on
which the Investor receives a Put Notice, however (notwithstanding anything to
the contrary, including Section 12(G)), a Put Notice shall be deemed received on
(a) the Trading Day it is received by facsimile, e-mail or otherwise by the
Investor if such notice is received prior to 9:00 am Eastern Time, or (b) the
immediately succeeding Trading Day if it is received by facsimile, e-mail or
otherwise after 9:00 am Eastern Time on a Trading Day. No Put Notice shall be
deemed received on a day that is not a Trading Day.
“Put Shares Due” shall have the meaning specified in Section 2(I).
“Registration Rights Agreement” shall have the meaning set forth in the
recitals, above.
“Registration Statement” means a registration statement under the 1933 Act filed
by the Company with the SEC to register the resale by the Investor of the Common
Stock issuable hereunder.
“Resolution” shall have the meaning specified in Section 8(E).
“SEC” shall mean the U.S. Securities and Exchange Commission.
“SEC Documents” shall have the meaning specified in Section 4(F).
“Securities” shall mean the shares of Common Stock issued pursuant to the terms
of the Agreement.
“Shares” shall mean the shares of the Company’s Common Stock.
“Subsidiaries” shall have the meaning specified in Section 4(A).
“Trading Day” shall mean any day on which the Principal Market for the Common
Stock is open for trading, from the hours of 9:30 am until 4:00 pm.
“VWAP” shall mean, with respect to any particular period, the simple average of
the daily volume weighted average prices for the Trading Days to be included in
the calculation for such period.
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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SECTION 2. PURCHASE AND SALE OF COMMON STOCK.
(A) PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set
forth herein, the Company may issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of Ten Million dollars ($10,000,000).
(B) DELIVERY OF PUT NOTICES. Subject to the terms and conditions of the Equity
Line Transaction Documents, and from time to time during the Open Period, the
Company may, in its sole discretion, deliver a Put Notice to the Investor which
states the dollar amount (designated in U.S. Dollars) (the “Put Amount”) of
Shares which the Company intends to sell to the Investor on a Closing Date (the
“Put”). The Put Notice shall be in the form attached hereto as Exhibit C and
incorporated herein by reference. The Company shall not be entitled to deliver a
Put Notice which sets forth a Put Amount in excess of the greater of: (I) Two
Hundred percent (200%) of the average daily volume (U.S. market only) of the
Common Stock for the Three (3) Trading Days prior to the date of delivery of the
applicable Put Notice, multiplied by the average of the closing prices for such
Trading Days, or (II) two hundred fifty thousand dollars ($250,000). After the
Company’s delivery of the initial Put Notice, the Company shall not be entitled
to submit a subsequent Put Notice until the Closing in respect to the previous
Put Notice has been completed.
(C) COMPANY’S RIGHT TO WITHDRAWAL. The Company shall reserve the right, but not
the obligation, to withdraw one-fifth of the Put Amount for each Trading Day
during the Pricing Period if the VWAP for such Trading Day is below the Minimum
Acceptable Price, by submitting to the Investor prior to the applicable Closing
Date, in writing, a notice to withdraw that portion of the Put Amount. In the
event that the Company withdraws any portion of any Put Amount, only the balance
of such Put Amount shall be put to the Investor.
(D) INTENTIONALLY OMITTED.
(E) CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE. Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put Notice, and the Investor shall not be obligated to purchase any
Shares at a Closing, unless each of the following conditions are satisfied:
(I) a Registration Statement shall have been declared effective and shall remain
effective and available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) subject to a Put Notice at all
times until the Closing with respect to the subject Put Notice;
(II) at all times during the period beginning on the applicable Put Notice Date
and ending on and including the applicable Closing Date, the Common Stock shall
have been listed or quoted on the Principal Market and shall not have been
suspended from trading thereon for a period of two (2) consecutive Trading Days
during the Open Period and the Company shall not have been notified of any
pending or threatened proceeding or other action to suspend the trading of the
Common Stock;
(III) the Company shall have materially complied with its obligations under, and
shall not be otherwise in breach of or in default under, the Equity Line
Transaction Documents, unless any such noncompliance, breach or default has been
cured prior to delivery of the Investor’s Put Notice Date;
(IV) no injunction shall have been issued and remain in force, and no action
shall have been commenced by a governmental authority which has not been stayed
or abandoned, which, in either case, would prohibit the purchase or the issuance
of the Securities; and
(V) the issuance of the Securities shall not violate any shareholder approval
requirements of the Principal Market.
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If any of the events described in clauses (I) through (V) above occurs during a
Pricing Period, then the Investor shall have no obligation to purchase the Put
Amount of Common Stock set forth in the applicable Put Notice.
(F) RESERVED.
(G) MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of
the conditions set forth in Sections 2(E), 7 and 8, each closing of a purchase
by the Investor of Shares (a “Closing”) shall occur on a date which is no
earlier than the first Trading Day following the applicable Pricing Period and
no later than ten (10) Trading Days following the applicable Put Notice Date
(each a “Closing Date”). On or prior to each Closing Date, (I) the Company shall
deliver to the Investor pursuant to this Agreement, certificates representing
the Shares to be issued to the Investor on such date and registered in the name
of the Investor; and (II) after receipt of confirmation of delivery of such
Securities to the Investor, the Investor shall deliver to the Company the
Purchase Price to be paid for such Shares by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
Notwithstanding the foregoing clause (I), provided that the Company’s transfer
agent then is participating in The Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Investor,
the Company, in lieu of delivering physical certificates representing the
Securities, shall use all commercially reasonable efforts to cause its transfer
agent to electronically transmit the Securities by crediting the account of the
Investor’s prime broker (as specified by the Investor within a reasonable period
of time in advance of the Investor’s request) with DTC through its Deposit
Withdrawal Agent Commission (“DWAC”) system.
The number of Shares to be put to the Investor and the Purchase Price to be paid
by the Investor for the Shares at any Closing shall be determined based on the
applicable Put Amount, any withdrawals by the Company of any portion of the
applicable Put Amount pursuant to Section 2(C), and the applicable Pricing
Period, and shall be set forth on a Put Settlement Sheet in the form attached
hereto as Exhibit D. The number of Shares to be put to the Investor at a
particular Closing shall equal the quotient of the applicable Put Amount divided
by the applicable Purchase Price, rounded to the nearest whole Share.
The Company understands that a delay in the issuance of any Securities beyond
the applicable Closing Date could result in economic damage to the Investor.
After the Effective Date, as compensation to the Investor for actual losses, the
Company agrees to make late payments to the Investor for late issuance of
Securities (delivery of Securities after the applicable Closing Date) up to the
amounts determined in accordance with the following schedule (where “No. of Days
Late” represents the number of Trading Days after the applicable Closing Date
that the Securities are actually delivered, with the Amounts being cumulative.):

              LATE PAYMENT FOR EACH $10,000 NO. OF DAYS LATE   OF PURCHASE PRICE
3
  $ 300  
4
  $ 400  
5
  $ 500  
6
  $ 600  
7
  $ 700  
8
  $ 800  
9
  $ 900  
10
  $ 1,000  
Over 10
  $1,000 + $200 for each Trading Day
late after 10 days

The Company shall make any payments incurred under this Section 2(G) in
immediately available funds upon demand by the Investor. Nothing herein shall
limit the Investor’s right to pursue actual damages in excess of the amounts
provided for herein for the Company’s failure to issue and deliver the
Securities to the Investor or for any Open Market Adjustment Amount; provided,
that, any amounts paid by the Company pursuant to this Section 2(G) shall offset
any such actual damages and/or Open Market Adjustment Amount.
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(H) OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained
herein to the contrary, the number of Shares issuable by the Company and
purchasable by the Investor hereunder, shall not exceed 12,000,000 (the “Maximum
Common Stock Issuance”).
(I) If, by the third (3rd) business day after a Closing Date, the Company fails
to deliver any of the Shares Put to the Investor on such Closing Date (the “Put
Shares Due”) and the Investor purchases, in an open market transaction or
otherwise, shares of Common Stock necessary to make delivery to a third party of
Shares which could have been delivered from the Put Shares Due if the full
amount of the Put Shares Due had been timely delivered to the Investor by the
Company (the “Open Market Purchase”), then the Company shall pay to the
Investor, in addition to delivering the Put Shares Due and not in lieu thereof,
the Open Market Adjustment Amount (as defined below). The “Open Market
Adjustment Amount” is the amount equal to the excess, if any, of (x) the
Investor’s total purchase price (including brokerage commissions, if any) for
the Open Market Purchase minus (y) the net proceeds (after brokerage
commissions, if any) received by the Investor from the sale of the Put Shares
Due. The Company shall pay the Open Market Adjustment Amount to the Investor in
immediately available funds within five (5) business days of written demand by
the Investor. By way of illustration and not in limitation of the foregoing, if
the Investor purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 in an Open Market Purchase to cover
a sale of shares of Common Stock for net proceeds of $10,000, the Open Market
Adjustment Amount which the Company would be required to pay to the Investor
would be $1,000.
(J) LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary
in this Agreement, in no event shall the Investor be required to purchase that
number of Shares, which when added to the sum of the number of shares of Common
Stock beneficially owned (as such term is defined under Section 13(d) and
Rule 13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number
of shares of Common Stock outstanding (as determined in accordance with
Rule 13d-1 of the 1934 Act) on the applicable Closing Date.
SECTION 3. INVESTOR’S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The Investor represents and warrants to the Company, and covenants, that:
(A) SOPHISTICATED INVESTOR. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it is
capable of (I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II) protecting its own
interest; and (III) bearing the economic risk of such investment for an
indefinite period of time.
(B) AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
(C) SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor
will comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor agrees not to sell the Company’s Common Stock short, either
directly or indirectly through its affiliates, principals or advisors, during
the term of this Agreement.
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(D) ACCREDITED INVESTOR. Investor is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D promulgated under the 1933 Act.
(E) NO CONFLICTS. The execution, delivery and performance of the Equity Line
Transaction Documents by the Investor and the consummation by the Investor of
the transactions contemplated hereby and thereby will not result in a violation
of the partnership agreement or other organizational documents of the Investor.
(F) OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to
the Company’s business, finance and operations which it has requested. The
Investor has had an opportunity to discuss the business, management and
financial affairs of the Company with the Company’s management.
(G) INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own
account for investment purposes and not with a view towards distribution or
resale in violation of the 1933 Act, and agrees to resell or otherwise dispose
of the Securities solely in accordance with the registration provisions of the
1933 Act or pursuant to an exemption from such registration provisions.
(H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to
be registered as a “dealer” under the 1934 Act, either as a result of its
execution and performance of its obligations under this Agreement or otherwise.
(I) GOOD STANDING. The Investor is a limited partnership, duly organized,
validly existing and in good standing in the State of Delaware.
(J) TAX LIABILITIES. The Investor understands that it is liable for its own tax
liabilities regarding the transactions contemplated by this Agreement, including
but not limited to, any subsequent sale of the Securities.
(K) REGULATION M. The Investor will comply with Regulation M under the 1934 Act.
(L) COMMERCIALLY REASONABLE EFFORTS. The Investor shall use all commercially
reasonable efforts to timely satisfy each of the conditions set forth in
Section 7 of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedules delivered by the Company to the Investor,
or as disclosed in the Company’s SEC Documents, the Company represents and
warrants to the Investor that:
(A) ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of Delaware,
and has the requisite corporate power and authorization to own its properties
and to carry on its business as now being conducted. Each of the Company and the
companies it owns or controls (“Subsidiaries”) is duly qualified to do business
and is in good standing in every jurisdiction in which its ownership of property
or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, “Material Adverse Effect” means any material adverse effect on the
(i) assets, results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, (ii) legality, validity or
enforceability of any Equity Line Transaction Document, or (iii) ability of the
Company to perform its obligations under the Equity Line Transaction Documents.
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(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(I) The Company has the requisite corporate power and authority to enter into
and perform this Agreement and the Registration Rights Agreement, and to issue
the Securities in accordance with the terms hereof.
(II) The execution and delivery of the Equity Line Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the reservation for issuance and the
issuance of the Securities pursuant to this Agreement, have been duly and
validly authorized by the Company’s board of directors and no further consent or
authorization is required by the Company, its board of directors, or its
shareholders.
(III) The Equity Line Transaction Documents have been duly and validly executed
and delivered by the Company.
(IV) The Equity Line Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors’ rights and remedies, and insofar as indemnification and
contribution provisions may be limited by applicable law.
(C) CAPITALIZATION. As of the date hereof, the authorized capital stock of the
Company consists of (i) 250,000,000 shares of common stock, $.001 par value per
share, of which 59,845,065 shares are issued and outstanding and (ii) 10,000,000
shares of Preferred Stock, $.001 par value per share, of which no shares are
issued and outstanding.
Except as disclosed in the SEC Documents or on Schedule 4(C):
(I) no shares of the Company’s capital stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (II) there are no outstanding debt securities; (III) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (IV) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement);
(V) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (VI) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; and (VII) the Company
does not have any stock appreciation rights or “phantom stock” plans or
agreements.
The Company has furnished to the Investor, or the Investor has had access
through SEC’s website to, true and correct copies of the Company’s Amended and
Restated Certificate of Incorporation, as amended, as in effect on the date
hereof (the “Certificate of Incorporation”), and the Company’s Amended and
Restated Bylaws, as in effect on the date hereof (the “By-laws”), and the terms
of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
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(D) ISSUANCE OF SHARES. The Company has reserved 12,000,000 Shares for issuance
pursuant to this Agreement, which have been duly authorized and reserved for
issuance pursuant to this Agreement. Upon issuance in accordance with this
Agreement, the Securities will be validly issued, fully paid for and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof (other than any taxes, liens or charges which may arise from the
acts of the Investor).
(E) NO CONFLICTS. The execution, delivery and performance of the Equity Line
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (I) result in a violation
of the Certificate of Incorporation, any certificate of designations,
preferences and rights of any outstanding series of preferred stock of the
Company or the By-laws; or (II) conflict with, or constitute a material default
(or an event which with notice or lapse of time or both would become a material
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract, indenture
mortgage, indebtedness or instrument to which the Company or any of its
Subsidiaries is a party, or to the Company’s knowledge result in a violation of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations and the rules and regulations
of the Principal Market applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Except as disclosed in Schedule 4(E), neither the Company nor
any of its Subsidiaries is in violation of any term of, or in default under, the
Certificate of Incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock of the Company or the
By-laws, or their organizational charter or by-laws, respectively, or any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have or constitute a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, statute, ordinance, rule, order
or regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act or any securities laws of any states, to the
Company’s knowledge, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or registration (except
the filing of a registration statement as outlined in the Registration Rights
Agreement between the parties hereto) with, any court, governmental authority or
agency, regulatory or self-regulatory agency or other third party in order for
it to execute, deliver or perform any of its obligations under, or contemplated
by, the Equity Line Transaction Documents in accordance with the terms hereof or
thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence (other than those specifically contemplated by this Agreement and as
required under the 1933 Act and state securities laws) have been obtained or
effected on or prior to the date hereof and are in full force and effect as of
the date hereof. Except as disclosed in Schedule 4(E), to the Company’s
knowledge, it is not aware of any facts or circumstances which might give rise
to any violation or default of the foregoing. The Company is not, and will not
be, in violation of the listing requirements of the Principal Market as in
effect on the date hereof and on each of the Closing Dates and, to the Company’s
knowledge, it is not aware of any facts which would reasonably lead to the
delisting or termination of the eligibility for quoting of the Common Stock by
the Principal Market in the foreseeable future.
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(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being herein referred to as the “SEC Documents”). The Company has delivered to
the Investor or its representatives, or they have had access through the SEC’s
website to, true and complete copies of the SEC Documents. As of their
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted 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. As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (I) as may be otherwise indicated in such financial
statements or the notes thereto, or (II) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments), and audited or
reviewed by a firm that is registered with the Public Companies Accounting
Oversight Board (“PCAOB”). Neither the Company nor any of its Subsidiaries or,
to the Company’s knowledge, any of their officers, directors, employees or
agents have provided the Investor with any material, nonpublic information which
was not publicly disclosed prior to the date hereof and any material, nonpublic
information provided to the Investor by the Company or its Subsidiaries or any
of their officers, directors, employees or agents prior to any Closing Date
shall be publicly disclosed by the Company prior to such Closing Date.
(G) INTENTIONALLY OMITTED.
(H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in
the SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, the Common Stock or any of
the Company’s Subsidiaries or any of the Company’s or the Company’s
Subsidiaries’ officers or directors in their capacities as such, in which an
adverse decision could have a Material Adverse Effect.
(I) ACKNOWLEDGMENT REGARDING INVESTOR’S PURCHASE OF SHARES. The Company
acknowledges and agrees that between the Company and the Investor, the Investor
is acting solely in the capacity of an arm’s length purchaser with respect to
the Equity Line Transaction Documents and the transactions contemplated hereby
and thereby (notwithstanding that the Investor will be an underwriter for
purposes of the Registration Statement). The Company further acknowledges that
the Investor is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Equity Line Transaction
Documents and the transactions contemplated hereby and thereby and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Equity Line Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investor’s purchase
of the Securities, and is not being relied on by the Company. The Company
further represents to the Investor that the Company’s decision to enter into the
Equity Line Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as
set forth in the SEC Documents, as of the date hereof, no event, liability,
development or circumstance has occurred or exists, or to the Company’s
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
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(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is
involved in any union labor dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that relations with their employees are
good. To the Company’s knowledge, no executive officer (as defined in Rule
501(f) of Regulation D promulgated under the 1933 Act) has notified the Company
that such officer intends to leave the Company’s employ or otherwise terminate
such officer’s employment with the Company.
(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights material to the conduct of their respective businesses as now
conducted. Except as set forth in the SEC Documents, none of the Company’s
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
government authorizations, trade secrets or other intellectual property rights
material to the conduct of its business as now or as proposed to be conducted
have expired or terminated, or are expected to expire or terminate within two
(2) years from the date of this Agreement. To the Company’s knowledge, the
Company and its Subsidiaries do not infringe any trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar rights of
others, and, except as set forth in the SEC Documents, there is no claim, action
or proceeding being made or brought against, or to the Company’s knowledge,
being threatened against, the Company or its Subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright, license, service
names, service marks, service mark registrations, trade secret or other
infringement; and, to the knowledge of the Company, the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of all of their intellectual properties.
(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the
knowledge of the Company, in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants (“Environmental Laws”); (II) have, to the
knowledge of the Company, received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses; and (III) are in compliance, to the knowledge of the Company, with
all terms and conditions of any such permit, license or approval where, in each
of (I), (II) and (III) above, the failure to so comply would have, individually
or in the aggregate, a Material Adverse Effect.
(N) TITLE. The Company and its Subsidiaries have good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the SEC Documents or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(O) INSURANCE. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company reasonably believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any of its Subsidiaries has been refused any insurance coverage sought or
applied for and neither the Company nor its Subsidiaries has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
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(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses as now
conducted, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, approval, authorization or permit, except for such certificates,
approvals, authorizations or permits which if not obtained, or such revocations
or modifications which, would not have a Material Adverse Effect.
(Q) INTERNAL CONTROL OVER FINANCIAL REPORTING. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (I) the Company and its Subsidiaries maintain
records that in reasonable detail accurately and fairly reflect their respective
transactions and dispositions of assets, (II) receipts and expenditures are
executed in accordance with management’s general or specific authorizations, and
(III) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP (except in the case of unaudited statements,
as permitted by the rules and regulations of the SEC).
(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect.
(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all
United States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and due prior
to the date hereof (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents and except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from disinterested third parties and other than the grant of stock
options disclosed in the SEC Documents, none of the officers, directors, or
employees of the Company is a party to any transaction with the Company or any
of its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement 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 corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
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(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company’s
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect on the shareholders of the Company. The board of
directors of the Company has concluded, in its good faith business judgment, and
with full understanding of the implications, that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to
such limitations as are expressly set forth in the Equity Line Transaction
Documents, its obligation to issue shares of Common Stock upon purchases
pursuant to this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(V) LOCK-UP. The Company shall cause its executive officers and directors to
refrain from selling Common Stock during each Pricing Period.
(W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor
any person acting on its behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D promulgated under the
1933 Act) in connection with the offer or sale of the Common Stock to be issued
to the Investor under this Agreement.
(X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers,
finders or financial advisory fees or commissions will be payable by the
Company, its agents or Subsidiaries, with respect to the transactions
contemplated by this Agreement, except as otherwise disclosed in this Agreement.
(Y) NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and
warranties contained in this Section 4, neither the Company nor any other person
on behalf of Company, including any director, officer or employee of the
Company, makes any express or implied representation or warranty with respect to
the Company or its Subsidiaries or with respect to any other information
provided to Investor or its agents or affiliates in connection with the
transactions contemplated hereby. Neither the Company nor any other person,
including any director, officer or employee of the Company, will have or be
subject to any liability or obligation to Investor or any other person resulting
from the distribution to Investor, or Investor’s use of, any such information,
including any information, documents, projections, forecasts of other material
made available to Investor in expectation of the transactions contemplated
hereby, unless any such information is expressly included in a representation or
warranty contained in this Section 4.
SECTION 5. COVENANTS OF THE COMPANY.
(A) COMMERCIALLY REASONABLE EFFORTS. The Company shall use all commercially
reasonable efforts to timely satisfy each of the conditions set forth in
Section 8 of this Agreement.
(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each
of the Closing Dates, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for, or obtain exemption for the
Securities for, sale to the Investor at each of the Closings pursuant to this
Agreement under applicable securities or “Blue Sky” laws of such states of the
United States, and shall provide evidence of any such action so taken to the
Investor on or prior to the Closing Date.
(C) REPORTING STATUS. Until one of the following occurs, the Company shall file
all reports required to be filed by the Company with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status, or take an action or
fail to take any action, which would terminate its status as a reporting company
under the 1934 Act: (I) the Investor has sold all of the Securities, or (II) the
Company has no right to put any additional shares of Common Stock to the
Investor under this Agreement.
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(D) USE OF PROCEEDS. The Company will use the proceeds from the sale of the
Securities (excluding amounts paid by the Company for fees as set forth in the
Equity Line Transaction Documents) to support the commercialization of its
current and future product candidates, to fund its research and development
activities, for general working capital needs, or for other purposes that the
board of directors of the Company, in its good faith, deems to be in the best
interest of the Company.
(E) FINANCIAL INFORMATION. During the Open Period, the Company agrees to make
available to the Investor, upon the Investor’s request, via SEC’s website, or if
such materials are not available via SEC’s website, by such other means, the
following documents and information on the forms set forth: (I) within five
(5) Trading Days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any Registration Statements or amendments filed pursuant to the
1933 Act; (II) copies of any notices and other information made available or
given to the shareholders of the Company generally, contemporaneously with the
making available or giving thereof to the shareholders; and (III) within two
(2) calendar days of filing or delivery thereof, copies of all documents filed
with, and all correspondence sent to, the Principal Market, any securities
exchange or market, or the Financial Industry Regulatory Authority, unless such
information is material nonpublic information.
(F) RESERVATION OF SHARES. The Company shall reserve and keep available for
issuance 12,000,000 shares of Common Stock to provide for the issuance of the
Securities to the Investor as required hereunder.
(G) INTENTIONALLY OMITTED.
(H) INTENTIONALLY OMITTED.
(I) FILING OF FORM 8-K. On or before the date which is four (4) Trading Days
after the Execution Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transaction contemplated by the Equity
Line Transaction Documents in the form required by the 1934 Act.
(J) CORPORATE EXISTENCE. The Company shall use all commercially reasonable
efforts to preserve and continue the corporate existence of the Company.
(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE
A PUT. The Company shall promptly notify the Investor upon the occurrence of any
of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities by the Investor for
resale: (I) receipt of any request for additional information by the SEC during
the period of effectiveness of the Registration Statement for amendments or
supplements to the Registration Statement or related prospectus; (II) the
issuance by the SEC of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that purpose;
(III) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or notice of any proceeding for such
purpose; (IV) the happening of any event that makes any material statement made
in such Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of a
Registration Statement, 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 not misleading, and that in the case of
the related prospectus, 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 the light of the circumstances
under which they were made, not misleading; and (V) the Company’s reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
events described in this Section 5(K).
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(L) TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so
long as the Registration Statement is effective, the Company shall deliver
instructions to its transfer agent to issue Securities to the Investor that are
covered for resale by the Registration Statement free of restrictive legends.
(M) ACKNOWLEDGEMENT OF TERMS. The Company hereby represents and warrants to the
Investor that: (I) it is voluntarily entering into this Agreement of its own
freewill, (II) it is not entering into this Agreement under economic duress,
(III) the terms of this Agreement are reasonable and fair to the Company, and
(IV) the Company has had independent legal counsel of its own choosing review
this Agreement, advise the Company with respect to this Agreement, and represent
the Company in connection with this Agreement.
(N) ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC
Documents, the Company does not intend to change the business operations of the
Company in any material way. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
SECTION 6. INTENTIONALLY OMITTED.
SECTION 7. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
The obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following conditions set forth below. These conditions are for
the Company’s sole benefit and may be waived by the Company at any time in its
sole discretion.
(A) The Investor shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Company.
(B) The Investor shall have delivered to the Company prior to the applicable
Closing Date, a Put Settlement Sheet in the form attached hereto as Exhibit D
setting forth the calculation of the number of Shares subject to the Put (based
on the applicable Put Amount and Purchase Price) and to be purchased by the
Investor on the applicable Closing Date, including any revisions required as a
result of a withdrawal by the Company of any portion of the applicable Put
Amount pursuant to Section 2(C).
(C) The representations and warranties of the Investor shall be true and correct
in all material respects as of the date when made and as of the applicable
Closing Date as though made at that time (except for representations and
warranties that speak as of a particular date, which shall be true and correct
in all material respects as of such dates) and the Investor shall have
performed, satisfied and complied, in all material respects, with the covenants,
agreements and conditions required by the Equity Line Transaction Documents to
be performed, satisfied or complied with by the Investor on or before such
Closing Date.
(D) 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 which prohibits the
consummation of any of the transactions contemplated by this Agreement.
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SECTION 8. FURTHER CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase Shares is subject to the
satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A) The Company shall have executed the Equity Line Transaction Documents and
delivered the same to the Investor.
(B) The Common Stock shall be eligible for quotation on the Principal Market and
trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the applicable Put Notice Date and
through and including the respective Closing Date (excluding suspensions of not
more than one (1) Trading Day resulting from business announcements by the
Company).
(C) The representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the applicable
Closing Date as though made at that time (except for representations and
warranties that speak as of a particular date, which shall be true and correct
in all material respects as of such dates) and the Company shall have performed,
satisfied and complied, in all material respects, with the covenants, agreements
and conditions required by the Equity Line Transaction Documents to be
performed, satisfied or complied with by the Company on or before such Closing
Date. At the Investor’s request, the Company shall deliver a certificate of an
authorized officer of the Company, setting forth an update as of such Closing
Date of the representation contained in Section 4(C) above.
(D) The Company shall have executed and delivered to the Investor the
certificates representing, or have executed electronic book-entry transfer of,
the Securities (in such denominations as the Investor shall request) being
purchased by the Investor at such Closing.
(E) The board of directors of the Company shall have adopted resolutions
consistent with Section 4(B)(II) above (the “Resolutions”) and such Resolutions
shall not have been amended to be inconsistent with Section 4(B)(II) above or
rescinded prior to such Closing Date.
(F) Reserved.
(G) 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 which prohibits the
consummation of any of the transactions contemplated by this Agreement.
(H) The Registration Statement shall be effective on each Closing Date and no
stop order suspending the effectiveness of the Registration Statement shall be
in effect or to the Company’s knowledge shall be pending or threatened.
Furthermore, on each Closing Date (I) neither the Company nor the Investor shall
have received notice that the SEC has issued or intends to issue a stop order
with respect to such Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of such Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC’s concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action), and (II) no other
suspension of the use or withdrawal of the effectiveness of such Registration
Statement or related prospectus shall exist.
(I) At the time of each Closing, the Registration Statement (including
information or documents incorporated by reference therein) and any amendments
or supplements thereto shall 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 not misleading or which would require public
disclosure or an update supplement to the prospectus.
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(J) Intentionally omitted.
(K) The conditions to such Closing set forth in Section 2(E) shall have been
satisfied on or before such Closing Date.
(L) The Company shall have certified to the Investor the number of Shares of
Common Stock outstanding when a Put Notice is given to the Investor. The
Company’s delivery of a Put Notice to the Investor constitutes the Company’s
certification of the existence of the necessary number of shares of Common Stock
reserved for issuance.
SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following
events:
(I) when the Investor has paid an aggregate Purchase Price of ten million
dollars ($10,000,000) for the Common Stock of the Company issued pursuant to
this Agreement; or,
(II) on the date which is thirty-six (36) months after the Effective Date; or,
(III) five (5) days after the Company shall deliver written notice of
termination to the Investor.
Any and all Shares and amounts (including penalties, if any), due under this
Agreement shall be immediately payable and due upon termination of this
Agreement.
SECTION 10. SUSPENSION
The Company’s right to put and the Investor’s obligation to purchase Shares
under this Agreement shall be suspended upon any of the following events, and
shall remain suspended until such event is rectified:
(I) the trading of the Common Stock is suspended by the SEC or the Principal
Market for a period of two (2) consecutive Trading Days during the Open Period;
or,
(II) The Common Stock ceases to be registered under the 1934 Act or listed or
traded on the Principal Market.
Immediately upon the occurrence of one of the above-described events, the
Company shall send written notice of such event to the Investor.
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SECTION 11. INDEMNIFICATION.
In consideration of the parties mutual obligations set forth in the Equity Line
Transaction Documents, each of the parties (in such capacity, an “Indemnitor”)
shall defend, protect, indemnify and hold harmless the other and all of the
other party’s shareholders, officers, directors, employees, counsel, and direct
or indirect investors and any of the foregoing person’s agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and reasonable
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys’ fees and disbursements (the “Indemnified
Liabilities”), incurred by any Indemnitee as a result of, or arising out of, or
relating to (I) any material misrepresentation or material breach of any
representation or warranty made by the Indemnitor in any other Equity Line
Transaction Document; (II) any material breach of any covenant, agreement or
obligation of the Indemnitor contained in the Equity Line Transaction Documents;
or (III) any cause of action, suit or claim brought or made against such
Indemnitee by a third party and arising out of or resulting from the
Indemnitor’s execution, delivery, performance or enforcement of the Equity Line
Transaction Documents, except (i) insofar as any such misrepresentation, breach
or any untrue statement, alleged untrue statement, omission or alleged omission
is made in reliance upon and in conformity with information furnished to
Indemnitor which is specifically intended for use in the preparation of any such
Registration Statement, preliminary prospectus, prospectus or amendments to the
prospectus or (ii) for any diminution in the value of Common Stock or loss
incurred upon any resale of Securities. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason, the
Indemnitor shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The indemnity provisions contained herein shall be exclusive of any cause
of action or similar rights Indemnitor may have, and any liabilities the
Indemnitor or the Indemnitees may be subject to.
SECTION 12. MISCELLANEOUS.
(A) GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION. All disputes arising under
this agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Massachusetts, without regard to principles of conflict
of laws. The parties to this agreement will submit all disputes arising under
this agreement to arbitration in Boston, Massachusetts before a single
arbitrator of the American Arbitration Association (“AAA”). The arbitrator shall
be selected by application of the rules of the AAA, or by mutual agreement of
the parties, except that such arbitrator shall be an attorney admitted to
practice law in the Commonwealth of Massachusetts. No party to this agreement
will challenge the jurisdiction or venue provisions as provided in this section.
Nothing contained herein shall prevent the party from obtaining an injunction.
(B) LEGAL FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the
Equity Line Transaction Documents, each party shall pay the fees and expenses of
its advisers, counsel, the accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any attorneys’ fees and
expenses incurred by either the Company or the Investor in connection with the
preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of any Securities.
(C) COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which 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; provided that a facsimile signature or an e-mail
delivery of a “.pdf” format data file shall be considered due execution and
shall be binding upon the signatory thereto with the same force and effect as if
the signature were an original signature.
(D) HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.
(E) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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(F) ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between
the Company and the Investor with respect to the terms and conditions set forth
herein, and, the terms of this Agreement may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties hereto. No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Investor, and no provision hereof may be
waived other than by an instrument in writing signed by the party against whom
enforcement is sought. The execution and delivery of the Equity Line Transaction
Documents shall not alter the force and effect of any other agreements between
the parties hereto, and the obligations under those agreements.
(G) NOTICES. Any notices or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered (I) upon receipt, when delivered personally; (II) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (III) one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
PolyMedix, Inc.
170 N. Radnor-Chester Road; Suite 300
Radnor, PA 19087
Telephone: 484-598-2332
Facsimile: 484-598-2333
Attention: Ed Smith, Chief Financial Officer
E-mail: esmith@polymedix.com
If to the Investor:
Dutchess Equity Fund, LP
50 Commonwealth Avenue, Suite 2
Boston, MA 02116
Telephone: 617-301-4702
Facsimile: 617-249-0947
Attention: Theodore J. Smith, Chief Operating Officer & Managing Director
E-mail: tsmith@dpef.com
Each party shall provide five (5) days prior written notice to the other party
of any change in address or facsimile number.
(H) NO ASSIGNMENT. This Agreement may not be assigned.
(I) NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of
the parties hereto and is not for the benefit of, nor may any provision hereof
be enforced by, any other person, except that the Company acknowledges that the
rights of the Investor may be enforced by its general partner.
(J) SURVIVAL. Section 11 and Section 12 shall survive termination of this
Agreement.
(K) PUBLICITY. The Company and the Investor shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior consent of
the other party, which consent shall not be unreasonably withheld, conditioned
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement to the extent permitted by
applicable law or regulatory authority. The Investor acknowledges that this
Agreement and all or part of the Equity Line Transaction Documents may be deemed
to be “material contracts” as that term is defined by Item 601(b)(10) of
Regulation S-K, and that the Company may therefore be required to file such
documents as exhibits to reports or registration statements filed under the 1933
Act or the 1934 Act. The Investor further agrees that the status of such
documents and materials as material contracts shall be determined solely by the
Company, in consultation with its counsel.
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(M) INTENTIONALLY OMITTED.
(N) NO STRICT CONSTRUCTION. 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, as the parties
mutually agree that each has had a full and fair opportunity to review this
Agreement and seek the advice of counsel on it.
(O) REMEDIES. Any person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically, to recover damages by
reason of any default or breach of any provision of this Agreement, including
the recovery of reasonable attorneys fees and costs, and to exercise all other
rights granted by law.
(P) PAYMENT SET ASIDE. To the extent that the Company makes a payment or
payments to the Investor hereunder or under the Registration Rights Agreement,
or the Investor enforces or exercises its rights hereunder or 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.
(Q) PRICING OF COMMON STOCK. For purposes of this Agreement, the daily VWAP of
the Common Stock shall be as reported on Bloomberg.
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Nothing herein shall require the Company to disclose non-public information to
the Investor or its advisors or representatives, and the Company represents that
it does not disseminate material non-public information to any investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
material non-public information (whether or not requested of the Company
specifically or generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 13 shall be
construed to mean that persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information) may not
obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
SECTION 14. ACKNOWLEDGEMENTS OF THE PARTIES.
Notwithstanding anything in this Agreement to the contrary, the parties hereto
hereby acknowledge and agree to the following: (I) the Investor makes no
representations or covenants that it will not engage in trading in the
securities of the Company, other than the Investor will not sell short the
Company’s common stock at any time during this Agreement and will comply with
all applicable laws, regulations and rules; (II) the Company shall, by 8:30 a.m.
Boston Time on the fourth business day following the date hereof, file a current
report on Form 8-K disclosing the material terms of the transactions
contemplated hereby and in the other Equity Line Transaction Documents;
(III) the Company has not and shall not provide material non-public information
to the Investor unless prior thereto the Investor shall have executed a written
agreement regarding the confidentiality and use of such information; and
(IV) the Company understands and confirms that the Investor will be relying on
the acknowledgements set forth in clauses (I) through (III) above if the
Investor effects any transactions in the securities of the Company.
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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SIGNATURE PAGE OF INVESTMENT AGREEMENT
Your signature on this Signature Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.
The undersigned signatory hereby certifies that he has read and understands the
Investment Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its terms.

            DUTCHESS EQUITY FUND, LP,
      By:   /s/ Douglas H. Leighton         Douglas H. Leighton        Managing
Member of:
Dutchess Capital Management, LLC
General Partner to:
Dutchess Equity Fund, LP        POLYMEDIX, INC.
      By:   /s/ Edward F. Smith         Edward F. Smith        Vice President,
Finance
Chief Financial Officer   

POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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LIST OF EXHIBITS

     
EXHIBIT A
  Registration Rights Agreement
EXHIBIT B
  Intentionally Omitted
EXHIBIT C
  Put Notice
EXHIBIT D
  Put Settlement Sheet

POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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EXHIBIT A
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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EXHIBIT C
PUT NOTICE
Date:
RE: Put Notice Number  _____ 
Dear Mr. Leighton,
This is to inform you that as of today, PolyMedix, Inc., a Delaware corporation
(the “Company”), hereby elects to exercise its right pursuant to the Investment
Agreement to require Dutchess Equity Fund, LP to purchase shares of its common
stock. The Company hereby certifies that:
The amount of this put is $                    .
The Pricing Period runs from                      until                     .
The Minimum Acceptable Price is                     .
The current number of shares issued and outstanding of the Company are:
The number of shares currently issuable pursuant to the Investment Agreement and
available for resale pursuant to the Registration Statement (prior to giving
effect to this Put Notice) is:
                                                            
Regards,
                                                            
PolyMedix, Inc.
Edward F. Smith
Vice President, Finance
Chief Financial Officer
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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EXHIBIT D
PUT SETTLEMENT SHEET
Date:
Dear Mr. Smith,
Pursuant to the Put given by PolyMedix, Inc., to Dutchess Equity Fund, LP on
                     200_, we are now submitting the amount of common shares for
you to issue to Dutchess.
Please have a certificate bearing no restrictive legend totaling
                     shares issued to Dutchess Equity Fund, LP immediately and
send via DWAC to the following account:
XXXXXX
If not DWAC eligible, please send FedEx Priority Overnight to:
XXXXXX
Once these shares are received by us, we will have the funds wired to the
Company.
Regards,
Douglas H. Leighton
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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      DATE   PRICE
 
   
Date of Day 1
  VWAP of Day 1
Date of Day 2
  VWAP of Day 2
Date of Day 3
  VWAP of Day 3
Date of Day 4
  VWAP of Day 4
Date of Day 5
  VWAP of Day 5

         
VWAP IN PRICING PERIOD
       
 
 
 
   
 
       
PUT AMOUNT
       
 
       
 
       
AMOUNT WIRED TO COMPANY
       
 
       
 
        PURCHASE PRICE (95)% (NINETY-FIVE PERCENT))        
 
       
 
       
AMOUNT OF SHARES DUE
       
 
       

The undersigned has completed this Put as of this  _____th day of
                    , 200_.
POLYMEDIX, INC.
                                                            
Edward F. Smith
Vice President, Finance
Chief Financial Officer
POLYMEDIX, INC. INVESTMENT AGREEMENT. MAY 2009.

 

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