Exhibit 10.2
PURCHASE AGREEMENT
     PURCHASE AGREEMENT (the “Agreement”), dated as of January 4, 2011, by and
between REGENERX BIOPHARMACEUTICALS, INC., a Delaware corporation, (the
“Company”), and LINCOLN PARK CAPITAL FUND, LLC, an Illinois limited liability
company (the “Investor”).
WHEREAS:
Subject to the terms and conditions set forth in this Agreement, the Company
wishes to sell to the Investor, and the Investor wishes to buy from the Company,
up to Eleven Million Dollars ($11,000,000) of the Company’s common stock, $0.001
par value per share (the “Common Stock”). The shares of Common Stock to be
purchased hereunder are referred to herein as the “Purchase Shares.”
NOW THEREFORE, the Company and the Investor hereby agree as follows:

     1.   CERTAIN DEFINITIONS.

     For purposes of this Agreement, the following terms shall have the
following meanings:
     (a) “Accelerated Purchase Notice” shall mean an irrevocable written notice
from the Company to the Investor directing the Investor to buy such Accelerated
Purchase Amount in Purchase Shares as specified by the Company therein on the
Purchase Date.
     (b) “Available Amount” means initially Eleven Million Dollars ($11,000,000)
in the aggregate which amount shall be reduced by the Purchase Amount each time
the Investor purchases shares of Common Stock pursuant to Section 2 hereof.
     (c) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
     (d) “Business Day” means any day on which the Principal Market is open for
trading including any day on which the Principal Market is open for trading for
a period of time less than the customary time.
     (e) “Closing Sale Price” means, for any security as of any date, the last
closing sale price for such security on the Principal Market as reported by the
Principal Market, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing sale price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by the Principal Market.
     (f) “Confidential Information” means any information disclosed by either
party to the other party, either directly or indirectly, in writing, orally or
by inspection of tangible objects (including, without limitation, documents,
prototypes, samples, plant and equipment), which is designated as
“Confidential,” “Proprietary” or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) Business Days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.
Confidential Information shall not, however, include any information which
(i) was publicly known and made generally available in the public domain prior
to the time of disclosure by the disclosing party; (ii) becomes publicly known
and

 

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

 

made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party’s files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party’s obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party’s Confidential Information, as shown
by documents and other competent evidence in the receiving party’s possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.
     (g) “Custodian” means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
     (h) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
     (i) “Maturity Date” means the date that is 600 Business Days (30 Monthly
Periods) from the Commencement Date.
     (j) “Monthly Period” means each successive 20 Business Day period
commencing with the Commencement Date.
     (k) “Person” means an individual or entity including but not limited to any
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.
     (l) “Principal Market” means initially the OTC Bulletin Board; provided
however, that in the event the Company’s Common Stock is ever listed or traded
on the Nasdaq Global Market, the Nasdaq Global Select Market, the Nasdaq Capital
Market, the New York Stock Exchange, or the NYSE Amex, or a successor to any
such national securities exchange, then the “Principal Market” shall mean such
other market or exchange on which the Company’s Common Stock is then listed or
traded.
     (m) “Purchase Amount” means, with respect to any particular purchase made
hereunder, the portion of the Available Amount to be purchased by the Investor
pursuant to Section 2 hereof.
     (n) “Purchase Date” means with respect to any particular purchase made
hereunder, the Business Day on which the Investor receives by 10:00 a.m. eastern
time of such Business Day a valid Regular Purchase Notice or a valid Accelerated
Purchase Notice that the Investor is to buy Purchase Shares pursuant to
Section 2 hereof.
     (o) “Purchase Price” means the lower of the (A) the lowest Sale Price of
the Common Stock on the Purchase Date and (B) the arithmetic average of the
three (3) lowest Closing Sale Prices for the Common Stock during the twelve
(12) consecutive Business Days ending on the Business Day immediately preceding
such Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).
     (p) “Regular Purchase Notice” shall mean an irrevocable written notice from
the Company to the Investor directing the Investor to buy such Regular Purchase
Amount in Purchase Shares as specified by the Company therein on the Purchase
Date.

-2-

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

 

     (q) “Sale Price” means any sale price for the shares of Common Stock on the
Principal Market as reported by the Principal Market.
     (r) “SEC” means the United States Securities and Exchange Commission.
     (s) “Securities Act” means the Securities Act of 1933, as amended.
     (t) “Transfer Agent” means the transfer agent of the Company as set forth
in Section 11(f) hereof or such other person who is then serving as the transfer
agent for the Company in respect of the Common Stock.

     2.   PURCHASE OF COMMON STOCK.

     Subject to the terms and conditions set forth in this Agreement, the
Company has the right to sell to the Investor, and the Investor has the
obligation to purchase from the Company, Purchase Shares as follows:
     (a) Commencement of Regular Sales of Common Stock. Upon the satisfaction of
the conditions set forth in Sections 7 and 8 hereof (the “Commencement,” and the
date of satisfaction of such conditions, the “Commencement Date”) the Company
shall have the right but not the obligation to direct the Investor by its
delivery to the Investor of a Regular Purchase Notice from time to time to buy
Purchase Shares (each such purchase a “Regular Purchase”) in any amount up to
200,000 Purchase Shares per Regular Purchase Notice (and the amount so
purchased, the “Regular Purchase Amount”) at the Purchase Price on the Purchase
Date. The Company may deliver a new Regular Purchase Notice to the Investor so
long as at least two (2) Business Days have passed since the most recent
Purchase Date.
     (b) Accelerated Purchases. At any time on or after the Commencement Date,
the Company shall also have the right to direct the Investor to buy up to
200,000 Purchase Shares (each such purchase, an “Accelerated Purchase” and the
amount so purchased, the “Accelerated Purchase Amount”) per Accelerated Purchase
Notice at the Accelerated Purchase Price on the Purchase Date by delivering to
the Investor Accelerated Purchase Notices provided that the Closing Sale Price
of the Common Stock must not be below $0.35 (subject to equitable adjustment for
any reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction) (the “Accelerated Purchase Threshold Price”) on the
Purchase Date. With respect to each such Accelerated Purchase, the Company must
deliver the Purchase Shares before 1:00 p.m. eastern time on the Business Day
following the Purchase Date. As used herein, the term “Accelerated Purchase
Price” shall mean the lesser of (i) the lowest Sale Price of the Common Stock on
the Purchase Date or (ii) the lowest Purchase Price during the previous five
(5) Business Days prior to the date that the valid Accelerated Purchase Notice
was received by the Investor. However, if on any Purchase Date the Closing Sale
Price of the Common Stock is below the Accelerated Purchase Threshold Price,
such Accelerated Purchase shall be void and the Investor’s obligations to buy
Purchase Shares in respect of that Accelerated Purchase Notice shall be
terminated. Thereafter, the Company shall again have the right to submit an
Accelerated Purchase Notice as set forth herein by delivery of a new Accelerated
Purchase Notice only if the Closing Sale Price of the Common Stock is at or
above the Accelerated Purchase Threshold Price on the date of the delivery of
the Accelerated Purchase Notice. The Company may deliver a new Accelerated
Purchase Notice to the Investor so long as at least two (2) Business Days have
passed since the most recent Purchase Date.
     (c) Payment for Purchase Shares. The Investor shall pay to the Company an
amount equal to the Purchase Amount with respect to such Purchase Shares as full
payment for such Purchase Shares via wire transfer of immediately available
funds on the same Business Day that the Investor

-3-

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

 

receives such Purchase Shares if they are received by the Investor before 1:00
p.m. eastern time or if received by the Investor after 1:00 p.m. eastern time,
the next Business Day. The Company shall not issue any fraction of a share of
Common Stock upon any purchase. If the issuance would result in the issuance of
a fraction of a share of Common Stock, the Company shall round such fraction of
a share of Common Stock up or down to the nearest whole share. All payments made
under this Agreement shall be made in lawful money of the United States of
America or wire transfer of immediately available funds to such account as the
Company may from time to time designate by written notice in accordance with the
provisions of this Agreement. Whenever any amount expressed to be due by the
terms of this Agreement is due on any day that is not a Business Day, the same
shall instead be due on the next succeeding day that is a Business Day.
     (d) Purchase Price Floor. The Company and the Investor shall not effect any
sales and purchases under this Agreement on any Purchase Date where the Purchase
Price for any purchases of Purchase Shares would be less than the Floor Price.
“Floor Price” means $0.15, which shall be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction.
     (e) Compliance with Principal Market Rules. The Company shall not be
required to issue any Purchase Shares under this Agreement if such issuance
would breach the Company’s obligations under the rules or regulations of the
Principal Market.

     3.   INVESTOR’S REPRESENTATIONS AND WARRANTIES.

     The Investor represents and warrants to the Company that as of the date
hereof and as of the Commencement Date:
     (a) Organization; Authority. Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder and thereunder.
     (b) Investment Purpose. The Investor is acquiring the Purchase Shares and
Commitment Shares (as defined below) (collectively, the “Securities”) as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing
any of such Securities in violation of the Securities Act or any applicable
state securities law and has no direct or indirect arrangement or understandings
with any other persons to distribute or regarding the distribution of such
Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting the Investor’s right to sell
the Securities at any time pursuant to the Registration Statement (as defined
herein) or otherwise in compliance with applicable federal and state securities
laws and with respect to the Additional Commitment Shares, subject to Section
5(e) hereof). The Investor is acquiring the Securities hereunder in the ordinary
course of its business.
     (c) Accredited Investor Status. The Investor is an “accredited investor” as
that term is defined in Rule 501(a)(3) of Regulation D.
     (d) Reliance on Exemptions. The Investor understands that the Securities
may be offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and

-4-

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

 

understandings of the Investor set forth herein in order to determine the
availability of such exemptions and the eligibility of the Investor to acquire
the Securities.
     (e) Information. The Investor understands that its investment in the
Securities involves a high degree of risk. The Investor (i) is able to bear the
economic risk of an investment in the Securities including a total loss,
(ii) has such knowledge and experience in financial and business matters that it
is capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Investor or its representatives shall modify, amend or affect
the Investor’s right to rely on the Company’s representations and warranties
contained in Section 4 below. The Investor has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
     (f) No Governmental Review. The Investor understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
     (g) Transfer or Sale. The Investor understands that(i) the Securities may
not be offered for sale, sold, assigned or transferred unless (A) registered
pursuant to the Securities Act or (B) an exemption exists permitting such
Securities to be sold, assigned or transferred without such registration;
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder.
     (h) Validity; Enforcement. This execution and delivery of this Agreement
and the performance by the Investor of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of
Investor. This Agreement, the Registration Rights Agreement and each of the
other documents and agreements entered into by the parties on the Commencement
Date and attached as exhibits to this Agreement (collectively, the “Transaction
Documents”) to which the Investor is a party has been duly executed by 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.
     (i) Residency. The Investor is a resident of the State of Illinois.
     (j) No Short Selling. The Investor represents and warrants to the Company
that at no time has any of the Investor, its agents, representatives or
affiliates engaged in or effected, in any manner whatsoever, directly or
indirectly, any (i) “short sale” (as such term is defined in Section 242.200 of
Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.
     (k) No General Solicitation. Neither the Investor nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in or is
aware of any form of general solicitation or general

-5-

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

 

advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Securities.

     4.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to the Investor that as of the date
hereof and as of the Commencement Date:
     (a) Organization and Qualification. The Company is duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company is not in violation or default of any of the provisions
of its certificate of incorporation, bylaws or other organizational or charter
documents. The Company is duly qualified to conduct business and is in good
standing as a foreign corporation 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, could not have or reasonably be expected to result in: (i) a
material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company, or (iii) a material adverse effect on the Company’s ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification. The Company has no Subsidiaries.
     (b) Authorization; Enforcement; Validity. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
the Transaction Documents, and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation, the issuance of
the Commitment Shares and the reservation for issuance and the issuance of the
Purchase Shares issuable under this Agreement, have been duly 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) this Agreement
has been, and each other Transaction Document shall be on the Commencement Date,
duly executed and delivered by the Company and (iv) this Agreement constitutes,
and each other Transaction Document upon its execution on behalf of the Company,
shall 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. The Board of Directors of the Company has approved the resolutions
(the “Signing Resolutions”) substantially in the form as set forth as Exhibit C
attached hereto to authorize this Agreement and the transactions contemplated
hereby. The Signing Resolutions are valid, in full force and effect and have not
been modified or supplemented in any respect. The Company has delivered to the
Investor a true and correct copy of a unanimous written consent adopting the
Signing Resolutions executed by all of the members of the Board of Directors of
the Company. No other approvals or consents of the Company’s Board of Directors
and/or shareholders is necessary under applicable laws and the Company’s
Certificate of Incorporation and/or Bylaws to authorize the execution and
delivery of this Agreement or any of the transactions contemplated hereby,
including, but not limited to, the issuance of the Commitment Shares and the
issuance of the Purchase Shares.
     (c) Capitalization. As of the date hereof, the authorized capital stock of
the Company is set forth on Schedule 4(c). Except as disclosed in Schedule 4(c),
(i) no shares of the Company’s capital stock

-6-

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

 

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 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 contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company 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, (iv) there are no
agreements or arrangements under which the Company is obligated to register the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement), (v) there are no outstanding securities or
instruments of the Company which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements by which
the Company is or may become bound to redeem a security of the Company, (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 or any similar plan or agreement.
The Company has furnished to the Investor true and correct copies of the
Company’s Certificate of Incorporation, as amended and as in effect on the date
hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as
amended and as in effect on the date hereof (the “By-laws”), and summaries of
the terms of all securities convertible into or exercisable for Common Stock, if
any, and copies of any documents containing the material rights of the holders
thereof in respect thereto.
     (d) Issuance of Securities. The Company has authorized and reserved
73,333,333 shares of Common Stock for issuance as Purchase Shares under this
Agreement, and upon issuance and payment therefor in accordance with the terms
and conditions of this Agreement, the Purchase Shares shall be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. The Company has authorized and reserved
958,333 shares of Common Stock for issuance as Initial Commitment Shares and an
additional 958,333 shares of Common Stock for issuance as Additional Commitment
Shares, in each case subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction.
Upon issuance in accordance with the terms hereof, the Commitment Shares shall
be validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof.
     (e) No Conflicts. Except as disclosed in Schedule 4(e), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase Shares) 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 default (or an event which 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 of, any
agreement, indenture or instrument to which the Company is a party, or result in
a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the Principal Market applicable to the Company) or by which any property or
asset of the Company is bound or affected, except in the case of conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
under clause (ii), which could not reasonably be expected to result in a
Material Adverse Effect. Except as disclosed in Schedule 4(e), the Company is
not in violation of any term of or in default under its Certificate of
Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or By-laws or their
organizational charter or by-laws, respectively. Except as disclosed in
Schedule 4(e), the Company is not in violation of any term of or is in default
under any material contract, agreement, mortgage, indebtedness, indenture,
instrument,

-7-

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

 

judgment, decree or order or any statute, rule or regulation applicable to the
Company, except for possible conflicts, defaults, terminations or amendments
which could not reasonably be expected to have a Material Adverse Effect. The
business of the Company is not being conducted, and shall not be conducted, in
violation of any law, ordinance, regulation of any governmental entity, except
for possible violations, the sanctions for which either individually or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under the
Securities Act or applicable state securities laws, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. Except as disclosed in Schedule 4(e), all
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence shall be obtained or
effected on or prior to the Commencement Date.
     (f) SEC Documents; Financial Statements. Except as disclosed in Schedule
4(f) the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) of the Exchange Act,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Documents”)
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Documents prior to the expiration of any such extension.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as
applicable, and none of the SEC Documents, when filed, 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 the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents 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 United
States generally accepted accounting principles applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, 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. Except
as listed in Schedule 4(f), the Company has received no notices or
correspondence from the SEC for the one year preceding the date hereof. The SEC
has not commenced any enforcement proceedings against the Company or any of its
subsidiaries.
     (g) Absence of Certain Changes. Except as disclosed in Schedule 4(g), since
the filing of the Company’s quarterly report on Form 10-Q for the quarter ended
September 30, 2010, there has been no material adverse change in the business,
properties, operations, financial condition or results of operations of the
Company. 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 have any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy or insolvency proceedings. The Company is
financially solvent and is generally able to pay its debts as they become due.
     (h) Absence of Litigation. 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 officers or directors in their capacities as such, which could
reasonably be expected to

-8-

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

 

have a Material Adverse Effect. A description of each action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body which, as of the date of this
Agreement, is pending or threatened in writing against or affecting the Company,
the Common Stock or any of the Company’s officers or directors in their
capacities as such, is set forth in Schedule 4(h).
     (i) Acknowledgment Regarding Investor’s Status. The Company acknowledges
and agrees that the Investor is acting solely in the capacity of arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. 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 Transaction Documents and the
transactions contemplated hereby and thereby and any advice given by the
Investor or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor’s purchase of the Securities. The Company
further represents to the Investor that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.
     (j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.
     (k) Intellectual Property Rights. To its knowledge, the Company owns or
possesses adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 4(k), none of the
Company’s material 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 have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company does not have any knowledge of any infringement by
the Company of any material 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, or of any
such development of similar or identical trade secrets or technical information
by others and, except as set forth on Schedule 4(k), there is no claim, action
or proceeding being made or brought against, or to the Company’s knowledge,
being threatened against, the Company regarding trademark, trade name, patents,
patent rights, invention, copyright, license, service names, service marks,
service mark registrations, trade secret or other infringement, which could
reasonably be expected to have a Material Adverse Effect.
     (l) Environmental Laws. To its knowledge, the Company (i) is 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) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to conduct
its business and (iii) is in compliance with all terms and conditions of any
such permit, license or approval, except where, in each of the three foregoing
clauses, the failure to so comply could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
     (m) Title. The Company has good and marketable title in fee simple to all
real property owned by it and good and marketable title in all personal property
owned by it that is material to the

-9-

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

 

business of the Company, in each case free and clear of all liens, encumbrances
and defects (“Liens”) and except for Liens as 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 Liens for the payment of federal,
state or other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company are
held by it under valid, subsisting and enforceable leases with which the Company
is in compliance 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.
     (n) 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 believes to be prudent and customary in the business in which the
Company is engaged. The Company has not been refused any insurance coverage
sought or applied for and the Company has no 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 materially and adversely
affect the condition, financial or otherwise, or the business or operations of
the Company.
     (o) Regulatory Permits. The Company possesses all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business, except for any such
certificates, authorization or permits to failure of which to have obtained
would not be reasonably expected to have a Material Adverse Effect. The Company
has not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
     (p) Tax Status. The Company has made or filed all federal and state income
and all other material tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company 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.
     (q) Transactions With Affiliates. Except as set forth in the SEC Documents,
none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company (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 entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than for (i) payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
other employee benefits, including stock option agreements under any stock
option plan of the Company.
     (r) Application of Takeover Protections. The Company and its board of
directors have taken or will take prior to the Commencement Date 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 Certificate of
Incorporation or the laws of

-10-

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

 

the state of its incorporation which is or could become applicable to the
Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the
Investor’s ownership of the Securities.
     (s) Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has provided the
Investor or its agents or counsel with any information that it believes
constitutes or might constitute material, non-public information which is not
otherwise disclosed in the Registration Statement (as defined herein) or
prospectus supplements thereto. The Company understands and confirms that the
Investor will rely on the foregoing representation in effecting purchases and
sales of securities of the Company. All of the disclosure furnished by or on
behalf of the Company to the Investor regarding the Company, its business and
the transactions contemplated hereby, including the disclosure schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that the Investor
neither makes nor has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3 hereof.
     (t) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
     (u) DTC Eligible. The Company through its transfer agent currently
participates in the Depository Trust Company Fast Automated Securities Transfer
Program (“DTC FAST System”) and the Company’s Common Stock can be transferred
electronically to third parties via the DTC FAST System.

     5.   COVENANTS.

     (a) Filing of Form 8-K and Registration Statement. The Company agrees that
it shall, within the time required under the Exchange Act, file a Current Report
on Form 8-K disclosing this Agreement and the transactions contemplated hereby.
Pursuant to the Registration Rights Agreement, of even date herewith, by and
between the Company and the Investor (the “Registration Rights Agreement”), the
Company shall also file within twenty (20) Business Days from the date hereof a
new registration statement covering only the sale of the Purchase Shares and the
Additional Commitment Shares (the “Registration Statement”). Any securities
issuable under this Agreement that have not been registered under the Securities
Act shall bear the following restrictive legend (the “Restrictive Legend”):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR

-11-

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

 

(2) AN OPINION OF HOLDER’S COUNSEL, IN A CUSTOMARY FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
     (b) Blue Sky. The Company shall take such action, if any, as is reasonably
necessary in order to obtain an exemption for or to qualify (i) the initial sale
of the Commitment Shares and any Purchase Shares to the Investor under this
Agreement and (ii) any subsequent resale of the Commitment Shares and any
Purchase Shares by the Investor, in each case, under applicable securities or
“Blue Sky” laws of the states of the United States in such states as is
reasonably requested by the Investor from time to time, and shall provide
evidence of any such action so taken to the Investor.
     (c) Listing/DTC. The Company shall maintain the Common Stock’s
authorization for quotation on the Principal Market. The Company shall not take
any action that would be reasonably expected to result in suspension of the
Common Stock from quotation on the Principal Market. The Company shall promptly,
and in no event later than the following Business Day, provide to the Investor
copies of any notices it receives from the Principal Market regarding the
continued eligibility of the Common Stock for quotation on such market. The
Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section. The Company shall use commercially reasonable
efforts to ensure that its Common Stock can be transferred electronically via
the DTC FAST System.
     (d) Limitation on Short Sales and Hedging Transactions. The Investor agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11, the Investor and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) “short sale” (as such term is
defined in Section 242.200 of Regulation SHO of the Exchange Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.
     (e) Issuance of Commitment Shares. Immediately upon the execution of this
Agreement, the Company shall issue to the Investor as consideration for the
Investor entering into this Agreement 958,333 shares of Common Stock (the
“Initial Commitment Shares”) and shall deliver to the Transfer Agent a letter in
the form as set forth as Exhibit E attached hereto with respect to the issuance
of the Initial Commitment Shares. In connection with each purchase of Purchase
Shares hereunder, the Company agrees to issue to the Investor a number of shares
of Common Stock (the “Additional Commitment Shares” and together with the
Initial Commitment Shares, the “Commitment Shares”) equal to the product of
(x) 958,333 and (y) the Purchase Amount Fraction. The “Purchase Amount Fraction”
shall mean a fraction, the numerator of which is the Purchase Amount purchased
by the Investor with respect to such purchase of Purchase Shares and the
denominator of which is Eleven Million Dollars ($11,000,000). The Additional
Commitment Shares shall be equitably adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction.
The Initial Commitment Shares shall be issued in certificated form and shall
bear the Restrictive Legend. The Investor agrees that the Investor shall not
pledge, transfer or sell the Additional Commitment Shares until the earlier of
(a) 600 Business Days (30 Monthly Periods) from the date hereof or (b) the date
on which this Agreement has been terminated, provided, however, that such
restrictions shall not apply: (i) in connection with any transfers to or among
affiliates (as defined in the Exchange Act), or (ii) if an Event of Default has
occurred, or any event which, after notice and/or lapse of time, would become an
Event of Default, including any failure by the Company to timely issue Purchase
Shares under this Agreement. Notwithstanding the forgoing, the Investor may
transfer Additional Commitment Shares to a third party in order to settle a sale
made by the Investor where the Investor reasonably expects the Company to
deliver additional Purchase Shares to the Investor under this Agreement so long
as the Investor maintains ownership of the amount of Additional Commitment
Shares received up to that point by “replacing” such

-12-

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

 

Additional Commitment Shares so transferred with new Purchase Shares when the
new Purchase Shares are actually issued by the Company to the Investor.
     (f) Due Diligence. The Investor shall have the right, from time to time as
the Investor may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours. The Company and its
officers and employees shall provide information and reasonably cooperate with
the Investor in connection with any reasonable request by the Investor related
to the Investor’s due diligence of the Company. Each party hereto agrees not to
disclose any Confidential Information of the other party to any third party and
shall not use the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions contemplated hereby.
Each party hereto acknowledges that the Confidential Information shall remain
the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party. The Company confirms that neither it nor any other
Person acting on its behalf shall provide the Investor or its agents or counsel
with any information that it believes constitutes or might constitute material,
non-public information which is not otherwise disclosed in the Registration
Statement or prospectus supplements thereto.
     (g) Purchase Records. The Investor and the Company shall each maintain
records showing the remaining Available Amount at any given time and the dates
and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Investor and the Company.
     (h) Taxes. The Company shall pay any and all transfer, stamp or similar
taxes that may be payable with respect to the issuance and delivery of any
shares of Common Stock to the Investor made under this Agreement.
     (i) No Variable Rate Transactions. From the date hereof until the Maturity
Date, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company of Common Stock or Common Stock
Equivalents for cash consideration (or a combination of units thereof) involving
a Variable Rate Transaction other than in connection with an Exempt Issuance.
“Variable Rate Transaction” means a transaction in which the Company (i) issues
or sells any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common
Stock either (A) at a conversion price, exercise price or exchange rate or other
price that is based upon and/or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent
events directly or indirectly related to the business of the Company or the
market for the Common Stock or (ii) enters into any agreement, including, but
not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price. “Exempt Issuance” means the issuance of
(a) shares of Common Stock or options to employees, officers, directors or
consultants of the Company pursuant to any stock or option plan duly adopted for
such purpose, by a majority of the non-employee members of the Board of
Directors or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock
issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, which acquisitions or strategic
transactions can have a Variable Rate Transaction component, provided that any
such issuance shall only be to a Person (or to the equity holders of a Person)
which is, itself or through its subsidiaries, an operating company or an asset
in a business synergistic with the business of the Company

-13-

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

 

and shall provide to the Company additional benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is
issuing securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities. “Common Stock Equivalents”
means any securities of the Company which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is at any
time convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.

     6.   TRANSFER AGENT INSTRUCTIONS.

     On the Commencement Date and thereafter, the Company shall cause all of the
Purchase Shares and Additional Commitment Shares to be issued under this
Agreement electronically via the DTC FAST System to Investor’s account as
designated by Investor unless the Investor expressly consents otherwise. The
Company shall issue irrevocable instructions to the Transfer Agent, and any
subsequent transfer agent, to issue Purchase Shares and Additional Commitment
Shares in the name of the Investor (the “Irrevocable Transfer Agent
Instructions”). The Company warrants to the Investor that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 6,
will be given by the Company to the Transfer Agent with respect to the Purchase
Shares and that the Additional Commitment Shares and the Purchase Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement.

     7.   CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF
COMMON STOCK.

     The right of the Company hereunder to commence sales of the Purchase Shares
is subject to the satisfaction of each of the following conditions:
     (a) The Investor shall have executed each of the Transaction Documents and
delivered the same to the Company; and
     (b) The Registration Statement shall have been declared effective under the
Securities Act by the SEC, and no stop order with respect to the Registration
Statement shall be pending or threatened by the SEC.

     8.   CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE SHARES OF COMMON
STOCK.

     The obligation of the Investor to buy Purchase Shares under this Agreement
is subject to the satisfaction of each of the following conditions and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement Date:
     (a) The Company shall have executed each of the Transaction Documents and
delivered the same to the Investor;
     (b) The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the Principal Market;

-14-

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

 

     (c) The Investor shall have received the opinions of the Company’s legal
counsel dated as of the Commencement Date in a customary form reasonably
acceptable to the Investor;
     (d) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 4 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of the Commencement Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date. The Investor shall
have received a certificate, executed by the CEO, President or CFO of the
Company, dated as of the Commencement Date, to the foregoing effect in
substantially the form attached hereto as Exhibit A;
     (e) The Board of Directors of the Company shall have adopted resolutions in
a form reasonably acceptable to the Investor, which resolutions shall be in full
force and effect without any amendment or supplement thereto as of the
Commencement Date;
     (f) As of the Commencement Date, the Company shall have reserved out of its
authorized and unissued Common Stock, (A) solely for the purpose of effecting
purchases of Purchase Shares hereunder, 73,333,333 shares of Common Stock and
(B) as Additional Commitment Shares in accordance with Section 5(e) hereof,
958,333 shares of Common Stock;
     (g) The Irrevocable Transfer Agent Instructions shall have been delivered
to and acknowledged in writing by the Company and the Company’s Transfer Agent;
     (h) The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of the Company in the State of
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Business Days of the Commencement Date;
     (i) The Company shall have delivered to the Investor a certified copy of
the Certificate of Incorporation as certified by the Secretary of State of the
State of Delaware within ten (10) Business Days of the Commencement Date;
     (j) The Company shall have delivered to the Investor a secretary’s
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in substantially the form attached hereto as Exhibit B;
     (k) The Registration Statement shall have been declared effective under the
Securities Act by the SEC and no stop order with respect to the Registration
Statement shall be pending or threatened by the SEC. The Company shall have
prepared and delivered to the Investor a final and complete form of prospectus,
dated and current as of the Commencement Date, to be used by the Investor in
connection with any sales of any Purchase Shares or Additional Commitment
Shares, and to be filed by the Company within two (2) Business Days after the
Commencement Date. The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of the
Commitment Shares and Purchase Shares pursuant to this Agreement in compliance
with such laws;
     (l) No Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred;

-15-

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

 

     (m) On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the
Investor, in order to render inapplicable any control share acquisition,
business combination, shareholder rights plan or poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation or the laws of the state of its
incorporation which is or could become applicable to the Investor as a result of
the transactions contemplated by this Agreement, including, without limitation,
the Company’s issuance of the Securities and the Investor’s ownership of the
Securities; and

     9.   INDEMNIFICATION.

In consideration of the Investor’s execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Investor and all of its
affiliates, shareholders, officers, directors, employees 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 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 (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law. Payment
under this indemnification shall be made within thirty (30) days from the date
Investor makes written request for it. A certificate containing reasonable
detail as to the amount of such indemnification submitted to the Company by
Investor shall be conclusive evidence, absent manifest error, of the amount due
from the Company to Investor.

     10.   EVENTS OF DEFAULT.

     An “Event of Default” shall be deemed to have occurred at any time as any
of the following events occurs:
     (a) the effectiveness of the Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to the Investor for sale of any or all of the Purchase Shares or Additional
Commitment Shares (the “Registrable Securities”), and such lapse or
unavailability continues for a period of twenty (20) consecutive Business Days
or for more than an aggregate of sixty (60) Business Days in any 365-day period;
     (b) the suspension from trading or failure of the Common Stock to be listed
or quoted on the Principal Market for a period of three (3) consecutive Business
Days;

-16-

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

 

     (c) the delisting of the Company’s Common Stock from the OTC Bulletin
Board, provided, however, that the Common Stock is not immediately thereafter
trading on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq
Global Select Market, the Nasdaq Capital Market, or NYSE Amex;
     (d) the failure for any reason by the Transfer Agent to issue Purchase
Shares to the Investor within five (5) Business Days after the applicable
Purchase Date which the Investor is entitled to receive;
     (e) the Company breaches any representation, warranty, covenant or other
term or condition under any Transaction Document if such breach could have a
Material Adverse Effect and except, in the case of a breach of a covenant which
is reasonably curable, only if such breach continues for a period of at least
five (5) Business Days;
     (f) if any Person commences a proceeding against the Company pursuant to or
within the meaning of any Bankruptcy Law ;
     (g) if the Company pursuant to or within the meaning of any Bankruptcy Law;
(A) commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due;
     (h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary;
     (i) the Company is not eligible to transfer its Common Stock electronically
via the DTC FAST System; or
     (j) the occurrence of an event that is reasonably likely to have a Material
Adverse Effect; provided, however, that for purposes of this Section 10,
“Material Adverse Effect” shall not include facts, circumstances, events,
changes, effects or occurrences (i) generally affecting the economy or the
financial, debt, credit or securities markets in the United States, including as
a result of changes in geopolitical conditions, (ii) generally affecting any of
the industries in which the Company operates, (iii) resulting from the
announcement of this Agreement, (iv) resulting from changes in any applicable
laws or regulations or applicable accounting regulations or principles or
interpretations thereof, (v) resulting from any actions taken pursuant to or in
accordance with the terms of this Agreement, (vi) resulting from any outbreak or
escalation of hostilities or war or any act of terrorism, (vii) resulting from
any failure by the Company to meet its internal or published projections,
budgets, plans or forecasts of its revenues, earnings or other financial
performance or results of operations, in and of itself (it being understood that
the facts or occurrences giving rise or contributing to such failure that are
not otherwise excluded from the definition of Material Adverse Effect may be
taken into account in determining whether there has been a Material Adverse
Effect), or (viii) resulting from a decline in the price of the Company’s common
stock on the Principal Market (it being understood that the facts or occurrences
giving rise or contributing to such decline that are not otherwise excluded from
the definition of Material Adverse Effect may be taken into account in
determining whether there has been a Material Adverse Effect).
In addition to any other rights and remedies under applicable law and this
Agreement, including the Investor termination rights under Section 11 hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default,

-17-

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

 

has occurred and is continuing, or so long as the Purchase Price is below the
Floor Price, the Investor shall not be permitted or obligated to purchase any
shares of Common Stock under this Agreement. If pursuant to or within the
meaning of any Bankruptcy Law, the Company commences a voluntary case or any
Person commences a proceeding against the Company, a Custodian is appointed for
the Company or for all or substantially all of its property, or the Company
makes a general assignment for the benefit of its creditors, (any of which would
be an Event of Default as described in Sections 10(f), 10(g) and 10(h) hereof)
this Agreement shall automatically terminate without any liability or payment to
the Company without further action or notice by any Person. No such termination
of this Agreement under Section 11(a) or 11(d) shall affect the Company’s or the
Investor’s obligations under this Agreement with respect to pending purchases
and the Company and the Investor shall complete their respective obligations
with respect to any pending purchases under this Agreement.

     11.   TERMINATION

     This Agreement may be terminated only as follows:
     (a) If pursuant to or within the meaning of any Bankruptcy Law, the Company
commences a voluntary case or any Person commences a proceeding against the
Company, a Custodian is appointed for the Company or for all or substantially
all of its property, or the Company makes a general assignment for the benefit
of its creditors, (any of which would be an Event of Default as described in
Sections 10(f), 10(g) and 10(h) hereof) this Agreement shall automatically
terminate without any liability or payment to the Company without further action
or notice by any Person. No such termination of this Agreement under this
Section 11(a) shall affect the Company’s or the Investor’s obligations under
this Agreement with respect to pending purchases and the Company and the
Investor shall complete their respective obligations with respect to any pending
purchases under this Agreement.
     (b) Prior to the Commencement Date, the Company shall have the option to
terminate this Agreement for any reason or for no reason without any liability
whatsoever of any party to any other party under this Agreement.
     (c) In the event that the Commencement Date shall not have occurred on or
before April 30, 2011, due to the failure to satisfy the conditions set forth in
Sections 7 and 8 above, the non-breaching party shall have the option to
terminate this Agreement at the close of business on such date or thereafter
without liability of any party to any other party.
     (d) At any time after the Commencement Date, the Company shall have the
option to terminate this Agreement for any reason or for no reason by delivering
notice (a “Company Termination Notice”) to the Investor electing to terminate
this Agreement without any liability whatsoever of any party to any other party
under this Agreement. The Company Termination Notice shall not be effective
until one (1) Business Day after it has been received by the Investor. No such
termination of this Agreement under this Section 11(d) shall affect the
Company’s or the Investor’s obligations under this Agreement with respect to
pending purchases and the Company and the Investor shall complete their
respective obligations with respect to any pending purchases under this
Agreement.
     (e) This Agreement shall automatically terminate on the date that the
Company sells and the Investor purchases the full Available Amount as provided
herein, without any action or notice on the part of any party and without any
liability whatsoever of any party to any other party under this Agreement.
     (f) If by the Maturity Date for any reason or for no reason the full
Available Amount under this Agreement has not been purchased as provided for in
Section 2 of this Agreement, this Agreement

-18-

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

 

shall automatically terminate on the Maturity Date, without any action or notice
on the part of any party and without any liability whatsoever of any party to
any other party under this Agreement.
Except as set forth in Sections 11(a) (in respect of an Event of Default under
Sections 10(f), 10(g) and 10(h)) and 11(f), any termination of this Agreement
pursuant to this Section 11 shall be effected by written notice from the Company
to the Investor, or the Investor to the Company, as the case may be, setting
forth the basis for the termination hereof. The representations and warranties
and covenants of the Company and the Investor contained in Sections 3, 4, 5, and
6 hereof, the indemnification provisions set forth in Section 9 hereof and the
agreements and covenants set forth in Sections 10, 11 and 12, shall survive the
Commencement Date and any termination of this Agreement. No termination of this
Agreement shall affect the Company’s or the Investor’s rights or obligations
(i) under the Registration Rights Agreement which shall survive any such
termination or (ii) under this Agreement with respect to pending purchases and
the Company and the Investor shall complete their respective obligations with
respect to any pending purchases under this Agreement.

     12.   MISCELLANEOUS.

     (a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such 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 HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
     (b) 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 signature
delivered by e-mail in 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, not a facsimile signature or a
signature in a “.pdf” format data file.
     (c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

-19-

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

 

     (d) 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.
     (e) Entire Agreement. This Agreement and the Registration Rights Agreement
supersedes all other prior oral or written agreements between the Investor, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to such
matters. The Company acknowledges and agrees that is has not relied on, in any
manner whatsoever, any representations or statements, written or oral, other
than as expressly set forth in this Agreement.
     (f) Notices. Any notices, consents 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 Business 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:
RegeneRx Biopharmaceuticals, Inc.
15245 Shady Grove Road, Ste 470
Rockville, MD 20850
Telephone: (301) 208-9191
Facsimile: (301) 208-9194
Attention: Chief Financial Officer
With a copy to:
Cooley LLP
One Freedom Square, Reston Town Center
11951 Freedom Drive
Reston, VA 20190-5656
Telephone: (703) 456-8034
Facsimile: (703) 456-8100
Attention: Darren K. DeStefano, Esq.
If to the Investor:
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 620
Chicago, IL 60654
Telephone: (312) 822-9300
Facsimile: (312) 822-9301
Attention: Josh Scheinfeld/Jonathan Cope
If to the Transfer Agent:
American Stock Transfer and Trust Company
6201 15th Street

-20-

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

 

Brooklyn, NY 11219
Telephone: (718) 921-8208
Facsimile: (718) 921-8335
Attention: Kevin Jennings
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, and
recipient facsimile number or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
     (g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor, including by merger or
consolidation. The Investor may not assign its rights or obligations under this
Agreement.
     (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
     (i) Publicity. The Investor shall have the right to approve before issuance
any press release, SEC filing or any other public disclosure made by or on
behalf of the Company whatsoever with respect to, in any manner, the Investor,
its purchases hereunder or any aspect of this Agreement or the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Investor, to make any press release or other
public disclosure (including any filings with the SEC) with respect to such
transactions as is required by applicable law and regulations so long as the
Company and its counsel consult with the Investor in connection with any such
press release or other public disclosure at least one (1) Business Day prior to
its release. The Investor must be provided with a copy thereof at least one
(1) Business Day prior to any release or use by the Company thereof. The Company
agrees and acknowledges that its failure to fully comply with this provision
constitutes a material adverse effect on its ability to perform its obligations
under this Agreement.
     (j) 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.
     (k) No Financial Advisor, Placement Agent, Broker or Finder. The Company
represents and warrants to the Investor that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Investor represents and warrants to the Company that it
has not engaged any financial advisor, placement agent, broker or finder in
connection with the transactions contemplated hereby. The Company shall be
responsible for the payment of any fees or commissions, if any, of any financial
advisor, placement agent, broker or finder relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold the Investor
harmless against, any liability, loss or expense (including, without limitation,
attorneys’ fees and out of pocket expenses) arising in connection with any such
claim.

-21-

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

 

     (l) 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.
     (m) Remedies, Other Obligations, Breaches and Injunctive Relief. The
Investor’s remedies provided in this Agreement shall be cumulative and in
addition to all other remedies available to the Investor under this Agreement,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy of the Investor contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy and nothing
herein shall limit the Investor’s right to pursue actual damages for any failure
by the Company to comply with the terms of this Agreement. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
     (n) Enforcement Costs. If: (i) this Agreement is placed by the Investor in
the hands of an attorney for enforcement or is enforced by the Investor through
any legal proceeding; or (ii) an attorney is retained to represent the Investor
in any bankruptcy, reorganization, receivership or other proceedings affecting
creditors’ rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Investor in any other proceedings
whatsoever in connection with this Agreement, then the Company shall pay to the
Investor, as incurred by the Investor, all reasonable costs and expenses
including attorneys’ fees incurred in connection therewith, in addition to all
other amounts due hereunder.
     (o) Failure or Indulgence Not Waiver. No failure or delay in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
* * * * *

-22-

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

 

     IN WITNESS WHEREOF, the Investor and the Company have caused this Purchase
Agreement to be duly executed as of the date first written above.

            THE COMPANY:

REGENERX BIOPHARMACEUTICALS, INC.
      By:   /s/ J.J. Finkelstein         Name:   J.J. Finkelstein       
Title:   President and Chief Executive Officer     

            INVESTOR:

LINCOLN PARK CAPITAL FUND, LLC
BY: LINCOLN PARK CAPITAL, LLC
BY: ROCKLEDGE CAPITAL CORPORATION
      By:   /s/ Josh Scheinfeld         Name:   Josh Scheinfeld        Title:  
President     

-23-

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

 

EXHIBIT A
FORM OF OFFICER’S CERTIFICATE
          This Officer’s Certificate (“Certificate”) is being delivered pursuant
to Section 8(e) of that certain Purchase Agreement dated as of January 4, 2011
(the “Purchase Agreement”), by and between REGENERX BIOPHARMACEUTICALS, INC., a
Delaware corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”). Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Purchase Agreement.
          The undersigned,                       ,                            of
the Company, hereby certifies as follows:
          1. I am the                      of the Company and make the
statements contained in this Certificate;
          2. The representations and warranties of the Company are true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 4 of the Purchase Agreement, in which case, such representations and
warranties are true and correct without further qualification) as of the date
when made and as of the Commencement Date as though made at that time (except
for representations and warranties that speak as of a specific date);
          3. The Company has performed, satisfied and complied in all material
respects with covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Commencement Date.
          4. 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 any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy or insolvency
proceedings. The Company is financially solvent and is generally able to pay its
debts as they become due.
IN WITNESS WHEREOF, I have hereunder signed my name on this       day
of                     .

                      Name:           Title:        

          The undersigned as Secretary of REGENERX BIOPHARMACEUTICALS, INC., a
Delaware corporation, hereby certifies that                      is the duly
elected, appointed, qualified and acting                     
of                      and that the signature appearing above is his genuine
signature.

                      Secretary           

 

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

 

         

EXHIBIT B
FORM OF SECRETARY’S CERTIFICATE
          This Secretary’s Certificate (“Certificate”) is being delivered
pursuant to Section 7(k) of that certain Purchase Agreement dated as of
January 4, 2011 (the “Purchase Agreement”), by and between REGENERX
BIOPHARMACEUTICALS, INC., a Delaware corporation (the “Company”) and LINCOLN
PARK CAPITAL FUND, LLC (the “Investor”), pursuant to which the Company may sell
to the Investor up to Eleven Million Dollars ($11,000,000) of the Company’s
Common Stock, $0.001 par value per share (the “Common Stock”). Terms used herein
and not otherwise defined shall have the meanings ascribed to them in the
Purchase Agreement.
          The undersigned,                     , Secretary of the Company,
hereby certifies as follows:
          1. I am the Secretary of the Company and make the statements contained
in this Secretary’s Certificate.
          2. Attached hereto as Exhibit A and Exhibit B are true, correct and
complete copies of the Company’s bylaws (“Bylaws”) and Certificate of
Incorporation (“Articles”), in each case, as amended through the date hereof,
and no action has been taken by the Company, its directors, officers or
shareholders, in contemplation of the filing of any further amendment relating
to or affecting the Bylaws or Articles.
          3. Attached hereto as Exhibit C are true, correct and complete copies
of the resolutions duly adopted by the Board of Directors of the Company on
        , at which a quorum was present and acting throughout. Such resolutions
have not been amended, modified or rescinded and remain in full force and effect
and such resolutions are the only resolutions adopted by the Company’s Board of
Directors, or any committee thereof, or the shareholders of the Company relating
to or affecting (i) the entering into and performance of the Purchase Agreement,
or the issuance, offering and sale of the Purchase Shares and the Commitment
Shares and (ii) and the performance of the Company of its obligation under the
Transaction Documents as contemplated therein.
          4. As of the date hereof, the authorized, issued and reserved capital
stock of the Company is as set forth on Exhibit D hereto.
     IN WITNESS WHEREOF, I have hereunder signed my name on this            day
of                     .

                      Secretary             

The undersigned as                      of           , a            corporation,
hereby certifies that is the duly elected, appointed, qualified and acting
Secretary of                     , and that the signature appearing above is his
genuine signature.

                                     

 

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

 

EXHIBIT C
FORM OF LETTER TO THE TRANSFER AGENT FOR THE ISSUANCE OF THE INITIAL
COMMITMENT SHARES AT SIGNING OF THE PURCHASE AGREEMENT
[COMPANY LETTERHEAD]
[DATE]
[TRANSFER AGENT]

 

 

 
Re: Issuance of Common Shares to Lincoln Park Capital Fund, LLC
Dear                     ,
On behalf of REGENERX BIOPHARMACEUTICALS, INC., (the “Company”), you are hereby
instructed to issue as soon as possible 958,333 shares of our common stock in
the name of Lincoln Park Capital Fund, LLC. The share certificate should be
dated [DATE OF THE PURCHASE AGREEMENT]. I have included a true and correct copy
of a unanimous written consent executed by all of the members of the Board of
Directors of the Company adopting resolutions approving the issuance of these
shares. The shares should be issued subject to the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.

 

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

 

The share certificate should be sent as soon as possible via overnight mail to
the following address:
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 620
Chicago, IL 60654
Attention: Josh Scheinfeld/Jonathan Cope
Thank you very much for your help. Please call me at                          
if you have any questions or need anything further.

          REGENERX BIOPHARMACEUTICALS, INC.
      BY:          [name]        [title]