LEASE
AGREEMENT
 
 THIS
LEASE AGREEMENT, made this 26th day of April 2004, by and between RED GATE III
LLC (“LANDLORD”) and REXAHN CORPORATION (“TENANT”).
 
 
 WI T N E
S S E T H:
 
 
 DEMISE OF
PREMISES
 
 Landlord
hereby demises unto Tenant, and Tenant hereby leases from Landlord for the terms
and upon the conditions set forth in this Lease 8,030 square feet of space in
the building located at 9620 Medical Center Drive, Suite 100, Rockville,
Maryland (the “Building”), as set forth on Exhibit A, hereto attached, said
space being referred to as the “Premises.”
 
 2.
              TERM
 
 The term
of this Lease shall be for a period of 5 years, commencing on the 1st day of
July 2004, and terminating on the 30th day of June 2009, with an option for an
additional 5 years on the same terms and conditions in this Lease, provided that
Tenant shall have given the Landlord written notice of Tenant’s intention to do
so at least six (6) months prior to the expiration of this Lease and that Tenant
is not in default under this Lease.
 
 In the
event the Landlord is not able to deliver possession of the Premises to Tenant
on the date this Lease is to commence because Landlord has not fully completed
the Landlord’s Work, or an earlier tenant has failed to vacate the Premises, the
commencement date shall be extended to the date said Work is completed and/or
the earlier tenant has vacated and the expiration date shall be similarly
extended.
 
 The date
of delivery of the Premises by Landlord to Tenant shall be that date on which
all required improvements to be furnished by Landlord as stated in Exhibit “A”
have been substantially completed except for punch list items. Rent shall be
pro-rated for any portion of the initial month in which Tenant is required to
commence rental payments hereunder, which does not commence with the first day
thereof.
 
 At any
time prior to delivery of possession of the Premises, Tenant shall have the
right to enter upon the Premises for the purpose of taking measurements,
provided such entry does not unreasonably interfere with or obstruct the
progress of work being done by the Landlord,
 
 3.
              RENT
 
 The
Tenant shall pay to the Landlord an annual rental (herein called “Minimum Rent’)
in the amount of TWO HUNDRED THOUSAND SEVEN HUNDRED FLFTY and 04/100 DOLLARS
($200,750~04), subject to adjustment as hereinafter set forth, payable without
deduction or set off in equal monthly installments of
 SIXTEEN
THOUSAND SEVEN HUNDRED TWENTY NINE and 17/100 DOLLARS ($16,729.17) in advance,
the first installment of which is due and payable upon signing of the Lease and
upon commencement all subsequent installments due and payable on the first day
of each calendar month thereafter during the term of the Lease until the total
rent provided for herein is paid. No payment by Tenant or receipt of Landlord of
a lesser amount than a monthly installment of rent herein stipulated, or
endorsement or statement on any check or any letter accompanying any check for
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such check for payment without prejudice to Landlord’s right to recover the
balance of such rent or pursue any other remedy provided for in this
Lease.
  REXAHN
PAGE 1
  4.
              ADJUSTMENT
      OF MINIMUM RENT
 
 The
Minimum Rent shall be increased at the end of each lease year during the term
hereby by three percent (3%) of the rent then being paid. There shall be no
additional pass-throughs of increases in operating expenses except for real
estate taxes or as otherwise provided for herein.
 
 5.
              REAL
      ESTATE TAXES
 
 In the
event the real estate taxes levied or assessed against the land and Building on
which the Premises are a part in future tax years are greater than the real
estate taxes for the Base Year, the Tenant shall pay within fifteen (15) days
after submission of the bill to Tenant for the increase in real estate taxes, as
additional rent, a proportionate share of such increase, which proportionate
share shall be computed at 12.25% of the increase in taxes, but shall exclude
any fine, penalty, or interest charge for late or non-payment of taxes by
Landlord. The Base Year shall be July 1, 2004, to June 30, 2005.
 
 Any
reasonable expense incurred by Landlord (including counsel fees) in contesting
any tax increase shall be included as an item of taxes for the purpose of
computing additional rent due Landlord. Landlord, however, shall be under no
obligation to contest any tax increase.
 
 6.
              UTILITIES
 
 Tenant
shall be responsible for the payment of all utilities used or consumed by the
Tenant in and upon the Premises. Electric and Gas shall be separately metered.
Water shall be either separately metered or an equitable allocation made between
the Tenants in the Building based on the quantity of water consumed. In the
event any utility service to the Premises shall be interrupted for a continuous
period of more than two (2) days due to the gross negligence or willful
misconduct of Landlord, its agents or servants, the Minimum Rent shall abate
until such services are rendered.
 
 Landlord
shall not be liable to Tenant for any damage or inconvenience caused by the
cessation or interruption of any utility service, or the elevators in the
Building, occasioned by fire, accident, strike or other cause beyond Landlord’s
control.
 
 7.
              USE
      OF PREMISES
 
 Tenant
shall use the Premises only for research laboratory purposes consistent with
Tenant’s business, and for no other purpose, except as approved by Landlord in
advance, in writing, which approval shall not be unreasonably withheld. Tenant
shall not make any use of the Premises which would disturb the quiet enjoyment
of the Landlord or other tenants in the Building or prejudice or increase the
fire insurance premium for the Building, and shall comply with all laws and
regulations of all governmental authorities pertaining to Tenant’s use of
Premises.
  REXAHN
PAGE 2
  8.
              WASTE
      REMOVAL
 
 Tenant
shall be responsible for removal of waste generated by Tenant’s operation. This
includes waste service fees levied by local jurisdictions.
 
 9.
              HAZARDOUS
      MATERIALS
 
 Tenant
shall be permitted to store Hazardous Materials on the Premises and shall comply
with all laws and regulations of all governmental authorities pertaining to
Tenants use of the Premises, including, without limitation, all Environmental
Laws (as hereinafter defined) and laws pertaining to Hazardous Materials and Air
and Water Quality. The term “Hazardous Materials” means and includes any
petroleum products and/or any hazardous toxic or other dangerous waste,
substance or material defined as such in the Environmental Laws. The term
“Environmental Laws” means the Comprehensive Environmental Response,
Compensation and Liability Act, any “Superfund” or “Superlien” law, or any other
federal, state or local statute, law, ordinance, code, regulation, order or
decree regulating, relating to, or imposing liability or standards of conduct
concerning the use or storage of Hazardous Materials. All such materials must be
completely removed upon expiration of this Lease, and any de-contamination
certificates required by the Landlord or any government authority must be
obtained and delivered to the Landlord.
 
 Tenant
shall obtain and maintain, in full force and effect, all necessary government
licenses, permits and approvals legally required for materials used in the
conduct of its business. if the presence of any Hazardous Materials on the
Premises caused or permitted by Tenant results in any contamination of the
Premises or any portion of the Building or Common Areas, Tenant shall promptly
take all actions, at its sole expense, necessary to return the Premises to the
condition existing prior to the introduction of such Hazardous Materials,
provided that all such actions shall be subject to the approval of Landlord,
which approval shall not be unreasonably withheld.
 
 At the
Commencement Date of the Lease and on January 1 of each year thereafter, Tenant
shall disclose to Landlord the names and amounts of all Hazardous Materials
which are to be stored, used or disposed of on the Premises.
 
 Any
Hazardous Materials stored or used on the Premises must not in any way prejudice
the Landlord’s insurance or increase the fire hazards to a greater extent than
necessarily incident to the business for which the Premises are
leased.
 
 10.
              LATE
      CHARGE
 
 ifany installment of rent
accruing herein shall not be paid within five (5) days of due date, and other
sums not paid within fifteen (15) days after written notice to Tenant, such
installment and other sums shall be increased without affecting the Landlord’s
other rights under this Lease, by a late charge of ten percent (10%) of the
delinquent installment. Anything contained herein to the contrary
notwithstanding.
 
 11.
              REPAIRS
      AND MAINTENANCE
 
 Landlord
shall be responsible for all structural repairs, including repairs to the roof
and load-bearing walls of the Building, for maintaining the parking area and
sidewalks, and the Common Areas (as hereinafter defined) in the
Building.
 
 The
Tenant shall be responsible for the maintenance and repair of the Premises and
all fixtures, appliances and equipment therein, including, but not limited to,
the Heating and Air Conditioning system(s) serving Tenant’s suite. Landlord will
pay for major Heating and Air Conditioning component replacement and all repairs
to the Landlord installed heating and air conditioning system(s) in excess of
Three Hundred Dollars ($300.00) per occurrence per Heating and Air Conditioning
unit.
  REXAHN
PAGE 3
  Tenant
shall provide its own char service. Tenant, at its sole expense, shall keep all
Tenant fixtures and equipment in the Premises in safe and sanitary condition and
good order and repair, together with related plumbing, electrical or other
utility service, whether installed by Tenant or by Landlord on Tenant’s behalf.
Tenant shall pay for all damage to the Building and any fixtures and
appurtenances related thereto due to the malfunction, lack of repair, or
improper installation of the Tenant’s fixtures and equipment.
 
 12.
              COMMON
      AREAS
 
 In
addition to the use of the Premises, Tenant, its employees and business invitees
shall have the right to use the Common Areas in common with Landlord and other
tenants of the Building, their employees and visitors. The term “Common Areas’
shall mean those portions of the Building and the land upon which the Building
is erected which Landlord may from time to time designate for Tenant’s
non-exclusive use, which may include the entrance, foyer and lobby corridors,
lavatories, stairwells, elevators, and parking areas. All Common Areas shall be
subject to the exclusive control of the Landlord. The Landlord shall operate,
manage, light and maintain the Common Areas. Landlord reserves the right to
change the 5ize, area, level, location and arrangement of the Common Areas and
any such change or rearrangement shall not affect the obligations of the
Landlord and Tenant hereunder.
 
 13.
              LANDLORD’S
      WORK PRIOR TO COMMENCEMENT OF TERM
 
 Landlord
shall make the following improvements to the Premises prior to the commencement
of the term of the Lease:
 
 Construction
in accordance with Exhibit A.
 
 14.
              TENANT
      ALTERATIONS
 
 All
alterations, improvements, or additions to the demised Premises to be made by
Tenant shall be subject to the written consent of the Landlord, which consent
shall not be unreasonably withheld, provided such alterations and improvements
do not weaken the structural integrity of the Building or detract from its
dignity and/or uniformity. All alterations and improvements and/or additions
made by Tenant shall remain upon the Premises at the expiration or earlier
termination of this Lease and shall become the property of the Landlord, unless
Landlord shall, at the time of approval of the alteration, provide written
notice to Tenant to remove the same, in which event Tenant shall remove such
alterations, improvements and/or additions, and restore the Premises to the same
good order and condition in which it was at the commencement of this Lease,
reasonable wear and tear and unavoidable casualty excepted. Should Tenant fail
to do so, Landlord may do so, collecting the reasonable cost and expense thereof
from Tenant as additional rent.
 
 15.
              TRADE
      FIXTURES
 
 All trade
fixtures, telephone equipment, and apparatus installed by Tenant in the Premises
shall remain the property of Tenant and shall be removed at the expiration or
earlier termination of this Lease and, upon such removal, Tenant shall repair
any damage caused by the removal and shall promptly restore the Premises to
their good order and condition. Any such trade fixture not removed prior to such
termination shall be considered abandoned property, but such abandonment shall
not release Tenant of its obligation to pay for the cost of removing such trade
fixtures and repairing any damage caused by the removal.
  REXAHN
PAGE 4
  16.
              EQUIPMENT/BENCHWORK
 
 Landlord
has provided Laboratory Equipment and Benchwork listed below. It is the Tenant’s
responsibility to service and maintain these items by obtaining service
contracts with qualified vendors. All costs associated with the repair and
maintenance of these items is Tenant’s responsibility. Tenant is also
responsible for providing and installing HEPA filters if
applicable.
 
 a.)
Kewaunee 4’ fume hood
 b.)
Dayton in-line exhaust fan c.) Scotsman ice machine
 d.)
Getinge decomat 8-666 rack washer
 e.)
Environmental Techtonics autoclave, model 2401, S/N 100841
 f.)
Rietshle vacuum system with pump, model VXSD 200-208-X-F-20
 g.)
General ionic water conditioner with S/U hot water heater
 h.) Onan
emergency generator, model 500SGCA, S/N K920 492722
 i.) Onan
transfer switch, model OTCO 2250 14G. S/N B890212202
 j.)Laboratory
benchwork/countertops
 
 Note: All
equipment and benchwork provided by Landlord will remain the property of the
Landlord.
 
 17.
              QUIET
      ENJOYMENT
 
 Landlord
covenants that, upon payment of the rent herein provided and performance by the
Tenant of all other covenants herein contained, Tenant shall and may peaceably
and quietly have, hold and enjoy the Premises for the term hereof and
options.
 
 18.
              SURRENDER
      OF PREMISES
 
 Upon the
expiration or termination of this Lease, Tenant shall quit and surrender the
Premises to the Landlord broom clean and shall remove all of its property
therefrom, if the removal of any such property shall result in damaging the
Premises, or leaving any holes in the floors, walls or ceiling therein, the
Tenant shall make the appropriate repairs with Landlord approved building
materials prior to the expiration of this Lease. The obligation of this
paragraph shall survive the termination of the Lease.
 
 19.
              INSURANCE
 
 Tenant
covenants and agrees to maintain and carry, at all times during the term of this
Lease, in companies qualified and authorized to transact business in the State
of Maryland, general liability insurance in amounts of $500,000.00 per person,
$1,000,000.00 per occurrence and $100,000.00 for damage to property on the
Premises or arising out of the use thereof by Tenant or its agents. All policies
of insurance shall provide that they may not be canceled, except on thirty (30)
days written notice to Landlord, and all such policies shall name Landlord as an
additional insured.
 
 Prior to
commencement, Tenant shall furnish Landlord with satisfactory proof that the
insurance herein provided for is at all times in full force and effect. If
either party hereto is paid any proceeds under any policy of insurance naming
such party as an insured on account of any loss, damage or liability, then such
party hereby releases the other partyto (and only to) the
extent of the amount of such proceeds, from any and all liability for such loss
or damage, notwithstandingnegligent or intentionally tortuous act or omission of the other party,
itsagents or employees;
provided, such release shall be effective only as to a loss of damage occurringwhile the appropriate
policy of insurance of the releasing party provides that such release shall not
impair the effectiveness of such policy or the insured’sability to recover
thereunder. Each party hereto shall use reasonable efforts to have a clause to
such effect included in its said policies, and shall promptly notify the other
in writingif such clause
cannot be included in any such policy.
  REXAHN
PAGE 5
 
 20.
              INDEMNIFICATION
 
 Tenant
shall indemnify and hold harmless the Landlord from, and name LANDLORD as
additional insuredon
policy regarding, any and all liability, damage, -expense, cause of action, or
claimsarising out of
injury to persons or to property on the Premises, except for the negligence or
willful misconduct of Landlord, its agents, employees, or servants.
 
 21.
              DAMAGE
      BY FIRE OR CASUALTY
 
 (a)
              if
      the Premises are damaged by fire or other casualty, but are not thereby
      rendered untenantable in whole or in part, Landlord, at its ownexpense, and subject
      to the limitations set forth in this Lease, shall cause such damage to be
      repaired and the Minimum Rent and Additional Rent shall not be
      abated.
 
 If, by
reason of any damage or destruction, the Premises shall be rendered untenantable
in whole or in partand
cannot be repaired and made tenantable withinone hundred twenty(120) days after such
damage: (i) Landlord, at its option and its ownexpense, maycause the damage to be
repaired and the Minimum Rent and Additional Rent shall be abated
proportionately as to the portion of the Premises rendered untenantable while it
is untenantable; or (ii) Landlord shall have the right, to be exercised by
notice in writingdelivered to Tenant within
thirty(30) days of the occurrence of such damage or destruction, to
terminate this Lease, whereupon the MinimumRent and Additional Rent
shall be adjusted as of the date of such termination.
 
 (b)
              In the event that twenty-five
      percent (25%) or more of the rentable floor area of the Building shall be
      damaged or destroyed by fire or other cause, notwithstanding that the
      Premises may be unaffected by suchfire or other damage, Landlord shall
      have the right, to be exercised by notice in writing delivered to Tenant
      within thirty (30) days after such occurrence, to terminate this Lease.
      Upon the giving of such notice, the Minimum Rent and Additional Rent shall
      be adjusted as of the date of termination and ThisLease shall thereupon
      terminate.
  22.
              ASSIGNMENT
      OR SUBLETTING
 
 Tenant
acknowledges that Landlord has entered into thisLease because of Tenants
financial strength, goodwill, ability and expertise and thataccordingly, this lease is
personal to Tenant. Taking this into consideration, tenant shall not assign,
mortgage, sublet, pledge or encumber this Lease, in whole or in part, except
with the writtenconsent
of the Landlord, which shall not be unreasonably withheld or delayed. Tenant
agrees that, in the event of any such assignment or subletting, Tenant shall
nevertheless remain liable for the performance of all terms, covenants,and conditions
of this Lease.
  REXAHN
PAGE 6
 
 In the
event the Landlord consents to an assignment of the Lease,any money or
consideration to be paid to Tenant for the assignment shall be paid to the
Landlord as partial consideration for the Landlord’s consent to the
assignment.
 
 In the
event the Landlord consents to a sublease of the Premises, or any portion
thereof, Tenant shall pay to the Landlord a sumequal to (1) any money, rent
or other consideration paid to the Tenant by any subtenant in excess of the
pro-rata portion of the rent for such space then being paid by Tenant to
Landlord under this Lease and (2) any other profit or gainrealized by the Tenant from
such subletting. All sums payable hereunder by Tenant shall be paid to Landlord
as additional rent immediately upon the receipt thereof by Tenant.
 
 23.
              SUBORDINATION
      AND ATTORNMENT
 
 This
Lease shall be subject to and subordinate at all timesto the lien of any
mortgage and/or deeds of trustand all land leases now or hereafter made on any portion of the Premises,
and to all advances thereunder, provided the mortgagee or trusteenamed in said mortgage
or deed of trust shall agree to recognize this Lease and agrees, in the event of
foreclosure, not to disturbthe Tenant’s possession hereunder, provided Tenant is not in default
under this Lease. This subordination shall be self-operative and no further
instrument of subordination shall be required.
 
 if any
proceedings are commenced to foreclose any mortgage or deed of trustencumbering the Premises,
Tenant agrees to attornto
the purchaser at the foreclosure sale, if requested to do so by any such
purchaser, and to recognize such purchaser as the Landlord under this Lease,
provided purchaser shall agree that Tenant’s rights hereunder shall not be
disturbed so long as Tenant has not committed any event of default as to which
the applicable cure period has expired.
 
 24.
              CONDEMNATION
 
 (a)
              If
      the whole of the Premises shall be taken by any public or quasi-public
      authority under the power of eminent domain, condemnation or conveyance in
      lieu thereof, then this Lease shall terminate as of the date on which
      possession of the Premises is required to be surrendered to the condemning
      authority and the Tenant shall have no claim against Landlord or the
      condemning authority for the value of the unexpired termof this Lease. Tenant
      shall have the right to claim, however, the unamortized cost of any
      improvements or additions made to the Premises by Tenant at itscost, the value of any
      Tenant fixtures and furnishings and any moving
  expenses.
 
 (b)
              if
      a portion of the Premises shall be so taken or conveyed, and if such
      partial taking or conveyance shall render the Premises unsuitable for the
      business of the Tenant, then the term of this Lease shall cease and
      terminate as of the date on which possession of the portion of the
      Premises is surrendered to the condemning authority, and Tenant shall have
      no claim against Landlord or the condemning authority for the value of any
      unexpired term of this Lease.
 
 In the
event such partial takingor conveyance is not extensive enough to render the Premises untenantable
for the business of Tenant, this Lease shall continue in full force and effect,except that the Minimum
Rent shall be reduced in the same proportion that the floor area of the Premisesso taken or conveyed
bears to such floor area
immediately priorto such taking or conveyance.
  REXAHN
PAGE 7
 
 In the
event of such partial taking and continuation of Lease, Landlord shall promptly
restore the Premises as nearly as practicalto the condition
comparable to that whichexisted prior to the condemnation.
 
 25.
              EVENTS
      OF DEFAULT
 
 The occurrence of any of the following
shall constitute an event ofdefault
 
 hereunder:
 (a)
              Failure
      of Tenant to pay installmentof rent within
      five (5) days of the due date, or failure of Tenant to pay within fifteen
      (15) days afterreceipt of writtennotice any other sum herein required to be paid by
      Tenant.
 
 (b)
              Tenant’s
      failure to performany other covenant or condition of this Lease within thirty (30)
      days afterreceipt
      of written notice and demand, unless the failureis of such a
      character as to require more than thirty(30) days to cure
      in whichevent
      Tenant’s failure to proceed diligently to curesuch failure shall
      constitute an event of default.
 
 26.
              LANDLORD’S
      REMEDIES
 
 Upon the
occurrence of any event of default, Landlord may, at Landlord’s sole option,
exercise any or all of the following remedies, together with any such other
remedies as may be available to Landlord at law or in equity.
 
 (a)
              Landlord
      may terminate this Lease by giving Tenant writtennotice of its
      election to do so, as of a specified date not less than thirty (30) days
      afterthe date of
      the giving of such notice and this Lease shall then expire on the date so
      specified, and Landlord shall then be entitled to immediately regain
      possession of the Premises as if the date had been originally fixed as the
      expiration date of the term of this Lease. Landlord may then re-enter upon
      the Premises, either with or without due process of law, and remove all
      persons therefrom, the statutorynotice to quitor any other notice
      to quit being hereby expressly waived by Tenant. Tenantexpressly agrees
      that the exercise by Landlord of the right of re-entry shall not be a bar
      to or prejudice in any way other legal remedies available to Landlord. In
      that event, Landlord shall be entitled to recover from Tenant as and for
      liquidated damages an amount equal to the rent and additional rent reservedin this Lease
      less any and all amounts
      receivedby Landlord from the rental of the Premises to another
      tenant. Nothingherein contained, however, shall limit or prejudice the right of
      Landlord to prove for and obtain asliquidated
      damages, by reason of such termination, an amount equal to the maximum
      allowed by any statute or rule of law in effect at the timewhen, and governing
      the proceedings in which such damages areto be proved,
      whether or not such amount may be greater, equal to, or less than the
      amount of the difference referred to above, and the Landlord may,in his own name, but
      as agent for Tenant, re-let the Premises. Any recoveryby the Landlord
      shall be limited to the rent hereunder (plus any costs incurred in
      re-letting) less any rent actually paid by the new
  tenant.
 
 (b)
              No
      termination of this Lease or any takingof possession of
      the Premises shall deprive Landlord of any of its remedies or actions
      against Tenant for past or future rent, nor shallthe bringingof any action for
      rent or breach of covenant, or the resort to any other remedy herein
      provided for the recovery of rent, be construed as a waiver of the right
      to obtain possession of the
Premises.
  REXAHN
PAGE 8
 
 (c)
              In
      addition to any damages becoming due under thisparagraph, Landlord
      shallbe entitled to
      recover from Tenant and Tenant shallpay to Landlord an
      amount equal to all expenses, including attorneys’ fees,if any, incurred by
      the Landlord in recovering possession of the Premises, and all reasonable
      costs and charges for the care of said Premises while vacant, which
      damages shall be due and payable by Tenant to Landlord at such timeor times as such
      expenses are incurred by the
Landlord.
 
 (d)
              In
      the event of a default or threatened default by Tenant of any of the terms
      or conditions of thisLease, Landlord shall have the right of injunction and the right to
      invoke any remedy allowed by law or in equityas if no specific
      remedies of Landlord were set forth in thisLease.
 
 (e)
              If
      default be made and a compromise and settlement shallbe had thereupon, it
      shallnot constitute
      a waiver of any covenant herein contained, nor of the Lease
      itself.
 
 27.
              MGHTS
      OF LANDLORD
 
 Landlord
reserves the following rights with respect to the Premises:
 
 (a)
              During
      normal business hours, upon 24 hours notice, to go upon and inspect the
      Premises, and at Landlord’s option, to make repairs, alterations and
      additions to the Premises or the Building of which the Premises are a
      part, provided there is no interference with Tenant’s occupancy. An Agent
      of the Tenant may be present for inspection, if requested by
      Tenant.
 
 (b)
              To
      display, within sixty (60) days prior to the expiration of thisLease or after notice
      from either party of intention to terminate this Lease, a “For Rent” sign,
      and all of said signs which shallbe placed upon such
      partof the Premises
      as Landlord shall determine, except on doors leading into the Premises.
      Prospective purchasers or tenants authorized by Landlord may inspectthe Premises
      during normal business hours following adequate notice to
      Tenant.
 
 (c)
              To
      install, place upon, or fix to the roof and exterior walls of the
      Premises, equipment, signs, displays, antennae, and any other object or
      structure of any kind, providing the sameshall not materially
      impair the structural integrity of the Building or interfere with Tenant’s
      occupancy.
 
 28.
              HOLDING
      OVER
 
 If Tenant
holds possession of the Premises after the termination of this Lease or any
renewal or extension thereof, Tenant shall become a Tenant from month to month
at 150% of the then current escalated rental rate.
 
 29.
              WAWER
      OF CLAIMS
 
 Except as
mayresult from their
gross negligence, Landlord and Landlord’s agents, employees, and contractors
shall not be liable for, and Tenant hereby releases all claims for, damages to
persons or property sustained by Tenant (or any person claiming through Tenant)
resulting from any fire, accident, occurrence or condition in or upon the
Premises or Building, including but not limited to such claims for damage
resulting from (1) any defect in or failure of plumbing, heating or
air-conditioning equipment, electric wiring or installation thereof, water
pipes, stairs, railings or walks; (2) any equipment or apparatus becoming out of
repair; (3) the bursting, leaking or runningof any tank, washstand,
water closet, waste pipe, drain or any other pipe or tank, upon or about such
building or premises; (4) the backing up of any sewer pipe or downspout; (5) the
escape of steam or hot water; (6) water, snow or ice being upon or coming
through the roof or any other place upon or near the Building or Premises or
otherwise; (7)the
falling of anyfixtures,
plaster or stucco; (8) broken glass; and (9) any act or omission of occupants of
adjoining or contiguous property or buildings.
  REXAHN
PAGE 9
 
 30.
              NOTICE
 
 All
notices required under this Lease shall be given in writingand shall be deemed to
be properly serviced if sent by certified or registered United States Mail,
postage prepaid, as follows:
 
 if
      to the Landlord:
              REDGATE III
      LLC
 15215
Shady Grove Road
 Suite
201
 Rockville,
Maryland 20850
 
 If
      to the Tenant:
              REXAHN
      CORPORATION
 9620 Medical CenterDrive
 Suite100
 Rockville,
Maryland 20850
 
 or to
such other address as either may have designated from timeto time by writtennotice to the other. The
date of service of such notices shallbe the date such notices
are deposited in any United States Post Office.
 
 31.
              COVENANTS
      OF TENANT
 
 Tenant
covenants and agrees:
 
 (a)
              To
      give to Landlord prompt written notice of any accident, fire, or damage
      occurring on or to the Premises.
 
 (b)
              To
      keep the thermostats in the Premises set at a temperature sufficient to
      prevent freezing of water pipes, fixtures and HVAC
  units.
 
 (c)
              To
      keep the Premises clean, orderly, sanitary, and free from all
      objectionable odors and from insects, verminand other
      pests.
 
 (d)
              To
      comply with the requirements of the State, Federal and County statutes,
      ordinances, and regulations applicable to Tenant and its use of the
      Premises, and to save Landlord harmless from penalties, fines, costs, and
      expenses resulting from failure to do so, provided Tenant shallnot be obligated to
      make structuralrepairs or alterations to so
comply.
 
 (e)
              Tenant
      shall promptly pay all contractors, suppliers of material and persons it
      engages to perform work and provide materials for construction work on the
      Premises so as to minimize the possibility of a lien attaching to the
      Premises. Should any such lien be made or filed, Tenant shall cause the
      same to be discharged and released of record by bond or otherwise within
      ten (10) days of receipt of written request from
  Landlord.
  (f)
              Tenant
      is responsible for the security of the
Premises.
  REXAHN
PAGE 10
 
 32.
              LANDLORD’S
      RIGHTTO ALTER SITE
      PLAN
 
 LANDLORD
shall, from timeto time,have the right to alter or
modifythe site plan of
the Building and to rearrange the driveways and parking areas, as well asthe
entrance and exits to the Premises.
 
 33.
              PARKING
      SPACES
 
 LANDLORD
agrees to furnish 31/3
unreserved parkingspaces
per thousand square feet of space occupied by the TENANT.
 
 34.
              ENTIRE
      AGREEMENT
 
 ThisLease containsthe entire agreement of
the parties. There are no oral agreements existing between them.
 
 35.
              SUCCESSORS
      AND ASSIGNS
 
 This Lease, and the covenants and
conditions herein contained shall inure to the benefit of and be binding upon
the Landlord,its successors andassigns, andshall inure to thebenefit of and be binding upon the Tenant, its
successors andassigns, ifpermitted.
 
 36.
              BANKRUPTCY
 
 if Tenant
shall make an assignment of its assets for the benefit of creditors, or if
Tenant shallfile a
voluntary petition in bankruptcy,or if any involuntary petition in bankruptcy or for receivership be
instituted against the Tenantand the same be not dismissed within thirty(30) days of the
filing thereof, or if Tenant shallbe adjudged bankrupt,then and in any of
saidevents, thisLease shall immediatelycease and
terminateat the option of
the Landlordwith the
sameforce and effect as
though the date of said event was the date herein fixed for expiration of the
termof this
Lease.
 
 37.
              NON-DEL
      IVERY
 
 In the
event the Landlord shall be unable to give possession of the Premises because constructionof the
Building is not complete or for any other cause reasonably beyond the control of
the Landlord,the Landlord
shall not be liable to Tenant for any damage resultingfrom failureto give
possession.
 
 38.
              PARTIAL
      INVALIDITY
 
 if any
term, covenant, or condition of this Leaseor the application
thereof to any person or circumstance shallbe held to be invalid and
unenforceable, the remainder of this Lease, and the application of such terms, covenants,or conditions
shallbe valid and
enforceable to the fullest extent permitted by law.
 
 39.
              FORCE
      MAJEUR
 
 With the
exception of those provisions contained herein regarding the payment of rent,
the inabilityof either
party to perform any of the terms, covenantsor conditions
of thisLease shallnot be deemed a default if
the same shallbe due to
any cause beyond the control of that party.
 
 40.
              ESTOPPEL
      CERTIFICATE
 
 The
Tenant shallfrom timeto time, withinfive (5) days after being
requested to do so by the Landlord or any Mortgagee, execute, acknowledge and
deliver to the Landlord (or, at the Landlord’s request, to any existing or
prospective purchasers transferee, assignee or Mortgagee of any or all of the
Premises) an instrument in recordable form, certifying (a) that this Lease is
unmodified and in full force and effect (or, if there has been any modification
thereof, that it is in full force and effect as so modified, stating therein the
nature of such modification); (b) as to the dates to which the Minimum Rent and
other chargesarising
hereunder have been paid; (c) as to the amount of any prepaid Rent or any creditdue to the Tenant
hereunder; (d) that the Tenant has accepted possession of the Premises, and the
date on which the Term commenced; (e) as to whether, to the best knowledge,
information and belief of the signer of such certificate, the Landlord or the
Tenant is then in default in performing any of its obligations hereunder (and,
if so, specifying the nature of each such default); and (f) as to any other fact
or condition reasonably requested by the Landlord or such other addressee. In
the event the Tenant fails or refuses to provide such a certificate, Tenant
shall be liable to Landlord for any loss or damage (including reasonable counsel
fees) arising out of or in connection with such failure or
refusal.
  REXAHN
PAGE 11
  IN
WITNESS WHEREOF, the parties have caused this Lease Agreement to be executed on
the year and date first written.
 
 
 LANDLORD:WITNESS:
              
              RED
      GATE III LLC/s/
      William M. RickmanBy:
              William
      M. RickmanTENANT:WITNESS:
              
              REXAHN
      CORPORATION/s/
      Chang H. AhnBy:
              Chang
      H. Ahn, Ph. DChairman/Chief
      Executive Officer