ex10_1.htm


    
      

    

    Exhibit
      10.1

     

    SECURITIES
      PURCHASE AGREEMENT

    


    This
      SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
      as of November 19, 2007, by and between Rexahn Pharmaceuticals, Inc., a Delaware
      corporation (the “Company”), and KT&G Corporation, a Korean
      corporation (the "Purchaser").

    


    Recitals

    


    The
      Company and the Purchaser are executing and delivering this Agreement in
      reliance upon the exemption from securities registration afforded by Section
      4(2) under the Securities Act of 1933, as amended (the “1933 Act”), and
      the provisions of Regulation D (“Regulation D”), as promulgated by the
      U.S. Securities and Exchange Commission (the “SEC”) under the 1933
      Act.

    


    The
      Purchaser wishes to purchase, and the Company wishes to sell and issue to the
      Purchaser, upon the terms and subject to the conditions stated in this
      Agreement, (i) 2,142,858 shares (the “Initial Shares”) of its common
      stock, par value $0.0001 per share (the “Common Stock”), and (ii) a
      warrant, in substantially the form attached hereto as Exhibit A (the
“Warrant”), to acquire up to 428,572 shares of Common Stock (as
      exercised, the “Warrant Shares”) at an exercise price of $1.80 per share,
      for aggregate cash consideration of $3,000,001.20.

    


    Contemporaneous
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement, in the form attached
      hereto as Exhibit B (the “Registration Rights Agreement”),
      pursuant to which the Company has agreed to provide certain registration rights
      under the 1933 Act and the rules and regulations promulgated thereunder, and
      applicable state securities laws.

    


    Agreement

    


    NOW,
      THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
      and for other good and valuable consideration, the receipt and sufficiency
      of
      which is hereby acknowledged, the Company and the Purchaser agree as
      follows:

    


    1.         
         DEFINITIONS.  In addition to those terms
      defined above and elsewhere in this Agreement, for the purposes of this
      Agreement, the following terms shall have the meanings here set
      forth:

    


    1.1           “1934
      Act” means the Securities Exchange Act of 1934, as amended.

    


    1.2           “Affiliate”
      means, with respect to any Person, any other Person that directly or indirectly
      through one or more intermediaries controls, is controlled by or is under common
      control with, such Person, as such terms are used in and construed under Rule
      144 under the 1933 Act.

    


    1.3           “Business
      Day” means any day other than Saturday, Sunday or any other day on which
      commercial banks in the City of New York are authorized or required by law
      to
      remain closed.

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    1.4           “Closing”
      means the closing of the purchase and sale of the Securities pursuant to
Section 2.1.

    


    1.5           “Closing
      Date” means the date and time of the Closing and shall be on such date amd
      time as is mutually agreed upon but no later than December 31, 2007 by the
      Company and the Purchaser.

    


    1.6           “Effective
      Date” means the date that the Registration Statement is first declared
      effective by the SEC.

    


    1.7           “Eligible
      Market” means any of the New York Stock Exchange, the American Stock
      Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
      Capital Market or the NASD Over-the-Counter Bulletin Board.

    


    1.8           “Lien”
      means any lien, charge, claim, security interest, encumbrance, right of first
      refusal or other restriction.

    


    1.9           “Material
      Adverse Effect” means a material adverse effect on (i) the condition
      (financial or otherwise), business, assets or results of operations of the
      Company,  (ii) the Company’s ability to perform any of its obligations
      under the terms of the Transaction Documents in any material respect or (iii)
      the rights and remedies of the Purchaser under the Transaction
      Documents.

    


    1.10           “Person”
      means an individual, corporation, partnership, limited liability company, trust,
      business trust, association, joint stock company, joint venture, pool,
      syndicate, sole proprietorship, unincorporated organization, governmental
      authority or any other form of entity not specifically listed
      herein.

    


    1.11           “Registration
      Statement” means a registration statement meeting the requirements set forth
      in the Registration Rights Agreement and covering the resale of the Initial
      Shares and the Warrant Shares.

    


    1.12           “Securities”
      means the Common Stock, the Warrant and the Warrant Shares issued or issuable
      pursuant to the Transaction Documents.

    


    1.13           “Subsidiary”
      means any Person in which the Company, directly or indirectly, owns capital
      stock or holds an equity or similar interest.

    


    1.14           “Trading
      Day” means (a) any day on which the Common Stock is listed or quoted and
      traded on its primary Trading Market, (b) if the Common Stock is not then listed
      or quoted and traded on any Eligible Market, then a day on which trading occurs
      on the NASDAQ Global Market (or any successor thereto), or (c) if trading ceases
      to occur on the NASDAQ Global Market (or any successor thereto), any Business
      Day.

    


    
      
        
          
          

        

        
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    1.15           “Trading
      Market” means the NASD Over-the-Counter Bulletin Board or any other Eligible
      Market, or any other national securities exchange, market or trading or
      quotation facility on which the Common Stock is then listed or
      quoted.

    


    1.16           “Transaction
      Documents” means this Agreement, the Registration Rights Agreement, the
      Warrant and any other agreement entered into, now or in the future, by the
      Company in connection with this Agreement or any of the other Transaction
      Documents.

    


    1.17           List
      of Additional Definitions.  The following is a list of additional
      terms used in this Agreement and a reference to the Section hereof in which
      such
      term is defined:

    


    
      	
              Term

            	
              Section

            
	
              Action

            	
              3.8

            
	
              Additional
                Shares of Stock

            	
              5.7(b)

            
	
              Adjusted
                Initial Shares

            	
              5.7(b)

            
	
              Adjusted
                Purchase Price

            	
              5.7(b)

            
	
              Aggregate
                Consideration

            	
              5.7(b)

            
	
              Agreement

            	
              Preamble

            
	
              Common
                Stock

            	
              Recitals

            
	
              Company

            	
              Preamble

            
	
              Diluted
                Price

            	
              5.8(a)

            
	
              Initial
                Shares

            	
              Recitals

            
	
              Make-Whole
                Number

            	
              5.7(b)

            
	
              Purchase
                Price

            	
              2.1

            
	
              Purchaser

            	
              Preamble

            
	
              Registration
                Rights Agreement

            	
              Recitals

            
	
              Regulation
                D

            	
              Recitals

            
	
              SEC

            	
              Recitals

            
	
              Warrant

            	
              Recitals

            
	
              Warrant
                Shares

            	
              Recitals

            
	
              1933
                Act

            	
              Preamble

            


    

    


    
      
        
          
          

        

        
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    2.          PURCHASE
      AND SALE OF SECURITIES.

     

    2.1           Purchase
      of the Initial Shares and Warrant.  Subject to the terms and
      conditions of this Agreement and on the basis of the representations and
      warranties made herein, at the Closing the Company hereby agrees to sell and
      issue to the Purchaser, and the Purchaser hereby agrees to purchase from the
      Company, the Initial Shares and the Warrant for the aggregate purchase price
      of
      US$3,000,001.20 (the “Purchase Price”).

    


    2.2           Time
      and Place of Closing.  The Closing shall take place at the offices
      of Chadbourne & Parke LLP, 1200 New Hampshire Avenue, N.W., Washington,
      DC  20036, on the third Business Day following the date on which each
      of the conditions to the obligations of the parties to consummate the
      transactions contemplated hereby have been satisfied.

    


    2.3           Closing
      Deliveries.

    


    (a)           At
      the Closing, the Company shall deliver or cause to be delivered to the Purchaser
      the following:

    


    (i)     
             a stock certificate, free and clear of all
      restrictive legends (except as expressly provided in Section 6.1(b)),
      evidencing the Initial Shares, registered in the name of the
      Purchaser;

     

    (ii)        
         the Warrant, issued in the name of the Purchaser, exercisable
      for up to 428,572 Warrant Shares;

    


    (iii)           the
      executed Registration Rights Agreement; and

    


    (iv)           any
      other documents reasonably requested by the Purchaser or its counsel in
      connection with the Closing, including, without limitation, certified copies
      of
      the Company’s certificate of incorporation, certificates of good standing and
      customary officers’ and secretary’s certificates.

    


    (b)           At
      the Closing, the Purchaser shall deliver or cause to be delivered to the Company
      the Purchase Price of US$3,000,001.20 by wire transfer of immediately available
      federal funds to the account of the Company.  Prior to Closing, the
      Company shall notify the Purchaser as to the account number and ABA routing
      number for such account.

    


    2.4           Use
      of Proceeds.  The Company will use the net proceeds of the
      issuance and sale of Initial Shares and the Warrant for its general working
      capital and other corporate purposes.

    


    
      
        
          
          

        

        
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    3.          
        REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The
      Company hereby represents and warrants to the Purchaser as follows:

    


    3.1           Subsidiaries.  The
      Company has no direct or indirect Subsidiaries other than those listed in
Schedule 3.1.  Except as disclosed in Schedule 3.1, the
      Company owns, directly or indirectly, all of the capital stock or comparable
      equity interests of each Subsidiary free and clear of any Lien, and all the
      issued and outstanding shares of capital stock or comparable equity interests
      of
      each Subsidiary are validly issued and are fully paid, non-assessable and free
      of preemptive and similar rights.

    


    3.2           Organization
      and Good Standing.  Each of the Company and each Subsidiary is a
      corporation validly existing and in good standing under the laws of the
      jurisdiction of its incorporation or organization (as applicable), with all
      requisite power and authority to carry on its business as presently conducted
      and own and use its properties and assets.  Each of the Company and
      each Subsidiary is authorized to conduct business as a foreign corporation
      and
      is in good standing in each jurisdiction where the conduct of its business
      or
      the ownership of its property requires such qualification, except where the
      failure to be so qualified and in good standing would not, individually or
      in
      the aggregate, reasonably be expected to have or result in a Material Adverse
      Effect.

    


    3.3           Authorization;
      Enforcement.  The Company has the requisite corporate power and
      authority to enter into and to consummate the transactions contemplated by
      each
      of the Transaction Documents and otherwise to carry out its obligations
      hereunder and thereunder.  The execution and delivery of each of the
      Transaction Documents by the Company and the consummation by it of the
      transactions contemplated hereunder and thereunder have been duly authorized
      by
      all necessary action on the part of the Company and no further action is
      required by the Company in connection therewith.  Each Transaction
      Document has been (or upon delivery will have been) duly executed by the Company
      and, when delivered in accordance with the terms hereof, will constitute the
      valid and binding obligation of the Company enforceable against the Company
      in
      accordance with its terms.

    


    3.4           No
      Conflicts.  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 do not and will not (a) conflict
      with or violate any provision of the Company’s or any Subsidiary’s certificate
      or articles of incorporation, bylaws or other organizational or charter
      documents, (b) conflict with, or constitute a default (or an event that with
      notice or lapse of time or both would become a default) under, or give to others
      any rights of termination, amendment, acceleration or cancellation (with or
      without notice, lapse of time or both) of, any agreement, credit facility,
      debt
      or other instrument (evidencing a Company or Subsidiary debt or otherwise)
      or
      other understanding to which the Company or any Subsidiary is a party or by
      which any property or asset of the Company or any Subsidiary is bound or
      affected, or (c) result in a violation of any law, rule, regulation, order,
      judgment, injunction, decree or other restriction of any court or governmental
      authority to which the Company or a Subsidiary is subject (assuming the accuracy
      of the Purchaser’s representations and warranties and compliance by the
      Purchaser with its respective covenants as set forth in this Agreement),
      including federal and state securities laws and regulations and the rules and
      regulations of any self-regulatory organization to which the Company or its
      securities are subject, or by which any property or asset of the Company or
      a
      Subsidiary is bound or affected; except in the case of each of clauses (b)
      and
      (c), such as would not, individually or in the aggregate, reasonably be expected
      to have or result in a Material Adverse Effect.

    


    
      
        
          
          

        

        
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    3.5           Issuance
      of the Securities.  The Securities have been duly
      authorized.  The Initial Shares and Warrant, when issued and paid for
      in accordance with the terms of this Agreement, and the Warrant Shares issuable
      upon exercise of the Warrant when so issued and paid for in accordance with
      the
      terms of the Warrant, will be validly issued, fully paid and nonassessable,
      and
      free and clear of all Liens and charges and shall not be subject to preemptive
      or similar rights.  The Company has reserved from its duly authorized
      capital stock the maximum number of shares of Common Stock to be issued to
      the
      Purchaser upon exercise of the Securities.  Assuming the continued
      validity of the Purchaser’s representations and warranties contained in
Section 4, the offer, issuance and sale of the Securities to the
      Purchaser pursuant to this Agreement and upon exercise of the Warrant are exempt
      from registration requirements of the 1933 Act.

    


    3.6           Capitalization.  The
      aggregate number of shares and type of all authorized, issued and outstanding
      capital stock, options and other securities of the Company (whether or not
      presently convertible into or exercisable or exchangeable for shares of capital
      stock of the Company) is set forth in Schedule 3.6.  All
      outstanding shares of capital stock are duly authorized, validly issued, fully
      paid and nonassessable and have been issued in compliance with all applicable
      securities laws.  Except as set forth in Schedule 3.6 and
      except for customary adjustments as a result of stock dividends, stock splits,
      combinations of shares, reorganizations, recapitalizations, reclassifications
      or
      other similar events, there are no anti-dilution or price adjustment provisions
      contained in any security issued by the Company (or in any agreement providing
      rights to security holders), and the issuance and sale of the Securities will
      not obligate the Company to issue shares of Common Stock or other securities
      to
      any Person (other than the Purchasers) and will not result in a right of any
      holder of Company securities to adjust the exercise, conversion, exchange or
      reset price under such securities.

    


    3.7           Answer
      to all Inquires.  The Company has answered all inquiries that the
      Purchaser has made of it concerning the Company, its business and financial
      condition, or any other matter relating to the operation of the Company and
      the
      offering and sale of the Initial Shares and Warrant. No written statement or
      inducement that is contrary to the information conveyed to the Purchaser that
      if
      untrue would have a material effect on the Company’s business taken as a whole
      has been made by or on behalf of the Company to the Purchaser.

    


    3.8           Absence
      of Litigation.  Except as set forth in Schedule 3.8, there
      is no action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company, threatened against or affecting
      the
      Company, any Subsidiary, any of the Company’s officers or directors in their
      capacities as such and any of their respective properties before or by any
      court, arbitrator, governmental or administrative agency or regulatory authority
      (federal, state, county, local or foreign) (collectively, an “Action”)
      which (a) adversely affects or challenges the legality, validity or
      enforceability of any of the Transaction Documents or the Securities or (b)
      could, if there were an unfavorable decision, individually or in the aggregate,
      have or result in a Material Adverse Effect.  To the knowledge of the
      Company, no judgment, injunction, writ, award, decree or order has been issued
      by any court or other governmental authority against the Company.

    


    
      
        
          
          

        

        
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    3.9           Labor
      Relations.  No material labor dispute exists or, to the knowledge
      of the Company is imminent, with respect to any of the employees of the
      Company.

    


    3.10           Compliance.  Neither
      the Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse of
      time or both, would result in a default by the Company or any Subsidiary under),
      nor has the Company or any Subsidiary received notice of a claim that it is
      in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other agreement or instrument to which it is a party or by
      which it or any of its properties is bound (whether or not such default or
      violation has been waived), (ii) is in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has been in violation of any
      statute, rule or regulation of any governmental authority, including without
      limitation all foreign, federal, state and local laws relating to taxes,
      environmental protection, occupational health and safety, product quality and
      safety and employment and labor matters, except in each case as could not,
      individually or in the aggregate, reasonably be expected to have or result
      in a
      Material Adverse Effect.

    


    3.11           Transactions
      with Affiliates and Employees.  Except as set forth in Schedule
      3.11, 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 or any Subsidiary (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.

    


    3.12           Title
      to Assets.  The Company and its Subsidiaries have valid title to
      or leasehold rights for all real property that is material to the business
      of
      the Company and the Subsidiaries and good and marketable title in all personal
      property owned by them that is material to the business of the Company and
      the
      Subsidiaries, in each case free and clear of all Liens, except for Liens
      disclosed in Schedule 3.12 or as do not, individually or in the
      aggregate, materially interfere with the use made and proposed to be made of
      such property by the Company and the Subsidiaries.  Any real property
      and facilities held under lease by the Company and its Subsidiaries are held
      by
      them under valid, subsisting and enforceable leases of which the Company and
      the
      Subsidiaries are in compliance; except as would not, individually or in the
      aggregate, reasonably be expected to have or result in a Material Adverse
      Effect.

    


    3.13           Registration
      Rights.  Except as described in Schedule 3.13, the Company
      has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
      registered with the SEC or any other governmental authority that have not been
      satisfied or waived.

    


    
      
        
          
          

        

        
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    3.14           Form
      SB-2 Eligibility.  The Company is eligible to register the resale
      of its Common Stock for resale by the Purchasers under Form SB-2 promulgated
      under the 1933 Act.

    


    3.15           Disclosure.  All
      disclosure provided to the Purchaser regarding the Company, its business and
      the
      transactions contemplated hereby, including the Schedules to this Agreement,
      furnished by or on behalf of the Company are true and correct in all material
      respects and do not contain any untrue statement of a material fact to the
      extent of the Company’s knowledge.  Except for the transactions
      contemplated by this Agreement, no event or circumstance has occurred or
      information exists with respect to the Company or any of its Subsidiaries or
      its
      or their business, properties, prospects, operations or financial conditions,
      which, under applicable law, rule or regulation, requires public disclosure
      or
      announcement by the Company but which has not been so publicly announced or
      disclosed.

    


    4.        
          REPRESENTATIONS AND WARRANTIES OF THE
      PURCHASER.  The Purchaser hereby represents and warrants to the
      Company as follows:

    


    4.1           Organization;
      Authority.  The Purchaser is an entity duly organized, validly
      existing and in good standing under the laws of the Republic of
      Korea.  The Purchaser has the requisite corporate power and authority
      to enter into and to consummate the transactions contemplated by the Transaction
      Documents to which it is a party and otherwise to carry out its obligations
      hereunder and thereunder.  The execution, delivery and performance by
      the Purchaser of the Transaction Documents to which it is a party have been
      duly
      authorized by all necessary action on the part of the Purchaser.  Each
      Transaction Document to which the Purchaser is a party has been (or upon
      delivery will have been) duly executed by the Purchaser and, when delivered
      by
      the Purchaser in accordance with terms hereof, will constitute the valid and
      legally binding obligations of the Purchaser, enforceable against it in
      accordance with its terms.

    


    4.2           The
      Purchaser’s Status.  At the time the Purchaser was offered the
      Securities, it was, and at the date hereof it is, an “accredited investor” as
      defined in Rule 501(a) under the 1933 Act.  The Purchaser is not a
      broker-dealer, or required to be registered as a broker-dealer, under Section
      15
      of the 1934 Act.

    


    4.3           Experience
      of the Purchaser.  The Purchaser, either alone or together with
      its representatives, has such knowledge, sophistication and experience in
      business and financial matters so as to be capable of evaluating the merits
      and
      risks of the prospective investment in the Securities, and has so evaluated
      the
      merits and risks of such investment, and the Purchaser has had available such
      information with respect to the Company as the Purchaser deems necessary or
      appropriate to make such evaluation and an informed investment decision with
      respect thereto. The Purchaser is able to bear the economic risk of an
      investment in the Securities and, at the present time, is able to afford a
      complete loss of such investment.

    


    
      
        
          
          

        

        
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    4.4           General
      Solicitation.  The Purchaser is not purchasing the Securities as a
      result of any advertisement, article, notice or other communication regarding
      the Securities published in any newspaper, magazine or similar media or
      broadcast over television or radio or presented at any seminar or any other
      general solicitation or general advertisement.

    


    4.5           No
      Public Sale or Distribution; Investment Intent.  The Purchaser is
      acquiring the Securities in the ordinary course of business for its own account
      for investment purposes only and not with a view towards, or for resale in
      connection with, the public sale or distribution thereof, and the Purchaser
      does
      not have a present intention nor a present arrangement to effect any
      distribution of the Securities to or through any person or entity; provided,
      however, that by making the representations herein, the Purchaser does not
      agree to hold any of the Securities for any minimum or other specific term
      and
      reserves the right to dispose of the Securities at any time in accordance with
      or pursuant to an effective registration statement or an exemption under the
      1933 Act.

    


    4.6           Information
      Regarding the Company.  The Purchaser has been furnished with or
      has had access to documents and records of the Company so as to allow the
      Purchaser to understand and evaluate such records and documents
      fully.  In addition, the Purchaser has received from the Company such
      other information concerning its operations, financial condition and other
      matters as the Purchaser has requested and considered all factors the Purchaser
      deems material in deciding on the advisability of investing in the Securities.
      The Purchaser acknowledges that any business plans prepared by the Company
      have
      been, and continue to be, subject to change and that any projections included
      in
      such business plans or otherwise are necessarily speculative in nature, and
      that
      some or all of the assumptions underlying the projections will not materialize
      or will vary significantly from actual results.

    


    4.7           No
      Distribution.  The Purchaser has not distributed the records and
      documents the Company provided to the Purchaser under this Agreement to any
      other Person.

    


    4.8           Information
      Regarding the Purchaser.  All information which the Purchaser has
      provided to the Company concerning itself, its financial position, and the
      knowledge of financial and business matters of the person making the investment
      decision on behalf of the  Purchaser, including all information
      contained herein, is true and complete as of the date of this Agreement and
      will
      be true and complete as of the Closing Date, and if there should be any adverse
      change in such information prior to the Closing, the Purchaser will immediately
      provide the Company, in writing, with accurate and complete information
      concerning any such change. The representations and warranties contained herein
      and all other information that the Purchaser has provided to the Company are
      true and accurate as of their date and shall be true and accurate as of the
      date
      of the Purchaser’s admission to the Company as a stockholder.  If in
      any respect such representations, warranties or information shall not be true
      and accurate at any time prior to the Purchaser’s admission as a stockholder,
      the Purchaser agrees to give prompt written notice of such fact to the Company,
      specifying which representations, warranties or information are not true and
      accurate and the reasons therefore.

    


    5.        
          COVENANTS AND AGREEMENTS.

    


    
      
        
          
          

        

        
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    5.1           Transfer
      Restrictions.

    


    (a)           The
      Purchaser covenants that the Securities may only be disposed of pursuant to
      an
      effective registration statement under the 1933 Act or pursuant to an available
      exemption from the registration requirements of the 1933 Act, and in compliance
      with any applicable state securities laws.  In connection with any
      transfer of Securities other than pursuant to an effective registration
      statement or to the Company or pursuant to Rule 144(k) under the 1933 Act,
      the
      Company may require the transferor to provide to the Company an opinion of
      counsel selected by the transferor and reasonably acceptable to the Company,
      the
      form and substance of which opinion shall be reasonably satisfactory to the
      Company, to the effect that such transfer does not require registration under
      the 1933 Act.  Notwithstanding the foregoing, the Company hereby
      consents to and agrees to register on the books of the Company without any
      such
      legal opinion, any transfer of Securities by the Purchaser to an Affiliate
      of
      the Purchaser, provided that the transferee certifies to the Company
      that it is an “accredited investor” as defined in Rule 501(a) promulgated under
      the 1933 Act.

    


    (b)           The
      Purchaser agrees to the imprinting, except as otherwise permitted by Section
      5.1(c), of a legend in substantially the following form on any certificate
      evidencing Securities:

    


    
      	 	
              THESE
                SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] HAVE
                NOT
                BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
                “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS IN RELIANCE UPON AN
                EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND, ACCORDINGLY,
                MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
                REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES
                LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
                NOT
                SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
                IN
                COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY
                LAWS.  THE COMPANY MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
                SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY PROPOSED OFFER,
                SALE,
                TRANSFER OR OTHER DISPOSITION IS IN COMPLIANCE WITH THE SECURITIES
                ACT AND
                ANY APPLICABLE STATE SECURITIES LAWS.

            	 


    

    


    (c)           Certificates
      evidencing Securities shall not be required to contain the legend set forth
      in
Section 5.1(b) or any other legend if such Securities are eligible for
      sale under Rule 144(k) under the 1933 Act or if such legend is not required
      under applicable requirements of the 1933 Act (including judicial
      interpretations and pronouncements issued by the Staff of the
      SEC).  Following such time as a legend is no longer required for
      certain Securities, the Company will, no later than ten Trading Days following
      the delivery by the Purchaser to the Company of a legended certificate
      representing such Securities, deliver or cause to be delivered to the Purchaser
      a certificate representing such Securities that is free from all restrictive
      and
      other legends.

    


    
      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

     

    5.2           Reservation
      and Listing of Securities.

    


    (a)           The
      Company shall maintain a reserve from its duly authorized shares of Common
      Stock
      for issuance pursuant to the Transaction Documents in such amount as may be
      required to fulfill its obligations in full under the Transaction
      Documents.

    


    (b)           The
      Company shall (i) in the time and manner required by each Trading Market,
      prepare and file with such Trading Market an additional shares listing
      application covering all of the shares of Common Stock issued or issuable under
      the Transaction Documents, (ii) take all steps necessary to cause such shares
      of
      Common Stock to be approved for listing on each Trading Market as soon as
      possible thereafter, (iii) provide to the Purchasers evidence of such listing,
      and (iv) maintain the listing of such Common Stock on each such Trading
      Market.

    


    5.3           Reports
      and Filing.  Upon execution of this Agreement, the Company shall
      fully cooperate with the Purchaser in preparing, drafting and filing the reports
      the Purchaser must file with the relevant government authorities, agencies,
      offices and other institutions in connection with the acquisition of foreign
      securities by the Purchaser. The Purchaser shall fully cooperate with the
      Company in preparing, drafting and filing any reports and documents pursuant
      to
      the relevant securities laws and regulations.

    


    5.4           General
      Indemnity.  The Company agrees to indemnify and hold harmless the
      Purchaser and its directors, officers, affiliates, agents, successors and
      assigns from an against any and all losses, liabilities, deficiencies, costs,
      damages and expenses (including, without limitation, reasonable attorneys’ fees,
      charges and disbursements) incurred by the Purchaser as a result of any
      inaccuracy in or breach of the representations, warranties or covenants made
      by
      the Company herein.  The Purchaser agrees to indemnify and hold
      harmless the Company and its directors, officers, affiliates, agents, successors
      and assigns from and against any and all losses, liabilities, deficiencies,
      costs, damages and expenses (including, without limitation, reasonable
      attorneys’ fees, charges and disbursements) incurred by the Company as a result
      of any inaccuracy in or breach of the representations, warranties or covenants
      made by such the Purchaser herein.

    


    5.5           Compliance
      with Laws.  So long as the Purchaser beneficially owns any
      Securities, the Company will use reasonable efforts to comply with all
      applicable laws, rules, regulations, orders and decrees of all governmental
      authorities, except to the extent non-compliance (in one instance or in the
      aggregate) would not have a Material Adverse Effect.

    


    5.6           Disbursement
      of Funds.  At the Closing, the Purchaser shall transfer the
      Purchase Price to a separate account of the Company in the manner specified
      in
      Section 2.3(b).

    


    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

     

    5.7           Antidilution.

    


    (a)           If,
      at any time prior to the second anniversary of the Closing Date, the Company
      issues Additional Shares of Stock at an effective net price to the Company
      (the
“Diluted Price”) that is less than the Adjusted Purchase Price, then
      within ten Business Days of such issuance, the Company shall issue to the
      Purchaser an additional number of shares of Common Stock equal to the Make-Whole
      Number.  No shares shall be issued pursuant to this Section 5.8
      upon the issuance by the Company of warrants or options to purchase Common
      Stock
      or preferred stock, and any adjustment in connection with such options or
      warrants shall be made at the time such options or warrants are exercised and
      the Company issues Common Stock or preferred stock, as applicable, to the holder
      thereof (provided that such exercise occurs prior to the second
      anniversary of the Closing Date).

    


    (b)           For
      purposes of this Section 5.7, the following defined terms shall have the
      following meanings:

    


    “Additional
      Shares of Stock” shall mean all shares of Common Stock and/or preferred
      stock issued by the Company, other than: (1) shares of Common Stock issued
      upon
      conversion of any shares of preferred stock of the Company; (2) shares of Common
      Stock and/or preferred stock and/or warrants and/or options (and the Common
      Stock or preferred stock issued upon the exercise of such warrants and/or
      options) issued before or after the Closing Date to directors, officers,
      employees, consultants and other advisors of the Company and which are approved
      by at least a majority of the Board of Directors of the Company; and (3) shares
      of Common Stock or preferred stock or other rights issued in connection with
      any
      stock dividends, combinations, splits, recapitalizations and the
      like.

    


    “Adjusted
      Initial Shares” means 2,142,858 shares of Common Stock, as adjusted by the
      Company for any stock dividend, combination, split, recapitalization and the
      like with respect to the Initial Shares occurring after the Closing
      Date.

    


    “Adjusted
      Purchase Price” means $1.40 per share of Common Stock,  as
      adjusted by the Company for any stock dividend, combination, split,
      recapitalization and the like with respect to the Initial Shares occurring
      after
      the Closing Date.

    


    “Aggregate
      Consideration” shall mean: (1) to the extent it consists of cash, the net
      amount of cash received by the Company after deduction of any underwriting
      or
      similar commissions, compensation or concessions paid or allowed by the Company
      in connection with such issue or sale; (2) to the extent it consists of property
      other than cash, the fair value of such property as determined by the Board
      of
      Directors of the Company; and (3) if shares of Common Stock or preferred stock
      are issued or sold together with other stock or securities or other assets
      of
      the Company for a consideration that covers both, the portion of the
      consideration so received that may be determined by the Board of Directors
      of
      the Company to be allocable to such shares of Common Stock or preferred
      stock.

    


    
      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

     

    “Make-Whole
      Number” means (1) the quotient of $3,000,001.20 divided by the Diluted
      Purchase Price minus (2) the Adjusted Initial Shares.

    


    5.8           AMEX
      Listing.  Following the Closing, the Company shall take
      commercially reasonable efforts to cause the Common Stock to be listed for
      trading on the American Stock Exchange within three years from the Closing
      Date.

    


    6.         
         CONDITIONS.

    


    6.1           Conditions
      Precedent to the Obligations of the Purchaser.  The obligation of
      the Purchaser to acquire Securities at the Closing is subject to the
      satisfaction or waiver by the Purchaser, at or before the Closing, of each
      of
      the following conditions:

    


    (a)           Representations
      and Warranties.  The representations and warranties of the Company
      contained herein shall be true and correct in all material respects as of the
      date when made and as of the Closing as though made on and as of such
      date;

    


    (b)           Performance.  The
      Company shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by it at or prior to
      the
      Closing;

    


    (c)           No
      Injunction.  No statute, rule, regulation, executive order,
      decree, ruling or injunction shall have been enacted, entered, promulgated
      or
      endorsed by any court or governmental authority of competent jurisdiction that
      prohibits the consummation of any of the transactions contemplated by the
      Transaction Documents; and

    


    (d)           Material
      Adverse Changes.  Since the date of execution of this Agreement,
      no event or series of events shall have occurred that reasonably would
      reasonably be expected to have or result in a Material Adverse
      Effect.

    


    (e)           Third
      Party Financing Commitments.  The Company shall have received
      binding commitments from third parties to purchase an aggregate of $5,000,000
      of
      its Common Stock and warrants on terms no less favorable than those applicable
      to the Purchaser hereunder.

    


    (f)            Stockholder
      Approval.  The issuance of the Initial Shares and the Warrant
      shall have been approved by the holders of a majority of the shares of the
      outstanding Common Stock in accordance with all applicable requirements of
      the
      Delaware General Corporation Law and the 1934 Act.

    


    6.2           Conditions
      Precedent to the Obligations of the Company.  The obligation of
      the Company to sell Securities at the Closing is subject to the satisfaction
      or
      waiver by the Company, at or before the Closing, of each of the following
      conditions:

    


    (a)           Representations
      and Warranties.  The representations and warranties of the
      Purchaser contained herein shall be true and correct in all material respects
      as
      of the date when made and as of the Closing Date as though made on and as of
      such date;

    


    
      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

    

     

    (b)           Performance.  The
      Purchaser shall have performed, satisfied and complied in all material respects
      with all covenants, agreements and conditions required by the Transaction
      Documents to be performed, satisfied or complied with by the Purchaser at or
      prior to the Closing;

    


    (c)           No
      Injunction.  No statute, rule, regulation, executive order,
      decree, ruling or injunction shall have been enacted, entered, promulgated
      or
      endorsed by any court or governmental authority of competent jurisdiction that
      prohibits the consummation of any of the transactions contemplated by the
      Transaction Documents; and

    


    (d)           No
      Material Adverse Effect.  Since the date of execution of this
      Agreement, no event or series of events shall have occurred that reasonably
      would reasonably be expected to have or result in a Material Adverse
      Effect.

    


    (e)           Stockholder
      Approval.  The issuance of the Initial Shares and the Warrant
      shall have been approved by the holders of a majority of the shares of the
      outstanding Common Stock in accordance with all applicable requirements of
      the
      Delaware General Corporation Law and the 1934 Act.

    


    7.         
         MISCELLANEOUS.

    


    7.1           Entire
      Agreement.  The Transaction Documents, together with the Exhibits
      and Schedules thereto, contain the entire understanding of the parties with
      respect to the subject matter hereof and supersede all prior agreements and
      understandings, oral or written, with respect to such matters, which the parties
      acknowledge have been merged into such documents, exhibits and
      schedules.

    


    7.2           Notices.  Any
      and all notices or other communications or deliveries required or permitted
      to
      be provided hereunder shall be in writing and shall be deemed given and
      effective on the earliest of (a) the date of transmission, if such notice or
      communication is delivered via facsimile or e-mail at the facsimile number
      or
      e-mail address specified in this Section 7.2 prior to 18:30 (New York
      City time) on a Trading Day, (b) the Trading Day after the date of transmission,
      if such notice or communication is delivered via facsimile at the facsimile
      number specified in this Agreement later than 18:30 (New York City time) on
      any
      date and earlier than 24:00 (New York City time) on such date, (c) the Trading
      Day following the date of mailing, if sent by nationally recognized overnight
      courier service, or (d) upon actual receipt by the party to whom such notice
      is
      required to be given.  The address for such notices and communications
      shall be as follows:

    


    
      	 	
              If
                to the Company:

            	
              Rexahn
                Pharmaceuticals, Inc.

            
	 	 	
              9620
                Medical Center Drive

            
	 	 	
              Rockville,
                MD 20850

            
	 	 	
              Attn:         Tae
                Heum Jeong

            
	 	 	
              Fax
                No.:    (240) 453-5310

            
	 	 	
              E-Mail:     ted@rexahn.com

            


    

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    
      	 	
              With
                a copy to:

            	
              Chadbourne
                & Parke LLP

            
	 	 	
              1200
                New Hampshire Avenue, N.W.

            
	 	 	
              Washington,
                D.C.  20036

            
	 	 	
              Attn:         Hwan
                Kim

            
	 	 	
              Fax
                No.:    (202) 974-6790

            
	 	 	
              E-Mail:     hkim@chadbourne.com

            
	 	 	 
	 	
              If
                to the Purchasers

            	
              KT&G
                Corporation

            
	 	 	
              New
                Business Development Bureau

            
	 	 	
              17th
                Floor, Kosmo Tower, 1002

            
	 	 	
              Daechi-dong,
                Gangnam-gu

            
	 	 	
              Seoul,
                Korea 135-280

            
	 	 	
              Attn:         Hyo-Jin
                Oh

            
	 	 	
              Fax
                No.:    82-2-3404-4670

            
	 	 	
              Email:      
                 kail05@ktng.com

            


    

    


    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

    


    7.3           Amendments;
      Waivers.  No provision of this Agreement may be waived or amended
      except in a written instrument signed by the Company.  No waiver of
      any default with respect to any provision, condition or requirement of this
      Agreement shall be deemed to be a continuing waiver in the future or a waiver
      of
      any subsequent default or a waiver of any other provision, condition or
      requirement hereof, nor shall any delay or omission of either party to exercise
      any right hereunder in any manner impair the exercise of any such
      right.

    


    7.4           Construction.  The
      headings herein are for convenience only, do not constitute a part of this
      Agreement and shall not be deemed to limit or affect any of the provisions
      hereof.  The language used in this Agreement will be deemed to be the
      language chosen by the parties to express their mutual intent, and no rules
      of
      strict construction will be applied against any party.

    


    7.5           Successors
      and Assigns.  Except as otherwise expressly provided herein, the
      provisions hereof shall be binding upon and inure to the benefit of the parties
      and their successors and permitted assigns.

    


    7.6           No
      Third-Party Beneficiaries.  This Agreement is intended for the
      benefit of the parties hereto and their respective successors and permitted
      assigns and is not for the benefit of, nor may any provision hereof be enforced
      by, any other Person, except that each Indemnitee is an intended third-party
      beneficiary of Section 6.4.

    


    7.7           GOVERNING
      LAW; VENUE; WAIVER OF JURY TRIAL.  ALL QUESTIONS CONCERNING THE
      CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
      BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
      REPUBLIC OF KOREA WITHOUT REGARD TO CONFLICTS OF LAWS
      PRINCIPLES.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
      THE EXCLUSIVE JURISDICTION OF THE SEOUL CENTRAL DISTRICT COURT OF THE
      REPUBLIC OF KOREA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
      HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
      DOCUMENTS), 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, OR THAT 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 VIA REGISTERED OR CERTIFIED MAIL OR
      OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
      IN
      EFFECT FOR NOTICES TO IT UNDER THIS WARRANT 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.  THE COMPANY AND THE PURCHASER HEREBY
      WAIVE ALL RIGHTS TO A TRIAL BY JURY.

    


    
      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

    


    7.8           Survival.  The
      representations, warranties, agreements and covenants contained herein shall
      survive the Closing and the delivery and/or exercise of the Securities for
      a
      period of one year; provided, however, that if the Purchaser sells or
      transfers 50% or more the Initial Shares to any third party, such
      representations, warranties and covenants made by the parties under this
      Agreement immediately shall cease to be effective.

    


    7.9           Execution.  This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart.  In the event that any signature is delivered by
      facsimile transmission, such signature shall create a valid and binding
      obligation of the party executing (or on whose behalf such signature is
      executed) with the same force and effect as if such facsimile signature page
      were an original thereof.

    


    7.10           Severability.  If
      any provision of this Agreement is held to be invalid or unenforceable in any
      respect, the validity and enforceability of the remaining terms and provisions
      of this Agreement shall not in any way be affected or impaired thereby and
      the
      parties will attempt to agree upon a valid and enforceable provision that is
      a
      reasonable substitute therefor, and upon so agreeing, shall incorporate such
      substitute provision in this Agreement.

    


    7.11           Replacement
      of Securities.  If any certificate or instrument evidencing any
      Securities is mutilated, lost, stolen or destroyed, the Company shall issue
      or
      cause to be issued in exchange and substitution for and upon cancellation
      thereof, or in lieu of and substitution therefor, a new certificate or
      instrument, but only upon receipt of evidence reasonably satisfactory to the
      Company of such loss, theft or destruction and customary and reasonable
      indemnity, if requested.  The applicants for a new certificate or
      instrument under such circumstances shall also pay any reasonable third-party
      costs associated with the issuance of such replacement Securities.

    


    
      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

    


    7.12           Remedies.  In
      addition to being entitled to exercise all rights provided herein or granted
      by
      law, including recovery of damages, the Purchaser and the Company will be
      entitled to specific performance under the Transaction Documents.  The
      parties agree that monetary damages may not be adequate compensation for any
      loss incurred by reason of any breach of obligations described in the foregoing
      sentence and hereby agrees to waive in any action for specific performance
      of
      any such obligation the defense that a remedy at law would be
      adequate.

    


    7.13           Adjustments
      in Share Numbers and Prices.  In the event of any stock split,
      subdivision, dividend or distribution payable in shares of Common Stock (or
      other securities or rights convertible into, or entitling the holder thereof
      to
      receive directly or indirectly shares of Common Stock), combination or other
      similar recapitalization or event occurring after the date hereof, each
      reference in any Transaction Document to a number of shares or a price per
      share
      shall be amended to appropriately account for such event.

    


    [Signature
      page follows]

    


    
      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

    


    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the date first
      above written.

    


    
      	 	
              The
                Company 

            
	 	  
	 	
              REXAHN
                PHARMACEUTICALS, INC. 

            
	 	  
	 	  
	 	
              By:

            	
              /s/  Chang
                H. Ahn

            
	 	
              Name:  
                

            	
              Chang
                H. Ahn

            
	 	
              Title:

            	
              CEO

            
	 	  
	 	  
	 	
              The
                Purchaser 

            
	 	  
	 	
              KT&G
                CORPORATION 

            
	 	  
	 	  
	 	
              By:

            	
              /s/  Yong-Tak,
                Kang. Ph.D

            
	 	
              Name:

            	
              Yong-Tak,
                Kang. Ph.D

            
	 	
              Title:

            	
              Managing
                Director

            
	 	 	
              Chief
                of Growth Business Headquarter

            


    

    


    


    [Signature
      page to Securities Purchase Agreement]