Exhibit 10.1
 
PURCHASE AGREEMENT
 
THIS PURCHASE AGREEMENT (“Agreement”) is made as of the 30th day of June, 2008
by and among NEXMED, INC., a Nevada corporation (the “Company”), and the
Purchasers set forth on the signature page affixed hereto (each a “Purchaser”
and collectively the “Purchasers”).
 
Recitals

A. The Company and the Purchasers 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;
 
B. The Purchasers wish to purchase, and the Company wishes to sell and issue to
the Purchasers, upon the terms and subject to the conditions stated in this
Agreement an aggregate of $5.75 million in principal amount of the Company’s 7%
Convertible Notes due December 31, 2011 in the form attached hereto as Exhibit A
(the “Notes”), which Notes shall be convertible into shares of common stock of
the Company, $0.001 par value per share (the “Common Stock”), in accordance with
the terms of the Notes, in such amounts as are set forth on the signature page
attached hereto and executed by each such Purchaser, for an aggregate purchase
price of $5.75 million; and
 
C. 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 Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and applicable state securities laws; and
 
In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto 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. “Affiliate” means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person, where “control” means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
 

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1.2. “Agreements” means this Agreement, the Registration Rights Agreement, the
Subsidiary Guaranty, the Mortgage and the Notes.
 
1.3. The “Company” shall refer to the Company (as defined in the first paragraph
hereof) together with its subsidiaries wherever applicable (including without
limitation with respect to all representations of the Company unless the context
otherwise requires).

1.4. “Closing” means the consummation of the transactions contemplated by this
Agreement, and “Closing Date” means the date of such Closing.

1.5. “Convertible Securities” means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.

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

1.7. “Mortgage” means the Mortgage, Security Agreement and Assignment of Leases
and Rents, in the form attached hereto as Exhibit C, executed by the Operating
Subsidiary in favor of the Purchasers, securing the Company’s obligations under
the Notes.

1.8. “Notes” shall have meaning set forth in the recitals to this Agreement.

1.9. “Operating Subsidiary” means NexMed (U.S.A.), Inc., a Delaware corporation
which is wholly-owned by the Company.

1.10. “Participation Percentage” means the product of (a) 20% multiplied by (b)
a fraction, the numerator of which equals the then aggregate outstanding
principal amount of all Notes and the denominator of which equals the original
aggregate principal amount of all Notes.

1.11. “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.

1.12. “SEC” means the U.S. Securities and Exchange Commission.

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1.13. “SEC Filings” means the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2006 and all other reports filed by the Company
pursuant to the 1934 Act since December 31, 2006.

1.14. “Securities” means the Notes and Underlying Shares.

1.15. “Subsidiary Guaranty” means the Subsidiary Guaranty, in the form attached
hereto as Exhibit D, executed by the Operating Subsidiary in favor of the
Purchasers, guaranteeing the Company’s obligations under the Notes.

1.16. “Underlying Shares” means the shares of Common Stock issued or issuable
upon conversion of, as payment for interest or accreted amounts under, or
otherwise pursuant to, the Notes.

1.17. “Variable Rate Transaction” means a transaction in which the Company
issues or sells, or agrees to issue or sell, Common Stock or Convertible
Securities in which the applicable sale, conversion, exercise or exchange price
or rate may directly or indirectly effectively be reduced, reset or repriced
based upon future events or occurrences, future trading prices or quotations, or
future issuances of Common Stock or Convertible Securities (including such
resets effected directly or indirectly by the issuance of additional
securities), including an “equity line” transaction but excluding standard
provisions for rights of first refusal on additional financings and standard
anti-dilution provisions including weighted-average anti-dilution provisions
substantially similar to those set forth in the Notes which are contained in
Convertible Securities.

1.18. “1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

1.19. “1934 Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

2.Purchase and Sale of the Notes. Subject to the terms and conditions of this
Agreement and on the basis of the representations and warranties made herein,
each of the Purchasers hereby severally, and not jointly, agrees to purchase,
and the Company hereby agrees to sell and issue to each of the Purchasers, the
principal amount of Notes set forth on such Purchaser’s signature page attached
hereto and as indicated herein. Each Purchaser’s aggregate purchase price (the
“Purchase Price”) for the Notes to be purchased hereunder is set forth on such
Purchaser’s signature page attached hereto.
 
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3.Closing.
 
3.1. Closing Procedure. The Company shall promptly deliver to Purchasers’
counsel, Peter J. Weisman, P.C., in trust, Notes registered in the names of the
Purchasers as indicated on the signature pages to this Agreement, representing
all of the Notes, with instructions that such Notes are to be held in escrow for
release to the Purchasers only upon payment of the Purchase Price to the Company
and confirmation of receipt by the Company or its counsel. Upon receipt by
counsel to the Purchasers of the Notes and the execution and/or delivery of such
other documents contemplated hereby to be executed and/or delivered on or prior
to the Closing, each Purchaser shall promptly cause a wire transfer in same day
funds to be sent to the account of the Company as instructed in writing by the
Company, in an amount representing the Purchase Price. On the date the Company
receives such funds, the Notes shall be released to the Purchasers (and such
date shall be deemed the “Closing Date”).
 
3.2. Closing Date Deliveries.
 
(a) On the Closing Date, the Company shall deliver to the Purchasers:
 
(i) Notes in the form attached as Exhibit A;

(ii) The executed Registration Rights Agreement in the form attached as Exhibit
B;

(iii) The executed Subsidiary Guaranty in the form attached as Exhibit D and the
executed and acknowledged Mortgage in the form attached as Exhibit C, in each
case executed by the Operating Subsidiary;

(iv) An originally executed satisfaction and release, in proper form for
recording in the applicable recording office in New Jersey, evidencing the
satisfaction of all outstanding obligations which are secured by a mortgage
and/or security interest in the Mortgaged Property (as defined in the Mortgage)
and the release of all currently existing mortgages and security interests in
the Mortgaged Property;

(v) The opinion(s) of counsel referred to in Section 7.5 below; and

(vi) An officer’s certificate in form and substance reasonably satisfactory to
the Purchasers and the Purchasers’ counsel, executed by an officer of the
Company and the Operating Subsidiary, certifying as to satisfaction of
applicable closing conditions, incumbency of signing officers, the true, correct
and complete nature of the Certificate of Incorporation and By-laws, good
standing and authorizing resolutions, in each case of the Company and the
Operating Subsidiary.

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(b) On the Closing Date, the Purchasers shall deliver to the Company:
 
(i) The Purchase Price set forth on the Purchasers’ signature page hereto; and

(ii) The executed Registration Rights Agreement.

4.Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchasers that:
 
4.1. Organization, Good Standing and Qualification. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and own its properties. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property makes such qualification or licensing necessary
unless the failure to so qualify would not be reasonably likely to result in a
Material Adverse Effect. All of the Company’s subsidiaries are listed by name
and jurisdiction on Schedule 4.1 attached hereto. All subsidiaries are
wholly-owned by the Company. The Operating Subsidiary is a wholly-owned
subsidiary of the Company and owns all the Mortgaged Property (as defined in the
Mortgage).
 
4.2. Authorization. The Company has full power and authority and has taken all
requisite action on the part of the Company, its officers, directors and
stockholders necessary for (i) the authorization, execution and delivery of the
Agreements, (ii) authorization of the performance of all obligations of the
Company hereunder and thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Agreements
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability, relating to or affecting creditors’ rights generally.
 
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4.3. Capitalization. Set forth on Schedule 4.3 hereto is (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding on the date hereof; (c) the number of
shares of capital stock issuable pursuant to the Company’s stock plans; and (d)
the number of shares of capital stock issuable and reserved for issuance
pursuant to securities (other than the Notes) exercisable for, or convertible
into or exchangeable for any shares of capital stock. All of the issued and
outstanding shares of the Company’s capital stock have been duly authorized and
validly issued and are fully paid and nonassessable, except to the extent that
the failure of the foregoing to be true and correct would not have a Material
Adverse Effect. Except as set forth on Schedule 4.3, no Person is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as set forth on Schedule 4.3, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company is or may be
obligated to issue any equity securities of any kind, and except as contemplated
by this Agreement or set forth on Schedule 4.3, the Company is not currently in
negotiations for the issuance of any equity securities of any kind. Except as
set forth on Schedule 4.3, the Company has no knowledge of any voting
agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among any of the securityholders of the Company
relating to the securities of the Company held by them. Except as set forth on
Schedule 4.3, the Company has not granted any Person the right to require the
Company to register any securities of the Company under the 1933 Act, whether on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.
 
4.4. Valid Issuance. As of the Closing, the Company has reserved a sufficient
number of shares of Common Stock for the issuance upon conversion of, as payment
for interest on or repayment of principal of, and otherwise pursuant to, the
Notes. The Notes and Underlying Shares are duly authorized, and such Securities,
when issued in accordance herewith and, in respect of the Underlying Shares
issued pursuant to the terms of the Notes, will be validly issued, fully paid,
non-assessable and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws. The number
of shares to be reserved hereunder shall be determined without regard to any
restrictions on beneficial ownership contained in the Agreements.
 
4.5. Consents. The execution, delivery and performance by the Company of the
Agreements and, subject to the truth and accuracy of the representations made by
the Purchasers in Sections 5 of this Agreement, the offer, issuance and sale of
the Securities, require no consent of, action by or in respect of, or filing
with, any Person, governmental body, agency, or official, other than filings
that have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws and the
requirements of the Nasdaq Stock Market, which the Company undertakes to file
within the applicable time periods. The Company has been verbally advised by the
FINRA that the discussions with the Company and the review by the FINRA of the
executed term sheet describing the transactions contemplated hereby should cause
the FINRA to conclude that the transactions contemplated hereby should not be
integrated with any prior offering or issuance of securities by the Company
(subject to the FINRA’s review of the final transaction documents for the
transactions contemplated hereby).
 
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4.6. Delivery of SEC Filings; Business. The SEC Filings represent all filings
required of the Company pursuant to the 1934 Act since December 31, 2006. The
SEC Filings complied as to form in all material respects with the requirements
of the 1934 Act and did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The Company is engaged only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate description of the
business of the Company in all material respects. The Company has not provided
to any Purchaser (i) any information required to be filed under the 1934 Act
that has not been so filed or (ii) any material nonpublic information.
 
4.7. Use of Proceeds. The proceeds of the sale of the Securities hereunder shall
be used by the Company for working capital and general corporate purposes and to
pay off in full the approximately $3 million in debt outstanding to Twin Rivers
Associates LLC (“Twin Rivers Debt”) which is currently secured by the mortgage
on the Mortgaged Property (as defined in the Mortgage) which is to be released
at Closing.
 
4.8. No Material Adverse Change. Since December 31, 2007, except as disclosed
and described in the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 and the Company’s Form 10-Q filed with the SEC for the
fiscal quarter ending March 31, 2008, or any other reports filed by the Company
subsequent to such Form 10-K pursuant to the 1934 Act and filed at least ten
(10) days prior to the date hereof, there has not been:
 
(i) any change in the consolidated assets, liabilities, financial condition or
operating results of the Company from that reflected in the financial statements
included in the Company’s Form 10-K for the fiscal year ended December 31, 2007,
except changes in the ordinary course of business which have not had, in the
aggregate, a Material Adverse Effect;

(ii) any declaration or payment of any dividend, or any authorization or payment
of any distribution, on any of the capital stock of the Company, or any
redemption or repurchase of any securities of the Company;

(iii) any material damage, destruction or loss, whether or not covered by
insurance, to any assets or properties of the Company or any of its
subsidiaries;

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(iv) any waiver by the Company of a material right or of a material debt owed to
it;

(v) any satisfaction or discharge of any lien, claim or encumbrance or payment
of any obligation by the Company, except in the ordinary course of business and
which is not material to the assets, properties, financial condition, operating
results or business of the Company taken as a whole (as such business is
presently conducted and as it is proposed to be conducted) and except for the
Twin Rivers Debt to be repaid upon Closing;

(vi) any material change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject;

(vii) any material labor difficulties or labor union organizing activities with
respect to employees of the Company;

(viii) any transaction entered into by the Company other than in the ordinary
course of business; or

(ix) any other event or condition of any character that may have a Material
Adverse Effect.

4.9. Registration Statements; Material Contracts.
 
(a) During the preceding two years, each registration statement and any
amendment thereto filed by the Company pursuant to the 1933 Act, as of the date
such statement or amendment became effective, complied as to form in all
material respects with the 1933 Act and did not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading; and each prospectus
filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of
the closing of any sale of securities pursuant thereto did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
 
(b) Except as set forth on Schedule 4.3 hereto, there are no agreements or
instruments currently in force and effect that constitute a warrant, option,
convertible security or other right, agreement or arrangement of any character
under which the Company is or may be obligated to issue any material amounts of
any equity security of any kind, or to transfer any material amounts of any
equity security of any kind.
 
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4.10. Form S-3 Eligibility. The Company is currently eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
1933 Act.
 
4.11. No Conflict, Breach, Violation or Default; Compliance with Law. The
execution, delivery and performance of the Agreements by the Company and the
issuance and sale of the Securities will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a default
under (i) the Company’s Articles of Incorporation (including any certificates of
designation) or the Company’s Bylaws, both as in effect on the date hereof
(copies of which have been provided to the Purchasers before the date hereof),
or (ii) except where it would not have a Material Adverse Effect, (A) any
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or any of its
properties, or (B) any agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the properties of the
Company is subject. Except where it would not have a Material Adverse Effect,
the Company (i) is not in violation of any statute, rule or regulation
applicable to the Company or its assets, (ii) is not in violation of any
judgment, order or decree applicable to the Company or its assets, and (iii) is
not in breach or violation of any agreement, note or instrument to which it or
its assets are a party or are bound or subject. The Company has not received
notice from any Person of any claim or investigation that, if adversely
determined, would render the preceding sentence untrue or incomplete
 
4.12. Tax Matters. The Company has timely prepared and filed all tax returns
required to have been filed by the Company with all appropriate governmental
agencies and timely paid all taxes owed by it, in each case taking into account
permitted extensions. The charges, accruals and reserves on the books of the
Company in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company nor,
to the knowledge of the Company, any basis for the assessment of any additional
taxes, penalties or interest for any fiscal period or audits by any federal,
state or local taxing authority except such as which are not material. All
material taxes and other assessments and levies that the Company is required to
withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due. There are no tax
liens or claims pending or threatened against the Company or any of its
respective assets or property. There are no outstanding tax sharing agreements
or other such arrangements between the Company and any other corporation or
entity.
 
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4.13. Title to Properties and Securities. Except as disclosed in the SEC
Filings, the Company has, or will at or prior to Closing have, good and
marketable title to all real properties and all other properties and assets
owned by it, in each case free from liens, encumbrances and defects that would
materially affect the value thereof or materially interfere with the use made or
currently planned to be made thereof by them; and except as disclosed in the SEC
Filings, the Company holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them. Except as disclosed in
the SEC Filings, the Operating Subsidiary owns all the Mortgaged Property (as
defined in the Mortgage) free and clear of all liens, claims, encumbrances and
defects except those that would not individually or in the aggregate materially
affect the value thereof or materially interfere with the use made or currently
planned to be made thereof. The Company (excluding its subsidiaries) does not
own any assets other than the securities of each of its wholly-owned
subsidiaries and does not engage in any operating activities other than acting
as a holding company of the securities of such subsidiaries. All of the
Company’s operating assets and properties (including without limitation all
Equipment, as defined in the Mortgage) are owned or leased by the Operating
Subsidiary, except for the Company’s intellectual property rights which are
entirely owned by NexMed Holdings, Inc., a Delaware corporation (“Holdings”),
which is wholly-owned subsidiary of the Company, and except for assets located
outside the United States, which are entirely owned by NexMed International
Limited, a corporation which is organized under the laws of the British Virgin
Islands and which is wholly-owned subsidiary of the Company (“International”).
Holdings does not engage in any activities except for holding the intellectual
property rights of the Company, and International and its two subsidiaries do
not engage in any business or activities in the United States.
 
4.14. Certificates, Authorities and Permits. The Company possesses adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by it and has not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse Effect.
 
4.15. No Labor Disputes. Except as disclosed in the SEC Filings, no material
labor dispute with the employees of the Company exists or, to the knowledge of
the Company, is imminent.
 
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4.16. Intellectual Property. The Company owns or possesses adequate rights or
licenses to the inventions, know-how, patents, patent rights, copyrights,
trademarks, trade names, licenses, approvals, governmental authorizations, trade
secrets confidential information and other intellectual property rights
(collectively, “Intellectual Property Rights”), free and clear of all liens,
security interests, charges, encumbrances, equities and other adverse claims,
necessary to conduct the business now operated by it, or presently employed by
it, and presently contemplated to be operated by it, and the Company has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property Rights except as disclosed in
the SEC Filings. Except as set forth on Schedule 4.16 hereto or as disclosed in
the SEC Filings, none of the Company's Intellectual Property Rights have expired
or terminated, or are expected to expire or terminate within three years from
the date of this Agreement, except where such expirations or termination would
not result, either individually or in the aggregate, in a Material Adverse
Effect. To the knowledge of the Company, the Company’s patents and other
Intellectual Property Rights and the present activities of the Company do not
infringe any patent, copyright, trademark, trade name or other proprietary
rights of any third party where such infringement may cause a Material Adverse
Effect on the Company, and there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company regarding its Intellectual Property Rights, and the Company is unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company has no knowledge of the material infringement of its Intellectual
Property Rights by third parties and has no reason to believe that any of its
Intellectual Property Rights is unenforceable, and the Company is unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company has taken commercially reasonable security measures to protect the
secrecy, confidentiality and value of all of its intellectual properties.
 
4.17. Mortgage Representations. All of the representations and warranties
contained in the Mortgage are true and correct as of the date hereof.
 
4.18. Litigation. Except as disclosed in the SEC Filings, there are no pending
actions, suits or proceedings against or affecting the Company or any of its
properties that, if determined adversely to the Company, would individually or
in the aggregate have a Material Adverse Effect or would materially and
adversely affect the ability of the Company to perform its obligations under the
Agreements, or which are otherwise material in the context of the sale of the
Securities; and to the Company’s knowledge, no such actions, suits or
proceedings are threatened or contemplated.
 
4.19. Financial Statements. The financial statements included in each SEC Filing
present fairly and accurately in all material respects the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. Except as set forth in the financial
statements of the Company included in the SEC Filings filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, except those
which individually or in the aggregate are not material to the financial
condition or operating results of the Company.
 
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4.20. Insurance Coverage. The Company maintains in full force and effect
insurance coverage that the Company reasonably believes to be adequate against
all liabilities, claims and risks against which it is customary for comparably
situated companies to insure.
 
4.21. Compliance with Nasdaq Continued Listing Requirements. The Company is in
compliance with all applicable Nasdaq Capital Market continued listing
requirements. There are no proceedings pending or to the Company’s knowledge
threatened against the Company relating to the continued listing of the
Company’s Common Stock on the Nasdaq Capital Market and the Company has not
received any notice of, nor to the knowledge of the Company is there any basis
for, the delisting of the Common Stock from the Nasdaq Capital Market.
 
4.22. Brokers and Finders. Neither the Purchasers nor the Company shall have any
liability or responsibility for the payment of any commission or any finder,
agent, broker or consultant fee to any third party in connection with or
resulting from this agreement or the transactions contemplated by this Agreement
by reason of any agreement of or action taken by the Company, and the Company
shall not pay any such commission or fee.
 
4.23. No General Solicitation. Neither the Company nor any Person acting on its
behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D promulgated under the 1933 Act) in connection
with the offer or sale of any of the Securities.
 
4.24. No Integrated Offering. Neither the Company nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would adversely affect reliance by the Company on
Section 4(2) of the 1933 Act for the exemption from registration for the
transactions contemplated hereby or would require registration of the Securities
under the 1933 Act. After consultation with FINRA and/or the Nasdaq Stock
Market, the Company does not believe that the offer and sale of the Securities
and the transactions contemplated hereby requires any stockholder approval by
the Company, including without limitation pursuant to the rules of the Nasdaq
Stock Market.
 
4.25. Disclosures. No representation or warranty made by the Company under any
section hereof and no written information furnished by the Company to the
Purchasers or any authorized representative of the Purchasers, pursuant to the
Agreements or in connection therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which the statements were made, not misleading.
 
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5. Representations and Warranties of the Purchaser. Each of the Purchasers
hereby severally, and not jointly, represents and warrants to the Company as to
itself only that:
 
5.1. Organization and Existence. The Purchaser is a validly existing
corporation, partnership or limited liability company and has all requisite
corporate, partnership or limited liability company power and authority to
invest in the Securities pursuant to this Agreement.
 
5.2. Authorization. The execution, delivery and performance by the Purchaser of
this Agreement and the Registration Rights Agreement have been duly authorized
and this Agreement and the Registration Rights Agreement will each constitute
the valid and legally binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights generally.
 
5.3. Purchase Entirely for Own Account. The Securities to be received by the
Purchaser hereunder will be acquired for the Purchaser’s own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of securities laws, and the Purchaser has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of securities laws. The Purchaser is not a registered
broker dealer or an entity engaged in the business of being a broker dealer.
 
5.4. Investment Experience. The Purchaser acknowledges that it can bear the
economic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters and in private
placement transactions of companies similar to the Company so that it is capable
of evaluating the merits and risks of the purchase contemplated hereby.
 
5.5. Disclosure of Information. The Purchaser has had an opportunity to receive
documents related to the Company and to ask questions of and receive answers
from the Company regarding the Company, its business and the terms and
conditions of the offering of the Securities and has received and read the SEC
Filings filed via EDGAR at least five days prior to the date hereof. Neither
such inquiries nor any other due diligence investigation conducted by the
Purchaser shall modify, amend or affect the Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or made
pursuant to this Agreement.
 
5.6. Restricted Securities. The Purchaser understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws, applicable state laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.
 
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5.7. Legends.
 
(a) It is understood that, until such time as certificates evidencing the
Underlying Shares are required to be issued without legends pursuant paragraph
(b) below, certificates evidencing the Securities may bear one or all of the
following legends or legends substantially similar thereto:
 
(i) “The shares represented by this certificate may not be transferred without
(i) the opinion of counsel reasonably satisfactory to the corporation that such
transfer may lawfully be made without registration under the Securities Act of
1933 or qualification under applicable state securities laws; or (ii) such
registration or qualification.”

(ii) If required by the authorities of any state in connection with the issuance
of sale of the Securities, the legend required by such state authority.

(b) Upon registration for resale pursuant to the Registration Rights Agreement
or upon the first anniversary of the Closing Date (and the holder thereof
confirming that it is not an affiliate of the Company), the Company shall
promptly cause certificates evidencing the Underlying Shares previously issued
to be replaced with certificates (or issue original certificates if not
previously issued) which do not bear such restrictive legends, and all
Underlying Shares subsequently issued shall not bear such restrictive legends.
In addition, in the event of any sales of Underlying Shares by the holder
thereof pursuant to Rule 144(b)(1)(i) under the 1933 Act prior to the first
anniversary of the Closing Date, the Company shall promptly cause certificates
evidencing such Underlying Shares previously issued to be replaced with
certificates (or issue original certificates if not previously issued) which do
not bear such restrictive legends. In the event that the Company does not issue
new, unlegended certificates in replacement of the legended certificates as
required under this Section 5.7 within 10 business days of a written request to
do so, or if any subsequently issued Underlying Shares are issued with
restrictive legends when unlegended certificates are required under this Section
5.7, the Company shall be liable to the Purchaser (or subsequent holder thereof)
for damages in an amount of $500 cash for each such day beyond the replacement
date (or issuance date, in the case of newly converted Notes) that such
unlegended certificates are not issued and delivered to the Purchaser or
subsequent holder.
 
5.8. Accredited Investor. The Purchaser is an “accredited investor” as defined
in Rule 501(a) of Regulation D, as amended, under the 1933 Act.
 
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5.9. No General Solicitation. The Purchaser did not learn of the investment in
the Securities as a result of any public advertising or general solicitation.

6. Closing Documents. The parties acknowledge and agree that part of the
inducement for the Purchasers to enter into this Agreement is the Company’s
execution and delivery of the Registration Rights Agreement and the execution
and delivery of the Subsidiary Guarantee and the Mortgage by the Operating
Subsidiary. The parties acknowledge and agree that on or prior to the Closing,
the Registration Rights Agreement, the Subsidiary Guarantee and the Mortgage
will be duly executed and delivered by the parties thereto.
 
7. Covenants and Agreements of the Company.
 
7.1. Rule 144. Until such time that the Purchasers no longer own any Notes, the
Company covenants to file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the 1934 Act even if the Company is
not then subject to the reporting requirements of the 1934 Act. As long as any
Purchaser owns Notes, if the Company is not required to file reports pursuant to
the 1934 Act, it will prepare and furnish to such Purchaser and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchaser to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Notes may reasonably
request, to the extent required from time to time to enable such Person to sell
the Underlying Shares without registration under the Securities Act within the
requirements of the exemption provided by Rule 144. So long as any Notes are
outstanding, the Company shall cause itself to be subject to the reporting
requirements of Section 13 or 15(d) of the 1934 Act and file all reports
required to be filed thereunder. The Company agrees that, for purposes of
determining the holding period under Rule 144 of the 1933 Act for Underlying
Shares issued upon conversion of the Notes, the holding period of such
Underlying Shares shall be tacked to the holding period of the Notes.

7.2. Limitation on Transactions.
 
(a) So long as any of the Notes remain outstanding, without the prior written
consent of the holders of a majority-in-interest of the Notes (which consent may
be withheld in such holders’ discretion), the Company shall not issue or sell or
agree to issue or sell any securities in a Variable Rate Transaction, provided,
however, that without such consent, the Company may issue or sell for cash any
securities in a Variable Rate Transaction so long as the total number of shares
of Common Stock issued and/or agreed to be issued in the aggregate for all such
transactions (determined as if all such securities as of their issuance are
deemed fully converted, exercised and exchanged into Common Stock without regard
to limitations or restrictions contained therein) represents less than seven
percent (7%) of the total number of the Company’s issued and outstanding shares
of Common Stock as of the closing date of any such transaction.
 
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(b)  So long as any Notes remain outstanding, the Company and the Operating
Subsidiary shall not directly or indirectly, create, incur, assume or permit or
suffer to exist any lien, mortgage, security interest or encumbrance (other than
statutory liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made in respect thereof) upon any of the Mortgaged Property (as defined in
the Mortgage) except for those created by the Mortgage and shall not directly or
indirectly sell, transfer or lease any of the Mortgaged Property, subject to
Section 7.2(c) below.
 
(c) Notwithstanding anything contained herein or the other Agreements, the
Company or the Operating Subsidiary may sell the Mortgaged Property in its
entirety at any time after December 31, 2009, provided that (i) upon or prior to
such sale, the Company shall deposit into escrow for the benefit of the
Purchasers an amount of cash equal to (x) the aggregate then outstanding
principal amount of all Notes, plus (y) all Accreted Amounts (as defined in the
Notes) accrued to date thereon, plus (z) all Accreted Amounts scheduled to
accrue under the Notes from such date through the Maturity Date (as defined in
the Notes) (“Escrow Funds”), which Escrow Funds shall secure all obligations
under the Notes, and (ii) thereafter the Purchasers may at any time and from
time to time demand immediate repayment of all or part of the amounts (including
principal and Accreted Amounts) then outstanding and accrued under the Notes,
which repayment shall be made from the Escrow Funds. In the event that the
Company shall be required to deposit Escrow Funds in escrow pursuant to this
Section 7.2(c), an independent escrow agent (the “Escrow Agent”) mutually
acceptable to the Company and the Purchasers shall be appointed to hold such
Escrow Funds in escrow pursuant to an escrow agreement on terms mutually
acceptable to the Company and the Purchasers (the “Escrow Agreement”). The
Escrow Agreement shall provide that each Purchaser may make any demand of
repayment as contemplated in clause 7.2(c)(ii) above directly to the Escrow
Agent, whereupon such repayment shall be made to such Purchaser from such Escrow
Funds. Upon deposit of the Escrow Funds into escrow, the Company shall, and
shall cause the Operating Subsidiary to, execute and deliver in favor of the
Purchasers a control agreement in form and substance reasonably acceptable to
the Purchasers and such other agreements and documents to ensure that (1) the
Purchasers have a first priority security interest in and lien on such Escrow
Funds, (2) to the extent possible such Escrow Funds may not be released except
as set forth in such Escrow Agreement, and (3) to the extent possible such
Escrow Funds will not be subject to any claims by any of the Company’s or
Operating Subsidiary’s creditors. The deposit of the Escrow Funds into escrow
and the creation of a security interest therein in accordance with the terms of
this Section 7.2(c) shall be a condition precedent to any sale of the Mortgaged
Property and neither the Company nor the Operating Subsidiary shall effectuate
any such sale unless and until such condition has been satisfied. To the extent
any principal amount of Notes and/or Accreted Amounts is converted into shares
of Common Stock pursuant to the terms of the Notes, an amount of cash equal to
such principal amount and/or Accreted Amounts may be released to the Company.
For clarification purposes (1) following any such sale of the Mortgaged Property
the Notes shall remain outstanding and in full force and effect in accordance
with the terms set forth therein, except for the Purchasers right to repayment
upon demand as set forth above, (2) the Company (and the Operating Subsidiary
pursuant to the Subsidiary Guarantee) shall remain liable under the Notes in
accordance with the terms thereof notwithstanding the escrow contemplated
hereby, and (3) Escrow Funds remaining in escrow after no Notes remain
outstanding shall be returned to the Company. 
 
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7.3. Right of the Purchasers to Participate in Future Transactions. So long as
any Notes remain outstanding, the Purchasers will have a right to participate in
any sales of any of the Company’s securities in a capital raising transaction on
the terms and conditions set forth in this Section 7.3, provided that this
Section 7.3 shall not apply with respect to any capital raising transaction with
an effective Per Share Selling Price per share of Common Stock in excess of
$1.00 occurring after February 28, 2010. During such period, the Company shall
give ten (10) business days advance written notice to the Purchasers prior to
any non-public offer or sale of any of the Company's equity securities or any
securities convertible into or exchangeable or exercisable for such securities
in a capital raising transaction by providing to the Purchasers a comprehensive
term sheet containing all significant business terms of such a proposed
transaction. The Purchasers shall have the right (pro rata in accordance with
the Purchasers’ participation in this offering) to participate in such
transaction by purchasing in such transaction an amount of the identical
securities issued in such transaction equal to up to the Participation
Percentage of the aggregate amount of such securities issued to the Purchasers
and such other investors together for the same consideration and on the same
terms and conditions as such third-party sale. If, subsequent to the Company
giving notice to a Purchaser hereunder but prior to the Purchaser exercising its
rights hereunder, the terms and conditions of the third-party sale are changed
from that disclosed in the comprehensive term sheet provided to such Purchaser,
the Company shall be required to provide a new notice to the Purchaser hereunder
and the Purchasers shall have the right to exercise their rights to purchase the
identical securities in such transaction on such changed terms and conditions as
provided hereunder. The rights and obligations of this Section 7.3 shall in no
way diminish the other rights of the Purchaser pursuant to this Section 7.
Notwithstanding anything to the contrary contained herein, the number of shares
of Common Stock that may be acquired by any Purchaser pursuant to any capital
raising transaction as described in this Section 7.3 shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by such Purchaser (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the
Purchaser’s right to convert, exercise or purchase similar to the limitation set
forth herein), together with all shares of Common Stock deemed beneficially
owned by the Purchaser’s “affiliates” (as defined in Rule 144 of the 1933 Act)
that would be aggregated for purposes of determining whether a group under
Section 13(d) of the 1934 Act, exists, would exceed 9.9% of the total issued and
outstanding shares of the Common Stock.
 
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7.4. No Integration. Neither the Company nor any of its Affiliates, nor any
Person acting on its or their behalf, shall directly or indirectly make any
offers or sales of any securities or solicit any offers to buy any securities
under circumstances that would cause the loss of the 4(2) exemption under the
Securities Act for the transactions contemplated hereby. Subject to any consent
or approval rights of the Purchasers hereunder, in the event the Company
contemplates an offering of its equity or debt securities within six months
following the Closing Date, the Company agrees that it shall notify the
Purchasers of such offering (without providing any material non-public
information to any Purchaser without its prior approval), and upon the
reasonable request of Purchasers purchasing at least 75% in principal amount of
the Notes hereunder, the Company shall first disclose the terms and conditions
and other relevant facts of such proposed transaction to Nasdaq and obtain from
Nasdaq its verbal advice (subject to the FINRA’s review of the executed
transaction documents for such transaction) that such transaction should not be
integrated with the offering which is the subject of this Agreement for purposes
of the Nasdaq rules requiring shareholder approval of the issuance of 20% or
more of an issuer’s outstanding common stock. In the event the Company fails to
obtain such advise, then the Company shall not issue or sell any such securities
without the prior written consent of Purchasers purchasing at least 75% in
principal amount of the Notes hereunder, provided that the Company may sell or
issue securities without such consent if (i) it obtains prior shareholder
approval for such sale or issuance in compliance with the NASD Manual rules,
(ii) such sale or issuance is to a pharmaceutical company in connection with a
strategic transaction and not primarily as a capital raising transaction, so
long as the Company has not affirmatively been notified (orally or in writing)
by Nasdaq that it is reasonably likely to treat such sale or issuance as being
integrated with the transactions contemplated under this Agreement, or (iii)
none of the Notes are then outstanding, so long as the Company has not
affirmatively been notified (orally or in writing) by Nasdaq that it is
reasonably likely to treat such sale or issuance as being integrated with the
transactions contemplated under this Agreement. In the event that the
transactions contemplated under this Agreement are deemed integrated with any
other transaction(s) by the FINRA, then the Company shall as soon as possible
seek the approval of its stockholders and take such other action to authorize
the issuance of the full number of Underlying Shares and the full amount of
securities issued and/or to be issued in such other transaction.
 
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7.5. Opinion of Counsel. On or prior to the Closing Date, the Company will
deliver to the Purchasers the opinions of legal counsel to the Company
substantially in the form and substance reasonably acceptable to the Purchasers.
 
7.6. Reservation of Common Stock issuable upon Conversion of Notes. The Company
hereby agrees at all times to reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of providing for the
full conversion of Notes (including payment and repayment of interest and
principal thereon), such number of shares of Common Stock as shall from time to
time equal the number of shares sufficient to permit the full conversion of
Notes (including payment and repayment of interest and principal thereon) in
accordance with the terms of the Notes. All calculations pursuant to this
paragraph shall be made without regard to restrictions on beneficial ownership.
 
7.7. Reports. For so long as the Purchasers beneficially own the Notes, the
Company will furnish to the Purchasers the following reports, each of which
shall be provided to the Purchasers by air mail or reputable international
courier (within one week of filing with the SEC, in the case of SEC filings), to
the extent not filed on and available at that time via EDGAR:
 
(a) Quarterly Reports. As soon as available and in any event within 45 days
after the end of each fiscal quarter of the Company, the Company’s quarterly
report on Form 10-Q or, in the absence of such report, consolidated balance
sheets of the Company as at the end of such period and the related consolidated
statements of operations, stockholders’ equity and cash flows for such period
and for the portion of the Company’s fiscal year ended on the last day of such
quarter, all in reasonable detail and certified by the Company to have been
prepared in accordance with generally accepted accounting principles, subject to
year-end and audit adjustments.
 
(b) Annual Reports. As soon as available and in any event within 90 days after
the end of each fiscal year of the Company, the Company’s Form 10-K or, in the
absence of a Form 10-K, consolidated balance sheets of the Company as at the end
of such fiscal year and the related consolidated statements of earnings,
stockholders’ equity and cash flows for such year, all in reasonable detail and
accompanied by the report on such consolidated financial statements of an
independent certified public accountant selected by the Company and reasonably
satisfactory to the Purchaser.
 
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(c) Securities Filings. As promptly as practicable and in any event within five
days after the same are issued or filed, copies of (i) all notices, proxy
statements, financial statements, reports and documents as the Company shall
send or make available generally to its stockholders or to financial analysts,
and (ii) all periodic and special reports, documents and registration statements
(other than on Form S-8) which the Company furnishes or files, or, to the extent
also delivered to the Company, any officer or director of the Company (in such
person’s capacity as such) furnishes or files with the SEC.
 
(d) Other Information. Such other information relating to the Company as from
time to time may reasonably be requested by any Purchaser provided the Company
produces such information in its ordinary course of business, and further
provided that the Company, solely in its own discretion, determines that such
information is not confidential in nature and disclosure to the Purchaser would
not be harmful to the Company or violate any rules or regulations of the SEC or
the Nasdaq Stock Market.
 
7.8. Press Releases. Any press release or other publicity concerning this
Agreement or the transactions contemplated by this Agreement shall be submitted
to the Purchasers for comment at least two (2) business days prior to issuance,
unless the release is required to be issued within a shorter period of time by
law or pursuant to the rules of the NASDAQ Stock Market or a national securities
exchange. The Company shall issue a press release concerning the fact and
material terms of this Agreement within one business day of the Closing.
 
7.9. No Conflicting Agreements. The Company will not take any action, enter into
any agreement or make any commitment that would conflict or interfere in any
material respect with the obligations to the Purchasers under the Agreements.
 
7.10. Insurance. For so long as any Purchaser beneficially owns any of the
Securities, the Company shall have in full force and effect (a) insurance
reasonably believed by the Company to be adequate on all assets and activities,
covering property damage and loss of income by fire or other casualty, and (b)
insurance reasonably believed to be adequate protection against all liabilities,
claims and risks against which it is customary for companies similarly situated
as the Company to insure.
 
7.11. Compliance with Laws. So long as the Purchasers beneficially own 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.
 
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7.12. Listing of Underlying Shares and Related Matters. The Company hereby
agrees, promptly following the Closing of the transactions contemplated by this
Agreement, to take such action to cause the Underlying Shares to be listed on
the Nasdaq Capital Market as promptly as possible following the Closing but no
later than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the Company
applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it will include in such application the
Underlying Shares and will take such other action as is necessary to cause such
Common Stock to be so listed. For so long as any Notes remain outstanding, the
Company will take all action necessary to continue the listing and trading of
its Common Stock on the Nasdaq Stock Market, the New York Stock Exchange or the
American Stock Exchange (collectively, “Approved Markets”), and will comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of such exchange or market, as applicable, to ensure the
continued eligibility for trading of the Underlying Shares thereon.
 
7.13. Corporate Existence. So long as any Notes remain outstanding, the Company
shall maintain its corporate existence, except in the event of a merger,
consolidation or sale of all or substantially all of the Company’s assets, as
long as the surviving or successor entity in such transaction (a) assumes the
Company’s obligations hereunder and under the agreements and instruments entered
into in connection herewith, regardless of whether or not the Company would have
had a sufficient number of shares of Common Stock authorized and available for
issuance in order to fulfill its obligations hereunder and effect the conversion
(including payment on) in full of all Notes outstanding as of the date of such
transaction; (b) has no legal, contractual or other restrictions on its ability
to perform the obligations of the Company hereunder and under the agreements and
instruments entered into in connection herewith; and (c)(i) is a publicly traded
corporation whose common stock and the shares of capital stock issuable upon
conversion of the Notes are (or would be upon issuance thereof) listed for
trading on an Approved Market or (ii) if not such a publicly traded corporation,
then the buyer agrees that it will, at the election of the Purchasers, purchase
such Purchasers’ Securities at a price equal to the greater of (a) 110% of the
Purchase Price of such Securities or (b) the fair market value of such
Securities on an as-converted basis based on the closing price immediately
preceding such transaction or the redemption date, whichever is greater.
 
7.14. Insurance Endorsement. The Company agrees that on or prior to August 31,
2008, it shall deliver to the Purchasers (or their counsel) each of (a) an
original endorsement to the Company’s Commercial General Liability Insurance
Policy/Umbrella Liability Insurance Policy naming the Purchasers as additional
insureds, and (b) an original Standard New Jersey Mortgagee Non-Contribution
Clause endorsement to the Company’s “all risk” property insurance policy for the
Mortgaged Property in favor of the Purchasers.
 
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8. Survival. All representations, warranties, covenants and agreements contained
in this Agreement shall be deemed to be representations, warranties, covenants
and agreements as of the date hereof and shall survive the execution and
delivery of this Agreement and terminate upon expiration of the applicable
statute of limitations.
 
9. Miscellaneous.
 
9.1. Successors and Assigns. This Agreement may not be assigned by a party
hereto without the prior written consent of the other parties hereto which
consent may not be unreasonably withheld or delayed, except that without the
prior written consent of the Company, but after notice duly given, a Purchaser
may assign its rights and delegate its duties hereunder in whole or in part to
an Affiliate or to any Person to which such Purchaser has transferred or
assigned all or part of its Notes in accordance with the terms of the Notes,
provided in each case that such Affiliate, transferee or assignee acknowledges
in writing to the Company that the representations and warranties contained in
Section 5 hereof shall apply to such Affiliate, transferee or assignee. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
 
9.2. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement may be executed by
facsimile.
 
9.3. Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
 
9.4. Notices. Unless otherwise provided, any notice required or permitted under
this Agreement shall be given in writing and shall be deemed effectively given
only by delivery to each party to be notified by (i) personal delivery, (ii)
telex or telecopier, provided it is sent with electronic confirmation of
complete transmittal, or (iii) an internationally recognized overnight air
courier, addressed to the party to be notified at the address as follows, or at
such other address as such party may designate by ten days’ advance written
notice to the other party:
 
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If to the Company:

NexMed, Inc.
89 Twin Rivers Drive
East Windsor, NJ 08520
Fax: (609) 426-0340
Attention: Chief Financial Officer

With a copy to:

Katten Muchin Rosenman LLP
575 Madison Avenue
New York, New York 10022
Fax: (212) 940-6557
Attention: Robert Kohl, Esq.

If to the Purchasers, to the addresses set forth on the signature pages hereto.

Any notice or other communication or deliveries hereunder shall be deemed
delivered (i) upon receipt, if delivered personally, (ii) if sent by facsimile,
upon receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or
on the first Business Day following such receipt if received on a Business Day
after 5:00 p.m. (Eastern Time) or (iii) two (2) Business Days following deposit
with an internationally recognized overnight courier service.

9.5. Expenses.
 
(a) The parties hereto shall pay their own costs and expenses in connection
herewith, except that the Company shall pay to Tail Wind Advisory and Management
Ltd. (“TWAM”) a non-refundable sum equal to $45,000 as and for legal and due
diligence expenses incurred in connection herewith, $25,000 of which has been
previously paid and the balance of which shall be paid upon Closing.
 
(b) The Company shall pay the costs of all title, UCC, judgment, lien and
similar searches in connection with the Mortgage, and shall pay all title
insurance premiums on the Mortgaged Property in connection with Purchasers’
title insurance policy (updated through the Closing Date). The Company shall
also pay all costs and expenses hereafter incurred in amending, implementing,
perfecting, collecting, defending, declaring and enforcing and otherwise
relating to the Purchasers’ rights and security interests in the Mortgaged
Property hereunder or under the Notes or any other instrument or agreement
delivered in connection herewith or therewith, including, but not limited to,
searches and filings after the date hereof (provided that the Company shall not
be responsible for any costs and expenses incurred by the Purchasers in
connection with the negotiation, execution and delivery of the Mortgage or any
other Agreements, except as may be provided above or elsewhere herein or
therein). For clarification, the costs payable by the Company pursuant to this
Section 9.5(b) are in addition to the sum payable to TWAM pursuant to Section
9.5(a) above.
 
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9.6. Amendments and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and 75% in interest of the Purchasers, provided,
however, that any such amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Securities purchased under
this Agreement at the time outstanding, each future holder of all such
securities, and the Company.
 
9.7. Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 
9.8. Entire Agreement. This Agreement, including the Exhibits and Schedules
hereto, and the Registration Rights Agreement, the Notes and other documents
contemplated hereby constitute the entire agreement among the parties hereof
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.
 
9.9. Further Assurances. The parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be
required to carry out the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained.
 
9.10. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
 
9.11. Remedies.
 
(a) The Purchasers shall be entitled to specific performance of the Company’s
obligations under the Agreements.
 
(b) The Company on the one hand, and each Purchaser severally and not jointly on
the other hand, shall indemnify the other and hold it harmless from any loss,
cost, expense or fees (including attorneys’ fees and expenses) arising out of
any breach of any representation, warranty, covenant or agreement in any of the
Agreements, or arising out of the enforcement of this Section 9.11.
 
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9.12. Jurisdiction. The parties hereby agree that all actions or proceedings
arising directly or indirectly from or in connection with this Agreement or the
other Agreements shall be litigated only in the Supreme Court of the State of
New York or the United States District Court for the Southern District of New
York located in New York County, New York, except for actions or proceedings
arising directly or indirectly from or in connection with the Mortgage, which
may be litigated in the applicable court(s) in New Jersey. The parties consent
to the jurisdiction and venue of the foregoing courts and consent that any
process or notice of motion or other application to either of said courts or a
judge thereof may be served inside or outside the State of New York or the
Southern District of New York by registered mail, return receipt requested,
directed to the party being served at its address set forth in this Agreement
(and service so made shall be deemed complete three (3) days after the same has
been posted as aforesaid) or by personal service or in such other manner as may
be permissible under the rules of said courts. The Company and the Purchasers
hereby waive any right to a jury trial in connection with any litigation
pursuant to this Agreement or the other Agreements.
 
9.13. Like Treatment of Purchasers and Holders. Neither the Company nor any of
its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption, conversion or exercise of the Securities, or
otherwise, to any Purchaser or holder of Securities, for or as an inducement to,
or in connection with the solicitation of, any consent, waiver or amendment of
any terms or provisions of the Agreements, unless such consideration is required
to be paid to all Purchasers or holders of Securities bound by such consent,
waiver or amendment. The Company shall not, directly or indirectly, redeem any
Securities unless such offer of redemption is made pro rata to all Purchasers or
holders of Securities, as the case may be, on identical terms. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and shall not in any
way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.
 
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9.14. Actions of Purchasers. The obligations of each Purchaser hereunder and
under the documents contemplated hereby are several and not joint with the
obligations of any other Purchaser, and no Purchaser shall in any way be
responsible for the performance of the obligations of any other Purchaser under
any such document. Nothing contained herein or in any other document
contemplated hereby, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute any of the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated hereby or
thereby. Each Purchaser confirms that it has independently participated in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Purchaser shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other document contemplated hereby, and it shall
not be necessary for any other Purchaser to be joined as an additional party in
any proceeding for such purpose. Notwithstanding anything herein to the
contrary, the actions and obligations of the Purchasers hereunder shall at all
times be considered several and not joint, and the Purchasers are not, under any
circumstances, agreeing to act jointly with respect to the Securities or any of
their actions or obligations under the Agreements, and shall not constitute a
“group” under the 1934 Act. Each Purchaser acknowledges that no other Purchaser
has acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Agreements, and it shall not be necessary for any other Purchaser to be joined
as an additional party in any proceeding for such purpose. The Company has
elected to provide all Purchasers with the same terms and Agreements for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.
 
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9.15. Collateral Agent. The Purchasers hereby appoint The Tail Wind Fund Ltd. as
“Collateral Agent” under the Mortgage. The Collateral Agent may be removed, and
a successor Collateral Agent may be appointed, by a majority-in-interest of
holders of the Notes, and any Collateral Agent may resign from such position
upon thirty days prior notice to the Company (which shall constitute notice to
the Operating Subsidiary) and the holders of Notes. If a successor Collateral
Agent does not take such position within 30 days after the retiring Collateral
Agent resigns or is removed, the retiring Collateral Agent or a
majority-in-interest of the holders of the Notes may petition any court of
competent jurisdiction for the appointment of a successor Collateral Agent. The
Collateral Agent will act or refrain from acting based on the direction of a
majority-in-interest of holders of the Notes, and may take any action or refrain
from taking any action as provided in the Mortgage as it shall determine in its
reasonable judgment and discretion. With respect to any monies or property held
by, or expended by, the Collateral Agent on behalf of the holders of the Notes,
such amounts shall be allocated pro rata based on the principal amount of Notes
outstanding. The Collateral Agent shall be reimbursed by the holders of Notes
for all reasonable expenses incurred in connection with acting as Collateral
Agent under the Mortgage (provided that this shall in no way affect any
liability of the Operating Subsidiary or the Company under the Mortgage). The
Collateral Agent may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss, liability or
expense. No implied covenants or obligations shall be read into this Agreement
or the Mortgage against Collateral Agent. Except for Collateral Agent's own
willful misconduct, bad faith or gross negligence, the Collateral Agent (i) may
rely and/or act upon any written instrument, document or request believed by the
Collateral Agent in good faith to be genuine and to be executed and delivered by
the proper person(s), and may assume in good faith the authenticity, validity
and effectiveness thereof and shall not be obligated to make any investigation
or determination as to the truth and accuracy of any information contained
therein, and (ii) shall not be responsible for the acts or omissions of the
other parties hereto or holders of Notes. In consideration of its acceptance of
the appointment as the Collateral Agent, each of the Purchasers (and any
subsequent holder of the Notes) jointly and severally agree to indemnify the
Collateral Agent against, and hold the Collateral Agent harmless from, all
costs, damages, expenses (including reasonable attorney's fees and
disbursements) and liabilities that the Collateral Agent may incur or sustain in
connection with serving as Collateral Agent under the Mortgage, unless such
costs, damages, expenses and liabilities are caused by the Collateral Agent's
own willful misconduct, bad faith or gross negligence.

[REMAINDER OF PAGE INTENTIONALLY BLANK]
 
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

The Company:
NEXMED, INC.
     
By: /s/ Vivian Liu                                                              
 
Name: Vivian Liu
 
Title:   Chief Executive Officer

 
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The Purchasers: 
     
THE TAIL WIND FUND LTD.
 
By:        TAIL WIND ADVISORY AND
 
              MANAGEMENT LTD., as
 
              investment manager

 
              By:/s/ David Crook                                                
 
              Name: David Crook
 
              Title:   CEO

 
Aggregate Purchase Price:
$4,750,000
Principal Amount of Notes:
$4,750,000

 
Resident:
BVI
   
Address for Notices:
The Tail Wind Fund Ltd.
 
c/o Tail Wind Advisory and Management Ltd.
 
Attn: David Crook
 
77 Long Acre
 
London WC2E 9LB UK
 
Facsimile: 44-207- 420 3819
 
Email: dcrook@tailwindam.com
     
with a copy to:
     
Peter J. Weisman, P.C.
 
153 East 53rd Street, 29th Floor
 
New York, NY 10022
 
Telephone: 212-433-1368
 
Facsimile: 212-433-1361
 
Email: pweisman@pweisman.com

 
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SOLOMON STRATEGIC HOLDINGS, INC.
     
By:/s/ Andrew P. MacKellar                                    
 
             Name: Andrew P. MacKellar
 
             Title:   Director
   
Aggregate Purchase Price:
$1,000,000
Principal Amount of Notes:
$1,000,000
   
Resident:
BVI
   
Address for Notices:
Solomon Strategic Holdings, Inc.
 
c/o Andrew P. MacKellar (Director)
 
Greenlands
 
The Red Gap
 
Castletown
 
IM9 1HB
 
British Isles
 
Telephone: +011 (44) 1624 824171
 
Facsimile:    +011 (44) 1624 824191
     
with a copy to:
     
Peter J. Weisman, P.C.
 
153 East 53rd Street, 29th Floor
 
New York, NY 10022
 
Telephone: 212-433-1368
 
Facsimile: 212-433-1361
 
Email: pweisman@pweisman.com

 
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