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.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    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.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    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:

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    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.
      

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    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]

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    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

              


      

    

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              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

            


    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    
      
        	 	
                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

              


      

    

     

    
      
        
        

      

      
        30