<PAGE>


                            INVESTOR RIGHTS AGREEMENT

     This Investor Rights Agreement (this "Agreement") is made and entered into
as of July 2, 2003 among NexMed, Inc., a Nevada corporation (the "Company"), and
each of the purchasers executing this Agreement and listed on Schedule 1
attached hereto (collectively, the "Purchasers").

     This Agreement is being entered into pursuant to the Common Stock and
Warrant Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers (the "Purchase Agreement").

     The Company and the Purchasers hereby agree as follows:

     1. Definitions.

     Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:

     "Advice" shall have the meaning set forth in Section 3(m).

     "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.

     "Blackout Period" shall have the meaning set forth in Section 3(n).

     "Board" shall have the meaning set forth in Section 3(n).

     "Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New Jersey generally are authorized or required by law or other government
actions to close.

     "Commission" means the Securities and Exchange Commission.

     "Common Stock" means the Company's Common Stock, par value $0.001 per
share.

     "Effectiveness Period" shall have the meaning set forth in Section 2.




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     "Event" shall have the meaning set forth in Section 7(e).

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Filing Date" means the tenth (10th) business day following the Closing
Date.

     "Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities, including without limitation the
Purchasers and their assignees.

     "Indemnified Party" shall have the meaning set forth in Section 5(c).

     "Indemnifying Party" shall have the meaning set forth in Section 5(c).

     "Losses" shall have the meaning set forth in Section 5(a).

     "Nasdaq" shall mean The Nasdaq Stock Market.

     "Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.

     "Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

     "Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

     "Registrable Securities" means (a) the Shares and the Warrant Shares
(without regard to any limitations on beneficial ownership contained in the
Warrants) or other securities issued or issuable to each Purchaser or its
transferee or designee (i) upon exercise of the Warrants, or (ii) upon any
distribution with respect to, any exchange for or any replacement of such Shares
or Warrants or (iii) upon any conversion, exercise or exchange of any securities
issued in connection with any such distribution, exchange or replacement; (b)
securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar



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<PAGE>


event with respect to the foregoing; and (c) any other security issued as a
dividend or other distribution with respect to, in exchange for, in replacement
or redemption of, or in reduction of the liquidation value of, any of the
securities referred to in the preceding clauses; provided, however, that such
securities shall cease to be Registrable Securities when such securities have
been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction or when such securities may be
sold without any restriction pursuant to Rule 144(k) as determined by the
counsel to the Company pursuant to a written opinion letter, addressed to the
Company's transfer agent to such effect as described in Section 2 of this
Agreement.

     "Registration Statement" means the registration statements and any
additional registration statements contemplated by Section 2, including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference in such registration
statement.

     "Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     "Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     "Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

     "Securities Act" means the Securities Act of 1933, as amended.

     "Special Counsel" means one special counsel to the Holders selected by a
majority in interest of the Holders with notice of such selection given to the
Company.

     "Warrant Shares" means the shares of Common Stock issuable upon the
exercise of the warrants issued or to be issued to the Purchasers or their
assignees or designees in connection with the offering consummated under the
Purchase Agreement.

     2. Registration. As soon as possible following the Closing Date (but not
later



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<PAGE>

than the Filing Date), the Company shall prepare and file with the Commission a
"shelf" Registration Statement covering all Registrable Securities for a
secondary or resale offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (or if such form is not
available to the Company on another form appropriate for such registration in
accordance herewith). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act not
later than fifty (50) days after the Closing Date (ninety (90) days after the
Closing Date in the event of a "review" by the Commission) (including filing
with the Commission a request for acceleration of effectiveness in accordance
with Rule 12dl-2 promulgated under the Exchange Act within five (5) Business
Days of the date that the Company is notified (orally or in writing, whichever
is earlier) by the Commission that a Registration Statement will not be
"reviewed," or not be subject to further review) and to keep such Registration
Statement continuously effective under the Securities Act until such date as is
the earlier of (x) the date when all Registrable Securities covered by such
Registration Statement have been sold or (y) the date on which the Registrable
Securities may be sold without any restriction pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter,
addressed to the Company's transfer agent to such effect (the "Effectiveness
Period"). Upon the initial filing thereof, the Registration Statement shall
cover at least 100% of the Shares and 130% of the shares of Common Stock for
issuance upon the exercise of the Warrants. If the Commission informs the
Company that it will not allow the Registration Statement to cover at least 130%
of the shares of Common Stock for issuance upon the exercise of the Warrants,
then the Registration Statement shall cover the highest percentage of such
Common Stock that the Commission will allow. Such Registration Statement also
shall cover, to the extent allowable under the Securities Act and the Rules
promulgated thereunder (including Securities Act Rule 416), such indeterminate
number of additional shares of Common Stock resulting from stock splits, stock
dividends or similar transactions with respect to the Registrable Securities.

     3. Registration Procedures.

     In connection with the Company's registration obligations hereunder, the
Company shall:

     (a) Prepare and file with the Commission on or prior to the Filing Date, a
Registration Statement on Form S-3 (or if such form is not available to the
Company on another form appropriate for such registration in accordance
herewith) (which shall include a Plan of Distribution substantially in the form
of Exhibit A attached hereto), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than three (3) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto, the
Company shall (i) furnish to the Special Counsel, copies of all such documents
proposed



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<PAGE>

to be filed, which documents (other than those incorporated by reference) will
be subject to the review of such Special Counsel, and (ii) at the request of any
Holder cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or the Special Counsel shall reasonably object in writing within
three (3) Business Days after their receipt thereof, unless counsel to the
Company determines in writing that such objection is without merit.

     (b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be necessary to
keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and to the extent any
Registrable Securities are not included in such Registration Statement for
reasons other than the failure of the Holder to comply with Section 3(m) hereof,
shall prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; (iii) respond as promptly as
possible, and in no event later than 10 business days, to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

     (c) Notify the Holders of Registrable Securities to be sold and the Special
Counsel as promptly as possible (A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed (but in no event in the case of this subparagraph (A), less than
three (3) Business Days prior to date of such filing); (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement; and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, and after the
effectiveness thereof: (i) of any request by the Commission or any other Federal
or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for



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<PAGE>


additional information; (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceedings for that
purpose; (iii) if at any time any of the representations and warranties of the
Company contained in any agreement contemplated hereby ceases to be true and
correct in all material respects; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) if the financial statements included in the Registration
Statement become ineligible for inclusion therein or of the occurrence of any
event that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

     (d) Use its best efforts to avoid the issuance of, or, if issued, use best
efforts to obtain the withdrawal of, (i) any order suspending the effectiveness
of the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

     (e) If requested by the Holders of a majority in interest of the
Registrable Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this Section 3(e) that would, in the written opinion of counsel for
the Company (addressed to the Holder's Special Counsel), violate applicable law.

     (f) Furnish to each Holder and the Special Counsel, without charge, at
least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, and all exhibits to the
extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.

     (g) Promptly deliver to each Holder and the Special Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each



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<PAGE>

amendment or supplement thereto as such Persons may reasonably request; and the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.

     (h) Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders and the
Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any jurisdiction where it is
not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.

     (i) Cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold pursuant
to a Registration Statement, which certificates shall be free, to the extent
permitted by applicable law and the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any Holder may request at least two (2) Business
Days prior to any sale of Registrable Securities. In connection therewith, the
Company shall promptly after the effectiveness of the Registration Statement
cause an opinion of counsel to be delivered to and maintained with its transfer
agent, together with any other authorizations, certificates and directions
required by the transfer agent, which authorize and direct the transfer agent to
issue such Registrable Securities without legend upon sale by the Holder of such
shares of Registrable Securities under the Registration Statement.

     (j) Upon the occurrence of any event contemplated by Section 3(c)(v), as
promptly as possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.


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<PAGE>

     (k) Cause all Registrable Securities relating to such Registration
Statement to be listed on NASDAQ and any other United States securities
exchange, quotation system, market or over-the-counter bulletin board, if any,
on which similar securities issued by the Company are then listed as and when
required pursuant to the Purchase Agreement.

     (l) Comply in all material respects with all applicable rules and
regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 3-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.

     (m) Request each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law or the Commission to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities of
any such Holder who fails (i) to furnish such information or (ii) to agree to
furnish, upon request, such additional information regarding such Holder as may
later be required by law to be disclosed, in each case, within a reasonable time
prior to the filing of each Registration Statement, supplemented Prospectus
and/or amended Registration Statement.

     If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

     Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(i), 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or
3(n), such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.

     (n) If (i) there is material non-public information regarding the Company
which


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<PAGE>


the Company's Board of Directors (the "Board") reasonably determines not to be
in the Company's best interest to disclose and which the Company is not
otherwise required to disclose, or (ii) there is a significant business
opportunity (including, but not limited to, the acquisition or disposition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other similar transaction) available to the
Company which the Board reasonably determines not to be in the Company's best
interest to disclose and which the Company would be required to disclose under
the Registration Statement, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 30
consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period (each, a "Blackout Period").

     4. Registration Expenses.

     All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with Nasdaq
and each other securities exchange, quotation system, market or over-the-counter
bulletin board on which Registrable Securities are required hereunder to be
listed, (B) with respect to filings required to be made with the Commission, and
(C) in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of Special Counsel in connection with Blue
Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing or photocopying
prospectuses), (iii) messenger, telephone and delivery expenses, (iv) Securities
Act liability insurance, if the Company so desires such insurance, (v) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Company's independent public accountants (including, in
the case of an underwritten offering, the expenses of any comfort letters or
costs associated with the delivery by independent public accountants of a
comfort letter or comfort letters) and legal counsel, and (vi) fees and expenses
of the Special Counsel in connection with any Registration Statement hereunder.
In addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the



                                       9
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expense of any annual audit, the fees and expenses incurred in connection with
the listing of the Registrable Securities on any securities exchange as required
hereunder.

     5. Indemnification.

     (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls any such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all
losses, claims, damages, liabilities, costs (including, without limitation,
costs of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained or incorporated by reference in
the Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein (in the case of
any Prospectus or form of prospectus or amendment or supplement thereto, in the
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that (i) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing to
the Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to (x) such Holder and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus or in any amendment or supplement thereto
or (y) such Holder's proposed method of distribution of Registrable Securities
as set forth in Exhibit A (or as such Holder otherwise informs the Company in
writing); or (ii) in the case of an occurrence of an event of the type described
in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(n), the use by a Holder
of an outdated or defective Prospectus after the delivery to the Holder of
written notice from the Company that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 3(m).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party (as defined in Section 5(c) to this Agreement) and shall
survive the transfer of the Registrable Securities by the Holders.

     (b) Indemnification by Holders. Each Holder shall, severally and not
jointly,



                                       10
<PAGE>

indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents and employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising solely out of or based solely upon any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that (i) such untrue statement or omission is contained in
or omitted from any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement or such
Prospectus and that such information was reasonably relied upon by the Company
for use in the Registration Statement, such Prospectus, or in any amendment or
supplement thereto, or to the extent that such information relates to (x) such
Holder and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus, or such form
of prospectus or in any amendment or supplement thereto or (y) such Holder's
proposed method of distribution of Registrable Securities as set forth in
Exhibit A (or as such Holder otherwise informs the Company in writing) or (ii)
in the case of an occurrence of an event of the type described in Section
3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(n), the use by a Holder of an
outdated or defective Prospectus after the delivery to the Holder of written
notice from the Company that the Prospectus is outdated or defective and prior
to the receipt by such Holder of the Advice contemplated in Section 3(m);
provided, however, that the indemnity agreement contained in this Section 5(b)
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of the Holder, which consent shall
not be unreasonably withheld. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable under this Section 5(b) for only that amount
as does not exceed the net proceeds to such Holder as a result of the sale of
Registrable Securities pursuant to such Registration Statement.

     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure



                                       11
<PAGE>

shall have proximately and materially adversely prejudiced the Indemnifying
Party.

     An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel in writing (with a copy to the Indemnifying
Party) that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the reasonable expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding and does not impose any monetary
or other obligation or restriction on the Indemnified Party.

     All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).

     (d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
governmental authority to enforce such indemnification in accordance with its
terms (by reason of public policy or otherwise), then each Indemnifying Party,
in lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of



                                       12
<PAGE>

the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying,
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms.
Notwithstanding anything to the contrary contained herein, the Holder shall be
required to contribute under this Section 5(d) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.

     The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

     The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties. The indemnity and contribution agreements herein are in
addition to and not in diminution or limitation of any indemnification
provisions under the Purchase Agreement.

     6. Rule 144.

     As long as any Holder owns any Shares, Warrants or Warrant Shares, the
Company covenants to timely 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 Section 13(a) or 15(d) of the Exchange
Act. As long as any Holder owns any Shares, Warrants or Warrant Shares, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the



                                       13
<PAGE>


Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Shares and Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including compliance
with the provisions of the Purchase Agreement relating to the transfer of the
Shares and Warrant Shares. Upon the request of any Holder, the Company shall
deliver to such Holder a written certification of a duly authorized officer as
to whether it has complied with such requirements.

     7. Miscellaneous.

     (a) Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

     (b) No Inconsistent Agreements. Except as otherwise disclosed in the
Purchase Agreement, neither the Company nor any of its subsidiaries is a party
to an agreement currently in effect, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Without limiting the generality of the foregoing, without the written consent of
the Holders of a majority of the then outstanding Registrable Securities, the
Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of the
Holders set forth herein, and are not otherwise in conflict with the provisions
of this Agreement.

     (c) Notice of Effectiveness. Within two (2) Business Days after the
Registration Statement which includes the Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that the Registration Statement has
been declared effective by the Commission in the form attached hereto as



                                       14
<PAGE>


Exhibit B. On the day that such Registration Statement is declared effective,
the Company shall furnish to the Investors for completion the investor
representation letter attached thereto.

     (d) Piggy-Back Registrations. If at any time when there is not an effective
Registration Statement covering all of the Registrable Securities, the Company
shall determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or its then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each Holder of Registrable Securities written notice of such
determination and, if within seven (7) Business Days after receipt of such
notice, any such Holder shall so request in writing (which request shall specify
the Registrable Securities intended to be disposed of by the Holder), the
Company will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holder, to
the extent required to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such Holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities, would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after



                                       15
<PAGE>


consultation with the underwriter(s) recommends the inclusion of fewer
Registrable Securities, or (y) none of the Registrable Securities of the Holders
shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).

     (e) Failure to File Registration Statement and Other Events. The Company
and the Holders agree that the Holders will suffer damages if the Registration
Statement is not filed on or prior to the twenty-fifth (25th) day following the
Closing Date and maintained in the manner contemplated herein during the
Effectiveness Period. The Company and the Holders further agree that it would
not be feasible to ascertain the extent of such damages with precision.
Accordingly, if (i) the Registration Statement is not filed on or prior to the
twenty-fifth (25th) day following the Closing Date, or (ii) the Company fails to
file with the Commission a request for acceleration in accordance with Rule
12d1-2 promulgated under the Exchange Act within five (5) Business Days of the
date that the Company is notified (orally or in writing, whichever is earlier)
by the Commission that a Registration Statement will not be "reviewed," or not
subject to further review, or (iii) the Registration Statement is filed with and
declared effective by the Commission but thereafter ceases to be effective as to
all Registrable Securities at any time prior to the expiration of the
Effectiveness Period, without being succeeded immediately by a subsequent
Registration Statement filed with the Commission, except as otherwise permitted
by this Agreement, including pursuant to Section 3(n), or (iv) trading in the
Common Stock shall be suspended or if the Common Stock is delisted from Nasdaq
or any other securities exchange, quotation system, market or over-the-counter
bulletin board on which Registrable Securities are required hereunder to be
listed (each an "Exchange"), without immediately being listed on any other
Exchange, for any reason for more than one (1) Business Day, other than pursuant
to Section 3(n), or (v) the exercise rights of the Holders are suspended for any
reason without the consent of the particular Holder, or (vi) the Company has
breached Section 3(n) of this Agreement (any such failure or breach being
referred to as an "Event"), the Company shall pay in cash as liquidated damages
for such failure and not as a penalty to each Holder an amount equal to two
percent (2%) of such Holder's pro rata share of the purchase price paid by all
Holders for the Shares purchased and then outstanding pursuant to the Purchase
Agreement for the initial thirty (30) day period until the applicable Event has
been cured or until the Shares have been redeemed (whichever is earlier), which
shall be pro rated for such periods less than thirty (30) days and two percent
(2%) of such Holder's pro rata share of the purchase price paid by all Holders
for Shares purchased and then outstanding pursuant to the Purchase Agreement for
each subsequent thirty (30) day period until the applicable Event has been cured
which shall be pro rated for such periods less than thirty days (the "Periodic
Amount"). Payments



                                       16
<PAGE>


to be made pursuant to this Section 7(e) shall be due and payable immediately
upon demand in immediately available cash funds. The parties agree that the
Periodic Amount represents a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of damages that may be incurred by
the Holders if the Registration Statement is not filed on or prior to the
twenty-fifth (25th) day following the Closing Date and maintained in the manner
contemplated herein during the Effectiveness Period or if any other Event as
described herein has occurred.

     (f) Specific Enforcement, Consent to Jurisdiction.

         (i) The Company and the Holders acknowledge and agree that irreparable
     damage would occur in the event that any of the provisions of this
     Agreement were not performed in accordance with their specific terms or
     were otherwise breached. It is accordingly agreed that the parties shall be
     entitled to an injunction or injunctions to prevent or cure breaches of the
     provisions of this Agreement and to enforce specifically the terms and
     provisions hereof, this being in addition to any other remedy to which any
     of them may be entitled by law or equity.

         (ii) Each of the Company and the Holders (i) hereby irrevocably submits
     to the exclusive jurisdiction of the state and federal courts located in
     New York City, New York for the purposes of any suit, action or proceeding
     arising out of or relating to this Agreement and (ii) hereby waives, and
     agrees not to assert in any such suit, action or proceeding, any claim that
     it is not personally subject to the jurisdiction of such court, that the
     suit, action or proceeding is brought in an inconvenient forum or that the
     venue of the suit, action or proceeding is improper. Each of the Company
     and the Holders consents to process being served in any such suit, action
     or proceeding by mailing a copy thereof to such party at the address in
     effect for notices to it under this Agreement and agrees that such service
     shall constitute good and sufficient service of process and notice thereof.
     Nothing in this Section 7(f) shall affect or limit any right to serve
     process in any other manner permitted by law.

     (g) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
75% of the Registrable Securities. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of the
Registrable Securities to which such waiver or consent relates; provided,
however, that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.


                                       17
<PAGE>

     (h) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Business Day or later than 5:00
p.m., New York City time, on any date and earlier than 11:59 p.m., New York City
time, on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service such as Federal Express
or (iv) actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be with respect to each Holder at
its address set forth under its name on Schedule 1 attached hereto, or with
respect to the Company, addressed to:

                         NexMed, Inc.
                         350 Corporate Boulevard
                         Robbinsville, NJ 08691
                         Attention: Chief Financial Officer
                         Facsimile No.: 609-208-1622

or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Katten Muchin
Zavis Rosenman, 575 Madison Avenue, New York, NY 10022, Attn: Robert Kohl, Esq.,
Facsimile No. (212) 940-8776. Copies of notices to any Holder shall be sent to
the addresses, if any, listed on Schedule 1 attached hereto.

     (i) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and
shall inure to the benefit of each Holder and its successors and assigns;
provided, that the Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder; and
provided, further, that each Holder may assign its rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.

     (j) Assignment of Registration Rights. The rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the Shares, the Warrants or the Registrable Securities if: (i)
the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after



                                       18
<PAGE>


such transfer or assignment, furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees is restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section 7(j),
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions of this Agreement, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Holders (and to subsequent) successors
and assigns.

     The Company may require, as a condition of allowing such assignment in
connection with a transfer of Shares, Warrants or Registrable Securities (i)
that the Holder or transferee of all or a portion of the Shares, the Warrants or
the Registrable Securities as the case may be, furnish to the Company a written
opinion of counsel that is reasonably acceptable to the Company to the effect
that such transfer may be made without registration under the Securities Act,
(ii) that the Holder or transferee execute and deliver to the Company an
investment letter in form and substance acceptable to the Company and (iii) that
the transferee be an "accredited investor" as defined in Rule 501(a) promulgated
under the Securities Act.

     (k) Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

     (l) Governing 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 law thereof.

     (m) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.

     (n) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable in any respect, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated




                                       19
<PAGE>


by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

     (o) Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

     (p) Registrable Securities Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.

                            [signature page follows]






                                       20
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

COMPANY:
--------

NEXMED, INC.


By: Vivian Liu
    ----------
Name: Vivian Liu
Title: Vice President & Secretary


PURCHASERS:
-----------

ROYAL BANK OF CANADA
By:      Its agent, RBC Dominion Securities Corporation

By: /s/ Steven C. Milke
    -------------------
Name:   Steven C. Milke
Title:  Managing Director

By:  /s/ Roger A. Blissett
     ---------------------
Name:    Roger A. Blisset
Title:   Managing Director

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


         By: /s/ David A. Crook
             ------------------
         Name:   David A. Crook
         Title:  Chief Executive Officer

SOLOMON STRATEGIC HOLDINGS, INC.


By: /s/ Andrew P. MacKellar
    -----------------------
Name:   Andrew P. MacKellar
Title:  Director
Title:  Director



<PAGE>


MIDSUMMER INVESTMENT, LTD.
By:      MIDSUMMER CAPITAL, LLC,
         as investment advisor


         By: /s/ Scott Kaufman
             -----------------
         Name:   Scott Kaufman
         Title:  Managing Director


OMICRON MASTER TRUST
By:      Omicron Capital L.P., as subadvisor
By:      Omicron Capital Inc., its general partner


         By: /s/ Olivier Morali
             ------------------
         Name:   Olivier Morali, President


PROVIDENT MASTER FUND, LTD.


By: /s/ Irvin R. Kessler
    --------------------
Name:   Irvin R. Kessler
Title:  Managing Member, Provident Advisors LLC



CHULA PARTNERS, LP


By: /s/ Warren Berman
    -----------------
Name:   Warren Berman
Title:  General Partner




<PAGE>


DYNAMIC EQUITY HEDGE FUND


By: /s/ Morton A. Cohen
    -------------------
Name:   Morton A. Cohen
Title:  Investment Manager


MORTON A. COHEN TTEE FBO THE
MORTON A. COHEN REVOCABLE LIVING TRUST

By: /s/ Morton A. Cohen
    -------------------
Name:   Morton A. Cohen
Title:  Trustee

VIKING GLOBAL EQUITIES LP
By:     Viking Global Performance LLC, the general partner


        By: Brian Smith
            -----------
        Name: Brian G. Smith
        Title: Chief Financial Officer


VGE III PORTFOLIO LTD.
By:     Viking Global Performance LLC, the Investment Manager


        By: Brian Smith
            -----------
        Name: Brian G. Smith
        Title: Chief Financial Officer





<PAGE>


ISLANDIA, L.P.
By:      John Lang, Inc., its general partner


         By: /s/ Edgar Berner
             ----------------
         Name: Edgar Berner
         Title: General Partner




<PAGE>


     SCHEDULE 1

                                   PURCHASERS

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
            Name and Address                                         Copy of Notice to:
            ----------------                                         -----------------
--------------------------------------------------------------------------------------------------------
<S>                                                       <C>
ROYAL BANK OF CANADA                                      ROYAL BANK OF CANADA
c/o RBC Dominion Securities Corporation                   c/o RBC Dominion Securities Corporation
One Liberty Plaza                                         One Liberty Plaza
165 Broadway, 2nd Floor                                   165 Broadway, 2nd Floor
New York, NY 10006-1404                                   New York, NY 10006-1404
Fax:  212-858-7439                                        Fax:  212-858-7439
Attn:  Steve Lin                                          Attn:  Joe Muskatel
--------------------------------------------------------------------------------------------------------
THE TAIL WIND FUND LTD.
c/o Tail Wind Advisory & Management Ltd.                  Peter J. Weisman, P.C.
Attn:  David Crook                                        335 Madison Avenue, Suite 1702
1st Floor, No. 1 Regent Street                            New York, NY 10017
London, SW1Y 4NS UK                                       Telephone: 212-418-4972
Fax:  44-207-468-7657                                     Facsimile: 212-317-8855
--------------------------------------------------------------------------------------------------------
SOLOMON STRATEGIC HOLDINGS, INC.
c/o Andrew P. MacKellar (Director)                        Peter J. Weisman, P.C.
Greenlands, The Red Gap                                   335 Madison Avenue, Suite 1702
Castletown IM9 1HB                                        New York, NY 10017
British Isles                                             Telephone: 212-418-4972
Fax:  011 (44) 1624 824191                                Facsimile: 212-317-8855
--------------------------------------------------------------------------------------------------------
MIDSUMMER INVESTMENT, LTD.                                Rob Charron, Esq.
c/o Midsummer Capital, LLC                                Feldman Weinstein LLP
485 Madison Avenue, 23rd Floor                            420 Lexington Avenue, Ste 2620
New York, NY  10022                                       New York, NY 10170
Tel: 212-584-2140                                         Tel: (212) 997-4242
Attn: Scott Kaufman                                       Fax: (212) 931-8704
--------------------------------------------------------------------------------------------------------
OMICRON MASTER TRUST                                      Brian Pusch, Esq.
c/o Omicron Capital L.P.                                  Law Offices of Brian Pusch
810 Seventh Avenue, 39th Floor                            29 West 57th Street, 14th Floor
New York, NY  10019                                       New York, NY 10019
Fax: 212-803-5269                                         Tel: (212) 980-0408
Attn:  Brian Daly                                         Fax: (212) 980-7055
--------------------------------------------------------------------------------------------------------
</TABLE>




<PAGE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
            Name and Address                                         Copy of Notice to:
            ----------------                                         -----------------
--------------------------------------------------------------------------------------------------------
<S>                                                       <C>
PROVIDENT MASTER FUND, LTD.                               Peter J. Weisman, P.C.
894 Grove Lane East,  #280                                335 Madison Avenue, Suite 1702
Wayzata, MN 55391                                         New York, NY 10017
Attn: Patrick Schwinghammer                               Telephone: 212-418-4972
Fax: (952) 345-5230                                       Facsimile: 212-317-8855
--------------------------------------------------------------------------------------------------------
CHULA PARTNERS, LP
504 North Fourth Street,
Suite 102
Fairfield, IA 52556
Attn: Warren Berman
Fax: (641) 472-6929
--------------------------------------------------------------------------------------------------------
DYNAMIC EQUITY HEDGE FUND
Scotia Plaza, 55th Floor
40 King Street West
Toronto, Ontario M5H 4A9
Attn: Tom Niehaus
Fax: (216) 694-3545
--------------------------------------------------------------------------------------------------------
MORTON A. COHEN TTEE FBO THE MORTON A. COHEN REVOCABLE
LIVING TRUST
1801 East Ninth Street, # 1120
Cleveland, OH 44114
Attn: Mort Cohen or Tom Niehaus
Fax: (216) 694-3545
--------------------------------------------------------------------------------------------------------
VIKING GLOBAL EQUITIES LP
280 Park Avenue
New York, NY 10017
Attn: Brian Smith
--------------------------------------------------------------------------------------------------------
VGE III PORTFOLIO LTD.
280 Park Avenue
New York, NY 10017
Attn: Brian Smith
--------------------------------------------------------------------------------------------------------
ISLANDIA, L.P.
c/o John Lang, Inc.
485 Madison Avenue, 23rd Floor
New York, NY 10022
Attn: Fund Manager
Fax: (212) 584-2199
--------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>


                                    EXHIBIT A

                              PLAN OF DISTRIBUTION


     We are registering the shares of common stock on behalf of the selling
security holders. Sales of shares may be made by selling security holders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the
Nasdaq National Market, any other exchange upon which our shares may trade in
the future, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to market prices, or at
negotiated or fixed prices. The shares may be sold by one or more of, or a
combination of, the following:

-    a block trade in which the broker-dealer so engaged will attempt to sell
     the shares as agent but may position and resell a portion of the block as
     principal to facilitate the transaction (including crosses in which the
     same broker acts as agent for both sides of the transaction);

-    purchases by a broker-dealer as principal and resale by such broker-dealer,
     including resales for its account, pursuant to this prospectus;

-    ordinary brokerage transactions and transactions in which the broker
     solicits purchases;

-    through options, swaps or derivatives;

-    in privately negotiated transactions;

-    in making short sales or in transactions to cover short sales; and

-    put or call option transactions relating to the shares.

     The selling security holders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling security holders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). The
selling security holders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale



<PAGE>

of their securities.

     The selling security holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the selling
security holders. The selling security holders may also enter into options or
other transactions with broker-dealers or other financial institutions which
require the delivery of shares offered by this prospectus to those
broker-dealers or other financial institutions. The broker-dealer or other
financial institution may then resell the shares pursuant to this prospectus (as
amended or supplemented, if required by applicable law, to reflect those
transactions).

     The selling security holders and any broker-dealers that act in connection
with the sale of shares may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act of 1933, and any commissions received by
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals may be deemed to be underwriting discounts or commissions
under the Securities Act. The selling security holders may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of the shares against liabilities, including liabilities arising under the
Securities Act. We have agreed to indemnify each of the selling security holders
and each selling security holder has agreed, severally and not jointly, to
indemnify us against some liabilities in connection with the offering of the
shares, including liabilities arising under the Securities Act.

     The selling security holders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling security
holders that the anti-manipulative provisions of Regulation M promulgated under
the Securities Exchange Act of 1934 may apply to their sales in the market.

     Selling security holders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.

     Upon being notified by a selling security holder that a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required pursuant to Rule 424(b) under the Securities Act,
disclosing:

-    the name of each such selling security holder and of the participating
     broker-




<PAGE>

     dealer(s);

-    the number of shares involved;

-    the initial price at which the shares were sold;

-    the commissions paid or discounts or concessions allowed to the
     broker-dealer(s), where applicable;

-    that such broker-dealer(s) did not conduct any investigation to verify the
     information set out or incorporated by reference in this prospectus; and

-    other facts material to the transactions.

     In addition, if required under applicable law or the rules or regulations
of the Commission, we will file a supplement to this prospectus when a selling
security holder notifies us that a donee or pledgee intends to sell more than
500 shares of common stock.

     We are paying all expenses and fees in connection with the registration of
the shares. The selling security holders will bear all brokerage or underwriting
discounts or commissions paid to broker-dealers in connection with the sale of
the shares.






<PAGE>



                                    EXHIBIT B

                         FORM OF NOTICE OF EFFECTIVENESS

                            OF REGISTRATION STATEMENT


[Date]


Wells Fargo Bank Minnesota, N.A.
Shareowner Services
161 North Concord Exchange Street
South St Paul, MN 55075-1139
Attn:    Suzy Swits
Fax: 651-450-4078
Tel: 651-450-4120

Re: NexMed, Inc.

Ladies and Gentlemen:

We are counsel to NexMed, Inc. (the "Company") and have been requested to
furnish you with an opinion with respect to (a) the removal of the restrictive
legend from certificates representing shares of the Company's common stock,
$0.001 par value per share (the "Common Shares") currently held by the
individuals and/or entities who are listed, and in the amounts set forth, in
Column A on Schedule A attached hereto (individually, a "Holder" and
collectively, the "Holders") and (b) certain issuances of the Common Shares upon
exercise of the Company's warrants listed on Schedule B attached hereto (the
"Warrants") in each case held by the Holders and in the amounts set forth in
Column B on Schedule A.

Please be advised that the Common Shares referred to above have been registered
for resale by the Holders under the Securities Act of 1933 (the "1933 Act")
pursuant to a Registration Statement on Form S-3 (File No. 333-_______) filed
with the Securities and Exchange Commission ____________, and declared effective
on _____________ (the "Registration Statement").

For the purposes of rendering the opinions expressed herein, we have examined
and relied upon such documents as we have deemed relevant and necessary as the
basis for said opinions. In such examination we have assumed the genuineness of
all signatures, the




<PAGE>


authenticity of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such documents. As to questions
of fact material to the opinions expressed herein, we have relied, without
independent investigation or verification, upon the statements of fact contained
in the documents which we have examined. Based on the foregoing, and with due
regard to such legal considerations as we have deemed relevant, we are of the
opinion that for so long as the Company remains current in its filings under the
Securities Exchange Act of 1934 (the "1934 Act") and the Registration Statement
remains effective under the 1933 Act:

     1.  upon your receipt of (a) a legended certificate and/or certificates
         representing a number of Common Shares set forth opposite a Holder's
         name in Column A of Schedule A attached hereto, together with (b) a
         representation from such Holder in the form of Annex I attached hereto
         stating that it has sold or intends to resell such Common Shares solely
         in accordance with the Registration Statement, certificates
         representing such Common Shares may be issued to such Holder free of
         any restrictive legend; and

     2.  upon your receipt of (a) written instructions from the Secretary of the
         Company stating that any Warrants held by a Holder have been duly
         exercised, and the number of Common Shares to be issued upon such
         exercise, together with (b) a representation from such Holder
         identifying the Warrants that it is exercising into Common Shares and
         stating that it has current plans to resell such Common Shares in
         accordance with the Registration Statement in the form of the
         representation contained in Annex I (which representation may be
         contained in the Subscription Form delivered upon exercise of such
         Warrants), certificates representing such Common Shares, in an amount
         up to the number of unissued Common Shares set forth opposite such
         Holder's name in Column B of Schedule A attached hereto, may be issued
         to such Holder in accordance with the Company's instructions, free of
         any restrictive legend.

This is to advise you that, to the extent a Holder does not furnish a
representation letter as set forth in paragraphs 1 or 2 above for any Common
Shares, then certificates for those Common Shares should be issued with a
restrictive legend.

This opinion letter being provided to you as of the date hereof in connection
with the issuance of certificates representing up to the number of Common Shares
set forth opposite the names of the Holders listed on Schedule A, is solely for
your benefit and may not be used, circulated, quoted or otherwise referred to or
relied upon by you for any other purpose, or by any other person for any
purpose, without our prior written consent.



<PAGE>

Very truly yours.

KATTEN MUCHIN ZAVIS ROSENMAN


By: ________________________________
              A Partner




<PAGE>


                                   SCHEDULE A
                                   ----------


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                           COLUMN A                          COLUMN
                                                           --------                          ------

         NAME OF SELLING SHAREHOLDER             COMMON SHARES CURRENTLY OWNED     COMMON SHARES ISSUABLE WITH
         ---------------------------             -----------------------------     ---------------------------
                                                                                       RESPECT TO WARRANTS
                                                                                       -------------------
-----------------------------------------------------------------------------------------------------------------
<S>                                             <C>                               <C>

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

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

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

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

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

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

-----------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>


                                   SCHEDULE B
                                   ----------

1. Warrants issued in connection with offering of Common Stock and Warrants,
dated __________, 2003.







<PAGE>


                                     ANNEX I

                              HOLDER REPRESENTATION

Dated: ___________

Wells Fargo Bank Minnesota, N.A.
Shareowner Services
161 North Concord Exchange Street
South St Paul, MN 55075-1139
Attn:    Suzy Swits
Fax: 651-450-4078
Tel: 651-450-4120

Re:    NexMed, Inc.

Dear Ms. Swits:

In connection with a private placement transaction ("Private Placement") which
was consummated on or about July 2, 2003, NexMed, Inc. ("Company") issued to the
undersigned ("Holder") shares of the Company's common stock, $0.001 par value
per share ("Common Shares"), and warrants ("Warrants") to purchase Common
Shares. Holder hereby represents to you that: (check below as appropriate)

  [ ]    it has sold or intends to resell _____________ Common Shares purchased
         by Holder in connection with the Private Placement, solely in
         accordance with the terms of the Registration Statement filed with the
         U.S. Securities and Exchange Commission by the Company covering such
         Common Shares as described under the section entitled "Plan of
         Distribution" therein; and/or

  [ ]    it has exercised Warrant(s) No. ___, and in connection with such
         exercise has purchased _____________ Common Shares, and it has sold or
         has current plans to resell _____________ of such Common Shares, solely
         in accordance with the terms of the Registration Statement filed with
         the U.S. Securities and Exchange Commission by the Company covering
         such Common Shares as described under the section entitled "Plan of
         Distribution" therein.

Please contact _____________________ at (___) __________ if you require any
further representation, confirmation or information. Thank you.

Holder Name:
             -----------------------------
             By:
                 -------------------------
             Name:
             Title: