<PAGE>

                                                                    Exhibit 10.3

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A
PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR
CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRETED
AMOUNTS SET FORTH BELOW.


                      5% CONVERTIBLE NOTE DUE MAY 31, 2007

                                       OF

                                  NEXMED, INC.


NOTE NO.:                                             ORIGINAL PRINCIPAL AMOUNT:
ISSUANCE DATE: DECEMBER 12, 2003                              NEW YORK, NEW YORK


         THIS NOTE ("NOTE") is one of a duly authorized issue of Notes of
NEXMED, INC., a corporation duly organized and existing under the laws of the
State of Nevada (the "COMPANY"), designated as the Company's 5% Convertible
Notes Due May 31, 2007 ("MATURITY DATE") in an aggregate principal amount (when
taken together with the original principal amounts of all other Notes) which
does not exceed Six Million U.S. Dollars (U.S. $6,000,000) (the "NOTES").

         FOR VALUE RECEIVED, the Company hereby promises to pay to the order of
Solomon Strategic Holdings, Inc. or its registered assigns or
successors-in-interest ("HOLDER") the principal sum of Five Hundred Thousand
Dollars (U.S. $500,000) together with all accrued but unpaid accretions thereto,
if any, on the Maturity Date, to the extent such principal amount and accretion
has not been repaid with or converted into the Company's Common Stock, $0.001
par value per share (the "COMMON STOCK"), in accordance with the terms hereof.
The unpaid principal balance hereof shall automatically increase daily at the
rate of 5% per annum from the date of original issuance hereof (the "ISSUANCE
DATE") until the same becomes due and payable on the Maturity Date, or such
earlier date upon acceleration or by conversion or redemption in accordance with
the terms hereof or of the other Agreements. Such principal accretion under this
Note shall occur daily commencing on the Issuance Date and shall be computed on
the basis of a 360-day year and shall be payable in accordance with Section 2
hereof. Notwithstanding anything contained herein, this Note shall bear interest
on the due and unpaid Principal Amount from and after the occurrence and during
the continuance of an Event of Default pursuant to

<PAGE>

Section 5(a), at the rate (the "DEFAULT RATE") equal to the lower of eighteen
percent (18%) per annum or the highest rate permitted by law. Unless otherwise
agreed or required by applicable law, payments will be applied first to any
unpaid collection costs, then to unpaid default interest and Accreted Amounts,
and fees and any remaining amount to principal.

         All payments of principal (including accreted principal) and default
interest on this Note which are not paid in shares of Common Stock as permitted
hereunder shall be made in lawful money of the United States of America by wire
transfer of immediately available funds to such account as the Holder may from
time to time designate by written notice in accordance with the provisions of
this Note or by Company check. This Note may not be prepaid in whole or in part
except as otherwise provided herein or in the other Agreements. Whenever any
amount expressed to be due by the terms of this Note is due on any day which is
not a Business Day (as defined below), the same shall instead be due on the next
succeeding day which is a Business Day.

         The following terms and conditions shall apply to this Note:

         SECTION 1. DEFINITIONS. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Purchase Agreement dated on or
about the Issuance Date pursuant to which the Notes were originally issued (the
"PURCHASE AGREEMENT"). For purposes hereof the following terms shall have the
meanings ascribed to them below:

         "AVERAGE PRICE" shall equal the average VWAP over the six month period
commencing with and including the Trading Day immediately following the Closing
Date and ending on and including the date which is six months following the
Closing Date.

         "BANKRUPTCY EVENT" means any of the following events: (a) the Company
or any subsidiary commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any subsidiary thereof; (b) there is commenced against the Company or
any subsidiary any such case or proceeding that is not dismissed within 60 days
after commencement; (c) the Company or any subsidiary is adjudicated insolvent
or bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within 60 days; (e) the Company or any subsidiary
makes a general assignment for the benefit of creditors; (f) the Company or any
subsidiary fails to pay, or states that it is unable to pay or is unable to pay,
its debts generally as they become due; or (g) the Company or any subsidiary, by
any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for
the purpose of effecting any of the foregoing.

         "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the City of New York are authorized or required
by law or executive order to remain closed.


                                       2
<PAGE>

         "CHANGE IN CONTROL TRANSACTION" will be deemed to exist if (i) there
occurs any consolidation, merger or other business combination of the Company
with or into any other corporation or other entity or person (whether or not the
Company is the surviving corporation), or any other corporate reorganization or
corporate transaction or series of related transactions in which in any of such
events the voting stockholders of the Company prior to such event cease to own
50% or more of the voting power, or corresponding voting equity interests, of
the surviving corporation after such event (including without limitation any
"going private" transaction under Rule 13e-3 promulgated pursuant to the
Exchange Act or tender offer by the Company under Rule 13e-4 promulgated
pursuant to the Exchange Act for 20% or more of the Company's Common Stock),
(ii) any person (as defined in Section 13(d) of the Exchange Act), together with
its affiliates and associates (as such terms are defined in Rule 405 under the
Securities Act), beneficially owns or is deemed to beneficially own (as
described in Rule 13d-3 under the Exchange Act without regard to the 60-day
exercise period) in excess of 50% of the Company's voting power, (iii) there is
a replacement of more than one-half of the members of the Company's Board of
Directors which is not approved by those individuals who are members of the
Company's Board of Directors on the date thereof, (iv) in one or a series of
related transactions, there is a sale or transfer of all or substantially all of
the assets of the Company, determined on a consolidated basis, (v) the Company
enters into an agreement providing for an event set forth in (i), (ii), (iii) or
(iv) above, or (vi) any of the foregoing occurs with respect to the Operating
Subsidiary.

         "CONVERSION PRICE" shall equal $6.50, provided that if the Average
Price is less than $6.50 (as such figure shall be adjusted for stock splits,
stock dividends and similar events as provided herein), then the Conversion
Price shall equal the greater of (a) $5.00 (as such figure shall be adjusted for
stock splits, stock dividends and similar events as provided herein) and (b)
such Average Price; the Conversion Price shall be subject to adjustment as set
forth herein.

         "EFFECTIVE REGISTRATION" shall mean (i) the resale of all Registrable
Securities (as defined in the Registration Rights Agreement) is either covered
by an effective registration statement in accordance with the terms of the
Registration Rights Agreement which registration statement is not subject to any
suspension or stop orders or permitted without registration under the Securities
Act and without any limitations or restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (provided that independent counsel for the
Company furnishes to the Company's transfer agent a written legal opinion
confirming such permitted resale under Rule 144(k), which counsel and form of
opinion shall be reasonably acceptable to the Holder); (ii) the resale of such
Registrable Securities may be effected either pursuant to a current and
deliverable prospectus that is not subject at the time to any blackout or
similar circumstance or pursuant to Rule 144(k) promulgated under the Securities
Act without registration and without any limitations or restrictions (provided
that independent counsel for the Company furnishes to the Company's transfer
agent a written legal opinion confirming such permitted resale under Rule
144(k), which counsel and form of opinion shall be reasonably acceptable to the
Holder); (iii) such Registrable Securities are listed, or approved for listing
prior to issuance, on an Approved Market and are not subject to any trading
suspension (nor shall trading generally have been suspended on such exchange or
market), and the Company shall not have been notified of any pending or
threatened proceeding or other action to delist or suspend the Common Stock on
the Approved Market on


                                       3
<PAGE>

which the Common Stock is then traded or listed; (iv) the requisite number of
shares of Common Stock shall have been duly authorized and reserved for issuance
as required by the terms of the Agreements; (v) the closing bid price of the
Common Stock on the Principal Market shall be at least $1.00; and (vi) none of
the Company or any direct or indirect subsidiary of the Company is subject to
any Bankruptcy Event.

         "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

         "MARKET PRICE" shall equal 105% of the average VWAP over the last five
(5) consecutive Trading Days in the calendar month immediately preceding the
date on which the Market Price is being determined.

         "PRINCIPAL AMOUNT" shall refer to the sum of (i) the original principal
amount of this Note, (ii) all accrued but unpaid Accreted Amounts hereunder, and
(iii) any default payments (including default interest) owing under the
Agreements but not previously paid or added to the Principal Amount.

         "PRINCIPAL MARKET" shall mean the NASDAQ National Market or such other
principal market or exchange on which the Common Stock is then listed for
trading.

         "REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.

         "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

         "TRADING DAY" shall mean a day on which there is trading on the
Principal Market.

         "UNDERLYING SHARES" means the shares of Common Stock into which the
Notes are convertible (including conversion of Accreted Amounts into Common
Stock as set forth herein) in accordance with the terms hereof and the Purchase
Agreement.

         "VWAP" shall mean the daily dollar volume-weighted average sale price
for the Common Stock on the Principal Market on any particular Trading Day
during the period beginning at 9:30 a.m., New York City Time (or such other time
as the Principal Market publicly announces is the official open of trading), and
ending at 4:00 p.m., New York City Time (or such other time as the Principal
Market publicly announces is the official close of trading), as reported by
Bloomberg through its "Volume at Price" functions or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the period beginning at 9:30 a.m., New York City Time (or such other time
as the Principal Market publicly announces is the official open of trading), and
ending at 4:00 p.m., New York City Time (or such other time as the Principal
Market publicly announces is the official close of trading), as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau, Inc.


                                       4
<PAGE>

If the VWAP cannot be calculated for such security on such date on any of the
foregoing bases, the VWAP of such security on such date shall be the fair market
value as mutually determined by the Company and the holders of at least a
majority of the principal amount of the Notes then outstanding. All such
determinations of VWAP shall to be appropriately and equitably adjusted in
accordance with the provisions set forth herein for any stock dividend, stock
split, stock combination or other similar transaction occurring during any
period used to determine the Market Price (or other period utilizing VWAPs).

         SECTION 2. ACCRETION.

               (a) Payment Dates. On October 1 and April 1 of each year (each an
"ACCRETION PAYMENT DATE") after the Issuance Date, the Company shall either pay
the dollar amount accrued and accreted to the principal amount hereunder since
the prior Accretion Payment Date (or Issuance Date if no such Accretion Payment
Date has yet to occur) ("ACCRETED AMOUNT") or effect the automatic conversion of
such Accreted Amount as provided in this Section 2.

               (b) Payment or Automatic Conversion. Subject to the terms hereof,
the Company shall either (i) pay the Accreted Amount in full in cash on each
Accretion Payment Date or (ii) effect an automatic conversion of such Accreted
Amount into shares of Common Stock in accordance with the terms hereof, but not
both, at the Company's option. Prior to each Accretion Payment Date the Company
shall deliver to all the holders of Notes a written irrevocable notice electing
to pay such Accreted Amount in cash or effect such automatic conversion on such
Accretion Payment Date. Such notice shall be delivered at least five (5) Trading
Days prior to the applicable Accretion Payment Date but no more than twenty (20)
days prior to such Accretion Payment Date. If such notice is not delivered
within the prescribed period set forth in the preceding sentence, then the
Accreted Amount shall be paid in cash. If the Company elects to pay any Accreted
Amount in cash on an Accretion Payment Date, then on such date the Company shall
pay to the Holder an amount equal to the Accreted Amount due in satisfaction of
such obligation. If the Company elects to effect an automatic conversion of such
Accreted Amount into shares of Common Stock, the number of such shares to be
issued for such Accretion Payment Date shall be the number determined by
dividing (x) the Accreted Amount due, by (y) the Market Price as of such
Accretion Payment Date. Such shares shall be issued and delivered within three
(3) Trading Days following such Accretion Payment Date and shall be duly
authorized, validly issued, fully paid, non-assessable and free and clear of all
encumbrances, restrictions and legends. If any Holder does not receive the
requisite number of shares of Common Stock in the form required above within
such three Trading Day period, the Holder shall have the option of either (a)
requiring the Company to issue and deliver all or a portion of such shares or
(b) canceling such election to effect such automatic conversion of the Accreted
Amount (in whole or in part), in which case the Company shall immediately pay in
cash the Accreted Amount due hereunder or such portion as the Holder specifies
is to be paid in cash instead of being converted. Except as otherwise provided
in this Section 2, all holders of Notes must be treated equally (i.e.,
proportionately) with respect to such payment and conversion of Accreted
Amounts. Any conversion of the Accreted Amount hereunder into shares of Common
Stock pursuant to the terms hereof shall constitute and be deemed a conversion
of such portion of the Principal Amount of this Note for all purposes under this
Note and the other


                                       5
<PAGE>

Agreements (except that such conversion shall be at the Market Price and except
as otherwise provided herein).

               (c) Limitations to Automatic Conversion into Common Stock.
Notwithstanding anything to the contrary herein, the Company shall be prohibited
from exercising its right to effect an automatic conversion of any Accreted
Amount hereunder (and must deliver cash in respect thereof) on the applicable
Accretion Payment Date (1) if at any time within ten (10) Trading Days prior to
the Accretion Payment Date there fails to exist Effective Registration or an
Event of Default hereunder exists or occurs, unless otherwise waived in writing
by the Holder in whole or in part at the Holder's option, or (2) if the Market
Price as of such Accretion Payment Date is less than the greater of (i) the
closing bid price of the Common Stock on the Principal Market on the Trading Day
immediately preceding the Closing Date or (ii) the average of the closing bid
prices of the Common Stock on the Principal Market over the five consecutive
Trading Days immediately preceding the Closing Date. Notwithstanding anything to
the contrary herein, the Company shall be prohibited from exercising its right
to effect an automatic conversion of any Accreted Amount hereunder (and must
deliver cash in respect thereof) on the applicable Accretion Payment Date to the
extent, and only to the extent, that such conversion into shares of Common Stock
would result in the Holder hereof exceeding the limitations contained in Section
3(i) below.

         SECTION 3. CONVERSION.

               (a) Conversion Right. Subject to the terms hereof and
restrictions and limitations contained herein, the Holder shall have the right,
at such Holder's option, at any time and from time to time to convert the
outstanding Principal Amount under this Note in whole or in part by delivering
to the Company a fully executed notice of conversion in the form of conversion
notice attached hereto as Exhibit A (the "CONVERSION NOTICE"), which may be
transmitted by facsimile. Notwithstanding anything to the contrary herein, this
Note and the outstanding Principal Amount hereunder shall not be convertible
into Common Stock to the extent that such conversion would result in the Holder
hereof exceeding the limitations contained in, or otherwise violating the
provisions of, Section 3(i) below. For clarification purposes, any conversions
of the outstanding Principal Amount under this Note in part pursuant to this
Section 3(a) shall not affect the Company's obligation to repay 50% of the
original Principal Amount as provided in Section 4 below.

               (b) Common Stock Issuance Upon Conversion.

                    (i) Conversion Date Procedures. Upon conversion of this Note
pursuant to Section 3(a) above, the outstanding Principal Amount hereunder shall
be converted into such number of fully paid, validly issued and non-assessable
shares of Common Stock, free of any liens, claims and encumbrances, as is
determined by dividing the outstanding Principal Amount being converted by the
then applicable Conversion Price. The date of any Conversion Notice hereunder
shall be referred to herein as the "CONVERSION DATE". If a conversion under this
Note cannot be effected in full for any reason, or if the Holder is converting
less than all of the outstanding Principal Amount hereunder pursuant to a
Conversion Notice, the Company shall


                                       6
<PAGE>

promptly deliver to the Holder (but no later than five Trading Days after the
Conversion Date) a Note for such outstanding Principal Amount as has not been
converted if this Note has been surrendered to the Company for partial
conversion. The Holder shall not be required to physically surrender this Note
to the Company upon any conversion hereunder unless the full outstanding
Principal Amount represented by this Note is being converted. The Holder and the
Company shall maintain records showing the outstanding Principal Amount so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon each such conversion.

                    (ii) Stock Certificates or DWAC. The Company will deliver to
the Holder not later than three (3) Trading Days after the Conversion Date, a
certificate or certificates, which shall be free of restrictive legends and
trading restrictions if the Registration Statement has been declared effective,
representing the number of shares of Common Stock being acquired upon the
conversion of this Note. In lieu of delivering physical certificates
representing the shares of Common Stock issuable upon conversion of this Note,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of the Holder, the Company shall use commercially reasonable efforts to
cause its transfer agent to electronically transmit such shares issuable upon
conversion to the Holder (or its designee), by crediting the account of the
Holder's (or such designee's) prime broker with DTC through its Deposit
Withdrawal Agent Commission system (provided that the same time periods herein
as for stock certificates shall apply). If in the case of any conversion
hereunder, such certificate or certificates are not delivered to or as directed
by the Holder by the fifth Trading Day after the Conversion Date, the Holder
shall be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return this Note
tendered for conversion. If the conversion has not been rescinded in accordance
with the previous sentence and the Company fails to deliver to the Holder such
certificate or certificates (or shares through DTC) pursuant to this Section
3(b) (free of any restrictions on transfer or legends, if such shares have been
registered) in accordance herewith, prior to the seventh Trading Day after the
Conversion Date, the Company shall pay to the Holder, in cash, an amount equal
to 2% of the outstanding Principal Amount (but no less than $30,000) per month
(prorated on a daily basis) until such delivery takes place.

               (c) Conversion Price Adjustments.

                    (i) Stock Dividends, Splits and Combinations. If the Company
or any of its subsidiaries, at any time while the Notes are outstanding (A)
shall pay a stock dividend or otherwise make a distribution or distributions on
any equity securities (including instruments or securities convertible into or
exchangeable for such equity securities) in shares of Common Stock, (B)
subdivide outstanding Common Stock into a larger number of shares, or (C)
combine outstanding Common Stock into a smaller number of shares, then each
Affected Conversion Price (as defined below) shall be multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
before such event and the denominator of which shall be the number of shares of
Common Stock outstanding after such event. Any adjustment


                                       7
<PAGE>

made pursuant to this Section 3(c)(i) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.

               As used in this Note, the Affected Conversion Prices (each an
"AFFECTED CONVERSION PRICE") shall refer to: (i) the Conversion Price; and (ii)
each reported VWAP occurring on any Trading Day included in the period used for
determining the Market Price, which Trading Day occurred before the record date
in the case of events referred to in clause (A) of this subparagraph 3(c)(i) and
before the effective date in the case of the events referred to in clauses (B)
and (C) of this subparagraph 3(c)(i).

                    (ii) Distributions. If the Company or any of its
subsidiaries, at any time while the Notes are outstanding, shall distribute to
all holders of Common Stock evidences of its indebtedness or assets or cash or
rights or warrants to subscribe for or purchase any security of the Company or
any of its subsidiaries (excluding those referred to in Section 3(c)(i) above),
then concurrently with such distributions to holders of Common Stock, the
Company shall distribute to holders of the Notes the amount of such
indebtedness, assets, cash or rights or warrants which the holders of Notes
would have received had all their Notes then held been converted into Common
Stock at the applicable Conversion Rate immediately prior to the record date for
such distribution.

                    (iii) Rounding of Adjustments. All calculations under this
Section 3 or Section 2 shall be made to the nearest cent or the nearest 1/100th
of a share, as the case may be.

                    (iv) Notice of Adjustments. Whenever any Affected Conversion
Price is adjusted pursuant to Section 3(c)(i) or (ii) above, the Company shall
promptly deliver to each holder of the Notes, a notice setting forth the
Affected Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, provided that any failure to
so provide such notice shall not affect the automatic adjustment hereunder.

                    (v) Change in Control Transactions. In case of any Change in
Control Transaction, the Holder shall have the right thereafter to, at its
option, (A) convert this Note, in whole or in part, at the then applicable
Conversion Price into the shares of stock and other securities, cash and/or
property receivable upon or deemed to be held by holders of Common Stock
following such Change in Control Transaction, and the Holder shall be entitled
upon such event to receive such amount of securities, cash or property as the
shares of the Common Stock of the Company into which this Note could have been
converted immediately prior to such Change in Control Transaction would have
been entitled if such conversion were permitted, subject to such further
applicable adjustments set forth in this Section 3 or (B) require the Company or
its successor to redeem this Note, in whole or in part, at a redemption price
equal to 110% of the outstanding Principal Amount being redeemed. The terms of
any such Change in Control Transaction shall include such terms so as to
continue to give to the Holders the right to receive the amount of securities,
cash and/or property upon any conversion or redemption following such Change in
Control Transaction to which a holder of the number of shares of


                                       8
<PAGE>

Common Stock deliverable upon such conversion would have been entitled in such
Change in Control Transaction, and default interest and Accreted Amounts payable
hereunder shall be in cash or such new securities and/or property, at the
Holder's option. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.

                    (vi) Notice of Certain Events. If:

                         A.   the Company shall declare a dividend (or any other
                              distribution) on its Common Stock; or

                         B.   the Company shall declare a special nonrecurring
                              cash dividend on or a redemption of its Common
                              Stock; or

                         C.   the Company shall authorize the granting to all
                              holders of the Common Stock rights or warrants to
                              subscribe for or purchase any shares of capital
                              stock of any class or of any rights; or

                         D.   the approval of any stockholders of the Company
                              shall be required in connection with any
                              reclassification of the Common Stock of the
                              Company, any consolidation or merger to which the
                              Company is a party, any sale or transfer of all or
                              substantially all of the assets of the Company, or
                              any compulsory share of exchange whereby the
                              Common Stock is converted into other securities,
                              cash or property; or

                         E.   the Company shall authorize the voluntary or
                              involuntary dissolution, liquidation or winding up
                              of the affairs of the Company;

then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice to the Company's stockholders generally is given, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.

               (d) Reservation and Issuance of Underlying Securities. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of this Note (including


                                       9
<PAGE>

conversions of Accreted Amounts), free from preemptive rights or any other
actual contingent purchase rights of persons other than the holders of the
Notes, not less than such number of shares of Common Stock as shall (subject to
any additional requirements of the Company as to reservation of such shares set
forth in the Purchase Agreement) be issuable (taking into account the
adjustments under this Section 3 but without regard to any ownership limitations
contained herein) upon the conversion of this Note hereunder in Common Stock
(including conversion of Accreted Amounts into Common Stock). The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid, nonassessable.

               (e) No Fractions. Upon a conversion hereunder the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the closing price of a share of Common
Stock at such time. If the Company elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.

               (f) Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the conversion of this Note (including conversion of
Accreted Amounts) shall be made without charge to the holder hereof for any
issue or transfer tax or other incidental expense in respect of the issuance of
such certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such name
or names as may be directed by the Holder; provided, however, that in the event
certificates for shares of Common Stock are to be issued in a name other than
the name of the Holder, this Note when surrendered for conversion shall be
accompanied by an assignment form; and provided further, that the Company shall
not be required to pay any tax or taxes which may be payable in respect of any
such transfer.

               (g) Cancellation. After all of the Principal Amount (including
accrued but unpaid interest and Accreted Amounts and default payments at any
time owed on this Note) have been paid in full or converted into Common Stock,
this Note shall automatically be deemed canceled and the Holder shall promptly
surrender the Note to the Company at the Company's principal executive offices.

               (h) Notices Procedures. Any and all notices or other
communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by confirmed facsimile, or by a nationally recognized overnight
courier service to the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the Purchase
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or by a nationally recognized overnight courier service addressed
to the Holder at the facsimile telephone number or address of the Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed delivered (i)
upon


                                       10
<PAGE>

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.

               (i) Beneficial Ownership Limitation. Notwithstanding anything to
the contrary contained herein, the number of shares of Common Stock that may be
acquired by the Holder upon conversion pursuant to the terms hereof (including
conversion of Accreted Amounts into Common Stock hereunder) shall not exceed a
number that, when added to the total number of shares of Common Stock deemed
beneficially owned by such Holder (other than by virtue of the ownership of
securities or rights to acquire securities (including the Notes) that have
limitations on the Holder's right to convert, exercise or purchase similar to
the limitation set forth herein), together with all shares of Common Stock
deemed beneficially owned at such time (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the right to
convert, exercise or purchase similar to the limitation set forth herein) by the
holder's "affiliates" at such time (as defined in Rule 144 of the Securities
Act) ("AGGREGATION PARTIES") that would be aggregated for purposes of
determining whether a group under Section 13(d) of the Exchange Act exists,
would exceed 9.9% of the total issued and outstanding shares of the Common Stock
(the "RESTRICTED OWNERSHIP PERCENTAGE"). Each holder shall have the right at any
time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company. The Holder may increase its Restricted
Ownership Percentage upon, at the election of the Holder, not less than 61 days'
prior notice to the Company in the event of the announcement as pending or
planned, of a Change in Control Transaction, and the provisions of this Section
3(i) shall continue to apply until such 61st day. The Company's obligation to
issue shares of Common Stock which would exceed such limits referred to in this
Section 3(i) shall be suspended to the extent necessary until such time, if any,
as shares of Common Stock may be issued in compliance with such restrictions.

               (j) Forced Conversion. Subject to the terms set forth herein, in
the event that the VWAP is equal to or greater than $30 (which figure shall be
appropriately and equitably adjusted for any stock splits, stock combinations,
stock dividends and similar events) for twenty (20) consecutive Trading Days
("PRICING PERIOD"), the Company shall have the right, upon at least ten (10)
Trading Days' prior written notice to the Holder ("FORCED CONVERSION NOTICE"),
to compel the Holder to convert this Note in full on or prior to the date
("FORCED CONVERSION DATE") specified in the Forced Conversion Notice. Such
Forced Conversion Date may not occur until at least ten (10) Trading Days
following the date (the "FORCED CONVERSION NOTICE DATE") on which the Forced
Conversion Notice is deemed delivered to the Holder. The Company may not deliver
a Forced Conversion Notice until after the completion of the Pricing Period, and
must deliver the Forced Conversion Notice within five (5) Trading Days following
the last day of any Pricing Period. The period from the Forced Conversion Notice
Date to the Forced Conversion Date shall be referred to herein as the
"POST-NOTICE PERIOD". The Company may only exercise its right to force
conversion hereunder if it forces conversion under all the outstanding Notes in
full in accordance with this provision. Notwithstanding anything to the contrary
herein, the Company shall be prohibited from exercising its right to force
conversion of this Note pursuant to this Section if at any time during the
Post-Notice Period or during the thirty-five (35)


                                       11
<PAGE>

consecutive Trading Days immediately preceding such Post-Notice Period there
fails to exist Effective Registration or an Event of Default exists or occurs.

         SECTION 4. PRINCIPAL PAYMENT. On November 30, 2006, the Company shall
repay fifty percent (50%) of the original Principal Amount of this Note (or
repay this Note in full if less than such amount is then outstanding), together
with all accrued but unpaid interest to date on such principal amount being
repaid (notwithstanding any amounts converted to date).

         SECTION 5. DEFAULTS AND REMEDIES.

               (a) Events of Default. An "EVENT OF DEFAULT" is:

                    (i) a default in payment of the Principal Amount under any
of the Notes on or after the date such payment is due, which default continues
for five (5) Business Days after written notice of such non-payment has been
received by the Company, or a default in payment of accrued but unpaid Accreted
Amounts under any of the Notes on or after the date such payment is due, which
default continues for fifteen (15) days after written notice of such non-payment
has been received by the Company;

                    (ii) a default in the timely issuance of Underlying Shares
upon and in accordance with terms hereof, which default continues for five (5)
Business Days after the Company has received written notice informing the
Company that it has failed to issue shares or deliver stock certificates within
the third Trading Day following the Conversion Date;

                    (iii) failure by the Company or the Operating Subsidiary for
thirty (30) days after written notice has been received by the Company to comply
with any material provision of any of the Notes, the Purchase Agreement, the
Registration Rights Agreement, the Subsidiary Guaranty, the Mortgage (as
modified by the Mortgage Modification) or any other agreement between the Holder
and the Company (including without limitation the failure to issue the requisite
number of shares of Common Stock upon conversion hereof and the failure to
redeem Notes upon the Holder's request following a Change in Control Transaction
pursuant to this Note);

                    (iv) any representation, warranty or statement made or
furnished by the Company or any of its subsidiaries to the Holder (or any
collateral agent on behalf of the Holder) under the Purchase Agreement,
Registration Rights Agreement, Subsidiary Guaranty, Mortgage (as modified by the
Mortgage Modification), or any other agreement between the Holder and the
Company or any certificate of schedule required thereby, is false or misleading
in any material respect when made;

                    (v) the Subsidiary Guaranty or Mortgage (as modified by the
Mortgage Modification) ceases to be in full force and effect (including failure
to create a valid and perfected first priority lien on and security interest in
the Mortgaged Property (as defined in the Mortgage) at any time for any reason;


                                       12
<PAGE>

                    (vi) any material adverse change in the condition, value or
operation of a material portion of the Mortgaged Property;

                    (vii) any acceleration prior to maturity of, any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or any
of its subsidiaries for in excess of $3 million or for money borrowed the
repayment of which is guaranteed by the Company or any of its subsidiaries for
in excess of $3 million, whether such indebtedness or guarantee now exists or
shall be created hereafter (provided that if a default precipitating such
acceleration is reasonably disputed in good faith in writing by the Company,
such acceleration shall not constitute a default hereunder unless such dispute
continues for more than 20 days);

                    (viii) the dissolution or termination of the Company or the
Operating Subsidiary as a going concern; or

                    (ix) if the Company is subject to any Bankruptcy Event.

               (b) Remedies. If an Event of Default occurs and is continuing
with respect to any of the Notes, the Holder may declare all of the then
outstanding Principal Amount of this Note and all other Notes held by the
Holder, including any default interest and Accreted Amounts due thereon, to be
due and payable immediately, except that in the case of an Event of Default
arising from events described in clauses (viii) through (ix) of Section 5(a),
this Note shall become due and payable without further action or notice. In the
event of such acceleration, the amount due and owing to the Holder shall be the
greater of (1) 120% of the outstanding Principal Amount of the Notes held by the
Holder (plus all accrued and unpaid default interest and Accreted Amounts, if
any) and (2) the product of (A) the highest closing price for the five (5)
Trading Days immediately preceding the Holder's acceleration and (B) the
outstanding Principal Amount divided by the Conversion Price. In either case the
Company shall pay interest on such amount in cash at the Default Rate to the
Holder if such amount is not paid within 7 days of Holder's request. The
remedies under this Note shall be cumulative.

         SECTION 6. SECURITY AND GUARANTY. The Company's and the Operating
Subsidiary's obligations under this Note and the other Agreements are secured by
Mortgaged Property (as defined in the Mortgage) pursuant to the terms of the
Mortgage (as modified by the Mortgage Modification) and the obligations under
this Note are guaranteed by the Operating Subsidiary pursuant to the Subsidiary
Guaranty.

         SECTION 7. GENERAL.

               (a) Payment of Expenses. The Company agrees to pay all reasonable
charges and expenses, including attorneys' fees and expenses, which may be
incurred by the Holder in successfully enforcing this Note and/or collecting any
amount due under this Note. This includes, without limitation and subject to any
limits under applicable law, Holder's reasonable collection costs under Section
5(b) and Holder's reasonable attorneys' fees and legal expenses whether or not
there is a lawsuit, including reasonable attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction),


                                       13
<PAGE>

appeals and any anticipated post-judgment collection services. If not prohibited
by applicable law, the Company also will pay any court costs, in addition to all
other sums provided by law.

               (b) Savings Clause. In case any provision of this Note is held by
a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. In no event shall the amount of
interest paid or converted hereunder (which for this purpose shall include all
default interest, all Accreted Amounts and all other consideration or charges
deemed to be interest) exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.

               (c) Amendment. Neither this Note nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and the Holder.

               (d) Assignment, Etc. The Holder may assign or transfer this Note
to any transferee only with the prior written consent of the Company, which may
not be unreasonably withheld or delayed, provided that (i) the Holder may assign
or transfer this Note to any of such Holder's Affiliates without the consent of
the Company and (ii) upon any Event of Default, the Holder may assign or
transfer this Note without the consent of the Company, 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 of the
Purchase Agreement shall apply to such Affiliate, transferee or assignee. The
Holder shall notify the Company of any such assignment or transfer promptly.
This Note shall be binding upon the Company and its successors and shall inure
to the benefit of the Holder and its successors and permitted assigns.

               (e) Waiver.

                    (i) No failure on the part of the Holder to exercise, and no
delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time. The release of any party liable under this Note shall not
operate to release any other party liable under this Note.

                    (ii) Except as otherwise provided herein, the Company and
any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, hereby expressly waives demand and presentment for payment,
notice of nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, all other notices


                                       14
<PAGE>

whatsoever and bringing of suit and diligence in taking any action to collect
amounts called for hereunder, and will be directly and primarily liable for the
payment of all sums owing and to be owing hereunder, regardless of and without
any notice, diligence, act or omission as or with respect to the collection of
any amount called for hereunder.

               (f) Governing Law; Jurisdiction.

                    (i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

                    (ii) Jurisdiction. The Company irrevocably submits to the
exclusive jurisdiction of any State or Federal Court sitting in the State of New
York, County of New York, over any suit, action, or proceeding arising out of or
relating to this Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action, or proceeding brought in such a court and
any claim that suit, action, or proceeding has been brought in an inconvenient
forum.

                    The Company agrees that the service of process upon it
mailed by certified or registered mail (and service so made shall be deemed
complete three days after the same has been posted as aforesaid) or by personal
service shall be deemed in every respect effective service of process upon it in
any such suit or proceeding. Nothing herein shall affect Holder's right to serve
process in any other manner permitted by law. The Company agrees that a final
non-appealable judgement in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.

                    (iii) No Jury Trial. The COMPANY hereto knowingly and
voluntarily waives any and all rights it may have to a trial by jury with
respect to any litigation based on, or arising out of, under, or in connection
with, this Note.

               (g) Replacement Notes. This Note may be exchanged by Holder at
any time and from time to time for a Note or Notes with different denominations
representing an equal aggregate outstanding Principal Amount, as reasonably
requested by Holder, upon surrendering the same. No service charge will be made
for such registration or exchange. In the event that Holder notifies the Company
that this Note has been lost, stolen or destroyed, a replacement Note identical
in all respects to the original Note (except for registration number and
Principal Amount, if different than that shown on the original Note), shall be
issued to the Holder, provided that the Holder executes and delivers to the
Company an agreement reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with this Note.


                            [Signature Page Follows]

                                       15
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed on the day and in the year first above written.


                                            NEXMED, INC.


                                            By:/s/ Y. Joseph Mo
                                               ----------------
                                            Name: Y. Joseph Mo, Ph.D.
                                            Title: Chairman, President and CEO


      [Corporate Seal]
                                            By: /s/ Vivian H. Liu
                                                -----------------
                                            Name: Vivian Liu
                                            Title: Secretary






                                       16
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERSION NOTICE

(To be executed by the Holder
in order to convert a Note)

         Re:      Note (this "Note") issued by NEXMED, INC to
                  ______________________________ on or about December ___, 2003
                  in the original principal amount of $_____________.

The undersigned hereby elects to convert the aggregate outstanding Principal
Amount (as defined in the Note) indicated below of this Note into shares of
Common Stock, $0.001 par value per share (the "Common Stock"), of NEXMED, INC.
(the "Company") according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any. The
undersigned represents as of the date hereof that, after giving effect to the
conversion of this Note pursuant to this Conversion Notice, the undersigned will
not exceed the "Restricted Ownership Percentage" contained in Section 3(i) of
this Note.


Conversion information:
                              --------------------------------------------------
                              Date to Effect Conversion


                              --------------------------------------------------
                              Aggregate Principal Amount of Note Being Converted


                              --------------------------------------------------
                              Number of Shares of Common Stock to be Issued


                              --------------------------------------------------
                              Applicable Conversion Price


                              --------------------------------------------------
                              Signature


                              --------------------------------------------------
                              Name


                              --------------------------------------------------
                              Address