Document:

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                                                                    Exhibit 10.1

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                 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

                                  by and among

                       NexMed, Inc., as Issuer and Seller

                                       and

    SDS Merchant Fund, L.P. and the other parties named herein, as Purchasers

                            with respect to Seller's

               Series B 8% Cumulative Convertible Preferred Stock

                      and Warrants to Purchase Common Stock

                                 April 21, 2003

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                         Table of Exhibits and Schedules

Exhibit A      Form of Certificate of Designation of the Series B 8%
               Cumulative Convertible Preferred Stock

Exhibit B      Form of Warrant

Exhibit C      Form of Investor Rights Agreement

Exhibit D      Form of Opinion of Seller's Counsel

Exhibit E      Form of Opinion of Nevada Counsel

Exhibit F      Form of Escrow Agreement

Schedule 1     Purchasers and Shares of Preferred Stock and Warrants
               Purchased

Schedule 3.10     Litigation

Schedule 3.11     Absence of Certain Changes

Schedule 3.15     Intellectual Property

Schedule 3.17     Preemptive Rights

Schedule 3.19     Subsidiaries and Investments

Schedule 3.20     Capitalization

Schedule 3.21     Options, Warrants, Rights

Schedule 3.22     Employees, Employment Agreements and Employee Benefit Plans

Schedule 3.27     Brokers

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         PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") dated
as of April 21, 2003, by and among NexMed, Inc., a Nevada corporation (the
"Seller"), and SDS Merchant Fund, L.P. and each of the other persons listed on
Schedule 1 hereto (each is individually referred to as a "Purchaser" and
collectively, the "Purchasers").

                              W I T N E S S E T H:

         WHEREAS, each of the Purchasers is willing to purchase from the Seller,
and the Seller desires to sell to the Purchasers, up to an aggregate of 800
shares of its Series B 8% Cumulative Convertible Preferred Stock, $10,000
liquidation preference per share, par value $0.001 per share (the "Preferred
Stock"), and Common Stock Purchase Warrants (the "Warrants") entitling the
holders thereof to purchase shares of the Seller's common stock, $0.001 par
value (the "Common Stock") as more fully set forth herein.

         NOW THEREFORE, in consideration of the mutual promises and
representations, warranties, covenants and agreements set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:

                          ARTICLE I - PURCHASE AND SALE

         1.1 Purchase and Sale.

         (a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing (as defined in Section 2.2), the Seller will sell and
each of the Purchasers will purchase the Preferred Stock in the amounts set
forth on Schedule 1 hereto. In addition, the Seller will sell and each Purchaser
will purchase at the Closing the number of Warrants set forth on Schedule 1
hereto.

         (b) The shares of Common Stock issuable upon conversion of the
Preferred Stock or upon payment of dividends on the Preferred Stock are referred
to herein as the "Conversion Shares," and the shares of Common Stock issuable
upon exercise of the Warrants are referred to herein as the "Warrant Shares."

         1.2 Terms of the Preferred Stock and Warrants. The terms and provisions
of the Preferred Stock are set forth in the form of Certificate of Designation
of Series B 8% Cumulative Convertible Preferred Stock, attached hereto as
Exhibit A (the "Certificate of Designation"). The terms and provisions of the
Warrants are more fully set forth in the form of Common Stock Purchase Warrant,
attached hereto as Exhibit B.

         1.3      Transfers; Legends.

         (a) Except as required by federal securities laws and the securities
law of any state or other jurisdiction within the United States, the Preferred
Stock, Conversion Shares, Warrants and Warrant Shares (collectively, the
"Securities") may be transferred, in whole or in part, by any of the Purchasers
at any time. In the case of Preferred Stock, such transfer may be effected by
delivering written transfer instructions to the Seller, and the Seller shall
reflect such transfer on its books and records and reissue certificates
evidencing the Preferred Stock upon surrender of

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certificates evidencing the Preferred Stock being transferred. Any such transfer
shall be made by a Purchaser in accordance with applicable law. In connection
with any transfer of Securities other than pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or to the Seller, the Seller may require the transferor thereof to furnish to
the Seller an opinion of counsel selected by the transferor, such counsel and
the form and substance of which opinion shall be reasonably satisfactory to the
Seller and Seller's counsel, to the effect that such transfer does not require
registration under the Securities Act; provided, that in the case of a transfer
pursuant to Rule 144 under the Securities Act, no opinion shall be required if
the transferor provides the Company with a customary seller's representation
letter, and if such sale is not pursuant to subsection (k) of Rule 144, a
customary broker's representation letter and Form 144. Notwithstanding the
foregoing, the Seller hereby consents to and agrees to register on the books of
the Seller and with any transfer agent for the securities of the Seller, without
any such legal opinion, any transfer of Securities by a Purchaser to an
Affiliate of such Purchaser, provided that the transferee certifies to the
Seller that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof) and not with a view to, or for,
resale, distribution or fractionalization thereof in whole or in part in
violation of the Securities Act. Any transferee shall agree to be bound by the
terms of the Investor Rights Agreement and this Agreement. The Seller shall
reissue certificates evidencing the Securities upon surrender of certificates
evidencing the Securities being transferred in accordance with this Section
1.3(a). An "Affiliate" means any Person (as such term is defined below) that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser. A "Person" means any individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision of any thereof) or other entity of any kind.

         (b) The certificates representing the Securities shall bear the
following legends:

"THE SHARES REPRESENTED BY, OR ACQUIRABLE UPON CONVERSION OR EXERCISE OF
SECURITIES EVIDENCED BY, THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT UNLESS, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH REGISTRATION IS
NOT REQUIRED."

"THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS
AGREEMENT DATED AS OF APRIL 21, 2003, AS AMENDED FROM TIME TO TIME, AMONG THE
COMPANY AND CERTAIN HOLDERS OF ITS OUTSTANDING SECURITIES. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS

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CERTIFICATE TO THE SECRETARY OF THE COMPANY."

                     ARTICLE II - PURCHASE PRICE AND CLOSING

         2.1 Purchase Price. The aggregate purchase price (the "Purchase Price")
to be paid by the Purchasers to the Seller to acquire the Preferred Stock and
the applicable Warrants shall be the total amounts set forth on Schedule 1
hereto.

         2.2 The Closing. The closing of the transactions contemplated under
this Agreement (the "Closing") will take place as promptly as practicable, but
no later than five (5) business days following satisfaction or waiver of the
conditions set forth in Article 6.1(a) and (b) and 6.2(a) (other than those
conditions which by their terms are not to be satisfied or waived until the
Closing), at the offices of Wiggin & Dana LLP, 400 Atlantic Street, Stamford,
Connecticut 06901. The date on which the Closing occurs is the "Closing Date."

           ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER

         The Seller represents and warrants to the Purchasers as follows:

         3.1 Corporate Existence and Power; Subsidiaries. The Seller and its
Subsidiaries are corporations duly incorporated, validly existing and in good
standing under the laws of the state in which they are incorporated, and have
all corporate powers required to carry on their business as now conducted. The
Seller and its Subsidiaries are duly qualified to do business as a foreign
corporation and are in good standing in each jurisdiction where the character of
the property owned or leased by them or the nature of their activities makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified would not have a Material Adverse Effect on the Seller or any
of its Subsidiaries. For purposes of this Agreement, the term "Material Adverse
Effect" means, with respect to any person or entity, a material adverse effect
on its and its Subsidiaries' condition (financial or otherwise), business,
properties, assets, liabilities (including contingent liabilities), results of
operations or current prospects, taken as a whole. True and complete copies of
the Seller's Articles of Incorporation, as amended, and Bylaws, as amended, as
currently in effect and as will be in effect on the Closing Date (collectively,
the "Articles and Bylaws"), have previously been provided to the Purchasers. For
purposes of this Agreement, the term "Subsidiary" or "Subsidiaries" means, with
respect to any entity, any corporation or other organization of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by such entity or of which such entity is a partner
or is, directly or indirectly, the beneficial owner of 50% or more of any class
of equity securities or equivalent profit participation interests. The Seller
has no Subsidiaries other than the following, each of which, unless otherwise
indicated, is wholly-owned by the Seller:

              (a)  NexMed Holdings, Inc., a Delaware corporation,

              (b)  NexMed (U.S.A.), Inc., a Delaware corporation,

                   (1)  New Brunswick Medical Inc. a Delaware corporation and a
                        wholly-owned subsidiary of NexMed (U.S.A.), Inc.,

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              (c)  NexMed International Limited, organized under British Virgin
                   Islands law,

                   (1)  NexMed (Americas) Limited, organized under Nova Scotia
                        law and a wholly-owned subsidiary of NexMed
                        International Limited, and

                   (2)  NexMed International (Hong Kong) Ltd. organized under
                        Hong Kong law and a wholly-owned subsidiary of NexMed
                        International Limited, a wholly-owned subsidiary of
                        NexMed International Limited.

         3.2 Corporate Authorization. The execution, delivery and performance by
the Seller of this Agreement, and the Warrants, the Escrow Agreement (as defined
below), the Certificate of Designation, the Investor Rights Agreement, and each
of the other documents executed pursuant to and in connection with this
Agreement (collectively, the "Related Documents"), and the consummation of the
transactions contemplated hereby and thereby (including, but not limited to, the
sale and delivery of the Preferred Stock and the Warrants, and the subsequent
issuance of the Conversion Shares upon conversion of the Preferred Stock and the
Warrant Shares upon exercise of the Warrants) have been duly authorized, and no
additional corporate or stockholder action is required for the approval of this
Agreement. The Conversion Shares and the Warrant Shares have been duly reserved
for issuance by the Seller. This Agreement and the Related Documents have been
or, to the extent contemplated hereby or by the Related Documents, will be duly
executed and delivered and constitute the legal, valid and binding agreement of
the Seller, enforceable against the Seller in accordance with their terms,
except as may be limited by bankruptcy, reorganization, insolvency, moratorium
and similar laws of general application relating to or affecting the enforcement
of rights of creditors, and except as enforceability of its obligations
hereunder are subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

         3.3 Charter, Bylaws and Corporate Records. The minute books of the
Seller and its Subsidiaries contain complete and accurate records of all
meetings and other corporate actions of the board of directors, committees of
the board of directors, incorporators and stockholders of the Seller and its
Subsidiaries from September 15, 1995 to the date hereof. All material corporate
decisions and actions have been validly made or taken. All corporate books,
including without limitation the share transfer register, comply with applicable
laws and regulations and have been regularly updated. Such books fully and
correctly reflect all the decisions of the stockholders.

         3.4 Governmental Authorization. Except as otherwise specifically
contemplated in this Agreement and the Related Documents, and except for: (i)
the filings referenced in Section 5.11; (ii) the filing of the Certificate of
Designation; (iii) the filing of a Form D with respect to the Preferred Stock
and Warrants under Regulation D under the Securities Act; (iv) the filing of the
Registration Statement with the Commission; (v) the application(s) to each
trading market for the listing of the Conversion Shares and the Warrant Shares
for trading thereon; and (vi) any filings required under state securities laws
that are permitted to be made after the date hereof, the execution, delivery and
performance by the Seller of this Agreement and the Related Documents,

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and the consummation of the transactions contemplated hereby and thereby
(including, but not limited to, the sale and delivery of the Preferred Stock and
Warrants and the subsequent issuance of the Conversion Shares and Warrant Shares
upon conversion of the Preferred Stock or otherwise or exercise of the Warrants,
as applicable) by the Seller require no action by or in respect of, or filing
with, any governmental body, agency, official or authority. Notwithstanding the
foregoing, the Seller makes no representation or warranty with respect to the
compliance of the transactions contemplated by this Agreement with Rule 4350(i)
of the National Association of Securities Dealers, Inc.

         3.5 Non-Contravention. The execution, delivery and performance by the
Seller of this Agreement and the Related Documents, and the consummation by the
Seller of the transactions contemplated hereby and thereby (including the
issuance of the Conversion Shares and Warrant Shares) do not and will not (a)
contravene or conflict with the Articles (as amended by the Certificate of
Designation) and Bylaws of the Seller and its Subsidiaries or any material
agreement to which the Seller is a party or by which it is bound; (b) contravene
or conflict with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable to
the Seller or its Subsidiaries; (c) constitute a default (or would constitute a
default with notice or lapse of time or both) under or give rise to a right of
termination, cancellation or acceleration or loss of any benefit under any
material agreement, contract or other instrument binding upon the Seller or its
Subsidiaries or under any material license, franchise, permit or other similar
authorization held by the Seller or its Subsidiaries; or (d) result in the
creation or imposition of any Lien (as defined below) on any asset of the Seller
or its Subsidiaries. For purposes of this Agreement, the term "Lien" means, with
respect to any asset, any mortgage, lien, pledge, charge, security interest,
claim or encumbrance of any kind in respect of such asset.

         3.6 SEC Documents. The Seller is obligated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") to file reports pursuant
to Sections 13 or 15(d) thereof (all such reports filed or required to be filed
by the Seller, including all exhibits thereto or incorporated therein by
reference, and all documents filed by the Seller under the Securities Act
hereinafter called the "SEC Documents"). The Seller has filed all reports or
other documents required to be filed under the Exchange Act. All SEC Documents
filed by the Seller as of or for any period beginning on or after January 1,
2001, (i) were prepared in all material respects in accordance with the
requirements of the Exchange Act and (ii) did not at the time they were filed
(or, if amended or superseded by a filing prior to the date hereof, then on the
date of such filing) contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Seller has previously delivered to the Purchaser a
correct and complete copy of each report which the Seller filed with the
Securities and Exchange Commission (the "SEC" or the "Commission") under the
Exchange Act for any period ending on or after December 31, 2002 (the "Recent
Reports"). None of the information about the Seller or any of its Subsidiaries
which has been disclosed to the Purchasers herein or in the course of
discussions and negotiations with respect hereto which is not disclosed in the
Recent Reports is or was required to be so disclosed, and no material non-public
information has been disclosed to the Purchasers.

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         3.7 Financial Statements. Each of the Seller's audited consolidated
balance sheet and related consolidated statements of income, cash flows and
changes in stockholders' equity (including the related notes) as of and for the
years ended December 31, 2002 and December 31, 2001, as contained in the Recent
Reports (collectively, the "Seller's Financial Statements" or the "Financial
Statements") (x) present fairly in all material respects the financial position
of the Seller and its Subsidiaries on a consolidated basis as of the dates
thereof and the results of operations, cash flows and stockholders' equity as of
and for each of the periods then ended, and (y) were prepared in accordance with
generally accepted accounting principals ("GAAP") applied on a consistent basis
throughout the periods involved, in each case, except as otherwise indicated in
the notes thereto.

         3.8 Compliance with Law. The Seller and its Subsidiaries are in
compliance and have conducted their business so as to comply with all laws,
rules and regulations, judgments, decrees or orders of any court, administrative
agency, commission, regulatory authority or other governmental authority or
instrumentality, domestic or foreign, applicable to their operations, the
violation of which would cause a Material Adverse Affect. There are no judgments
or orders, injunctions, decrees, stipulations or awards (whether rendered by a
court or administrative agency or by arbitration), including any such actions
relating to affirmative action claims or claims of discrimination, against the
Seller or its Subsidiaries or against any of their properties or businesses.

         3.9 No Defaults. The Seller and its Subsidiaries are not, nor have they
received notice that they would be with the passage of time, giving of notice,
or both, (i) in violation of any provision of their Articles and Bylaws (ii) in
default or violation of any term, condition or provision of (A) any judgment,
decree, order, injunction or stipulation applicable to the Seller or its
Subsidiaries or (B) any material agreement, note, mortgage, indenture, contract,
lease or instrument, permit, concession, franchise or license to which the
Seller or its Subsidiaries are a party or by which the Seller or its
Subsidiaries or their properties or assets may be bound, and no circumstances
exist which would entitle any party to any material agreement, note, mortgage,
indenture, contract, lease or instrument to which such Seller or its
Subsidiaries are a party, to terminate such as a result of such Seller or its
Subsidiaries, having failed to meet any material provision thereof including,
but not limited to, meeting any applicable milestone under any material
agreement or contract.

         3.10 Litigation. Except as disclosed in the Recent Reports or on
Schedule 3.10, there is no action, suit, proceeding, judgment, claim or
investigation pending or, to the best knowledge of the Seller, threatened
against the Seller and its Subsidiaries which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Seller or its Subsidiaries or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
hereby, and there is no basis for the assertion of any of the foregoing.

         There are no claims or complaints existing or, to the knowledge of the
Seller or its Subsidiaries, threatened for product liability in respect of any
product of the Seller or its Subsidiaries, and the Seller and its Subsidiaries
are not aware of any basis for the assertion of any such claim.

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         3.11 Absence of Certain Changes. Since December 31, 2002, the Seller
has conducted its business only in the ordinary course and there has not
occurred, except as set forth in the Recent Reports or any exhibit thereto or
incorporated by reference therein:

         (a) Any event that could reasonably be expected to have a Material
Adverse Effect on the Seller or any of its Subsidiaries;

         (b) Any amendments or changes in the Articles or Bylaws of the Seller
and its Subsidiaries, other than on account of the filing of the Certificate of
Designation;

         (c) Any damage, destruction or loss, whether or not covered by
insurance, that would, individually or in the aggregate, have or would be
reasonably likely to have, a Material Adverse Effect on the Seller and its
Subsidiaries;

         (d) Except as set forth on Schedule 3.11(d), any

              (i) incurrence, assumption or guarantee by the Seller or its
         Subsidiaries of any debt for borrowed money other than for equipment
         leases;

              (ii) issuance or sale of any securities convertible into or
         exchangeable for securities of the Seller other than to directors,
         employees and consultants pursuant to existing equity compensation or
         stock purchase plans of the Seller;

              (iii) issuance or sale of options or other rights to acquire from
         the Seller or its Subsidiaries, directly or indirectly, securities of
         the Seller or any securities convertible into or exchangeable for any
         such securities, other than options issued to directors, employees and
         consultants in the ordinary course of business in accordance with past
         practice;

              (iv) issuance or sale of any stock, bond or other corporate
         security;

              (v) discharge or satisfaction of any material Lien, other than
         current liabilities incurred since December 31, 2001 in the ordinary
         course of business;

              (vi) declaration or making any payment or distribution to
         stockholders or purchase or redemption of any share of its capital
         stock or other security;

              (vii) sale, assignment or transfer any of its intangible assets
         except in the ordinary course of business, or cancellation of any debt
         or claim except in the ordinary course of business;

              (viii) waiver of any right of substantial value whether or not in
         the ordinary course of business;

              (ix) material change in officer compensation except in the
         ordinary course of business and consistent with past practices; or

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              (x) other commitment (contingent or otherwise) to do any of the
         foregoing.

         (e) Any creation, sufferance or assumption by the Seller or any of its
Subsidiaries of any Lien on any asset (other than Liens existing on the date
hereof or in connection with equipment leases and working capital lines of
credit set forth on Schedule 3.11(e)) or any making of any loan, advance or
capital contribution to or investment in any Person in an aggregate amount which
exceeds $25,000 outstanding at any time;

         (f) Any entry into, amendment of, relinquishment, termination or
non-renewal by the Seller or its Subsidiaries of any material contract, license,
lease, transaction, commitment or other right or obligation, other than in the
ordinary course of business; or

         (g) Any transfer or grant of a right with respect to the trademarks,
trade names, service marks, trade secrets, copyrights or other intellectual
property rights owned or licensed by the Seller or its Subsidiaries, except as
among the Seller and its Subsidiaries.

         3.12 No Undisclosed Liabilities. Except as set forth in the Recent
Reports, and except for liabilities and obligations incurred in the ordinary
course of business since December 31, 2002, as of the date hereof, (i) the
Seller and its Subsidiaries do not have any material liabilities or obligations
(absolute, accrued, contingent or otherwise) which, and (ii) there has not been
any aspect of the prior or current conduct of the business of the Seller or its
Subsidiaries which may form the basis for any material claim by any third party
which if asserted could result in any such material liabilities or obligations
which, are not fully reflected, reserved against or disclosed in the balance
sheet of the Seller as at December 31, 2002.

         3.13 Taxes. All tax returns and tax reports required to be filed with
respect to the income, operations, business or assets of the Seller and its
Subsidiaries have been timely filed (or appropriate extensions have been
obtained) with the appropriate governmental agencies in all jurisdictions in
which such returns and reports are required to be filed, and all of the
foregoing as filed are correct and complete and, in all material respects,
reflect accurately all liability for taxes of the Seller and its Subsidiaries
for the periods to which such returns relate, and all amounts shown as owing
thereon have been paid. All income, profits, franchise, sales, use, value added,
occupancy, property, excise, payroll, withholding, FICA, FUTA and other taxes
(including interest and penalties), if any, collectible or payable by the Seller
and its Subsidiaries or relating to or chargeable against any of its material
assets, revenues or income or relating to any employee, independent contractor,
creditor, stockholder or other third party through the Closing Date, were fully
collected and paid by such date if due by such date or provided for by adequate
reserves in the Financial Statements as of and for the periods ended December
31, 2002 (other than taxes accruing after such date) and all similar items due
through the Closing Date will have been fully paid by that date or provided for
by adequate reserves, whether or not any such taxes were reported or reflected
in any tax returns or filings. No taxation authority has sought to audit the
records of the Seller or any of its Subsidiaries for the purpose of verifying or
disputing any tax returns, reports or related information and disclosures
provided to such taxation authority, or for the Seller's or any of its
Subsidiaries' alleged failure to provide any such tax returns, reports or
related information and disclosure. No material claims or deficiencies have been
asserted against or inquiries raised with the Seller or any of its Subsidiaries
with respect to any taxes or

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other governmental charges or levies which have not been paid or otherwise
satisfied, including claims that, or inquiries whether, the Seller or any of its
Subsidiaries has not filed a tax return that it was required to file, and, to
the best of the Seller's knowledge, there exists no reasonable basis for the
making of any such claims or inquiries. Neither the Seller nor any of its
Subsidiaries has waived any restrictions on assessment or collection of taxes or
consented to the extension of any statute of limitations relating to taxation.

         3.14 Interests of Officers, Directors and Other Affiliates. The
description of any interest held, directly or indirectly, by any officer,
director or other Affiliate of Seller (other than the interests of the Seller
and its Subsidiaries in such assets) in any property, real or personal, tangible
or intangible, used in or pertaining to Seller's business, including any
interest in the Intellectual Property (as defined in Section 3.15 hereof), as
set forth in the Recent Reports, is true and complete, and no officer, director
or other Affiliate of the Seller has any interest in any property, real or
personal, tangible or intangible, used in or pertaining to the Seller's
business, including the Seller's Intellectual Property, other than as set forth
in the Recent Reports.

         3.15 Intellectual Property. Other than as set forth in the Recent
Reports:

         (a) the Seller or a Subsidiary thereof has the right to use or is the
sole and exclusive owner of all right, title and interest in and to all foreign
and domestic patents, patent rights, trademarks, service marks, trade names,
brands and copyrights (whether or not registered and, if applicable, including
pending applications for registration) owned, used or controlled by the Seller
and its Subsidiaries (collectively, the "Rights") and in and to each material
invention, software, trade secret, technology, product, composition, formula,
method of process used by the Seller or its Subsidiaries (the Rights and such
other items, the "Intellectual Property"), and, to the Seller's knowledge, has
the right to use the same, free and clear of any claim or conflict with the
rights of others;

         (b) no royalties or fees (license or otherwise) are payable by the
Seller or its Subsidiaries to any Person by reason of the ownership or use of
any of the Intellectual Property except as set forth on Schedule 3.15;

         (c) there have been no claims made against the Seller or its
Subsidiaries asserting the invalidity, abuse, misuse, or unenforceability of any
of the Intellectual Property, and, to its knowledge, there are no reasonable
grounds for any such claims;

         (d) neither the Seller nor its Subsidiaries have made any claim of any
violation or infringement by others of its rights in the Intellectual Property,
and to the best of the Seller's knowledge, no reasonable grounds for such claims
exist; and

         (e) neither the Seller nor its Subsidiaries have received notice that
it is in conflict with or infringing upon the asserted rights of others in
connection with the Intellectual Property.

         3.16 Restrictions on Business Activities. Other than as set forth in
the Recent Reports, there is no agreement, judgment, injunction, order or decree
binding upon the Seller or its Subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or

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materially impairing any business practice of the Seller or its Subsidiaries,
any acquisition of property by the Seller or its Subsidiaries or the conduct of
business by the Seller or its Subsidiaries as currently conducted or as
currently proposed to be conducted by the Seller.

         3.17 Preemptive Rights. Except as set forth in Schedule 3.17, none of
the stockholders of the Seller possess any preemptive rights in respect of the
Preferred Stock or the Conversion Shares or Warrant Shares to be issued to the
Purchasers upon conversion of the Preferred Stock or exercise of the Warrants,
as applicable.

         3.18 Insurance. The insurance policies providing insurance coverage to
the Seller or its Subsidiaries including for product liability are adequate for
the business conducted by the Seller and its Subsidiaries (currently limited to
the testing phase) and are sufficient for compliance by the Seller and its
Subsidiaries with all requirements of law and all material agreements to which
the Seller or its Subsidiaries are a party or by which any of their assets are
bound. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Seller and its Subsidiaries
have complied with all material terms and conditions of such policies, including
premium payments. None of the insurance carriers has indicated to the Seller or
its Subsidiaries an intention to cancel any such policy. 3.19 Subsidiaries and
Investments. Except as set forth in the Recent Reports or on Schedule 3.19, the
Seller has no Subsidiaries or Investments. For purposes of this Agreement, the
term "Investments" shall mean, with respect to any Person, all advances, loans
or extensions of credit to any other Person, all purchases or commitments to
purchase any stock, bonds, notes, debentures or other securities of any other
Person, and any other investment in any other Person, including partnerships or
joint ventures (whether by capital contribution or otherwise) or other similar
arrangement (whether written or oral) with any Person, including but not limited
to arrangements in which (i) the Person shares profits and losses, (ii) any such
other Person has the right to obligate or bind the Person to any third party, or
(iii) the Person may be wholly or partially liable for the debts or obligations
of such partnership, joint venture or other arrangement.

         3.19 Subsidiaries and Investments. Except as set forth in the Recent
Reports or on Schedule 3.19, the Seller has no Subsidiaries or Investments. For
purposes of this Agreement, the term "Investments" shall mean, with respect to
any Person, all advances, loans or extensions of credit to any other Person,
all purchases or commitments to purchase any stock, bonds, notes, debentures or
other securities of any other Person, and any other investment in any other
Person, including partnerships or joint ventures (whether by capital
contribution or otherwise) or other similar arrangement (whether written or
oral) with any Person, including but not limited to arrangements in which (i)
the Person shares profits and losses, (ii) any such other Person has the right
to obligate or bind the Person to any third party, or (iii) the Person may be
wholly or partially liable for the debts or obligations or such partnership,
joint venture or other arrangement.

         3.20 Capitalization. The authorized capital stock of the Seller
consists of 80,000,000 shares of common stock, $0.001 par value per share, of
which 29,484,234 shares are issued and outstanding as of the date hereof, and
10,000,000 shares of preferred stock, issuable in one or more classes or series,
with such relative rights and preferences as the Board of Directors may
determine, none of which has been authorized for issuance other than 1,000,000
shares of Series A Junior Participating Preferred Stock, $0.001 par value per
share, and other than the Preferred Stock contemplated hereby and none of which,
immediately prior to the Closing, is outstanding. All shares of the Seller's
issued and outstanding capital stock have been duly authorized, are validly
issued and outstanding, and are fully paid and nonassessable. No securities
issued by the Seller from the date of its incorporation to the date hereof were
issued in violation of any statutory or common law preemptive rights. There are
no dividends which have accrued or been declared but are unpaid on the capital
stock of the Seller. All taxes required to be paid by Seller in connection with
the issuance and any transfers of the Seller's capital stock have been paid.
Except as set forth on Schedule 3.20, all permits or authorizations required to
be obtained from or registrations required to be effected with any Person in
connection with any and all issuances

                                       10
<PAGE>

of securities of the Seller from the date of the Seller's incorporation to the
date hereof have been obtained or effected, and all securities of the Seller
have been issued and are held in accordance with the provisions of all
applicable securities or other laws.

         3.21 Options, Warrants, Rights. Except as set forth on Schedule 3.21,
there are no outstanding (a) securities, notes or instruments convertible into
or exercisable for any of the capital stock or other equity interests of the
Seller or its Subsidiaries; (b) options, warrants, subscriptions or other rights
to acquire capital stock or other equity interests of the Seller or its
Subsidiaries; or (c) commitments, agreements or understandings of any kind,
including employee benefit arrangements, relating to the issuance or repurchase
by the Seller or its Subsidiaries of any capital stock or other equity interests
of the Seller or its Subsidiaries, any such securities or instruments
convertible or exercisable for securities or any such options, warrants or
rights. Other than the rights of the Purchasers under the Preferred Stock and
the Warrants, and except as set forth on Schedule 3.21, neither the Seller nor
the Subsidiaries have granted anti-dilution rights to any person or entity in
connection with any outstanding option, warrant, subscription or any other
instrument convertible or exercisable for the securities of the Seller or any of
its Subsidiaries. Other than the rights granted to the Purchasers under the
Investor Rights Agreement, there are no outstanding rights which permit the
holder thereof to cause the Seller or the Subsidiaries to file a registration
statement under the Securities Act or which permit the holder thereof to include
securities of the Seller or any of its Subsidiaries in a registration statement
filed by the Seller or any of its Subsidiaries under the Securities Act, and
there are no outstanding agreements or other commitments which otherwise relate
to the registration of any securities of the Seller or any of its Subsidiaries
for sale or distribution in any jurisdiction, except as set forth on Schedule
3.21.

         3.22 Employees, Employment Agreements and Employee Benefit Plans.
Except as set forth in the Recent Reports or on Schedule 3.22, there are no
employment, consulting, severance or indemnification arrangements, agreements,
or understandings between the Seller and any officer, director, consultant or
employee of the Seller or its Subsidiaries (the "Employment Agreements"). No
Employment Agreement provides for the acceleration or change in the award,
grant, vesting or determination of options, warrants, rights, severance
payments, or other contingent obligations of any nature whatsoever of the Seller
or its Subsidiaries in favor of any such parties in connection with the
transactions contemplated by this Agreement. Except as disclosed in the Recent
Reports or on Schedule 3.22, the terms of employment or engagement of all
directors, officers, employees, agents, consultants and professional advisors of
the Seller and its Subsidiaries are such that their employment or engagement may
be terminated upon not more than two weeks' notice given at any time without
liability for payment of compensation or damages and the Seller and its
Subsidiaries have not entered into any agreement or arrangement for the
management of their business or any part thereof other than with their directors
or employees.

         3.23 Absence of Certain Business Practices. Neither the Seller, nor any
Affiliate of the Seller, nor to the knowledge of the Seller, any agent or
employee of the Seller, any other Person acting on behalf of or associated with
the Seller, or any individual related to any of the foregoing Persons, acting
alone or together, has: (a) received, directly or indirectly, any rebates,
payments, commissions, promotional allowances or any other economic benefits,
regardless of their nature

                                       11
<PAGE>

or type, from any customer, supplier, trading company, shipping company,
governmental employee or other Person with whom the Seller has done business
directly or indirectly; or (b) directly or indirectly, given or agreed to give
any gift or similar benefit to any customer, supplier, trading company, shipping
company, governmental employee or other Person who is or may be in a position to
help or hinder the business of the Seller (or assist the Seller in connection
with any actual or proposed transaction) which (i) may subject the Seller to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding, (ii) if not given in the past, may have had an adverse effect on the
Seller or (iii) if not continued in the future, may adversely affect the assets,
business, operations or prospects of the Seller or subject the Seller to suit or
penalty in any private or governmental litigation or proceeding.

         3.24 Products and Services. To the knowledge of the Seller and except
as disclosed in the Recent Reports, there exists no set of facts (i) which could
furnish a basis for the withdrawal, suspension or cancellation of any
registration, license, permit or other governmental approval or consent of any
governmental or regulatory agency with respect to any product or service
developed or provided by the Seller or its Subsidiaries, (ii) which could
furnish a basis for the withdrawal, suspension or cancellation by order of any
state, federal or foreign court of law of any product or service, or (iii) which
could have a Material Adverse Effect on the continued operation of any facility
of the Seller or its Subsidiaries or which could otherwise cause the Seller or
its Subsidiaries to withdraw, suspend or cancel any such product or service from
the market or to change the marketing classification of any such product or
service. Each product or service provided by Seller or its Subsidiaries has been
provided in accordance in all material respects with the specifications under
which such product or service normally is and has been provided and the
provisions of all applicable laws or regulations.

         3.25 Environmental Matters. None of the premises or any properties
owned, occupied or leased by the Seller or its Subsidiaries (the "Premises") has
been used by the Seller or the Subsidiaries or, to the Seller's knowledge, by
any other Person, to manufacture, treat, store, or dispose of any substance that
has been designated to be a "hazardous substance" under applicable Environmental
Laws (hereinafter defined) ("Hazardous Substances") in violation of any
applicable Environmental Laws. To its knowledge, the Seller has not disposed of,
discharged, emitted or released any Hazardous Substances which would require,
under applicable Environmental Laws, remediation, investigation or similar
response activity. No Hazardous Substances are present as a result of the
actions of the Seller or, to the Seller's knowledge, any other Person, in, on or
under the Premises which would give rise to any liability or clean-up
obligations of the Seller under applicable Environmental Laws. The Seller and,
to the Seller's knowledge, any other Person for whose conduct it may be
responsible pursuant to an agreement or by operation of law, are in compliance
with all laws, regulations and other federal, state or local governmental
requirements, and all applicable judgments, orders, writs, notices, decrees,
permits, licenses, approvals, consents or injunctions in effect on the date of
this Agreement relating to the generation, management, handling, transportation,
treatment, disposal, storage, delivery, discharge, release or emission of any
Hazardous Substance (the "Environmental Laws"). Neither the Seller nor, to the
Seller's knowledge, any other Person for whose conduct it may be responsible
pursuant to an agreement or by operation of law has received any written
complaint, notice, order, or citation of any actual, threatened or alleged
noncompliance with any of the Environmental Laws, and there is no proceeding,
suit or

                                       12
<PAGE>

investigation pending or, to the Seller's knowledge, threatened against the
Seller or, to the Seller's knowledge, any such Person with respect to any
violation or alleged violation of the Environmental Laws, and, to the knowledge
of the Seller, there is no basis for the institution of any such proceeding,
suit or investigation.

         3.26 Licenses; Compliance With FDA and Other Regulatory Requirements.

         (a) General. Except as disclosed in the Recent Reports, the Seller
holds all material authorizations, consents, approvals, franchises, licenses and
permits required under applicable law or regulation for the operation of the
business of the Seller and its Subsidiaries as presently operated (the
"Governmental Authorizations"). All the Governmental Authorizations have been
duly issued or obtained and are in full force and effect, and the Seller and its
Subsidiaries are in material compliance with the terms of all the Governmental
Authorizations. The Seller and its Subsidiaries have not engaged in any activity
that, to their knowledge, would cause revocation or suspension of any such
Governmental Authorizations. The Seller has no knowledge of any facts which
could reasonably be expected to cause the Seller to believe that the
Governmental Authorizations will not be renewed by the appropriate governmental
authorities in the ordinary course. Neither the execution, delivery nor
performance of this Agreement shall adversely affect the status of any of the
Governmental Authorizations.

         (b) FDA. Without limiting the generality of the representations and
warranties made in paragraph (a) above, the Seller represents and warrants that
(i) the Seller and each of its Subsidiaries is in material compliance with all
applicable provisions of the United States Federal Food, Drug, and Cosmetic Act
(the "FDC Act"), (ii) its products and those of each of its Subsidiaries that
are in the Seller's control are not adulterated or misbranded and are in lawful
distribution, (iii) the United States Food and Drug Administration (the "FDA")
has not initiated legal action with respect to the manufacturing of the Seller's
products, such as seizures or FDA-required recalls, and Seller uses best efforts
to comply with applicable FDA good manufacturing practice regulations, (iv) all
adverse events that were known to and required to be reported by Seller to the
FDA have been reported to the FDA in a timely manner, (v) neither the Seller nor
any of its Subsidiaries is, to their knowledge, employing or utilizing the
services of any individual who has been debarred under the FDC Act, (vi) all
stability studies required to be performed for products distributed by the
Seller or any of its Subsidiaries have been completed or are ongoing in material
compliance with the applicable FDA requirements, and (vii) the Seller and its
Subsidiaries is in compliance in all material respects with all applicable
provisions of the Controlled Substances Act.

         3.27 Brokers. Except as set forth on Schedule 3.27, no broker, finder
or investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement,
based upon any arrangement made by or on behalf of the Seller, which would make
any Purchaser liable for any fees or commissions.

         3.28 Securities Laws. Neither the Seller nor its Subsidiaries nor any
agent acting on behalf of the Seller or its Subsidiaries has taken or will take
any action which might cause this Agreement or the Preferred Stock or Warrants
to violate the Securities Act or the Exchange Act or any rules or regulations
promulgated thereunder, as in effect on the Closing Date. Assuming

                                       13
<PAGE>

that all of the representations and warranties of the Purchasers set forth in
Article IV are true, all offers and sales of capital stock, securities and notes
of the Seller were conducted and completed in compliance with the Securities
Act. All shares of capital stock and other securities issued by the Seller and
its Subsidiaries prior to the date hereof have been issued in transactions that
were either registered offerings or were exempt from the registration
requirements under the Securities Act and all applicable state securities or
"blue sky" laws and in compliance with all applicable corporate laws.

         3.29 Disclosure. No representation or warranty made by the Seller in
this Agreement, nor in any document, written information, financial statement,
certificate, schedule or exhibit prepared and furnished by the Seller or the
representatives of the Seller pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.

          ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

         Each Purchaser, for itself only, hereby severally and not jointly,
represents and warrants to the Seller as follows:

         4.1 Existence and Power. The Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of such
Purchaser's organization. The Purchaser has all powers required to carry on such
Purchaser's business as now conducted.

         4.2 Authorization. The execution, delivery and performance by the
Purchaser of this Agreement, the Related Documents to which such Purchaser is a
party, and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized, and no additional action is
required for the approval of this Agreement or the Related Documents. This
Agreement and the Related Documents to which the Purchaser is a party have been
or, to the extent contemplated hereby, will be duly executed and delivered and
constitute valid and binding agreements of the Purchaser, enforceable against
such Purchaser in accordance with their terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of their obligations thereunder are subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

         4.3 Investment. The Purchaser is acquiring the securities described
herein for its own account and not with a view to, or for sale in connection
with, any distribution thereof, nor with the intention of distributing or
reselling the same, provided, however, that by making the representation herein,
the Purchaser does not agree to hold any of the securities for any minimum or
other specific term and reserves the right to dispose of the securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act. The Purchaser is aware that none of the securities has
been registered under the Securities Act or under applicable state securities or
blue sky laws. The Purchaser is an "Accredited Investor" as

                                       14
<PAGE>

such term is defined in Rule 501 of Regulation D, as promulgated under the
Securities Act.

         4.4 Reliance on Exemptions. The Purchaser understands that the
Preferred Stock and Warrants are being offered and sold to such Purchaser in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that the Seller is relying upon the
truth and accuracy of, and such Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the securities.

         4.5 Experience of the Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. The Purchaser is able to bear
the economic risk of an investment in the securities and, at the present time,
is able to afford a complete loss of such investment.

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

         4.7 Independence. The Purchaser is neither an Affiliate of any other
Purchaser nor is a member of any "group" in which any other Purchaser is a
member, except that: SDS Merchant Fund, L.P. and BayStar Capital II, LP are
Affiliates of each other. For purposes hereof, "group" has the meaning set forth
in Section 13(d) of the Exchange Act and applicable regulations of the
Securities and Exchange Commission.

               ARTICLE V - COVENANTS OF THE SELLER AND PURCHASERS

         5.1 Insurance. The Seller and its Subsidiaries shall, from time to time
upon the written request of the Purchasers, promptly furnish or cause to be
furnished to the Seller evidence, in form and substance reasonably satisfactory
to the Purchasers, of the maintenance of all insurance maintained by it for loss
or damage by fire and other hazards, damage or injury to persons and property,
including from product liability, and under workmen's compensation laws.

         5.2 Reporting Obligations. So long as any of the Preferred Stock is
outstanding, and so long as any Warrant has not been exercised and has not
expired by its terms, the Seller shall furnish to the Purchasers, or any other
persons who hold any of the Preferred Stock or Warrants (provided that such
subsequent holders give notice to the Seller that they hold Preferred Stock or
Warrants and furnish their addresses) promptly upon their becoming available one
copy of (A) each report, notice or proxy statement sent by the Seller to its
stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act) and (B) any registration statement, prospectus or written
communication pursuant to the Securities Act relating to the issuance or
registration of Conversion Shares and the Warrant Shares and filed by the Seller
with the Commission or any securities market or exchange on which shares of
Common Stock are listed;

                                       15
<PAGE>

provided, however, that the Company shall have no obligation to deliver periodic
reports (pursuant to the Exchange Act) under this Section 5.2 to the extent such
reports are publicly available.

         The Purchasers are hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of the Seller which may have been furnished to the
Purchasers hereunder, to any regulatory body or agency having jurisdiction over
the Purchasers or to any Person which shall, or shall have right or obligation
to succeed to all or any part of the Purchasers' interest in the Seller or this
Agreement.

         5.3 Investigation. The representations, warranties, covenants and
agreements set forth in this Agreement shall not be affected or diminished in
any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchasers to discover any breach,
default or misrepresentation by the Seller under this Agreement or the Related
Documents (including under any certificate furnished pursuant to this
Agreement), notwithstanding the exercise by the Purchasers or other holders of
the Preferred Stock of their rights hereunder to conduct an investigation shall
not in any way diminish any liability hereunder.

         5.4 Further Assurances. The Seller shall, at its cost and expense, upon
written request of the Purchasers, duly execute and deliver, or cause to be duly
executed and delivered, to the Purchasers such further instruments and do and
cause to be done such further acts as may be necessary, advisable or proper, in
the absolute discretion of the Purchasers, to carry out more effectually the
provisions and purposes of this Agreement. The parties shall use their best
efforts to timely satisfy each of the conditions described in Article VI of this
Agreement.

         5.5 Use of Proceeds. The Seller covenants and agrees that the proceeds
of the Purchase Price shall be used by the Seller for working capital and
general corporate purposes; under no circumstances shall any portion of the
proceeds be applied to:

              (i) accelerated repayment of debt existing on the date hereof;

              (ii) the payment of dividends or other distributions on any
         capital stock of the Seller other than the Preferred Stock;

              (iii) increased executive compensation or loans to officers,
         employees, stockholders or directors, unless approved by a
         disinterested majority of the Board of Directors;

              (iv) the purchase of debt or equity securities of any person,
         including the Seller and its Subsidiaries, except in connection with
         investment of excess cash in high quality (A1/P1 or better) money
         market instruments having maturities of one year or less; or

              (v) any expenditure not directly related to the business of the
         Seller.

         5.6 Corporate Existence. So long as a Purchaser owns Preferred Stock,
Warrants,

                                       16
<PAGE>

Conversion Shares, or Warrant Shares, the Seller shall preserve and maintain and
cause its Subsidiaries to preserve and maintain their corporate existence and
good standing in the jurisdiction of their incorporation and the rights,
privileges and franchises of the Seller and its Subsidiaries (except, in each
case, in the event of a merger or consolidation in which the Seller or its
Subsidiaries, as applicable, is not the surviving entity) in each case where
failure to so preserve or maintain could have a Material Adverse Effect on the
financial condition, business or operations of the Seller and its Subsidiaries
taken as a whole.

         5.7 Licenses. The Seller shall, and shall cause its Subsidiaries to,
maintain at all times all material licenses or permits necessary to the conduct
of its business and as required by any governmental agency or instrumentality
thereof, including without limitation all FDA clearances and approvals.

         5.8 Short Selling. Each Purchaser hereby irrevocably agrees that it
will not make any net short sale of the Seller's Common Stock for a period
beginning on the date of this Agreement and ending on the second anniversary of
the Closing Date at a price below the Conversion Value as provided in the
Certificate of Designation. For purposes of this Section 5.8, a "net short sale"
by any Purchaser shall mean a sale of Common Stock by such Purchaser that is
marked as a short sale and that is made at a time when there is no equivalent
offsetting long position in Common Stock held by such Purchaser, where an
"equivalent offsetting long position" includes all shares of Common Stock held
by such Purchaser and all underlying shares of Common Stock which are issuable
upon conversion, exercise or exchange of convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for shares
of Common Stock.

         5.9 Taxes and Claims. The Seller and its Subsidiaries shall duly pay
and discharge (a) all material taxes, assessments and governmental charges upon
or against the Seller or its properties or assets prior to the date on which
penalties attach thereto, unless and to the extent that such taxes are being
diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established, and (b) all material lawful
claims, whether for labor, materials, supplies, services or anything else which
might or could, if unpaid, become a lien or charge upon the properties or assets
of the Seller or its Subsidiaries unless and to the extent only that the same
are being diligently contested in good faith and by appropriate proceedings and
appropriate reserves therefor have been established.

         5.10 Perform Covenants. The Seller shall (a) make full and timely
payment of any and all payments on the Preferred Stock, and all other
obligations of the Seller to the Purchasers in connection therewith, whether now
existing or hereafter arising, and (b) duly comply with all the terms and
covenants contained herein and in each of the instruments and documents given to
the Purchasers in connection with or pursuant to this Agreement, all at the
times and places and in the manner set forth herein or therein.

         5.11 Additional Covenants.

         (a) Except for transactions approved by a majority of the disinterested
directors of the Board of Directors, neither the Seller nor any of its
Subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock

                                       17
<PAGE>

of any class or series of capital stock of the Seller or any of its
Subsidiaries, member of the family of any such person, or any corporation,
partnership, trust or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, with the exception of
transactions which are consummated upon terms that are no less favorable than
would be available if such transaction had been effected at arms-length, in the
reasonable judgment of the Board of Directors.

         (b) The Seller shall timely prepare and file with the Securities and
Exchange Commission the form of notice of the sale of securities pursuant to the
requirements of Regulation D regarding the sale of the Preferred Stock and
Warrants under this Agreement.

         (c) The Seller shall timely prepare and file such applications,
consents to service of process (but not including a general consent to service
of process) and similar documents and take such other steps and perform such
further acts as shall be required by the state securities law requirements of
each jurisdiction where a Purchaser resides as indicated on Schedule 1 with
respect to the sale of the Preferred Stock and Warrants under this Agreement.

         5.12 Securities Laws Disclosure; Publicity. The Seller may (i) on or
promptly after the Closing Date, issue a press release acceptable to SDS
Merchant Fund, L.P. disclosing the transactions contemplated hereby, and (ii)
after the Closing Date, file with the Commission a Report on Form 8-K disclosing
the transactions contemplated hereby. Except as provided in the preceding
sentence, neither the Company nor the Purchasers shall make any press release or
other publicity about the terms of this Agreement or the transactions
contemplated hereby without the prior approval of the other unless otherwise
required by law or the rules of the Commission or Nasdaq.

         5.13 Like Treatment of Purchasers and Holders. Neither the Seller nor
any of its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration (immediate or contingent), whether by way of interest, fee,
payment for redemption, conversion or exercise of the Securities, or otherwise,
to any Purchaser or holder of Securities, for or as an inducement to, or in
connection with the solicitation of, any consent, waiver or amendment to any
terms or provisions of this Agreement or the Related Documents, unless such
consideration is required to be paid to all Purchasers or holders of Securities
bound by such consent, waiver or amendment. The Seller shall not, directly or
indirectly, redeem any Securities unless such offer of redemption is made pro
rata to all Purchasers or holders of Securities, as the case may be, on
identical terms.

                       ARTICLE VI - CONDITIONS TO CLOSING

         6.1 Conditions to Obligations of Purchasers to Effect the Closing. The
obligations of a Purchaser to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing, of each of the following conditions, any of which may be waived,
in writing, by a Purchaser:

         (a) The Seller shall deliver or cause to be delivered to each of the
Purchasers the following:

                                       18
<PAGE>

              1.   (i) One or more certificates evidencing the aggregate number
         of shares of the Preferred Stock, duly authorized, issued, fully paid
         and non-assessable, as is indicated on Schedule 1 to be purchased at
         the Closing by such Purchaser, registered in the name of such
         Purchaser, in such denominations as is indicated on Schedule 1 for such
         Purchaser;

                   (ii) One or more certificates evidencing the Warrants,
         registered in the name of such Purchaser, in such denominations as is
         indicated on Schedule 1 for such Purchaser, pursuant to which such
         Purchaser shall be initially entitled to purchase that number of shares
         of Common Stock as is indicated on Schedule 1.

              2. The Investor Rights Agreement, in the form attached hereto as
         Exhibit C (the "Investor Rights Agreement"), duly executed by the
         Seller.

              3. A legal opinion of Katten Muchin Zavis Rosenman ("Seller's
         Counsel"), counsel to the Seller, in the form attached hereto as
         Exhibit D.

              4. A legal opinion of Schreck Brignone ("Nevada Counsel"), Nevada
         counsel to the Seller, in the form attached hereto as Exhibit E.

              5. A certificate of the Secretary of the Seller (the "Secretary's
         Certificate"), in form and substance satisfactory to the Purchasers,
         certifying as follows:

                   (i) that the Certificate of Designation authorizing the
              Preferred Stock has been duly filed in the office of the Secretary
              of State of the State of Nevada, and that attached to the
              Secretary's Certificate is true and complete copy of the Articles
              of Incorporation of the Seller, as amended, and the Certificate of
              Designation;

                   (ii) that a true copy of the Bylaws of the Seller, as amended
              to the Closing Date, is attached to the Secretary's Certificate;

                   (iii) that attached thereto are true and complete copies of
              the resolutions of the Board of Directors of the Seller
              authorizing the execution, delivery and performance of this
              Agreement and the Related Documents, instruments and certificates
              required to be executed by it in connection herewith and approving
              the consummation of the transactions in the manner contemplated
              hereby including, but not limited to, the authorization and
              issuance of the Preferred Stock;

                   (iv) the names and true signatures of the officers of the
              Seller signing this Agreement and all other documents to be
              delivered in connection with this Agreement;

                   (v) such other matters as required by this Agreement; and

                   (vi) such other matters as the Purchasers may reasonably
              request.

                                       19
<PAGE>

              6. A wire transfer representing the Purchasers' reasonable legal
         fees and other expenses as described in Section 8.2 hereof; such fee
         may, at the election of the Purchasers, be paid out of the funds due
         from the Purchasers at the Closing.

              7. Proof of due filing with the Secretary of State of the State of
         Nevada of the Certificate of Designation authorizing the Preferred
         Stock.

              8. Seller shall have applied to each U.S. securities exchange,
         interdealer quotation system and other trading market where its Common
         Stock is currently listed or qualified for trading or quotation for the
         listing or qualification of the Conversion Shares and the Warrant
         Shares for trading or quotation thereon in the time and manner required
         thereby.

              9. Such other documents as the Purchasers shall reasonably
         request.

         (b) The Seller shall have entered into an Escrow Agreement with Wiggin
& Dana LLP (the "Escrow Agent") in the form attached hereto as Exhibit F (the
"Escrow Agreement") pursuant to which the Escrow Agent shall hold certain funds
described therein to secure the Seller's potential redemption payment
obligations pursuant to Section 14 of the Certificate of Designation.

         6.2 Conditions to Obligations of the Seller to Effect the Closing. The
obligations of the Seller to effect the Closing and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, by the Seller:

         (a) Each of the Purchasers shall deliver or cause to be delivered to
the Seller (i) payment of the portion of the Purchase Price set forth opposite
each Purchaser's name on Schedule 1, in cash by either (x) wire transfer of
immediately available funds to an account designated in writing by Seller prior
to the date hereof, or (y) certified or cashier's check; (ii) an executed copy
of this Agreement; (iii) an executed copy of the Investor Rights Agreement; and
(iv) such other documents as the Seller shall reasonably request.

             ARTICLE VII - INDEMNIFICATION, TERMINATION AND DAMAGES

         7.1 Survival of Representations. Except as otherwise provided herein,
the representations and warranties of the Seller and the Purchasers contained in
or made pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing Date and shall continue in full force and effect
for a period of three (3) years from the Closing Date; provided, however, that
the Seller's warranties and representations under Sections 3.13 (Taxes), 3.19
(Subsidiaries and Investments), 3.20 (Capitalization), and 3.21 (Options,
Warrants, Rights), shall survive the Closing Date and continue in full force and
effect until the expiration of all applicable statutes of limitation; and
further provided that the Seller's warranties and representations under Section
3.25 (Environmental Matters) shall survive the Closing Date and continue in full
force and effect for a period of six (6) years from the Closing Date. The
Seller's and the Purchasers' warranties and representations shall in no way be
affected by any

                                       20
<PAGE>

investigation of the subject matter thereof made by or on behalf of the Seller
or the Purchasers.

         7.2 Indemnification.

         (a) The Seller agrees to indemnify and hold harmless the Purchasers,
their Affiliates, each of their officers, directors, employees and agents and
their respective successors and assigns, from and against any losses, damages,
or expenses which are caused by or arise out of (i) any breach or default in the
performance by the Seller of any covenant or agreement made by the Seller in
this Agreement or in any of the Related Documents; (ii) any breach of warranty
or representation made by the Seller in this Agreement or in any of the Related
Documents (iii) any and all third party actions, suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal fees and
expenses) incident to any of the foregoing.

         (b) The Purchasers, severally and not jointly, agree to indemnify and
hold harmless the Seller, its Affiliates, each of their officers, directors,
employees and agents and their respective successors and assigns, from and
against any losses, damages, or expenses which are caused by or arise out of (A)
any breach or default in the performance by the Purchasers of any covenant or
agreement made by the Purchasers in this Agreement or in any of the Related
Documents; (B) any breach of warranty or representation made by the Purchasers
in this Agreement or in any of the Related Documents; and (C) any and all third
party actions, suits, proceedings, claims, demands, judgments, costs and
expenses (including reasonable legal fees and expenses) incident to any of the
foregoing; provided, however, that a Purchaser's liability under this Section
7.2(b) shall not exceed the Purchase Price paid by such Purchaser hereunder.

         7.3 Indemnity Procedure. A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this Agreement is
referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party". An Indemnified
Party under this Agreement shall, with respect to claims asserted against such
party by any third party, give written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity under this Agreement
within sixty (60) business days of the receipt of any written claim from any
such third party, but not later than twenty (20) days prior to the date any
answer or responsive pleading is due, and with respect to other matters for
which the Indemnified Party may seek indemnification, give prompt written notice
to the Indemnifying Party of any liability which might give rise to a claim for
indemnity; provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are materially prejudiced.

         The Indemnifying Party shall have the right, at its election, to take
over the defense or settlement of such claim by giving written notice to the
Indemnified Party at least fifteen (15) days prior to the time when an answer or
other responsive pleading or notice with respect thereto is required. If the
Indemnifying Party makes such election, it may conduct the defense of such claim
through counsel of its choosing (subject to the Indemnified Party's approval of
such counsel, which approval shall not be unreasonably withheld), shall be
solely responsible for the expenses of such defense and shall be bound by the
results of its defense or settlement of the claim. The Indemnifying Party shall
not settle any such claim without prior notice to and

                                       21
<PAGE>

consultation with the Indemnified Party, and no such settlement involving any
equitable relief or which might have an adverse effect on the Indemnified Party
may be agreed to without the written consent of the Indemnified Party (which
consent shall not be unreasonably withheld). So long as the Indemnifying Party
is diligently contesting any such claim in good faith, the Indemnified Party may
pay or settle such claim only at its own expense and the Indemnifying Party will
not be responsible for the fees of separate legal counsel to the Indemnified
Party, unless the named parties to any proceeding include both parties or
representation of both parties by the same counsel would be inappropriate due to
conflicts of interest or otherwise. If the Indemnifying Party does not make such
election, or having made such election does not, in the reasonable opinion of
the Indemnified Party proceed diligently to defend such claim, then the
Indemnified Party may (after written notice to the Indemnifying Party), at the
expense of the Indemnifying Party, elect to take over the defense of and proceed
to handle such claim in its discretion and the Indemnifying Party shall be bound
by any defense or settlement that the Indemnified Party may make in good faith
with respect to such claim. In connection therewith, the Indemnifying Party will
fully cooperate with the Indemnified Party should the Indemnified Party elect to
take over the defense of any such claim. The parties agree to cooperate in
defending such third party claims and the Indemnified Party shall provide such
cooperation and such access to its books, records and properties as the
Indemnifying Party shall reasonably request with respect to any matter for which
indemnification is sought hereunder; and the parties hereto agree to cooperate
with each other in order to ensure the proper and adequate defense thereof.

         With regard to claims of third parties for which indemnification is
payable hereunder, such indemnification shall be paid by the Indemnifying Party
upon the earlier to occur of: (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) days prior to the date that the judgment creditor has the
right to execute the judgment; (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party; or (iii) a settlement of
the claim. Notwithstanding the foregoing, the reasonable expenses of counsel to
the Indemnified Party shall be reimbursed on a current basis by the Indemnifying
Party. With regard to other claims for which indemnification is payable
hereunder, such indemnification shall be paid promptly by the Indemnifying Party
upon demand by the Indemnified Party.

         7.4 Liquidated Damages. The Seller and the Purchasers agree that the
Purchasers will suffer damages if a Breach Event (as defined below) occurs or is
ongoing. The Seller and the Purchasers further agree that it may not be feasible
to ascertain the extent of such damages with precision. If a Breach Event (as
defined below) occurs, then the Purchasers may elect, as liquidated damages, and
in addition to any other remedies legally available to such Purchasers, to
require that the Seller shall pay to the Purchasers liquidated damages at a rate
of 20% per annum of the aggregate Liquidation Amount of such Purchasers'
outstanding Preferred Stock payable monthly in cash at the end of each month in
which the Breach Event is outstanding. Notwithstanding the foregoing, the amount
of liquidated damages payable by the Seller pursuant to this Section 7.4 in
respect of any Breach Event shall be limited to a total of $500,000 and such
limitation amount shall be allocated to the Purchasers on a pro rata basis.

              "Breach Event" means either:

                                       22
<PAGE>

                   (i) Any breach of any material warranty or representation of
         the Seller as of the date made in this Agreement or any agreement
         delivered herewith which breach, if capable of being cured, has not
         been cured within ten (10) days after notice of such breach has been
         given by the holders of a majority of Preferred Stock to the Seller
         (the "Breach Cure Period"); or

                   (ii) Any breach by the Seller of any material covenant or
         other provision of this Agreement or any agreement delivered herewith
         which is within the control of the Seller, and which breach, if capable
         of being cured, has not been cured within the Breach Cure Period.

         The Seller and the Purchasers have expressly negotiated this Section
7.4, and have agreed that in light of the circumstances existing at the time of
execution of this Agreement, the liquidated damages expressed herein represent a
reasonable estimate of the harm likely to be suffered by the Purchasers upon the
occurrence of a Breach Event.

                          ARTICLE VIII - MISCELLANEOUS

         8.1 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to better evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of
this Agreement, and further agrees to take promptly, or cause to be taken, all
actions, and to do promptly, or cause to be done, all things necessary, proper
or advisable under applicable law to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.

         8.2 Fees and Expenses. The Seller shall be responsible for the payment
of the Purchasers' reasonable legal fees and other third-party expenses relating
to the preparation and negotiation of this Agreement and the Related Documents
and the consummation of the transactions contemplated herein and therein, up to
a maximum of $60,000 (which amount may be increased with the approval of the
Seller).

         8.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:00 p.m. (New York City time) on a business
day, (b) 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 business day, or (c) the business day following the date
of mailing, if sent by U.S. nationally recognized overnight courier service such
as Federal Express. The address for such notices and communications shall be as
follows:

                                       23
<PAGE>

         If to the Purchasers at each Purchaser's address set forth under its
name on Schedule 1 attached hereto, or with respect to the Seller, 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 Seller 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 Purchaser shall be sent
to the addresses, if any, listed on Schedule 1 attached hereto.

         Unless otherwise stated above, such communications shall be effective
when they are received by the addressee thereof in conformity with this Section.
Any party may change its address for such communications by giving notice
thereof to the other parties in conformity with this Section.

         8.4 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
enforced in accordance with the laws of the State of New York without reference
to the conflicts of laws principles thereof.

         8.5 Jurisdiction and Venue. This Agreement shall be subject to the
exclusive jurisdiction of the Federal District Court, Southern District of New
York and if such court does not have proper jurisdiction, the State Courts of
New York County, New York. The parties to this Agreement agree that any breach
of any term or condition of this Agreement shall be deemed to be a breach
occurring in the State of New York by virtue of a failure to perform an act
required to be performed in the State of New York and irrevocably and expressly
agree to submit to the jurisdiction of the Federal District Court, Southern
District of New York and if such court does not have proper jurisdiction, the
State Courts of New York County, New York for the purpose of resolving any
disputes among the parties relating to this Agreement or the transactions
contemplated hereby. The parties irrevocably waive, to the fullest extent
permitted by law, any objection which they may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement, or any judgment entered by any court in respect hereof brought
in New York County, New York, and further irrevocably waive any claim that any
suit, action or proceeding brought in Federal District Court, Southern District
of New York and if such court does not have proper jurisdiction, the State
Courts of New York County, New York has been brought in an inconvenient forum.
Each of the parties hereto 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 8.5 shall affect or limit any right to serve process in any other
manner permitted by law.

                                       24
<PAGE>

         8.6 Successors and Assigns. This Agreement is personal to each of the
parties and may not be assigned without the written consent of the other
parties; provided, however, that any of the Purchasers shall be permitted to
assign this Agreement to any Person to whom it assigns or transfers securities
issued or issuable pursuant to this Agreement. Any assignee must be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act.

         8.7 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.

         8.8 Entire Agreement. This Agreement and the other agreements and
instruments referenced herein constitute the entire understanding and agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings.

         8.9 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law, or in equity
on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.

         8.10 Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the Seller and the holders of 75% of
the Preferred Stock then outstanding, and such waiver or amendment, as the case
may be, shall be binding upon all Purchasers. The waiver by a party of any
breach hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
This Agreement may not be amended or supplemented by any party hereto except
pursuant to a written amendment executed by the Seller and the holders of 75% of
the Preferred Stock then outstanding. No amendment shall be effected to impact a
holder of Preferred Stock in a disproportionately adverse fashion without the
consent of such individual holder of Preferred Stock.

         8.11 No Waiver. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.

         8.12 Construction of Agreement; Knowledge. For purposes of this
Agreement, the term "knowledge," when used in reference to a corporation means
the knowledge of the directors and executive officers of such corporation
(including, if applicable, any person designated as a chief scientific, medical
or technical officer) assuming such persons shall have made inquiry that is
customary and appropriate under the circumstances to which reference is made,
and when used in reference to an individual means the knowledge of such
individual assuming the individual shall have made inquiry that is customary and
appropriate under the circumstances to which reference is made.

         8.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of

                                       25
<PAGE>

which together shall constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
signatories. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original thereof.

         8.14 No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.

         8.15 Waiver of Trial by Jury. THE PARTIES HERETO IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.

                            [Signature Page Follows]

                                       26
<PAGE>

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

SELLER:

NEXMED, INC.

By: /s/ Vivian H. Liu
    -----------------
Name: Vivian H. Liu
Title: Vice President

PURCHASERS:

SDS MERCHANT FUND, LP
By:      SDS CAPITAL PARTNERS, LLC

         By: /s/ Scott E. Derby
             ------------------
         Name:    Scott E. Derby
         Title:   General Counsel

NORTH SOUND LEGACY INSTITUTIONAL FUND LLC
By:      NORTH SOUND CAPITAL LLC

         By: /s/ Andrew Wilder
             -----------------
         Name:    Andrew Wilder
         Title:   Chief Financial Officer

                                       27
<PAGE>

NORTH SOUND LEGACY INTERNATIONAL LTD.
By:      NORTH SOUND CAPITAL LLC

         By: /s/ Andrew Wilder
             -----------------
         Name:    Andrew Wilder
         Title:   Chief Financial Officer

BAYSTAR CAPITAL II, LP
By:      BAYSTAR CAPITAL MANAGEMENT, LLC

         By: /s/ Steven M. Lamar
             -------------------
         Name:    Steven M. Lamar
         Title:   Managing Member

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

                                       28
<PAGE>

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

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

THE LEONARD AND DENA OPPENHEIM REVOCABLE TRUST

By: /s/ Leonard A. Oppenheim
    ------------------------
Name:    Leonard A. Oppenheim
Title:   Trustee

CHARLES DUCK, JR., IRA ROLLOVER ACCOUNT
NUMBER 2976-7384

By: /s/ Charles Duck, Jr.
    ---------------------
Name:    Charles Duck, Jr.
Title:   Owner

CHRISTOPHER H. BERG REVOCABLE TRUST

By: /s/ Chris Berg
    --------------
Name:    Chris Berg
Title:   Trustee

SYSOREX INTERNATIONAL INC.

By: /s/ A. Salam Qureish
    --------------------
Name:    A Salam Qureish
Title:   President

                                       29
<PAGE>

CLARION CAPITAL CORPORATION

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

CLARION PARTNERS, LP

By: /s/ Morton A. Cohen
    -------------------
Name:    Morton A. Cohen
Title:   General Partner

CLARION OFFSHORE FUND, LTD.

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

PROVIDENT MASTER FUND, LTD.

By: /s/ Irvin R. Kessler
    --------------------
Name:    Irvin R. Kessler
Title:   Director

CHULA PARTNERS, LP

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

                                       30
<PAGE>

/s/ Robert C. Ciricillo
-----------------------
Robert C. Ciricillo

/s/ Larry Zalk
--------------
Larry Zalk

                                       31
<PAGE>

<TABLE>
<CAPTION>
                                                            Schedule 1

                                         to Preferred Stock and Warrant Purchase Agreement

                                       Purchasers and Shares of Preferred Stock and Warrants
---------------------------------------------------------------------------------------------------------------------------------
        Name, Address and                                               Shares of Preferred     Common Stock
     Fax Number of Purchaser                Copies of Notices to          Stock Purchased    Underlying Warrants   Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                       <C>               <C>               <C>
SDS Merchant Fund, LP

Address:                               Wiggin & Dana LLP
                                       400 Atlantic Street
c/o SDS Capital Partners, LLC          Stamford, CT 06901                        150               824,780           $1,500,000
53 Forest Avenue, 2nd Floor            Telephone: (203) 363-7630
Old Greenwich, CT 06870                Facsimile:  (203) 363-7676
Attn: Scott E. Derby                   Attn: Michael Grundei, Esq.
Tel:  (203) 967-5850
Fax:  (203) 967-5851
---------------------------------------------------------------------------------------------------------------------------------
North Sound Legacy Institutional
  Fund LLC

Address:                               Wiggin & Dana LLP
                                       400 Atlantic Street
c/o North Sound Capital LLC            Stamford, CT 06901                      141.61              778,642           $1,416,100
53 Forest Avenue, Suite 202            Telephone: (203) 363-7630
Old Greenwich, CT 06870                Facsimile:  (203) 363-7676
Attn:  Andrew Wilder                   Attn: Michael Grundei, Esq.
Tel:  (203) 967-5700
Fax:  (203) 967-5701
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                 1
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
        Name, Address and                                               Shares of Preferred     Common Stock
     Fax Number of Purchaser                Copies of Notices to          Stock Purchased    Underlying Warrants   Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                       <C>               <C>               <C>
North Sound Legacy International
  Ltd.

Address:                               Wiggin & Dana LLP
                                       400 Atlantic Street
c/o North Sound Capital LLC            Stamford, CT 06901                      138.39              760,947           $1,383,900
53 Forest Avenue, Suite 202            Telephone: (203) 363-7630
Old Greenwich, CT 06870                Facsimile:  (203) 363-7676
Attn:  Andrew Wilder                   Attn: Michael Grundei, Esq.
Tel:  (203) 967-5700
Fax:  (203) 967-5701
---------------------------------------------------------------------------------------------------------------------------------
BayStar Capital II, LP

Address:                               Wiggin & Dana LLP
                                       400 Atlantic Street
c/o BayStar Capital Management, LLC    Stamford, CT 06901                        100               549,853           $1,000,000
53 Forest Avenue, Suite 203            Telephone: (203) 363-7630
Old Greenwich, CT 06870                Facsimile:  (203) 363-7676
Attn:  Steve Derby                     Attn: Michael Grundei, Esq.
Tel: (203) 967-5875
Fax:  (203) 967-5851
---------------------------------------------------------------------------------------------------------------------------------
The Tail Wind Fund Ltd.

Address:                               Peter J. Weisman, P.C.
                                       110 East 59th Street, 18th Floor
c/o Tail Wind Advisory and             New York, NY 10022                        60                329,912            $600,000
  Management Ltd.                      Telephone: 212-418-4972
Attn:  David Crook                     Facsimile: 212-317-8855
1st Floor, No. 1 Regent Street
London, SW1Y 4NS UK
Tel:  44-207-468-7660
Fax:  44-207-468-7657
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                 2
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
        Name, Address and                                               Shares of Preferred     Common Stock
     Fax Number of Purchaser                Copies of Notices to          Stock Purchased    Underlying Warrants   Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                       <C>               <C>               <C>
Solomon Strategic Holdings, Inc.

Address:

Solomon Strategic Holdings, Inc.       Peter J. Weisman, P.C.
c/o Andrew P. MacKellar (Director)     110 East 59th Street, 18th Floor
Greenlands                             New York, NY 10022                        10                 54,985            $100,000
The Red Gap                            Telephone: 212-418-4972
Castletown                             Facsimile: 212-317-8855
IM9 1HB
British Virgin Isles
Tel:  011 (44) 1624 824171
Fax:  011 (44) 1624 824191
---------------------------------------------------------------------------------------------------------------------------------
Midsummer Investment, Ltd.

Address:                               Rob Charron, Esq.
                                       Feldman Weinstein LLP
c/o Midsummer Capital, LLC             420 Lexington Avenue, Suite 2620          50                274,927            $500,000
485 Madison Avenue, 23rd Floor         New York, NY 10170
New York, New York 10022               Tel: (212) 997-4242
Tel: 212-584-2140                      Fax: (212) 931-8704
Fax: 212-584-2142
Attn: Scott Kaufman
---------------------------------------------------------------------------------------------------------------------------------
The Leonard and Dena Oppenheim
  Revocable Trust

Address:

2000 155th Street                                                                20                109,971            $200,000
Fairfield, IA 52556
Attn: Len Oppenheim, TTEE
Tel: (641) 472-1449
Fax: (641) 472-0583
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                3
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
        Name, Address and                                               Shares of Preferred     Common Stock
     Fax Number of Purchaser                Copies of Notices to          Stock Purchased    Underlying Warrants   Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                       <C>               <C>               <C>
Robert C. Ciricillo

Address:
                                                                                 10                 54,985            $100,000
335 East 51st Street, # 11A
New York, NY 10022
Attn: Robert C. Ciricillo
---------------------------------------------------------------------------------------------------------------------------------
Charles Duck, Jr , IRA Rollover
  Account Number 2976-7384

Address:
                                                                                 10                 54,985            $100,000
c/o Charles Scwab & Co., Inc.
7 Parkside Way
Greenbrae, Ca 94904
Attn: Charles Duck, Jr.
Cell: 415-860-3757
---------------------------------------------------------------------------------------------------------------------------------
Christopher H. Berg Revocable Trust

Address:

150 Dudley Avenue                                                                15                 82,478            $150,000
Piedmont, CA 94611
Attn: Chris Berg, TTEE
Tel: (510) 547-5176
Fax: (510) 547-0223
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                4
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
        Name, Address and                                               Shares of Preferred     Common Stock
     Fax Number of Purchaser                Copies of Notices to          Stock Purchased    Underlying Warrants   Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                       <C>               <C>               <C>
Sysorex International Inc.

Address:

335 East Middlefield Road                                                        10                 54,985            $100,000
Mountain View, CA 94043
Attn: Salam Qureishi
Tel: (650) 967-2211
Fax: (650) 967-9371
---------------------------------------------------------------------------------------------------------------------------------
Larry Zalk

Address:                                                                         10                 54,985            $100,000

51 Falmouth St.
Short Hills, NJ 07078
---------------------------------------------------------------------------------------------------------------------------------
Clarion Capital Corporation

Address:

1801 East Ninth Street, # 1120                                                   20                109,971            $200,000
Cleveland, OH 44114
Attn: Tom Niehaus
Tel: (216) 687-8948
Fax: (216) 694-3545
---------------------------------------------------------------------------------------------------------------------------------
Clarion Partners, LP

Address:

1801 East Ninth Street, # 1120                                                   16                 87,977            $160,000
Cleveland, OH 44114
Attn: Tom Niehaus
Tel: (216) 687-8948
Fax: (216) 694-3545
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                5
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
        Name, Address and                                               Shares of Preferred     Common Stock
     Fax Number of Purchaser                Copies of Notices to          Stock Purchased    Underlying Warrants   Purchase Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>                                       <C>               <C>               <C>
Clarion Offshore Fund, Ltd.

Address:

1801 East Ninth Street, # 1120                                                    4                 21,994             $40,000
Cleveland, OH 44114
Attn: Tom Niehaus
Tel: (216) 687-8948
Fax: (216) 694-3545
---------------------------------------------------------------------------------------------------------------------------------
Provident Master Fund, Ltd.

Address:

894 Grove Lane East,  #280                                                       20                109,971            $200,000
Wayzata, MN 55391
Attn: Patrick Schwinghammer
Tel: (952) 345-5232
Fax: (952) 345-5230
---------------------------------------------------------------------------------------------------------------------------------
Chula Partners, LP

Address:

504 North Fourth Street,                                                         15                 82,478            $150,000
Suite 102
Fairfield, IA 52556
Attn: Warren Berman
Tel: (641) 472-4887
Fax: (641) 472-6929
---------------------------------------------------------------------------------------------------------------------------------
Totals:                                                                          800              4,398,826          $8,000,000
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                6<PAGE>
                                                                    Exhibit 10.2

                            INVESTOR RIGHTS AGREEMENT

         This Investor Rights Agreement (this "Agreement") is made and entered
into as of April 21, 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 Preferred 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.

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

<PAGE>

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

         "Filing Date" means the 30th 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 Conversion Shares and the
Warrant Shares (without regard to any limitations on beneficial ownership
contained in the Certificate of Designation or Warrants) or other securities
issued or issuable to each Purchaser or its transferee or designee (i) upon
conversion of the Preferred Stock and/or upon exercise of the Warrants, or (ii)
upon any distribution with respect to, any exchange for or any replacement of
such Preferred Stock 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 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

                                       2
<PAGE>

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 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 ninety (90) days after the Closing Date (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

                                       3
<PAGE>

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 130% of the shares of Common Stock for issuance upon the
conversion of the Preferred Stock and 100% 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 conversion of the Preferred
Stock, 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 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

                                       4
<PAGE>

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 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

                                       5
<PAGE>

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 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,

                                       6
<PAGE>

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.

         (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

                                       7
<PAGE>

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 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

                                       8
<PAGE>

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 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,

                                       9
<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 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

                                       10
<PAGE>

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 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

                                       11
<PAGE>

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 Preferred Stock, Conversion 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 Preferred Stock,
Conversion 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 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 Conversion 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 Conversion 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

                                       12
<PAGE>

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 Exhibit
B.

         (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

                                       13
<PAGE>

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 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 forty-fifth (45th) 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
forty-fifth (45th) 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

                                       14
<PAGE>

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 conversion rights of the Holders are
suspended for any reason without the consent of the particular Holder other than
as set forth in the Certificate of Designation, 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
Preferred Stock 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 Preferred Stock has 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 Preferred Stock 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 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 forty-fifth (45th) 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.

                                       15
<PAGE>

         (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.

         (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,

                                       16
<PAGE>

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 Preferred Stock, 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 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 Preferred Stock, Warrants or Registrable
Securities (i) that the Holder or transferee of all or a portion of the
Preferred Stock, 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

                                       17
<PAGE>

alternative means to achieve the same or substantially the same result as that
contemplated 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]

                                       18
<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: /s/ Vivian H. Liu
    -----------------
Name: Vivian H. Liu
Title: Vice President

PURCHASERS:

SDS MERCHANT FUND, LP
By:      SDS CAPITAL PARTNERS, LLC

         By: /s/ Scott E. Derby
             ------------------
         Name:    Scott E. Derby
         Title:   General Counsel

NORTH SOUND LEGACY INSTITUTIONAL FUND LLC
By:      NORTH SOUND CAPITAL LLC

         By: /s/ Andrew Wilder
             -----------------
         Name:    Andrew Wilder
         Title:   Chief Financial Officer

                                       19
<PAGE>

NORTH SOUND LEGACY INTERNATIONAL LTD.
By:      NORTH SOUND CAPITAL LLC

         By: /s/ Andrew Wilder
             -----------------
         Name:    Andrew Wilder
         Title:   Chief Financial Officer

BAYSTAR CAPITAL II, LP
By:      BAYSTAR CAPITAL MANAGEMENT, LLC

         By: /s/ Steven M. Lamar
             -------------------
         Name:    Steven M. Lamar
         Title:   Managing Member

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

                                       20
<PAGE>

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

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

THE LEONARD AND DENA OPPENHEIM REVOCABLE TRUST

By: /s/ Leonard A. Oppenheim
    ------------------------
Name:    Leonard A. Oppenheim
Title:   Trustee

CHARLES DUCK, JR., IRA ROLLOVER ACCOUNT
NUMBER 2976-7384

By: /s/ Charles Duck, Jr.
    ---------------------
Name:    Charles Duck, Jr.
Title:   Owner

CHRISTOPHER H. BERG REVOCABLE TRUST

By: /s/ Chris Berg
    --------------
Name:    Chris Berg
Title:   Trustee

SYSOREX INTERNATIONAL INC.

By: /s/ A. Salam Qureish
    --------------------
Name:    A Salam Qureish
Title:   President

                                       21
<PAGE>

CLARION CAPITAL CORPORATION

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

CLARION PARTNERS, LP

By: /s/ Morton A. Cohen
    -------------------
Name:    Morton A. Cohen
Title:   General Partner

CLARION OFFSHORE FUND, LTD.

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

PROVIDENT MASTER FUND, LTD.

By: /s/ Irvin R. Kessler
    --------------------
Name:    Irvin R. Kessler
Title:   Director

CHULA PARTNERS, LP

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

                                       22
<PAGE>

/s/ Robert C. Ciricillo
-----------------------
Robert C. Ciricillo

/s/ Larry Zalk
--------------
Larry Zalk

                                       23
<PAGE>

SCHEDULE 1

                                   PURCHASERS

--------------------------------------------------------------------------------
         Name and Address                           Copy of Notice to:
--------------------------------------------------------------------------------
SDS Merchant Fund, LP

Address:                                     Wiggin & Dana LLP
                                             400 Atlantic Street
c/o SDS Capital Partners, LLC                Stamford, CT 06901
53 Forest Avenue, 2nd Floor                  Telephone: (203) 363-7630
Old Greenwich, CT 06870                      Facsimile:  (203) 363-7676
Attn: Scott E. Derby                         Attn: Michael Grundei, Esq.
Tel:  (203) 967-5850
Fax:  (203) 967-5851
--------------------------------------------------------------------------------
North Sound Legacy Institutional
  Fund LLC

Address:                                     Wiggin & Dana LLP
                                             400 Atlantic Street
c/o North Sound Capital LLC                  Stamford, CT 06901
53 Forest Avenue, Suite 202                  Telephone: (203) 363-7630
Old Greenwich, CT 06870                      Facsimile:  (203) 363-7676
Attn:  Andrew Wilder                         Attn: Michael Grundei, Esq.
Tel:  (203) 967-5700
Fax:  (203) 967-5701
--------------------------------------------------------------------------------
North Sound Legacy International Ltd.

Address:                                     Wiggin & Dana LLP
                                             400 Atlantic Street
c/o North Sound Capital LLC                  Stamford, CT 06901
53 Forest Avenue, Suite 202                  Telephone: (203) 363-7630
Old Greenwich, CT 06870                      Facsimile:  (203) 363-7676
Attn:  Andrew Wilder                         Attn: Michael Grundei, Esq.
Tel:  (203) 967-5700
Fax:  (203) 967-5701
--------------------------------------------------------------------------------

                                       24
<PAGE>

--------------------------------------------------------------------------------
         Name and Address                           Copy of Notice to:
--------------------------------------------------------------------------------
BayStar Capital II, LP
                                             Wiggin & Dana LLP
Address:                                     400 Atlantic Street
                                             Stamford, CT 06901
c/o BayStar Capital Management, LLC          Telephone: (203) 363-7630
53 Forest Avenue, Suite 203                  Facsimile:  (203) 363-7676
Old Greenwich, CT 06870                      Attn: Michael Grundei, Esq.
Attn:  Steve Derby
Tel: (203) 967-5875
Fax:  (203) 967-5851
--------------------------------------------------------------------------------
The Tail Wind Fund Ltd.

Address:
                                             Peter J. Weisman, P.C.
c/o Tail Wind Advisory and                   110 East 59th Street, 18th Floor
  Management Ltd.                            New York, NY 10022
Attn:  David Crook                           Telephone: 212-418-4972
1st Floor, No. 1 Regent Street               Facsimile: 212-317-8855
London, SW1Y 4NS UK
Telephone:  44-207-468-7660
Facsimile:  44-207-468-7657
--------------------------------------------------------------------------------
Solomon Strategic Holdings, Inc.

Address:

Solomon Strategic Holdings, Inc.             Peter J. Weisman, P.C.
c/o Andrew P. MacKellar (Director)           110 East 59th Street, 18th Floor
Greenlands                                   New York, NY 10022
The Red Gap                                  Telephone: 212-418-4972
Castletown                                   Facsimile: 212-317-8855
IM9 1HB
British Isles
Telephone:  011 (44) 1624 824171
Facsimile:  011 (44) 1624 824191
--------------------------------------------------------------------------------
Midsummer Investment, Ltd.

Address:                                     Rob Charron, Esq.
                                             Feldman Weinstein LLP
c/o Midsummer Capital, LLC                   420 Lexington Avenue, Suite 2620
485 Madison Avenue, 23rd Floor               New York, NY 10170
New York, New York 10022                     Tel: (212) 997-4242
Telephone: 212-584-2140                      Fax: (212) 931-8704
Facsimile: 212-584-2142
Attn: Scott Kaufman
--------------------------------------------------------------------------------

                                       25
<PAGE>

--------------------------------------------------------------------------------
         Name and Address                           Copy of Notice to:
--------------------------------------------------------------------------------
The Leonard and Dena Oppenheim
  Revocable Trust

Address:

2000 155th Street
Fairfield, IA 52556
Attn: Len Oppenheim, TTEE
Tel: (641) 472-1449
Fax: (641) 472-0583
--------------------------------------------------------------------------------
Robert C. Ciricillo

Address:

335 East 51st Street, # 11A
New York, NY 10022
Attn: Robert C. Ciricillo
--------------------------------------------------------------------------------
Charles Duck, Jr., IRA Rollover
  Account Number 2976-7384

Address:

c/o Charles Scwab & Co., Inc.
7 Parkside Way
Greenbrae, Ca 94904
Attn: Charles Duck, Jr.
Cell: 415-860-3757
--------------------------------------------------------------------------------
Christopher H. Berg Revocable Trust

Address:

150 Dudley Avenue
Piedmont, CA 94611
Attn: Chris Berg, TTEE
Tel: (510) 547-5176
Fax: (510) 547-0223
--------------------------------------------------------------------------------
Sysorex International Inc.

Address:

335 East Middlefield Road
Mountain View, CA 94043
Attn: Salam Qureishi
Tel: (650) 967-2211
Fax: (650) 967-9371
--------------------------------------------------------------------------------

                                       26
<PAGE>

--------------------------------------------------------------------------------
         Name and Address                           Copy of Notice to:
--------------------------------------------------------------------------------
Larry Zalk

Address:

51 Falmouth St.
Short Hills, NJ 07078
--------------------------------------------------------------------------------
Clarion Capital Corporation

Address:

1801 East Ninth Street, # 1120
Cleveland, OH 44114
Attn: Tom Niehaus
Tel: (216) 687-8948
Fax: (216) 694-3545
--------------------------------------------------------------------------------
Clarion Partners, LP

Address:

1801 East Ninth Street, # 1120
Cleveland, OH 44114
Attn: Tom Niehaus
Tel: (216) 687-8948
Fax: (216) 694-3545
--------------------------------------------------------------------------------
Clarion Offshore Fund, Ltd.

Address:

1801 East Ninth Street, # 1120
Cleveland, OH 44114
Attn: Tom Niehaus
Tel: (216) 687-8948
Fax: (216) 694-3545
--------------------------------------------------------------------------------
Provident Master Fund, Ltd.

Address:

894 Grove Lane East,  #280
Wayzata, MN 55391
Attn: Patrick Schwinghammer
Tel: (952) 345-5232
Fax: (952) 345-5230
--------------------------------------------------------------------------------

                                       27
<PAGE>

--------------------------------------------------------------------------------
         Name and Address                           Copy of Notice to:
--------------------------------------------------------------------------------
Chula Partners, LP

Address:

504 North Fourth Street,
Suite 102
Fairfield, IA 52556
Attn: Warren Berman
Tel: (641) 472-4887
Fax: (641) 472-6929
--------------------------------------------------------------------------------

                                       28
<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 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

                                       29
<PAGE>

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-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

                                       30
<PAGE>

-        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.

                                       31
<PAGE>

                                    EXHIBIT B

                         FORM OF NOTICE OF EFFECTIVENESS

                            OF REGISTRATION STATEMENT

[Name and Address of Transfer Agent]

Re:  NexMed, Inc.

Dear [______]:

         We are counsel to NexMed, Inc., a Nevada corporation (the "Company"),
and have represented the Company in connection with that certain Preferred Stock
and Warrant Purchase Agreement (the "Purchase Agreement") dated as of
__________________, 2003 by and among the Company and the buyers named therein
(collectively, the "Holders") pursuant to which the Company issued to the
Holders its Series B 8% Cumulative Convertible Preferred Stock, par value $0.001
per share, (the "Preferred Stock") convertible into shares of the Company's
common stock, par value $0.001 per share (the "Common Stock"), and warrants to
purchase shares of the Common Stock (the "Warrants"). Pursuant to the Purchase
Agreement, the Company has also entered into an Investor Rights Agreement with
the Holders (the "Investor Rights Agreement") pursuant to which the Company
agreed, among other things, to register the shares of Common Stock issuable upon
conversion of the Preferred Stock and exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Investor Rights Agreement, on ____________ ___,
2003, the Company filed a Registration Statement on Form S-3 (File No.
333-_____________) (the "Registration Statement") with the Securities and
Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling securityholder thereunder.

         In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

Very truly yours,

By:__________________________________
cc:  [LIST NAMES OF HOLDERS]

                                       32

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