8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) June 30, 2008

NexMed, Inc. 

(Exact name of registrant as specified in its charter)

Nevada	0-22245	87-0449967
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

89 Twin Rivers Drive, East Windsor, New Jersey	08520
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (609) 371-8123

 (Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)  

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)  

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))  

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

ITEM 1.01ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On June 30, 2008, NexMed, Inc. (the “Company”) entered into a Purchase Agreement (the “Agreement”) with Tail Wind Fund Ltd. and Solomon Strategic Holdings, Inc. (the “Purchasers”). Pursuant to the Agreement, the Company issued to the Purchasers 7% convertible notes (the “Notes”) due December 31, 2011 (the “Due Date”) in the aggregate principal amount of $5.75 million. In connection therewith, NexMed (U.S.A.), Inc. (the “Subsidiary”), a wholly owned subsidiary of the Company, entered into a Mortgage, Security Agreement and Assignment of Leases and Rents (the “Mortgage”) and a Subsidiary Guaranty (the “Guaranty”), both dated June 30, 2008, pursuant to which the Purchasers have been granted a security interest in the two East Windsor, New Jersey properties (the “Properties”) owned by the Subsidiary.

The Notes are convertible into shares of the Company’s common stock (the “Common Stock”), par value $0.001 per share, with $4.75 million convertible at $2 per share on or before the Due Date and $1 million convertible at $1.75 per share on or before December 31, 2008. The Notes have a coupon rate of 7% per annum, which is payable at the Company’s option in cash or, with certain exceptions, in shares of Common Stock at the lesser of $0.08 less than, or a price of 95% of, a five-day weighted average of the market price of the Common Stock prior to the time of payment.

The Company and the Purchasers also entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to register for resale by the Purchasers the shares of Common Stock that are issuable upon conversion of the Notes and/or received by Purchasers as payment of the coupon on the Notes. The Company used approximately $3.06 million of the proceeds from this transaction to repay all of its obligations under a Purchase Agreement between the Company and Twin Rivers Associates LLC, dated October 26, 2007, which was secured by a mortgage on the Properties and such mortgage was released upon repayment.

The description of the transaction contained herein is subject to the terms and conditions set forth in the Agreement, the Notes, the Registration Rights Agreement, the Mortgage and the Guaranty, copies of which are filed herewith as Exhibits 10.1, 10.2, 10.3, 10.4, and 10.5, respectively, and the full text of which are incorporated herein by reference.

ITEM 9.01.FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits

10.1 Form of Purchase Agreement*

10.2 Form of Note

10.3 Form of Registration Rights Agreement

10.4 Form of Mortgage, Security Agreement and Assignment of Leases and Rents

10.5 Form of Subsidiary Guaranty

* The schedules to the Purchase Agreement are not being filed herewith. The registrant agrees to furnish supplementally a copy of such schedules to the Securities and Exchange Commission upon request

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

NEXMED, INC.
By:	/s/ Mark Westgate
Name:	Mark Westgate
Title:	Vice President and
	Chief Financial Officer

Date: July 2, 2008

EX-10.1

Exhibit 10.1

PURCHASE AGREEMENT

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

Recitals

A.The Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) under the Securities Act of 1933, as amended;

B.The Purchasers wish to purchase, and the Company wishes to sell and issue to the Purchasers, upon the terms and subject to the conditions stated in this Agreement an aggregate of $5.75 million in principal amount of the Company’s 7% Convertible Notes due December 31, 2011 in the form attached hereto as Exhibit A (the “Notes”), which Notes shall be convertible into shares of common stock of the Company, $0.001 par value per share (the “Common Stock”), in accordance with the terms of the Notes, in such amounts as are set forth on the signature page attached hereto and executed by each such Purchaser, for an aggregate purchase price of $5.75 million; and

C.Contemporaneous with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, in the form attached hereto as Exhibit B (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and applicable state securities laws; and

In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings here set forth:

1.1.“Affiliate” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person, where “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

1.2.“Agreements” means this Agreement, the Registration Rights Agreement, the Subsidiary Guaranty, the Mortgage and the Notes.

1.3.The “Company” shall refer to the Company (as defined in the first paragraph hereof) together with its subsidiaries wherever applicable (including without limitation with respect to all representations of the Company unless the context otherwise requires).

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

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

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

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

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

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

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

1.11.“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

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

2

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

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

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

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

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

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

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

2.Purchase and Sale of the Notes. Subject to the terms and conditions of this Agreement and on the basis of the representations and warranties made herein, each of the Purchasers hereby severally, and not jointly, agrees to purchase, and the Company hereby agrees to sell and issue to each of the Purchasers, the principal amount of Notes set forth on such Purchaser’s signature page attached hereto and as indicated herein. Each Purchaser’s aggregate purchase price (the “Purchase Price”) for the Notes to be purchased hereunder is set forth on such Purchaser’s signature page attached hereto.

3

3.Closing.

3.1.Closing Procedure. The Company shall promptly deliver to Purchasers’ counsel, Peter J. Weisman, P.C., in trust, Notes registered in the names of the Purchasers as indicated on the signature pages to this Agreement, representing all of the Notes, with instructions that such Notes are to be held in escrow for release to the Purchasers only upon payment of the Purchase Price to the Company and confirmation of receipt by the Company or its counsel. Upon receipt by counsel to the Purchasers of the Notes and the execution and/or delivery of such other documents contemplated hereby to be executed and/or delivered on or prior to the Closing, each Purchaser shall promptly cause a wire transfer in same day funds to be sent to the account of the Company as instructed in writing by the Company, in an amount representing the Purchase Price. On the date the Company receives such funds, the Notes shall be released to the Purchasers (and such date shall be deemed the “Closing Date”).

3.2.Closing Date Deliveries.

(a)On the Closing Date, the Company shall deliver to the Purchasers:

(i)Notes in the form attached as Exhibit A;

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

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

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

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

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

4

(b)On the Closing Date, the Purchasers shall deliver to the Company:

(i)The Purchase Price set forth on the Purchasers’ signature page hereto; and

(ii)The executed Registration Rights Agreement.

4.Representations and Warranties of the Company. The Company hereby represents and warrants to the Purchasers that:

4.1.Organization, Good Standing and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and own its properties. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or licensing necessary unless the failure to so qualify would not be reasonably likely to result in a Material Adverse Effect. All of the Company’s subsidiaries are listed by name and jurisdiction on Schedule 4.1 attached hereto. All subsidiaries are wholly-owned by the Company. The Operating Subsidiary is a wholly-owned subsidiary of the Company and owns all the Mortgaged Property (as defined in the Mortgage).

4.2.Authorization. The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Agreements, (ii) authorization of the performance of all obligations of the Company hereunder and thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Agreements constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

5

4.3.Capitalization. Set forth on Schedule 4.3 hereto is (a) the authorized capital stock of the Company on the date hereof; (b) the number of shares of capital stock issued and outstanding on the date hereof; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Notes) exercisable for, or convertible into or exchangeable for any shares of capital stock. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid and nonassessable, except to the extent that the failure of the foregoing to be true and correct would not have a Material Adverse Effect. Except as set forth on Schedule 4.3, no Person is entitled to preemptive or similar statutory or contractual rights with respect to any securities of the Company. Except as set forth on Schedule 4.3, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company is or may be obligated to issue any equity securities of any kind, and except as contemplated by this Agreement or set forth on Schedule 4.3, the Company is not currently in negotiations for the issuance of any equity securities of any kind. Except as set forth on Schedule 4.3, the Company has no knowledge of any voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among any of the securityholders of the Company relating to the securities of the Company held by them. Except as set forth on Schedule 4.3, the Company has not granted any Person the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.

4.4.Valid Issuance. As of the Closing, the Company has reserved a sufficient number of shares of Common Stock for the issuance upon conversion of, as payment for interest on or repayment of principal of, and otherwise pursuant to, the Notes. The Notes and Underlying Shares are duly authorized, and such Securities, when issued in accordance herewith and, in respect of the Underlying Shares issued pursuant to the terms of the Notes, will be validly issued, fully paid, non-assessable and free and clear of all encumbrances and restrictions, except for restrictions on transfer imposed by applicable securities laws. The number of shares to be reserved hereunder shall be determined without regard to any restrictions on beneficial ownership contained in the Agreements.

4.5.Consents. The execution, delivery and performance by the Company of the Agreements and, subject to the truth and accuracy of the representations made by the Purchasers in Sections 5 of this Agreement, the offer, issuance and sale of the Securities, require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official, other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws and the requirements of the Nasdaq Stock Market, which the Company undertakes to file within the applicable time periods. The Company has been verbally advised by the FINRA that the discussions with the Company and the review by the FINRA of the executed term sheet describing the transactions contemplated hereby should cause the FINRA to conclude that the transactions contemplated hereby should not be integrated with any prior offering or issuance of securities by the Company (subject to the FINRA’s review of the final transaction documents for the transactions contemplated hereby).

6

4.6.Delivery of SEC Filings; Business. The SEC Filings represent all filings required of the Company pursuant to the 1934 Act since December 31, 2006. The SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Company is engaged only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description of the business of the Company in all material respects. The Company has not provided to any Purchaser (i) any information required to be filed under the 1934 Act that has not been so filed or (ii) any material nonpublic information.

4.7.Use of Proceeds. The proceeds of the sale of the Securities hereunder shall be used by the Company for working capital and general corporate purposes and to pay off in full the approximately $3 million in debt outstanding to Twin Rivers Associates LLC (“Twin Rivers Debt”) which is currently secured by the mortgage on the Mortgaged Property (as defined in the Mortgage) which is to be released at Closing.

4.8.No Material Adverse Change. Since December 31, 2007, except as disclosed and described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and the Company’s Form 10-Q filed with the SEC for the fiscal quarter ending March 31, 2008, or any other reports filed by the Company subsequent to such Form 10-K pursuant to the 1934 Act and filed at least ten (10) days prior to the date hereof, there has not been:

(i)any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2007, except changes in the ordinary course of business which have not had, in the aggregate, a Material Adverse Effect;

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

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

7

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

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

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

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

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

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

4.9.Registration Statements; Material Contracts.

(a)During the preceding two years, each registration statement and any amendment thereto filed by the Company pursuant to the 1933 Act, as of the date such statement or amendment became effective, complied as to form in all material respects with the 1933 Act and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; and each prospectus filed pursuant to Rule 424(b) under the 1933 Act, as of its issue date and as of the closing of any sale of securities pursuant thereto did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(b)Except as set forth on Schedule 4.3 hereto, there are no agreements or instruments currently in force and effect that constitute a warrant, option, convertible security or other right, agreement or arrangement of any character under which the Company is or may be obligated to issue any material amounts of any equity security of any kind, or to transfer any material amounts of any equity security of any kind.

8

4.10.Form S-3 Eligibility. The Company is currently eligible to register the resale of its Common Stock on a registration statement on Form S-3 under the 1933 Act.

4.11.No Conflict, Breach, Violation or Default; Compliance with Law. The execution, delivery and performance of the Agreements by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Articles of Incorporation (including any certificates of designation) or the Company’s Bylaws, both as in effect on the date hereof (copies of which have been provided to the Purchasers before the date hereof), or (ii) except where it would not have a Material Adverse Effect, (A) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its properties, or (B) any agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the properties of the Company is subject. Except where it would not have a Material Adverse Effect, the Company (i) is not in violation of any statute, rule or regulation applicable to the Company or its assets, (ii) is not in violation of any judgment, order or decree applicable to the Company or its assets, and (iii) is not in breach or violation of any agreement, note or instrument to which it or its assets are a party or are bound or subject. The Company has not received notice from any Person of any claim or investigation that, if adversely determined, would render the preceding sentence untrue or incomplete

4.12.Tax Matters. The Company has timely prepared and filed all tax returns required to have been filed by the Company with all appropriate governmental agencies and timely paid all taxes owed by it, in each case taking into account permitted extensions. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company nor, to the knowledge of the Company, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except such as which are not material. All material taxes and other assessments and levies that the Company is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no tax liens or claims pending or threatened against the Company or any of its respective assets or property. There are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity.

9

4.13.Title to Properties and Securities. Except as disclosed in the SEC Filings, the Company has, or will at or prior to Closing have, good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and except as disclosed in the SEC Filings, the Company holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them. Except as disclosed in the SEC Filings, theOperating Subsidiary owns all the Mortgaged Property (as defined in the Mortgage) free and clear of all liens, claims, encumbrances and defects except those that would not individually or in the aggregate materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof. The Company (excluding its subsidiaries) does not own any assets other than the securities of each of its wholly-owned subsidiaries and does not engage in any operating activities other than acting as a holding company of the securities of such subsidiaries. All of the Company’s operating assets and properties (including without limitation all Equipment, as defined in the Mortgage) are owned or leased by the Operating Subsidiary, except for the Company’s intellectual property rights which are entirely owned by NexMed Holdings, Inc., a Delaware corporation (“Holdings”), which is wholly-owned subsidiary of the Company, and except for assets located outside the United States, which are entirely owned by NexMed International Limited, a corporation which is organized under the laws of the British Virgin Islands and which is wholly-owned subsidiary of the Company (“International”). Holdings does not engage in any activities except for holding the intellectual property rights of the Company, and International and its two subsidiaries do not engage in any business or activities in the United States.

4.14.Certificates, Authorities and Permits. The Company possesses adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it and has not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company, would individually or in the aggregate have a Material Adverse Effect.

4.15.No Labor Disputes. Except as disclosed in the SEC Filings, no material labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent.

10

4.16.Intellectual Property. The Company owns or possesses adequate rights or licenses to the inventions, know-how, patents, patent rights, copyrights, trademarks, trade names, licenses, approvals, governmental authorizations, trade secrets confidential information and other intellectual property rights (collectively, “Intellectual Property Rights”), free and clear of all liens, security interests, charges, encumbrances, equities and other adverse claims, necessary to conduct the business now operated by it, or presently employed by it, and presently contemplated to be operated by it, and the Company has not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights except as disclosed in the SEC Filings. Except as set forth on Schedule 4.16 hereto or as disclosed in the SEC Filings, none of the Company's Intellectual Property Rights have expired or terminated, or are expected to expire or terminate within three years from the date of this Agreement, except where such expirations or termination would not result, either individually or in the aggregate, in a Material Adverse Effect. To the knowledge of the Company, the Company’s patents and other Intellectual Property Rights and the present activities of the Company do not infringe any patent, copyright, trademark, trade name or other proprietary rights of any third party where such infringement may cause a Material Adverse Effect on the Company, and there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company regarding its Intellectual Property Rights, and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company has no knowledge of the material infringement of its Intellectual Property Rights by third parties and has no reason to believe that any of its Intellectual Property Rights is unenforceable, and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company has taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual properties.

4.17.Mortgage Representations. All of the representations and warranties contained in the Mortgage are true and correct as of the date hereof.

4.18.Litigation. Except as disclosed in the SEC Filings, there are no pending actions, suits or proceedings against or affecting the Company or any of its properties that, if determined adversely to the Company, would individually or in the aggregate have a Material Adverse Effect or would materially and adversely affect the ability of the Company to perform its obligations under the Agreements, or which are otherwise material in the context of the sale of the Securities; and to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated.

4.19.Financial Statements. The financial statements included in each SEC Filing present fairly and accurately in all material respects the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis. Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof, the Company has no liabilities, contingent or otherwise, except those which individually or in the aggregate are not material to the financial condition or operating results of the Company.

11

4.20.Insurance Coverage. The Company maintains in full force and effect insurance coverage that the Company reasonably believes to be adequate against all liabilities, claims and risks against which it is customary for comparably situated companies to insure.

4.21.Compliance with Nasdaq Continued Listing Requirements. The Company is in compliance with all applicable Nasdaq Capital Market continued listing requirements. There are no proceedings pending or to the Company’s knowledge threatened against the Company relating to the continued listing of the Company’s Common Stock on the Nasdaq Capital Market and the Company has not received any notice of, nor to the knowledge of the Company is there any basis for, the delisting of the Common Stock from the Nasdaq Capital Market.

4.22.Brokers and Finders. Neither the Purchasers nor the Company shall have any liability or responsibility for the payment of any commission or any finder, agent, broker or consultant fee to any third party in connection with or resulting from this agreement or the transactions contemplated by this Agreement by reason of any agreement of or action taken by the Company, and the Company shall not pay any such commission or fee.

4.23.No General Solicitation. Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D promulgated under the 1933 Act) in connection with the offer or sale of any of the Securities.

4.24.No Integrated Offering. Neither the Company nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) of the 1933 Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act. After consultation with FINRA and/or the Nasdaq Stock Market, the Company does not believe that the offer and sale of the Securities and the transactions contemplated hereby requires any stockholder approval by the Company, including without limitation pursuant to the rules of the Nasdaq Stock Market.

4.25.Disclosures. No representation or warranty made by the Company under any section hereof and no written information furnished by the Company to the Purchasers or any authorized representative of the Purchasers, pursuant to the Agreements or in connection therewith, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which the statements were made, not misleading.

12

5.Representations and Warranties of the Purchaser. Each of the Purchasers hereby severally, and not jointly, represents and warrants to the Company as to itself only that:

5.1.Organization and Existence. The Purchaser is a validly existing corporation, partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.

5.2.Authorization. The execution, delivery and performance by the Purchaser of this Agreement and the Registration Rights Agreement have been duly authorized and this Agreement and the Registration Rights Agreement will each constitute the valid and legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

5.3.Purchase Entirely for Own Account. The Securities to be received by the Purchaser hereunder will be acquired for the Purchaser’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of securities laws, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of securities laws. The Purchaser is not a registered broker dealer or an entity engaged in the business of being a broker dealer.

5.4.Investment Experience. The Purchaser acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters and in private placement transactions of companies similar to the Company so that it is capable of evaluating the merits and risks of the purchase contemplated hereby.

5.5.Disclosure of Information. The Purchaser has had an opportunity to receive documents related to the Company and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities and has received and read the SEC Filings filed via EDGAR at least five days prior to the date hereof. Neither such inquiries nor any other due diligence investigation conducted by the Purchaser shall modify, amend or affect the Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or made pursuant to this Agreement.

5.6.Restricted Securities. The Purchaser understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws, applicable state laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.

13

5.7.Legends.

(a)It is understood that, until such time as certificates evidencing the Underlying Shares are required to be issued without legends pursuant paragraph (b) below, certificates evidencing the Securities may bear one or all of the following legends or legends substantially similar thereto:

(i)“The shares represented by this certificate may not be transferred without (i) the opinion of counsel reasonably satisfactory to the corporation that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws; or (ii) such registration or qualification.”

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

(b)Upon registration for resale pursuant to the Registration Rights Agreement or upon the first anniversary of the Closing Date (and the holder thereof confirming that it is not an affiliate of the Company), the Company shall promptly cause certificates evidencing the Underlying Shares previously issued to be replaced with certificates (or issue original certificates if not previously issued) which do not bear such restrictive legends, and all Underlying Shares subsequently issued shall not bear such restrictive legends. In addition, in the event of any sales of Underlying Shares by the holder thereof pursuant to Rule 144(b)(1)(i) under the 1933 Act prior to the first anniversary of the Closing Date, the Company shall promptly cause certificates evidencing such Underlying Shares previously issued to be replaced with certificates (or issue original certificates if not previously issued) which do not bear such restrictive legends. In the event that the Company does not issue new, unlegended certificates in replacement of the legended certificates as required under this Section 5.7 within 10 business days of a written request to do so, or if any subsequently issued Underlying Shares are issued with restrictive legends when unlegended certificates are required under this Section 5.7, the Company shall be liable to the Purchaser (or subsequent holder thereof) for damages in an amount of $500 cash for each such day beyond the replacement date (or issuance date, in the case of newly converted Notes) that such unlegended certificates are not issued and delivered to the Purchaser or subsequent holder.

5.8.Accredited Investor. The Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

14

5.9.No General Solicitation. The Purchaser did not learn of the investment in the Securities as a result of any public advertising or general solicitation.

6.Closing Documents. The parties acknowledge and agree that part of the inducement for the Purchasers to enter into this Agreement is the Company’s execution and delivery of the Registration Rights Agreement and the execution and delivery of the Subsidiary Guarantee and the Mortgage by the Operating Subsidiary. The parties acknowledge and agree that on or prior to the Closing, the Registration Rights Agreement, the Subsidiary Guarantee and the Mortgage will be duly executed and delivered by the parties thereto.

7.Covenants and Agreements of the Company.

7.1.Rule 144. Until such time that the Purchasers no longer own any Notes, the Company covenants to file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the 1934 Act even if the Company is not then subject to the reporting requirements of the 1934 Act. As long as any Purchaser owns Notes, if the Company is not required to file reports pursuant to the 1934 Act, it will prepare and furnish to such Purchaser and make publicly available in accordance with Rule 144(c) such information as is required for the Purchaser to sell the Securities under Rule 144. The Company further covenants that it will take such further action as any holder of Notes may reasonably request, to the extent required from time to time to enable such Person to sell the Underlying Shares without registration under the Securities Act within the requirements of the exemption provided by Rule 144. So long as any Notes are outstanding, the Company shall cause itself to be subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act and file all reports required to be filed thereunder. The Company agrees that, for purposes of determining the holding period under Rule 144 of the 1933 Act for Underlying Shares issued upon conversion of the Notes, the holding period of such Underlying Shares shall be tacked to the holding period of the Notes.

7.2.Limitation on Transactions.

(a)So long as any of the Notes remain outstanding, without the prior written consent of the holders of a majority-in-interest of the Notes (which consent may be withheld in such holders’ discretion), the Company shall not issue or sell or agree to issue or sell any securities in a Variable Rate Transaction, provided, however, that without such consent, the Company may issue or sell for cash any securities in a Variable Rate Transaction so long as the total number of shares of Common Stock issued and/or agreed to be issued in the aggregate for all such transactions (determined as if all such securities as of their issuance are deemed fully converted, exercised and exchanged into Common Stock without regard to limitations or restrictions contained therein) represents less than seven percent (7%) of the total number of the Company’s issued and outstanding shares of Common Stock as of the closing date of any such transaction.

15

(b) So long as any Notes remain outstanding, the Company and the Operating Subsidiary shall not directly or indirectly, create, incur, assume or permit or suffer to exist any lien, mortgage, security interest or encumbrance (other than statutory liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof) upon any of the Mortgaged Property (as defined in the Mortgage) except for those created by the Mortgage and shall not directly or indirectly sell, transfer or lease any of the Mortgaged Property, subject to Section 7.2(c) below.

(c)Notwithstanding anything contained herein or the other Agreements, the Company or the Operating Subsidiary may sell the Mortgaged Property in its entirety at any time after December 31, 2009, provided that (i) upon or prior to such sale, the Company shall deposit into escrow for the benefit of the Purchasers an amount of cash equal to (x) the aggregate then outstanding principal amount of all Notes, plus (y) all Accreted Amounts (as defined in the Notes) accrued to date thereon, plus (z) all Accreted Amounts scheduled to accrue under the Notes from such date through the Maturity Date (as defined in the Notes) (“Escrow Funds”), which Escrow Funds shall secure all obligations under the Notes, and (ii) thereafter the Purchasers may at any time and from time to time demand immediate repayment of all or part of the amounts (including principal and Accreted Amounts) then outstanding and accrued under the Notes, which repayment shall be made from the Escrow Funds. In the event that the Company shall be required to deposit Escrow Funds in escrow pursuant to this Section 7.2(c), an independent escrow agent (the “Escrow Agent”) mutually acceptable to the Company and the Purchasers shall be appointed to hold such Escrow Funds in escrow pursuant to an escrow agreement on terms mutually acceptable to the Company and the Purchasers (the “Escrow Agreement”). The Escrow Agreement shall provide that each Purchaser may make any demand of repayment as contemplated in clause 7.2(c)(ii) above directly to the Escrow Agent, whereupon such repayment shall be made to such Purchaser from such Escrow Funds. Upon deposit of the Escrow Funds into escrow, the Company shall, and shall cause the Operating Subsidiary to, execute and deliver in favor of the Purchasers a control agreement in form and substance reasonably acceptable to the Purchasers and such other agreements and documents to ensure that (1) the Purchasers have a first priority security interest in and lien on such Escrow Funds, (2) to the extent possible such Escrow Funds may not be released except as set forth in such Escrow Agreement, and (3) to the extent possible such Escrow Funds will not be subject to any claims by any of the Company’s or Operating Subsidiary’s creditors. The deposit of the Escrow Funds into escrow and the creation of a security interest therein in accordance with the terms of this Section 7.2(c) shall be a condition precedent to any sale of the Mortgaged Property and neither the Company nor the Operating Subsidiary shall effectuate any such sale unless and until such condition has been satisfied. To the extent any principal amount of Notes and/or Accreted Amounts is converted into shares of Common Stock pursuant to the terms of the Notes, an amount of cash equal to such principal amount and/or Accreted Amounts may be released to the Company. For clarification purposes (1) following any such sale of the Mortgaged Property the Notes shall remain outstanding and in full force and effect in accordance with the terms set forth therein, except for the Purchasers right to repayment upon demand as set forth above, (2) the Company (and the Operating Subsidiary pursuant to the Subsidiary Guarantee) shall remain liable under the Notes in accordance with the terms thereof notwithstanding the escrow contemplated hereby, and (3) Escrow Funds remaining in escrow after no Notes remain outstanding shall be returned to the Company.

16

7.3.Right of the Purchasers to Participate in Future Transactions. So long as any Notes remain outstanding, the Purchasers will have a right to participate in any sales of any of the Company’s securities in a capital raising transaction on the terms and conditions set forth in this Section 7.3, provided that this Section 7.3 shall not apply with respect to any capital raising transaction with an effective Per Share Selling Price per share of Common Stock in excess of $1.00 occurring after February 28, 2010. During such period, the Company shall give ten (10) business days advance written notice to the Purchasers prior to any non-public offer or sale of any of the Company's equity securities or any securities convertible into or exchangeable or exercisable for such securities in a capital raising transaction by providing to the Purchasers a comprehensive term sheet containing all significant business terms of such a proposed transaction. The Purchasers shall have the right (pro rata in accordance with the Purchasers’ participation in this offering) to participate in such transaction by purchasing in such transaction an amount of the identical securities issued in such transaction equal to up to the Participation Percentage of the aggregate amount of such securities issued to the Purchasers and such other investors together for the same consideration and on the same terms and conditions as such third-party sale. If, subsequent to the Company giving notice to a Purchaser hereunder but prior to the Purchaser exercising its rights hereunder, the terms and conditions of the third-party sale are changed from that disclosed in the comprehensive term sheet provided to such Purchaser, the Company shall be required to provide a new notice to the Purchaser hereunder and the Purchasers shall have the right to exercise their rights to purchase the identical securities in such transaction on such changed terms and conditions as provided hereunder. The rights and obligations of this Section 7.3 shall in no way diminish the other rights of the Purchaser pursuant to this Section 7. Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by any Purchaser pursuant to any capital raising transaction as described in this Section 7.3 shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such Purchaser (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the Purchaser’s right to convert, exercise or purchase similar to the limitation set forth herein), together with all shares of Common Stock deemed beneficially owned by the Purchaser’s “affiliates” (as defined in Rule 144 of the 1933 Act) that would be aggregated for purposes of determining whether a group under Section 13(d) of the 1934 Act, exists, would exceed 9.9% of the total issued and outstanding shares of the Common Stock.

17

7.4.No Integration. Neither the Company nor any of its Affiliates, nor any Person acting on its or their behalf, shall directly or indirectly make any offers or sales of any securities or solicit any offers to buy any securities under circumstances that would cause the loss of the 4(2) exemption under the Securities Act for the transactions contemplated hereby. Subject to any consent or approval rights of the Purchasers hereunder, in the event the Company contemplates an offering of its equity or debt securities within six months following the Closing Date, the Company agrees that it shall notify the Purchasers of such offering (without providing any material non-public information to any Purchaser without its prior approval), and upon the reasonable request of Purchasers purchasing at least 75% in principal amount of the Notes hereunder, the Company shall first disclose the terms and conditions and other relevant facts of such proposed transaction to Nasdaq and obtain from Nasdaq its verbal advice (subject to the FINRA’s review of the executed transaction documents for such transaction) that such transaction should not be integrated with the offering which is the subject of this Agreement for purposes of the Nasdaq rules requiring shareholder approval of the issuance of 20% or more of an issuer’s outstanding common stock. In the event the Company fails to obtain such advise, then the Company shall not issue or sell any such securities without the prior written consent of Purchasers purchasing at least 75% in principal amount of the Notes hereunder, provided that the Company may sell or issue securities without such consent if (i) it obtains prior shareholder approval for such sale or issuance in compliance with the NASD Manual rules, (ii) such sale or issuance is to a pharmaceutical company in connection with a strategic transaction and not primarily as a capital raising transaction, so long as the Company has not affirmatively been notified (orally or in writing) by Nasdaq that it is reasonably likely to treat such sale or issuance as being integrated with the transactions contemplated under this Agreement, or (iii) none of the Notes are then outstanding, so long as the Company has not affirmatively been notified (orally or in writing) by Nasdaq that it is reasonably likely to treat such sale or issuance as being integrated with the transactions contemplated under this Agreement. In the event that the transactions contemplated under this Agreement are deemed integrated with any other transaction(s) by the FINRA, then the Company shall as soon as possible seek the approval of its stockholders and take such other action to authorize the issuance of the full number of Underlying Shares and the full amount of securities issued and/or to be issued in such other transaction.

18

7.5.Opinion of Counsel. On or prior to the Closing Date, the Company will deliver to the Purchasers the opinions of legal counsel to the Company substantially in the form and substance reasonably acceptable to the Purchasers.

7.6.Reservation of Common Stock issuable upon Conversion of Notes. The Company hereby agrees at all times to reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the full conversion of Notes (including payment and repayment of interest and principal thereon), such number of shares of Common Stock as shall from time to time equal the number of shares sufficient to permit the full conversion of Notes (including payment and repayment of interest and principal thereon) in accordance with the terms of the Notes. All calculations pursuant to this paragraph shall be made without regard to restrictions on beneficial ownership.

7.7.Reports. For so long as the Purchasers beneficially own the Notes, the Company will furnish to the Purchasers the following reports, each of which shall be provided to the Purchasers by air mail or reputable international courier (within one week of filing with the SEC, in the case of SEC filings), to the extent not filed on and available at that time via EDGAR:

(a)Quarterly Reports. As soon as available and in any event within 45 days after the end of each fiscal quarter of the Company, the Company’s quarterly report on Form 10-Q or, in the absence of such report, consolidated balance sheets of the Company as at the end of such period and the related consolidated statements of operations, stockholders’ equity and cash flows for such period and for the portion of the Company’s fiscal year ended on the last day of such quarter, all in reasonable detail and certified by the Company to have been prepared in accordance with generally accepted accounting principles, subject to year-end and audit adjustments.

(b)Annual Reports. As soon as available and in any event within 90 days after the end of each fiscal year of the Company, the Company’s Form 10-K or, in the absence of a Form 10-K, consolidated balance sheets of the Company as at the end of such fiscal year and the related consolidated statements of earnings, stockholders’ equity and cash flows for such year, all in reasonable detail and accompanied by the report on such consolidated financial statements of an independent certified public accountant selected by the Company and reasonably satisfactory to the Purchaser.

19

(c)Securities Filings. As promptly as practicable and in any event within five days after the same are issued or filed, copies of (i) all notices, proxy statements, financial statements, reports and documents as the Company shall send or make available generally to its stockholders or to financial analysts, and (ii) all periodic and special reports, documents and registration statements (other than on Form S-8) which the Company furnishes or files, or, to the extent also delivered to the Company, any officer or director of the Company (in such person’s capacity as such) furnishes or files with the SEC.

(d)Other Information. Such other information relating to the Company as from time to time may reasonably be requested by any Purchaser provided the Company produces such information in its ordinary course of business, and further provided that the Company, solely in its own discretion, determines that such information is not confidential in nature and disclosure to the Purchaser would not be harmful to the Company or violate any rules or regulations of the SEC or the Nasdaq Stock Market.

7.8.Press Releases. Any press release or other publicity concerning this Agreement or the transactions contemplated by this Agreement shall be submitted to the Purchasers for comment at least two (2) business days prior to issuance, unless the release is required to be issued within a shorter period of time by law or pursuant to the rules of the NASDAQ Stock Market or a national securities exchange. The Company shall issue a press release concerning the fact and material terms of this Agreement within one business day of the Closing.

7.9.No Conflicting Agreements. The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the obligations to the Purchasers under the Agreements.

7.10.Insurance. For so long as any Purchaser beneficially owns any of the Securities, the Company shall have in full force and effect (a) insurance reasonably believed by the Company to be adequate on all assets and activities, covering property damage and loss of income by fire or other casualty, and (b) insurance reasonably believed to be adequate protection against all liabilities, claims and risks against which it is customary for companies similarly situated as the Company to insure.

7.11.Compliance with Laws. So long as the Purchasers beneficially own any Securities, the Company will use reasonable efforts to comply with all applicable laws, rules, regulations, orders and decrees of all governmental authorities, except to the extent non-compliance (in one instance or in the aggregate) would not have a Material Adverse Effect.

20

7.12.Listing of Underlying Shares and Related Matters. The Company hereby agrees, promptly following the Closing of the transactions contemplated by this Agreement, to take such action to cause the Underlying Shares to be listed on the Nasdaq Capital Market as promptly as possible following the Closing but no later than the effective date of the registration contemplated by the Registration Rights Agreement. The Company further agrees that if the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it will include in such application the Underlying Shares and will take such other action as is necessary to cause such Common Stock to be so listed. For so long as any Notes remain outstanding, the Company will take all action necessary to continue the listing and trading of its Common Stock on the Nasdaq Stock Market, the New York Stock Exchange or the American Stock Exchange (collectively, “Approved Markets”), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such exchange or market, as applicable, to ensure the continued eligibility for trading of the Underlying Shares thereon.

7.13.Corporate Existence. So long as any Notes remain outstanding, the Company shall maintain its corporate existence, except in the event of a merger, consolidation or sale of all or substantially all of the Company’s assets, as long as the surviving or successor entity in such transaction (a) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith, regardless of whether or not the Company would have had a sufficient number of shares of Common Stock authorized and available for issuance in order to fulfill its obligations hereunder and effect the conversion (including payment on) in full of all Notes outstanding as of the date of such transaction; (b) has no legal, contractual or other restrictions on its ability to perform the obligations of the Company hereunder and under the agreements and instruments entered into in connection herewith; and (c)(i) is a publicly traded corporation whose common stock and the shares of capital stock issuable upon conversion of the Notes are (or would be upon issuance thereof) listed for trading on an Approved Market or (ii) if not such a publicly traded corporation, then the buyer agrees that it will, at the election of the Purchasers, purchase such Purchasers’ Securities at a price equal to the greater of (a) 110% of the Purchase Price of such Securities or (b) the fair market value of such Securities on an as-converted basis based on the closing price immediately preceding such transaction or the redemption date, whichever is greater.

7.14.Insurance Endorsement. The Company agrees that on or prior to August 31, 2008, it shall deliver to the Purchasers (or their counsel) each of (a) an original endorsement to the Company’s Commercial General Liability Insurance Policy/Umbrella Liability Insurance Policy naming the Purchasers as additional insureds, and (b) an original Standard New Jersey Mortgagee Non-Contribution Clause endorsement to the Company’s “all risk” property insurance policy for the Mortgaged Property in favor of the Purchasers.

21

8.Survival. All representations, warranties, covenants and agreements contained in this Agreement shall be deemed to be representations, warranties, covenants and agreements as of the date hereof and shall survive the execution and delivery of this Agreement and terminate upon expiration of the applicable statute of limitations.

9.Miscellaneous.

9.1.Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the other parties hereto which consent may not be unreasonably withheld or delayed, except that without the prior written consent of the Company, but after notice duly given, a Purchaser may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to any Person to which such Purchaser has transferred or assigned all or part of its Notes in accordance with the terms of the Notes, provided in each case that such Affiliate, transferee or assignee acknowledges in writing to the Company that the representations and warranties contained in Section 5 hereof shall apply to such Affiliate, transferee or assignee. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

9.2.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed by facsimile.

9.3.Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

9.4.Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given only by delivery to each party to be notified by (i) personal delivery, (ii) telex or telecopier, provided it is sent with electronic confirmation of complete transmittal, or (iii) an internationally recognized overnight air courier, addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

22

If to the Company:

NexMed, Inc.

89 Twin Rivers Drive

East Windsor, NJ 08520

Fax: (609) 426-0340

Attention: Chief Financial Officer

With a copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022

Fax: (212) 940-6557

Attention: Robert Kohl, Esq.

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

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

9.5.Expenses.

(a)The parties hereto shall pay their own costs and expenses in connection herewith, except that the Company shall pay to Tail Wind Advisory and Management Ltd. (“TWAM”) a non-refundable sum equal to $45,000 as and for legal and due diligence expenses incurred in connection herewith, $25,000 of which has been previously paid and the balance of which shall be paid upon Closing.

(b)The Company shall pay the costs of all title, UCC, judgment, lien and similar searches in connection with the Mortgage, and shall pay all title insurance premiums on the Mortgaged Property in connection with Purchasers’ title insurance policy (updated through the Closing Date). The Company shall also pay all costs and expenses hereafter incurred in amending, implementing, perfecting, collecting, defending, declaring and enforcing and otherwise relating to the Purchasers’ rights and security interests in the Mortgaged Property hereunder or under the Notes or any other instrument or agreement delivered in connection herewith or therewith, including, but not limited to, searches and filings after the date hereof (provided that the Company shall not be responsible for any costs and expenses incurred by the Purchasers in connection with the negotiation, execution and delivery of the Mortgage or any other Agreements, except as may be provided above or elsewhere herein or therein). For clarification, the costs payable by the Company pursuant to this Section 9.5(b) are in addition to the sum payable to TWAM pursuant to Section 9.5(a) above.

23

9.6.Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and 75% in interest of the Purchasers, provided, however, that any such amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such securities, and the Company.

9.7.Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.

9.8.Entire Agreement. This Agreement, including the Exhibits and Schedules hereto, and the Registration Rights Agreement, the Notes and other documents contemplated hereby constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

9.9.Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

9.10.Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws.

9.11.Remedies.

(a)The Purchasers shall be entitled to specific performance of the Company’s obligations under the Agreements.

(b)The Company on the one hand, and each Purchaser severally and not jointly on the other hand, shall indemnify the other and hold it harmless from any loss, cost, expense or fees (including attorneys’ fees and expenses) arising out of any breach of any representation, warranty, covenant or agreement in any of the Agreements, or arising out of the enforcement of this Section 9.11.

24

9.12.Jurisdiction. The parties hereby agree that all actions or proceedings arising directly or indirectly from or in connection with this Agreement or the other Agreements shall be litigated only in the Supreme Court of the State of New York or the United States District Court for the Southern District of New York located in New York County, New York, except for actions or proceedings arising directly or indirectly from or in connection with the Mortgage, which may be litigated in the applicable court(s) in New Jersey. The parties consent to the jurisdiction and venue of the foregoing courts and consent that any process or notice of motion or other application to either of said courts or a judge thereof may be served inside or outside the State of New York or the Southern District of New York by registered mail, return receipt requested, directed to the party being served at its address set forth in this Agreement (and service so made shall be deemed complete three (3) days after the same has been posted as aforesaid) or by personal service or in such other manner as may be permissible under the rules of said courts. The Company and the Purchasers hereby waive any right to a jury trial in connection with any litigation pursuant to this Agreement or the other Agreements.

9.13.Like Treatment of Purchasers and Holders. Neither the Company nor any of its affiliates shall, directly or indirectly, pay or cause to be paid any consideration (immediate or contingent), whether by way of interest, fee, payment for the redemption, conversion or exercise of the Securities, or otherwise, to any Purchaser or holder of Securities, for or as an inducement to, or in connection with the solicitation of, any consent, waiver or amendment of any terms or provisions of the Agreements, unless such consideration is required to be paid to all Purchasers or holders of Securities bound by such consent, waiver or amendment. The Company shall not, directly or indirectly, redeem any Securities unless such offer of redemption is made pro rata to all Purchasers or holders of Securities, as the case may be, on identical terms. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

25

9.14.Actions of Purchasers. The obligations of each Purchaser hereunder and under the documents contemplated hereby are several and not joint with the obligations of any other Purchaser, and no Purchaser shall in any way be responsible for the performance of the obligations of any other Purchaser under any such document. Nothing contained herein or in any other document contemplated hereby, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute any of the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby or thereby. Each Purchaser confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other document contemplated hereby, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Notwithstanding anything herein to the contrary, the actions and obligations of the Purchasers hereunder shall at all times be considered several and not joint, and the Purchasers are not, under any circumstances, agreeing to act jointly with respect to the Securities or any of their actions or obligations under the Agreements, and shall not constitute a “group” under the 1934 Act. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring its investment hereunder. Each Purchaser shall be entitled to independently protect and enforce its rights, including without limitation, the rights arising out of this Agreement or out of the other Agreements, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company has elected to provide all Purchasers with the same terms and Agreements for the convenience of the Company and not because it was required or requested to do so by the Purchasers.

26

9.15.Collateral Agent. The Purchasers hereby appoint The Tail Wind Fund Ltd. as “Collateral Agent” under the Mortgage. The Collateral Agent may be removed, and a successor Collateral Agent may be appointed, by a majority-in-interest of holders of the Notes, and any Collateral Agent may resign from such position upon thirty days prior notice to the Company (which shall constitute notice to the Operating Subsidiary) and the holders of Notes. If a successor Collateral Agent does not take such position within 30 days after the retiring Collateral Agent resigns or is removed, the retiring Collateral Agent or a majority-in-interest of the holders of the Notes may petition any court of competent jurisdiction for the appointment of a successor Collateral Agent. The Collateral Agent will act or refrain from acting based on the direction of a majority-in-interest of holders of the Notes, and may take any action or refrain from taking any action as provided in the Mortgage as it shall determine in its reasonable judgment and discretion. With respect to any monies or property held by, or expended by, the Collateral Agent on behalf of the holders of the Notes, such amounts shall be allocated pro rata based on the principal amount of Notes outstanding. The Collateral Agent shall be reimbursed by the holders of Notes for all reasonable expenses incurred in connection with acting as Collateral Agent under the Mortgage (provided that this shall in no way affect any liability of the Operating Subsidiary or the Company under the Mortgage). The Collateral Agent may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. No implied covenants or obligations shall be read into this Agreement or the Mortgage against Collateral Agent. Except for Collateral Agent's own willful misconduct, bad faith or gross negligence, the Collateral Agent (i) may rely and/or act upon any written instrument, document or request believed by the Collateral Agent in good faith to be genuine and to be executed and delivered by the proper person(s), and may assume in good faith the authenticity, validity and effectiveness thereof and shall not be obligated to make any investigation or determination as to the truth and accuracy of any information contained therein, and (ii) shall not be responsible for the acts or omissions of the other parties hereto or holders of Notes. In consideration of its acceptance of the appointment as the Collateral Agent, each of the Purchasers (and any subsequent holder of the Notes) jointly and severally agree to indemnify the Collateral Agent against, and hold the Collateral Agent harmless from, all costs, damages, expenses (including reasonable attorney's fees and disbursements) and liabilities that the Collateral Agent may incur or sustain in connection with serving as Collateral Agent under the Mortgage, unless such costs, damages, expenses and liabilities are caused by the Collateral Agent's own willful misconduct, bad faith or gross negligence.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

27

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

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

28

The Purchasers: 

THE TAIL WIND FUND LTD.

By:        TAIL WIND ADVISORY AND

              MANAGEMENT LTD., as

              investment manager

              By:/s/ David Crook                                                

              Name: David Crook

              Title:   CEO

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

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

29

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

30

EX-10.2

Exhibit 10.2

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

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

7% CONVERTIBLE NOTE DUE DECEMBER 31, 2011

OF

NEXMED, INC.

Note No.: ___	Original Principal Amount: ________
Issuance Date: June 27, 2008	New York, New York

This Note (“Note”) is one of a duly authorized issue of Notes of NEXMED, INC., a corporation duly organized and existing under the laws of the State of Nevada (the “Company”), designated as the Company's 7% Convertible Notes Due December 31, 2011 (“Maturity Date”) in an aggregate principal amount (when taken together with the original principal amounts of all other Notes) which does not exceed Five Million Seven Hundred Fifty Thousand U.S. Dollars (U.S. $5,750,000) (the “Notes”).

For Value Received, the Company hereby promises to pay to the order of [HOLDER] or its registered assigns or successors-in-interest (“Holder”) the principal sum of _____________________________ (U.S. $________), together with all accrued but unpaid accretions thereto, if any, on the Maturity Date, to the extent such principal amount and accretion has not been repaid with or converted into the Company's Common Stock, $0.001 par value per share (the “Common Stock”), in accordance with the terms hereof. The unpaid principal balance hereof shall automatically increase daily at the rate of 7% per annum from the date of original issuance hereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date, or such earlier date upon acceleration or by conversion or redemption in accordance with the terms hereof or of the other Agreements. Such principal accretion under this Note shall occur daily commencing on the Issuance Date and shall be computed on the basis of a 360-day year and shall be payable in accordance with Section 2 hereof. Notwithstanding anything contained herein, this Note shall bear interest on the due and unpaid Principal Amount from and after the occurrence and during the continuance of an Event of Default pursuant to Section 5(a), at the rate (the “Default Rate”) equal to the lower of twenty percent (20%) per annum or the highest rate permitted by law. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid default interest and Accreted Amounts (as defined below), and fees and any remaining amount to principal.

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

The following terms and conditions shall apply to this Note:

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

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

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

2

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

“Conversion Price” shall initially equal $2.00 (which Conversion Price shall be subject to adjustment as set forth herein).

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

“Effective Registration”shall mean (i) the resale of all Registrable Securities (as defined in the Registration Rights Agreement) is either covered by an effective registration statement in accordance with the terms of the Registration Rights Agreement which registration statement is not subject to any suspension or stop orders or permitted without registration under the Securities Act and without any limitations or restrictions pursuant to Rule 144 promulgated under the Securities Act (provided that independent counsel for the Company furnishes to the Company’s transfer agent a written legal opinion confirming such permitted resale under Rule 144, which counsel and form of opinion shall be reasonably acceptable to the Holder); (ii) the resale of such Registrable Securities may be effected either pursuant to a current and deliverable prospectus that is not subject at the time to any blackout or similar circumstance or pursuant to Rule 144 promulgated under the Securities Act without registration and without any limitations or restrictions (provided that independent counsel for the Company furnishes to the Company’s transfer agent a written legal opinion confirming such permitted resale under Rule 144, which counsel and form of opinion shall be reasonably acceptable to the Holder); (iii) such Registrable Securities are listed, or approved for listing prior to issuance, on an Approved Market and are not subject to any trading suspension (nor shall trading generally have been suspended on such exchange or market), and the Company shall not have been notified of any pending or threatened proceeding or other action to delist or suspend the Common Stock on the Approved Market on which the Common Stock is then traded or listed; (iv) the requisite number of shares of Common Stock shall have been duly authorized and reserved for issuance as required by the terms of the Agreements; (v) the closing bid price of the Common Stock on the Principal Market shall be at least $1.00; and (vi) none of the Company or any direct or indirect subsidiary of the Company is subject to any Bankruptcy Event.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“InterimConversion Price” shall initially equal $1.75 (which Interim Conversion Price shall be subject to adjustment as set forth herein).

3

“Market Price” shall equal the average of the daily VWAPs over the five (5) consecutive Trading Days immediately preceding the date on which the Market Price is being determined.

“Per Share Selling Price” shall include the amount actually paid by third parties for each share of Common Stock in a sale or issuance by the Company. In the event a fee is paid by the Company in connection with such transaction directly or indirectly to such third party or its affiliates, any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price. A sale of shares of Common Stock shall include the sale or issuance of Convertible Securities, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Company upon such sale or issuance less the fee amount as provided above). In case of any such security issued in a Variable Rate Transaction, the Per Share Selling Price shall be deemed to be the lowest conversion or exercise price at which such securities are converted or exercised or might have been converted or exercised, or the lowest adjustment price, as the case may be, over the life of such securities. If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Company and the Holder. In the event the Company directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, then the Per Share Selling Price shall equal such effectively reduced conversion, exercise or exchange price.

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

“Principal Market” shall mean the NASDAQ Capital Market or such other principal market or exchange on which the Common Stock is then listed for trading.

“Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Stock Payment Price” on any particular day shall mean the lesser of (a) 95% of the Market Price as of such day, or (b) the Market Price as of such day less $0.08.

“Trading Day” shall mean a day on which there is trading on the Principal Market.

4

“VWAP” shall mean the daily dollar volume-weighted average sale price for the Common Stock on the Principal Market on any particular Trading Day during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the holders of at least a majority of the principal amount of the Notes then outstanding. All such determinations of VWAP shall to be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock combination or other similar transaction occurring during any period used to determine the Market Price (or other period utilizing VWAPs).

Section 2.Accretion.

(a)Payment Dates.On the first day of each calendar quarter after the Issuance Date beginning on October 1, 2008 (each an “Accretion Payment Date”), the Company shall either pay in cash the dollar amount accrued and accreted to the principal amount hereunder since the prior Accretion Payment Date (or Issuance Date if no such Accretion Payment Date has yet to occur) (“Accreted Amount”) or effect the automatic conversion of such Accreted Amount as provided in this Section 2.

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

5

(c)Limitations to Automatic Conversion into Common Stock. Notwithstanding anything to the contrary herein, the Company shall be prohibited from exercising its right to effect an automatic conversion of any Accreted Amount hereunder (and must deliver cash in respect thereof) on the applicable Accretion Payment Date (1) if at any time within ten (10) Trading Days prior to the Accretion Payment Date there fails to exist Effective Registration or an Event of Default hereunder exists or occurs, unless otherwise waived in writing by the Holder in whole or in part at the Holder’s option, (2) if the Company’s net cash on hand (including cash equivalents) as of such Accretion Payment Date is greater than $3 million (any conversion election by the Company under this Section 2 shall constitute a representation by the Company that such net cash amount is below $3 million), and (3) to the extent, and only to the extent, that such conversion into shares of Common Stock would result in the Holder hereof exceeding the limitations contained in Section 3(i) below.

Section 3.Conversion.

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

(b)Common Stock Issuance Upon Conversion.

(i)Conversion Date Procedures. Upon conversion of this Note pursuant to Section 3(a) above, the outstanding Principal Amount hereunder shall be converted into such number of fully paid, validly issued and non-assessable shares of Common Stock, free of any liens, claims and encumbrances, as is determined by dividing the outstanding Principal Amount being converted by the then applicable Conversion Price. The date of any Conversion Notice hereunder shall be referred to herein as the “Conversion Date”. If a conversion under this Note cannot be effected in full for any reason, or if the Holder is converting less than all of the outstanding Principal Amount hereunder pursuant to a Conversion Notice, the Company shall promptly deliver to the Holder (but no later than five Trading Days after the Conversion Date) a Note for such outstanding Principal Amount as has not been converted if this Note has been surrendered to the Company for partial conversion. The Holder shall not be required to physically surrender this Note to the Company upon any conversion hereunder unless the full outstanding Principal Amount represented by this Note is being converted. The Holder and the Company shall maintain records showing the outstanding Principal Amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon each such conversion.

6

(ii)Stock Certificates or DWAC. The Company will deliver to the Holder not later than three (3) Trading Days after the Conversion Date, a certificate or certificates, which shall be free of restrictive legends and trading restrictions if the Registration Statement has been declared effective, representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company's transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposit Withdrawal Agent Commission system (provided that the same time periods herein as for stock certificates shall apply). If in the case of any conversion hereunder, such certificate or certificates are not delivered to or as directed by the Holder by the fifth Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return this Note tendered for conversion. If the conversion has not been rescinded in accordance with the previous sentence and the Company fails to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section 3(b) (free of any restrictions on transfer or legends, if such shares have been registered) in accordance herewith, prior to the seventh Trading Day after the Conversion Date, the Company shall pay to the Holder, in cash, an amount equal to 2% of the Principal Amount per month until such delivery takes place (pro rated for partial months).

(c)Conversion Price Adjustments.

(i)Stock Dividends, Splits and Combinations. If the Company or any of its subsidiaries, at any time while the Notes are outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares, or (C) combine outstanding Common Stock into a smaller number of shares, then each Affected Conversion Price (as defined below) shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section 3(c)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

7

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

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

(iii)Common Stock Issuances. In the event that the Company or any of its subsidiaries (A) issues or sells any Common Stock or Convertible Securities or (B) directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, at or to an effective Per Share Selling Price which is less than the Conversion Price or Interim Conversion Price, then in each such case the Conversion Price and/or Interim Conversion Price, as the case may be, in effect immediately prior to such issue or sale or record date, as applicable, shall be automatically reduced effective concurrently with such issue or sale to an amount determined by multiplying the Conversion Price and/or Interim Conversion Price, as the case may be, then in effect by a fraction, (x) the numerator of which shall be the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issue or sale, plus (2) the number of shares of Common Stock which the aggregate consideration received by the Company for such additional shares would purchase at such Conversion Price or Interim Conversion Price, as the case may be, and (y) the denominator of which shall be the number of shares of Common Stock of the Company outstanding immediately after such issue or sale. The foregoing provision shall not apply to any issuances or sales of Common Stock or Convertible Securities (i) pursuant to any Convertible Securities currently outstanding on the date hereof in accordance with the terms of such Convertible Securities in effect on the date hereof, (ii) pursuant to the Notes, or (iii) to any officer, director, employee or Consultant (as defined below) of the Company pursuant to a bona fide option or equity incentive plan duly adopted by the Company, provided that any such issuances or sales to Consultants must be reasonable consideration for the services rendered by such Consultants and shall not exceed more than $1 million in market value to all Consultants in the aggregate under any circumstances. “Consultant” shall mean any natural person providing bona fide services to the Company which are not in connection with the offer or sale of securities in a capital raising transaction and which do not directly or indirectly promote or maintain a market for the Company’s securities. The Company shall give to the Holder written notice of any such sale of Common Stock within 24 hours of the closing of any such sale and shall within such 24 hour period issue a press release announcing such sale if such sale is a material event for, or otherwise material to, the Company.

8

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

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

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

(vii)Notice of Certain Events. If:

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

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

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

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

9

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

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

(d)Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the holders of the Notes, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Purchase Agreement) be issuable (taking into account the adjustments under this Section 3 but without regard to any ownership limitations contained herein) upon the conversion of this Note hereunder in Common Stock (including conversion of Accreted Amounts or the Interim Repayment Amount into Common Stock). The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid, nonassessable.

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

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

10

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

(h)Notices Procedures. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by confirmed facsimile, or by a nationally recognized overnight courier service to the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or by a nationally recognized overnight courier service addressed to the Holder at the facsimile telephone number or address of the Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed delivered (i) upon receipt, when delivered personally, (ii) when sent by facsimile, upon receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a nationally recognized overnight courier service.

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

11

Section 4.Principal Repayments.

(a)Interim Repayment Right.

(i)Holder Repayment Right. The Holder shall have the right to compel the Company to repay up to its pro rata share of $1,000,000 in outstanding principal hereunder (based on the original principal amount of this Note relative to the original principal amount of all Notes issued under the Purchase Agreement), together with all Accreted Amounts accrued thereon through the date of payment (“Interim Repayment Amount”), on December 31, 2008 (“Interim Repayment Date”) either in cash or by automatically converting such amount into shares of Common Stock, or a combination thereof, at the Holder’s option.

(ii)Exercise Procedure. In order to exercise such interim repayment right, the Holder shall deliver the Company a written notice electing to compel such interim repayment (“Repayment Election Notice”), specifying the dollar amount of the Interim Repayment Amount to be converted into Common Stock and the dollar amount of the Interim Repayment Amount to be repaid in cash. Such Repayment Election Notice may be delivered at any time prior to the Interim Repayment Date, provided that the Interim Repayment Amount is not required to be paid until the tenth day after such Repayment Election Notice is delivered if it is delivered after December 21, 2008.

(iii)Payment/Conversion. On the Interim Repayment Date, (x) the Company shall pay to the Holder in cash the portion of the Interim Repayment Amount elected to be repaid in cash in the Repayment Election Notice and (y) the portion of the Interim Repayment Amount elected to be converted into stock in the Repayment Election Notice shall be automatically converted into Common Stock in accordance with the terms hereof. If the Holder does not receive the requisite amount of cash in connection with such repayment within three (3) Trading Days following the Interim Repayment Date, such amount shall bear interest hereunder at the Default Rate. To the extent the Holder elects to make any such repayment by converting all or a portion of the Interim Repayment Amount into shares of Common Stock pursuant to this Section 4(a), the number of such shares to be issued upon such conversion as of the Interim Repayment Date shall be the number determined by dividing (x) the portion of the Interim Repayment Amount to be converted into Common Stock, by (y) the Interim Conversion Price as of the Interim Repayment Date. Such shares shall be issued and delivered within three (3) Trading Days following the Interim Repayment Date and shall be duly authorized, validly issued, fully paid, non-assessable and free and clear of all encumbrances, restrictions and legends. Notwithstanding anything to the contrary herein, the Holder shall be prohibited from exercising its right to convert any portion of the Interim Repayment Amount into shares of Common Stock on the applicable Interim Repayment Date to the extent, and only to the extent, that such conversion into shares of Common Stock would result in the Holder hereof exceeding the limitations contained in Section 3(i) above. Any conversion hereunder into shares of Common Stock pursuant to the terms hereof shall constitute and be deemed a conversion of such portion of the Principal Amount of this Note for all purposes under this Note and the other Agreements (except that such conversion shall be at the Interim Conversion Price and except as otherwise provided herein).

12

(b)Maturity Date.

(i)Holder Election. The Holder may elect to have the all or part of the principal balance hereunder remaining outstanding on the Maturity Date, together with all Accreted Amounts accrued thereon through the Maturity Date (“Maturity Amount”), repaid on the Maturity Date either in cash or by automatically converting such amount into shares of Common Stock, or a combination thereof, at the Holder’s option.

(ii)Exercise Procedure. Prior to the Maturity Date the Holder shall deliver a written notice, which may be by email (“Maturity Election Notice”), specifying the dollar amount of the Maturity Amount to be converted into Common Stock and the dollar amount of the Maturity Amount to be repaid in cash.

(iii)Payment/Conversion. On the Maturity Date, (x) the Company shall pay to the Holder in cash the portion of the Maturity Amount elected to be repaid in cash in the Maturity Election Notice and (y) the portion of the Maturity Amount elected to be converted into stock in the Maturity Election Notice shall be automatically converted into Common Stock in accordance with the terms hereof. If the Holder does not receive the requisite amount of cash in connection with such repayment within three (3) Trading Days following the Maturity Date, such amount shall bear interest hereunder at the Default Rate. To the extent the Holder elects to make any such repayment by converting all or a portion of the Maturity Amount into shares of Common Stock pursuant to this Section 4(a), the number of such shares to be issued upon such conversion as of the Maturity Date shall be the number determined by dividing (x) the portion of the Maturity Amount to be converted into Common Stock, by (y) the Conversion Price as of the Maturity Date. Such shares shall be issued and delivered within three (3) Trading Days following the Maturity Date and shall be duly authorized, validly issued, fully paid, non-assessable and free and clear of all encumbrances, restrictions and legends. Notwithstanding anything to the contrary herein, the Holder shall be prohibited from exercising its right to convert any portion of the Maturity Amount into shares of Common Stock on the Maturity Date to the extent, and only to the extent, that such conversion into shares of Common Stock would result in the Holder hereof exceeding the limitations contained in Section 3(i) above. Any conversion hereunder into shares of Common Stock pursuant to the terms hereof shall constitute and be deemed a conversion of such portion of the Principal Amount of this Note for all purposes under this Note and the other Agreements.

Defeasement. In the event the Mortgage is defeased as set forth in Section 7.2(c) of the Purchase Agreement, then the Holder may at any time and from time to time thereafter demand immediate repayment of all or part of the amounts (including principal and Accreted Amounts) then outstanding and accrued under this Note.

Section 5.Defaults and Remedies.

(a)Events of Default.An “Event of Default” is:

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

13

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

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

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

(v)the Subsidiary Guaranty or Mortgage ceases to be in full force and effect (including failure to create a valid and perfected first priority lien on and security interest in the Mortgaged Property (as defined in the Mortgage) at any time for any reason, or, if the Mortgage is defeased in accordance with Section 7.2(c) of the Purchase Agreement, the Escrow Funds fail to be held in accordance with the terms of such Section and the Escrow Agreement (as such terms are defined in such Section);

(vi)any material adverse change in the condition, value or operation of a material portion of the Mortgaged Property or, if the Mortgage is defeased in accordance with Section 7.2(c) of the Purchase Agreement, any material adverse change in the condition or value or a material portion of the Escrow Funds;

(vii)any acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company or any of its subsidiaries for in excess of $250,000 or for money borrowed the repayment of which is guaranteed by the Company or any of its subsidiaries for in excess of $250,000, whether such indebtedness or guarantee now exists or shall be created hereafter;

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

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

14

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

Section 6. Security and Guaranty. The Company’s and the Operating Subsidiary’s obligations under this Note and the other Agreements are secured by Mortgaged Property (as defined in the Mortgage) pursuant to the terms of the Mortgage (or the Escrow Funds (as defined in the Purchase Agreement), if the Mortgage is defeased pursuant to Section 7.2(c) of the Purchase Agreement) and the obligations under this Note are guaranteed by the Operating Subsidiary pursuant to the Subsidiary Guaranty.

Section 7.General.

(a)Payment of Expenses. The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note. This includes, without limitation and subject to any limits under applicable law, Holder’s reasonable collection costs under Section 5(b) and Holder’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacateany automatic stay or injunction), appeals and any anticipated post-judgment collection services. If not prohibited by applicable law, the Company also will pay any court costs, in addition to all other sums provided by law.

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

15

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

(d)Assignment, Etc. The Holder may assign or transfer this Note to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Holder may assign or transfer this Note to any of such Holder's Affiliates without the consent of the Company and (ii) upon any Event of Default, the Holder may assign or transfer this Note without the consent of the Company, provided in each case that such Affiliate, transferee or assignee acknowledges in writing to the Company that the representations and warranties contained in Section 5 of the Purchase Agreement shall apply to such Affiliate, transferee or assignee. The Holder shall notify the Company of any such assignment or transfer promptly. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

(e)Waiver.

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

(ii)Except as otherwise provided herein, the Company and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, all other notices whatsoever and bringing of suit and diligence in taking any action to collect amounts called for hereunder, and will be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder.

(f)Governing Law; Jurisdiction.

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

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

16

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

(iii)NO JURY TRIAL. THE COMPANY HERETO KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE.

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

[Signature Page Follows]

17

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

NEXMED, INC.
By:	/s/ Vivian Liu
Name:	Vivian Liu
Title:	President and CEO
By:	/s/ Mark Westgate
Name:	Mark Westgate
Title:	Chief Financial Officer

18

EXHIBIT A

FORM OF CONVERSION NOTICE

(To be executed by the Holder

in order to convert a Note)

Re: Note (this “Note”) issued by NEXMED, INC. to ______________________________ on or about June ___, 2008 in the original principal amount of $_____________.

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

Conversion information:
	Date to Effect Conversion
	Aggregate Principal Amount of Note Being Converted
	Number of Shares of Common Stock to be Issued
	Applicable Conversion Price
	Signature
	Name
	Address

EX-10.3

Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into as of this 30th day of June, 2008 by and between NexMed, Inc., a Nevada corporation (the “Company”), and the “Purchasers” named in that Purchase Agreement of even date herewith by and between the Company and the Purchasers (the “Purchase Agreement”).

The parties hereby agree as follows:

1.Certain Definitions

As used in this Agreement, the following terms shall have the following meanings:

“Common Stock” shall mean the Company’s common stock, par value $0.001 per share.

“Investor” and “Investors” shall mean the Purchaser(s) identified in the Purchase Agreement and any transferee of the Purchaser(s) who is a permitted assignee of any Notes or Registrable Securities.

“Notes” shall mean the Company’s 7% Convertible Notes Due December 31, 2011 issued and sold to the Purchasers pursuant to the Purchase Agreement.

“Prospectus” shall mean the prospectus included in any Registration Statement, 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 by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus.

“Register,” “registered” and “registration” refer to a registration made by preparing and filing a registration statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Securities” shall mean (a) the Underlying Shares (without regard to any limitations on beneficial ownership contained in the Notes) or other securities issued or issuable to each Holder or its permitted transferee or designee (i) upon conversion of the Notes, or (ii) upon any distribution with respect to, any exchange for or any replacement of such Notes 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 or in replacement of the securities referred to in the preceding clauses.

“Registration Statement” shall mean any registration statement filed under the 1933 Act of the Company that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

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

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

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

2.Registration.

(a)Registration Statements. Promptly following the closing of the purchase and sale of the Notes contemplated by the Purchase Agreement (the “Closing Date”) (but no later than thirty (30) days after the Closing Date), the Company shall prepare and file with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities, subject to the Investor’s consent) covering the resale of the Registrable Securities in an amount equal to 130% of the number of shares of Common Stock necessary to permit the conversion in full of the Notes (without regard to any limitations on beneficial ownership contained therein). Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the Rules promulgated thereunder (including 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. Except for 250,000 shares of Common Stock underlying warrants issued to Southpoint Master Fund LP, no securities shall be included in the Registration Statement other than the Registrable Securities without the consent of the Investors holding a majority of the Registrable Securities (on an as-converted basis), which consent shall not be unreasonably withheld. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investor and its counsel prior to its filing or other submission. In the event any Registrable Securities are not covered by the Registration Statement, the Company shall promptly amend such Registration Statement or prepare and file with the SEC a new Registration Statement in accordance with the terms hereof in order to cause such Registrable Securities to be covered by a Registration Statement. If the Registration Statement covering the Registrable Securities is not filed within 30 days following the Closing Date, then the Company will make pro-rata payments to the Purchasers as liquidated damages and not as a penalty, in an amount equal to 2% of the sum of the aggregate principal amount then outstanding under the Notes for each month (or portion thereof) following such 30^th day during which such Registration Statement has not yet been filed. Each such payment shall be due and payable within five (5) days of the end of each month (or ending portion thereof) until such Registration Statement is so filed. Such payments shall be in partial compensation to the Purchasers, and shall not constitute the Purchasers’ exclusive remedy for such events.

2

(b)Expenses. The Company will pay all expenses associated with each registration, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals.

(c)Effectiveness.

(i) The Company shall use its best efforts to have each Registration Statement declared effective as soon as practicable, but in no event later than the earlier of (a) 120 days following the Closing Date (or the date of the occurrence of additional Registrable Securities, as the case may be) and (b) 5 days following the date on which the SEC notifies the Company or its counsel that the Registration Statement is not subject to any further review. In connection therewith, the Company shall respond to all SEC comments on the Registration Statement and file any amendments to the Registration Statement within 15 business days following any date on which the SEC furnishes comments to, asks questions of, or requests further information from, the Company or its counsel with respect to the Registration Statement or any part thereof or any document incorporated by reference therein. After any Registration Statement is declared effective by the SEC, the Company shall cause such Registration Statement to remain effective in accordance with the terms hereof, subject to permitted suspension of such effectiveness only for Allowed Delays (as defined below). On or prior to the date any Registration Statement is declared effective by the SEC, the Company shall cause the Registrable Securities to be specifically listed or included for quotation on an Approved Market, and maintain such listing and quotation for the Registrable Securities and the Common Stock in general.

(ii) For not more than twenty (20) consecutive Trading Days (as defined in the Notes) and for a total of not more than thirty (30) Trading Days in any twelve (12) consecutive month period, the Company may delay the disclosure of material non-public information concerning the Company, by terminating or suspending effectiveness of any registration contemplated by this Section not containing such information, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company (an “Allowed Delay”); provided, that the Company shall promptly (a) notify the Investor in writing of the existence of (but in no event, without the prior written consent of the Investor, shall the Company disclose to the Investor any of the facts or circumstances regarding) material non-public information giving rise to an Allowed Delay, and (b) advise the Investor in writing to cease all sales under the Registration Statement until the end of the Allowed Delay. The duration of the Registration Period will be extended by the number of days of any and all Allowed Delays.

(d)Underwritten Offering. If any offering pursuant to a Registration Statement pursuant to Section 2(a) hereof involves an underwritten offering, the Company shall have the right to select an investment banker and manager to administer the offering, which investment banker or manager shall be reasonably satisfactory to the Investor.

3

(e)Registration Defaults. If (A) the Registrable Securities specifically are not listed or included for quotation on an Approved Market or trading of the Common Stock is suspended or halted thereon, or (B) the Company fails, refuses or is otherwise unable to timely issue Underlying Shares in accordance with the terms of the Notes, or unlegended certificates for the Underlying Shares as required under the Agreements, in each case within ten (10) business days following the Purchaser’s written demand for issuance of such Underlying Shares or certificates, then the Company will make pro-rata payments to the Purchasers as liquidated damages and not as a penalty, in an amount equal to 2% of the sum of the aggregate principal amount then outstanding under the Notes for each month (pro rated for partial months) following the Registration Date during which any of the events described in (A), (B), (C) or (D) above occurs and is continuing (the “RRA Default Period”). Each such payment shall be due and payable within five (5) days of the end of each month (or ending portion thereof) of the RRA Default Period until the termination of the RRA Default Period. Such payments shall be in partial compensation to the Purchasers, and shall not constitute the Purchasers’ exclusive remedy for such events. The RRA Default Period shall terminate upon (x) listing or inclusion and/or trading of the Registrable Securities on an Approved Market in the case of (A) above, and (y) delivery of such shares in the case of (B) above. The amounts payable as liquidated damages pursuant to this paragraph shall be payable in lawful money of the United States.

3.Company Obligations. The Company will use its best efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:

(a)use its best efforts to cause such Registration Statement to become effective and to remain continuously effective for a period (the “Registration Period”) that will terminate upon the earlier of the date on which all Registrable Securities, covered by such Registration Statement, as amended from time to time (i) have been sold or (ii) become available for resale without registration or limitation pursuant to Rule 144 of the 1933 Act (but not less than one year following the Closing Date).

(b)prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the period specified in Section 3(a) and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all Registrable Securities; provided that, at least three (3) days prior to the filing of a Registration Statement or Prospectus, or any amendments or supplements thereto, the Company will furnish to the Investor copies of all documents proposed to be filed;

(c)permit counsel designated by the Investor to review each Registration Statement and all amendments and supplements thereto no fewer than five (5) business days prior to their filing with the SEC and not file any document to which such counsel reasonably objects on the basis that such document contains a material misstatement or omission;

4

(d)furnish to the Investor and its legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment, and provided that such items shall be redacted prior to delivering to the Investor and its counsel to the extent necessary to avoid disclosure of material non-public information concerning the Company), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as such Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor;

(e)in the event the Company selects an underwriter for the offering, the Company shall enter into and perform its reasonable obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the underwriter of such offering;

(f)if required by the underwriter, at the request of the Investor, the Company shall furnish, on the date that Registrable Securities, as applicable, are delivered to an underwriter, if any, for sale in connection with the Registration Statement (i) an opinion, dated as of such date, from counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the underwriter and the Investor and (ii) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriter and the Investor;

(g)make reasonable effort to prevent the issuance of any stop order or other suspension of effectiveness and, if such order is issued, obtain the withdrawal of any such order at the earliest possible moment;

(h)prior to any public offering of Registrable Securities, use its reasonable best efforts to register or qualify or cooperate with the Investor and its counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as the Investor reasonably requests in writing and do any and all other reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, or to become subject to any tax in any such state or jurisdiction where it is not otherwise subject;

(i)cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then quoted or listed;

5

(j)immediately notify the Investor, at any time when a Prospectus relating to the Registrable Securities is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such holder, promptly prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not include 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 not misleading in the light of the circumstances then existing; and

(k)otherwise use its best efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and make available to its security holders, as soon as reasonably practicable, but not later than the Availability Date (as defined below), an earnings statement covering a period of at least twelve months, beginning after the effective date of each Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act (for the purpose of this subsection 3(l), “Availability Date” means the 45th day following the end of the fourth fiscal quarter that includes the effective date of such Registration Statement, except that, if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability Date” means the 90th day after the end of such fourth fiscal quarter).

4.Obligations of the Investor.

(a)It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities, that the Investor shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities, and shall execute such documents in connection with such registration as the Company may reasonably request. At least fifteen (15) business days prior to the first anticipated filing date of any Registration Statement, the Company shall notify the Investor of the information the Company requires from the Investor if the Investor elects to have any of the Registrable Securities included in the Registration Statement. The Investor shall provide such information to the Company at least ten (10) business days prior to the first anticipated filing date of such Registration Statement if the Investor elects to have any of the Registrable Securities included in the Registration Statement.

(b)The Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from the Registration Statement, in which case the Investor shall be deemed to have waived its rights to have Registrable Securities registered under this Agreement, unless the Investor has good cause for such an election.

6

(c)In the event the Company determines to engage the services of an underwriter, the Investor agrees to enter into and perform its obligations under an underwriting agreement, in usual and customary form, including, without limitation, customary indemnification and contribution obligations, with the managing underwriter of such offering and take such other actions as are reasonably required in order to expedite or facilitate the dispositions of the Registrable Securities.

(d)The Investor agrees that, upon receipt of any notice from the Company of the happening of any event rendering a Registration Statement no longer effective, the Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor’s receipt of the copies of the supplemented or amended prospectus filed with the SEC and declared effective and, if so directed by the Company, the Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Investor’s possession of the prospectus covering the Registrable Securities, current at the time of receipt of such notice.

(e)The Investor may not participate in any underwritten registration hereunder unless it (i) agrees to sell the Registrable Securities on the basis provided in any underwriting arrangements in usual and customary form entered into by the Company, (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and (iii) agrees to pay its pro rata share of all underwriting discounts and commissions and any expenses in excess of those payable by the Company pursuant to the terms of this Agreement.

5.Indemnification.

(a)Indemnification by Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law the Investor, its officers, directors, stockholders and employees and each person who controls such Investor (within the meaning of the 1933 Act) against all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorney’s fees) and expenses imposed on such person caused by (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or any preliminary prospectus or any amendment or supplement thereto or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are based upon any information furnished in writing to the Company by such Investor, expressly for use therein, or (ii) any violation by the Company of any federal, state or common law, rule or regulation applicable to the Company in connection with any Registration Statement, Prospectus or any preliminary prospectus, or any amendment or supplement thereto, and shall reimburse in accordance with subparagraph (c) below, each of the foregoing persons for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claims. The foregoing is subject to the condition that, insofar as the foregoing indemnities relate to any untrue statement, alleged untrue statement, omission or alleged omission made in any preliminary prospectus or Prospectus that is eliminated or remedied in any Prospectus or amendment or supplement thereto, the above indemnity obligations of the Company shall not inure to the benefit of any indemnified party if a copy of such corrected Prospectus or amendment or supplement thereto had been made available to such indemnified party and was not sent or given by such indemnified party at or prior to the time such action was required of such indemnified party by the 1933 Act and if delivery of such Prospectus or amendment or supplement thereto would have eliminated (or been a sufficient defense to) any liability of such indemnified party with respect to such statement or omission. Indemnity under this Section 5(a) shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the permitted transfer of the Registrable Securities.

7

(b)Indemnification by Holder. In connection with any registration pursuant to the terms of this Agreement, the Investor will furnish to the Company in writing such information as the Company reasonably requests concerning the holders of Registrable Securities or the proposed manner of distribution for use in connection with any Registration Statement or Prospectus and agrees to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney’s fees) resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto and that such information was substantially relied upon by the Company in preparation of the Registration Statement or Prospectus or any amendment or supplement thereto. In no event shall the liability of an Investor be greater in amount than the dollar amount of the proceeds (net of all expense paid by such Investor and the amount of any damages such holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

(c)Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

8

(d)Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such holder and the amount of any damages such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of all the Registrable Securities sold by such indemnified party which were covered by the relevant Registration Statement or Prospectus contained therein.

6.Miscellaneous.

(a)Amendments and Waivers. This Agreement may be amended only by a writing signed by the parties hereto. The Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Investor.

(b)Notices. All notices and other communications provided for or permitted hereunder shall be made as set forth in the Purchase Agreement.

(c)Assignments and Transfers by Investor. This Agreement and all the rights and obligations of the Investor hereunder may not be assigned or transferred to any transferee or assignee except to a holder of any Notes or Registrable Securities which is a permitted assignee pursuant to the assignment provisions of such instruments.

9

(d)Assignments and Transfers by the Company. This Agreement may not be assigned by the Company without the prior written consent of Investor, except that without the prior written consent of the Investor, but after notice duly given, the Company shall assign its rights and delegate its duties hereunder to any successor-in-interest corporation, and such successor-in-interest shall assume such rights and duties, in the event of a merger or consolidation of the Company with or into another corporation or the sale of all or substantially all of the Company’s assets.

(e)Benefits of the Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

(f)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(g)Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(h)Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms to the fullest extent permitted by law.

(i)Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

(j)Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

(k)Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of law.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

10

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

The Company:	NEXMED, INC.
	By:	/s/ Vivian Liu
	Name:  Vivian Liu
	Title:    President and CEO

The Investors:	THE TAIL WIND FUND LTD.
	By:	TAIL WIND ADVISORY AND
		MANAGEMENT LTD., as
		investment manager
		By:	/s/ David Crook
		Name: David Crook
		Title:   CEO

SOLOMON STRATEGIC HOLDINGS, INC.
By:	/s/ Andrew P. MacKellar
Name:  Andrew P. MacKellar
Title:    Director

11

EX-10.4

Exhibit 10.4

NEXMED (U.S.A.), INC., AS MORTGAGOR

and

THE TAIL WIND FUND LTD. AND SOLOMON STRATEGIC HOLDINGS, INC., COLLECTIVELY AS MORTGAGEE

MORTGAGE, SECURITY AGREEMENT AND

ASSIGNMENT OF LEASES AND RENTS

(Fee)

Dated :	As of June 30, 2008
Locations:	89 Twin Rivers Drive
	East Windsor, New Jersey 08520
	113 Milford Road
	East Windsor, New Jersey 08520

The premises described within this instrument are also known as:

Block 20.06

Lot 6

and

Block 20.06

Lot 5

on the Official Tax Map of Mercer County.

RECORD AND RETURN TO:

MORTGAGE, SECURITY AGREEMENT AND

ASSIGNMENT OF LEASES AND RENTS

THIS MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS is made as of the 30th day of June, 2008, by NEXMED (U.S.A.), INC., a Delaware corporation having its principal place of business at 89 Twin Rivers Drive, East Windsor, New Jersey 08520 (the “Mortgagor”), to THE TAIL WIND FUND LTD., a British Virgin Islands limited liability company having an address at c/o Tail Wind Advisory and Management Ltd., Attn: David Crook, 77 Long Acre, London WC2E 9LB UK (“Tail Wind”), and SOLOMON STRATEGIC HOLDINGS, INC., a British Virgin Islands limited liability company, (collectively, the “Mortgagee”), and Tail Wind as collateral agent (including any successor collateral agent, the “Collateral Agent”).

W I T N E S S E T H

WHEREAS, the Mortgagor is the owner of a fee estate in the real property described in Exhibit A and Exhibit B attached hereto and made a part hereof (the “Premises”) and commonly known as 89 Twin Rivers Drive, East Windsor, New Jersey 08520 and 113 Milford Road, East Windsor, New Jersey 08520, respectively;

WHEREAS, the Mortgagor is a wholly-owned subsidiary of NexMed, Inc., a Nevada corporation (“Parent”);

WHEREAS, the Parent is executing, issuing and delivering one or more of the Parent’s 7% Convertible Notes due December 31, 2011 in the aggregate original principal amount of Five Million Seven Hundred Fifty Thousand Dollars ($5,750,000), lawful money of the United States of America, dated on or about the date hereof, to the Mortgagee, pursuant to the terms of that certain Purchase Agreement entered into on or about the date hereof between the Parent and the Mortgagee (“Purchase Agreement”); and

WHEREAS, as a condition to and as an inducement for the Mortgagee purchasing the Notes, the Mortgagor is entering into a subsidiary guaranty (“Guaranty”) dated on or about the date hereof in favor of the Mortgagee guaranteeing the Parent’s obligations under the Notes and the agreements entered into in connection therewith;

NOW THEREFORE, to secure the payment of an indebtedness in the aggregate original principal sum of Five Million Seven Hundred Fifty Thousand Dollars ($5,750,000), lawful money of the United States of America, to be paid with interest and with accretions to such principal amount (said indebtedness, interest, accretions to the principal amount due thereunder, and all other sums which may or shall become due hereunder or under the Notes and Guaranty, collectively, the “Debt”) pursuant to the above described 7% Convertible Notes due December 31, 2011 given by the Parent to the Mortgagee (the notes, together with all extensions, renewals or modifications thereof, being hereinafter collectively called the “Notes”) and pursuant to the Guaranty given by the Mortgagor to the Mortgagee, the Mortgagor has mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated, and by these presents does mortgage, give, grant, bargain, sell, alien, convey, confirm, pledge, assign and hypothecate unto the Mortgagee forever all right, title and interest of the Mortgagor now owned, or hereafter acquired, in and to the following property, rights and interest (such property, rights and interests, collectively, the “Mortgaged Property”):

(a)The Premises;

(b)all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located on the Premises (the “Improvements”);

(c)all of the estate, right, title, claim or demand of any nature whatsoever of the Mortgagor, either in law or in equity, in possession or expectancy, in and to the Premises, Improvements, Easements (defined below), Equipment (defined below), Leases (defined below), and/or Rents (defined below), or any part thereof;

(d)all easements, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, waters, water courses, water rights and powers, and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments, and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises and/or Improvements (including, without limitation, any and all development rights, air rights or similar or comparable rights of any nature whatsoever now or hereafter appurtenant to the Premises and/or Improvements or now or hereafter transferred to the Premises and/or Improvements) and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises and/or Improvements to the center line thereof (“Easements”);

(e)all machinery, apparatus, equipment, fittings, fixtures (including but not limited to all heating, air conditioning, plumbing, lighting and communications fixtures) now or hereafter located on the Mortgaged Property, and all machinery, apparatus, equipment, fittings, fixtures (including but not limited to all heating, air conditioning, plumbing, lighting and communications fixtures) which are replacements of, additions to or upgrades of such items (collectively, the “Equipment”);

(f)all awards or payments, including interest thereon, and the right to receive the same, which may be made with respect to the Premises, Improvements, Easements, Equipment, Leases and/or Rents, whether from the exercise of the right of eminent domain (including any transfer made in lieu of the exercise of said right), or awards or refunds received as a result of a reduction in the real estate taxes or tax assessment affecting the Premises, Improvements, Easements, Equipment, Leases and/or Rents, or proceeds received in connection with any tax certiorari proceeding affecting the Premises, Improvements, Easements, Equipment, Leases and/or Rents, or for any other injury to or decrease in the value of the Mortgaged Property;

(g)all leases and other agreements affecting the use or occupancy of the Premises, Improvements, Easements and/or Equipment, now or hereafter entered into (the “Leases”) and the right to receive and apply the rents, issues and profits of the Premises, Improvements, Easements, Equipment and/or Leases (the “Rents”) to the payment of the Debt;

-2-

(h)all right, title and interest of the Mortgagor in and to (i) all contracts from time to time executed by the Mortgagor or any manager or agent on its behalf relating to the ownership, construction, maintenance, repair, operation, occupancy, sale or financing of the Premises, Improvements, Easements, Equipment, Leases and/or Rents, or any part thereof and all agreements relating to the purchase or lease of any portion of the Premises, Improvements, Easements, Equipment, Leases and/or Rents, or any property which is adjacent or peripheral to the Premises, Improvements and/or Easements, together with the right to exercise such options and all leases of Equipment, (ii) all consents, licenses, building permits, certificates of occupancy and other governmental approvals relating to construction, completion, occupancy, use or operation of the Premises, Improvements, Easements, Equipment, Leases and/or Rents, or any part thereof, and (iii) all drawings, plans, specifications and similar or related items related to the Premises, Improvements, Easements, Equipment, Leases and/or Rents;

(i)all books and records relating to or used in connection with the operation of the Premises, Improvements, Easements, Equipment, Leases and/or Rents, or any part thereof; all general intangibles related to the operation of the Premises, Improvements, Easements, Equipment, Leases and/or Rents, now existing or hereafter arising;

(j)all proceeds, both cash and non-cash, of the foregoing;

(k)all proceeds of and any unearned premiums on any insurance policies covering the Premises, Improvements, Easements, Equipment, Leases and/or Rents, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, Improvements, Easements, Equipment, Leases and/or Rents; and

(l)after the occurrence of an Event of Default hereunder, the right, in the name and on behalf of the Mortgagor, to appear in and defend any action or proceeding brought with respect to the Premises, Improvements, Easements, Equipment, Leases and/or Rents, and to commence any action or proceeding to protect the interest of the Mortgagee in the Premises, Improvements, Easements, Equipment, Leases and/or Rents.

TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto and to the use and benefit of the Mortgagee, and the successors and assigns of the Mortgagee, forever.

AND the Mortgagor covenants and agrees with and represents and warrants to the Mortgagee as follows:

1.Payment of Debt. The Parent or Mortgagor will pay the Debt at the time and in the manner provided for its payment in the Notes and in this Mortgage.

2.Representations and Warranties. Mortgagor represents and warrants to the Mortgagee that:

(a)Warranty of Title.Mortgagor has good title to the Mortgaged Property and has the right to mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign and hypothecate the same, and Mortgagor possesses an unencumbered fee interest in the Mortgaged Property and owns the Mortgaged Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of this Mortgage. Mortgagor shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Mortgage and shall forever warrant and defend the same to Mortgagee against the claims of all persons whomsoever.

-3-

(b) Consideration. (i) Contemporaneously with, and in consideration for, the execution and delivery of this Mortgage, the Mortgagor is receiving new value from the Mortgagee, which new value is reasonably equivalent value in exchange for this Mortgage, (ii) the execution and delivery of this Mortgage by the Mortgagor does not constitute a “fraudulent conveyance” within the meaning of Title 11 of the United States Code as now constituted or under any other applicable statute, (iii) no bankruptcy or insolvency proceedings are pending or contemplated by or, to the knowledge of Mortgagor, against the Mortgagor, and (iv) this Mortgage is legal and valid and creates a lien on and security interest in the Mortgaged Property.

(c)Authority. The Mortgagor (i) has full power, authority and legal right to execute this Mortgage, and to mortgage, give, grant, bargain, sell, alien, convey, confirm and assign the Mortgaged Property pursuant to the terms hereof and to keep and observe all of the terms of this Mortgage on the Mortgagor's part to be performed and (ii) is a duly organized and presently existing corporation in good standing under the laws of the State of Delaware and this Mortgage has been duly executed by authority of its Board of Directors. No shareholder approval is required to authorize the execution, delivery and performance of this Mortgage. The Mortgagor is qualified to do business in the State of New Jersey.

(d)Priority. There are no liens on the Mortgaged Property other than those created by this Mortgage. Upon filing of this Mortgage and a UCC-1 financing statement fixture filing with Mercer County in the State of New Jersey, the Mortgagee will have a first priority lien on the real property and fixtures included within the Mortgaged Property. This Mortgage, upon the filing of a UCC-1 financing statements describing the Mortgaged Property with the Secretary of State of the State of Delaware, creates a valid, perfected (upon filing) and first priority security interest in the personal property included in the Mortgaged Property in favor of the Mortgagee. The Mortgagor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Mortgaged Property without the signature of the Mortgagor.

(e)Bills. There are no unpaid bills for labor, materials, supplies or services furnished upon or in connection with the Mortgaged Property more than 30 days past the due date thereof which could result in a lien on the Mortgaged Property. As of the date the Mortgage is recorded in the public records of the county in which the Mortgaged Property is located, there is no active "Notice of Commencement" on record with respect to the Mortgaged Property.

(f)Permits. Mortgagor has obtained all federal, state and local permits, licenses, approvals and authorizations from those federal agencies and any state or local authority charged with the enforcement or regulation of environmental and land use matters in connection with the Mortgaged Property. The Mortgaged Property is currently in compliance with all building, safety, zoning and other requirements of any state, municipal or other governmental authority pertaining to the use and occupancy of the Mortgaged Property, and prior to commencement of manufacturing in the Premises outside the existing production suite, the Mortgaged Property will be in compliance with all building, safety, zoning and other requirements of any state, municipal or other governmental authority pertaining to the use and occupancy of the Mortgaged Property for its intended purpose. If the Mortgaged Property includes wetlands or other areas subject to the regulatory jurisdiction of any water management district or other regulatory body having jurisdiction over wetlands, protected species of flora and fauna, or inland waterways, then Mortgagor has received all necessary permits, licenses and approvals of the applicable governmental authorities relating to such matters as may be necessary to use and occupy the Mortgaged Property for its intended purpose.

-4-

(g)Rights of Access. The Mortgaged Property has adequate right of access to public rights of way, directly or pursuant to insurable easements.

(h)Utilities. Prior to commencement of manufacturing on the Premises outside the existing production suite, sewer, water, telephone, electricity and all other necessary utilities will be physically available at the Mortgaged Property in sufficient capacity to serve the Mortgaged Property for its intended use, and the zoning, occupancy and land use classification(s) and designation(s) under all laws, ordinances, rules and regulations will permit the use and occupancy of the Mortgaged Property for its intended purpose, without the necessity of obtaining further approvals, variances, waivers, consents or authorizations. All easements, licenses or other interests in the property of others or any consent of other land owners as required for drainage or other utilities or services relating to the Mortgaged Property have been obtained.

(i)Litigation. There are no suits or proceedings pending or, to the knowledge of Mortgagor, threatened against or affecting Mortgagor, the Mortgaged Property, or involving the validity or enforceability of this Mortgage or involving any risk of a judgment or a liability which, if unsatisfied, would have a material adverse effect on the financial condition, business or properties of Mortgagor or the validity or priority of the lien of this Mortgage.

(j)No conflict. The execution and delivery of this Mortgage does not conflict with or result in the breach of any regulation, order, writ, injunction, judgment or decree of any court or governmental authority or in the breach of or default under any agreement or other instrument to which Mortgagor or Parent is a party or by which it or its property is bound.

(k)Location. Mortgagor's principal place of business and executive office is located at the address set forth in the introductory paragraph of this Mortgage. Mortgagor shall notify the Collateral Agent at least 30 days prior to any change in such location.

(l)Mortgaged Property. The building on the Mortgaged Property described in Exhibit A attached hereto consists of not less than 31,500 square feet of space and the Mortgaged Property described in Exhibit A attached hereto consists of not less than 3.55 acres of land. All machinery and equipment that currently is or will be affixed to the Premises or Improvements is or shall be owned by Mortgagor.

(m) Developer’s Agreement. No default exists under that certain Developer’s Agreement, dated September 1, 1999, between the Township of East Windsor and Simon Developments, LLC, that encumbers the Premises, and no event has occurred which, with the passage of time or the giving of notice or both, would constitute such a default.

-5-

(n)Other Real Property. The Mortgagor does not own any real property other than the real property included in the Mortgaged Property.

3.Insurance. The Mortgagor (i) will keep the Improvements and the Equipment insured against loss or damage by fire, standard extended coverage perils and such other hazards in amounts not less than 100% of the full insurable value of the Improvements and the Equipment, excluding the costs of foundations, excavations and footings below grade, and shall be sufficient to meet all applicable co-insurance requirements, and (ii) will maintain business interruption insurance and such other forms of insurance coverage with respect to the Mortgaged Property as the Collateral Agent shall from time to time reasonably require in amounts approved by the Collateral Agent but in no event in all such instances greater than those coverages customarily required of other comparable buildings in the Mercer County, New Jersey area by institutional commercial lenders. All policies of insurance (the “Policies”) shall be issued by insurers having a minimum policy holders rating of “A” per the latest rating publication of Property and Casualty Insurers by A.M. Best Company and who are lawfully doing business in New Jersey and are otherwise reasonably acceptable in all respects to the Collateral Agent in its reasonable discretion. All Policies shall contain the standard New Jersey mortgagee non-contribution clause endorsement or an equivalent endorsement satisfactory to the Collateral Agent naming the Mortgagee, or the Collateral Agent on behalf of the Mortgagee, as the person to which all payments made by the insurer thereunder shall be paid and shall otherwise be in form and substance satisfactory in all respects to the Collateral Agent. Blanket insurance policies shall not be acceptable for the purposes of this paragraph unless otherwise approved to the contrary by the Collateral Agent. The Mortgagor shall pay the premiums for the Policies as the same become due and payable. At the request of the Collateral Agent, the Mortgagor will deliver the Policies to the Collateral Agent. Not later than ten (10) business days prior to the expiration date of each of the Policies, the Mortgagor will deliver to the Collateral Agent a renewal policy or policies accompanied by evidence of payment of premiums billed reasonably satisfactory to the Collateral Agent. If at any time the Collateral Agent is not in receipt of written evidence that all insurance required hereunder is in force and effect, the Collateral Agent shall have the right upon three (3) business days notice to the Mortgagor to take such action as the Collateral Agent deems necessary to protect its interest in the Mortgaged Property, including, without limitation, the obtaining of such insurance coverage as the Collateral Agent in its sole discretion deems appropriate, and all expenses incurred by the Collateral Agent in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by the Mortgagor to the Collateral Agent upon demand. The Mortgagor shall at all times comply with and shall cause the Improvements and Equipment and the use, occupancy, operation, maintenance, alteration, repair and restoration thereof to comply with the terms, conditions, stipulations and requirements of the Policies.

If the Premises, or any portion of the Improvements, is located in a Federally designated “special flood hazard area,” in addition to the other Policies required under this paragraph, a flood insurance policy shall be delivered by the Mortgagor to the Collateral Agent. The Mortgagor shall also maintain such other property and liability insurance policies with respect to the Mortgaged Property as are customary and prudent under the circum-stances, evidence of which Collateral Agent at any time may require.

-6-

If the Mortgaged Property shall be damaged or destroyed, in whole or in part, by fire or other property hazard or casualty, the Mortgagor shall give prompt notice thereof to the Collateral Agent. Sums paid to the Mortgagee or the Collateral Agent by any insurer may be retained and applied by the Mortgagee (or the Collateral Agent on behalf of the Mortgagee) toward payment of the Debt whether or not then due and payable in such order, priority and proportions as the Mortgagee (or the Collateral Agent on behalf of the Mortgagee) in its discretion shall deem proper or, at the discretion of the Collateral Agent, the same may be paid, either in whole or in part, to the Mortgagor for such purposes as the Collateral Agent shall designate. If the Mortgagee (or the Collateral Agent on behalf of the Mortgagee) shall receive and retain such insurance proceeds, the lien of this Mortgage shall be reduced only by the amount thereof received and retained by the Mortgagee and actually applied by the Mortgagee in reduction of the Debt.

The Mortgagor shall also maintain commercial general liability insurance with respect to the Premises and the Improvements, on an “occurrence” basis and in such amounts and containing such coverage as shall be reasonably required by the Collateral Agent (so long as such amounts and coverage do not exceed what is customarily required of owners of other comparable buildings in the Mercer County, New Jersey area by institutional commercial lenders). The Mortgagee shall be named as an additional insured on such commercial general liability policy.

4.Covenants.

(a)Payment of Taxes, Etc. Mortgagor shall pay all taxes, assessments, water rates, sewer rents, ground rents, maintenance charges and other charges, including without limita-tion, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Premises, now or hereafter levied or assessed or imposed against the Mortgaged Property or any part thereof (the "Taxes") as same become due and payable. Mortgagor will deliver to Collateral Agent, upon request, evidence satisfactory to Collateral Agent that the Taxes are not delinquent. Mortgagor shall not suffer and shall promptly cause to be paid and discharged, any lien or charge whatsoever which may be or become a lien or charge against the Mortgaged Property, and shall promptly pay for all utility services provided to the Mortgaged Property. Mortgagor shall furnish to Collateral Agent receipts for the payment of the Taxes prior to the date the same shall become delinquent.

(b)Corporate Existence, Etc. The Mortgagor will preserve and keep in force and effect its corporate existence and will cause each subsidiary and its Parent to preserve and keep in force and effect its corporate, partnership or other existence, except in each such case in the event of a merger as expressly permitted herein, in accordance with the respective organizational documents of each such subsidiary and Parent, and the rights and franchises of the Mortgagor and its subsidiaries and Parent.

(c)Rights of the Mortgagee. The Mortgagor will not, at any time, by any amendment of the Mortgagor’s corporate charter or by-laws, or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other action, seek to avoid the observance or performance hereof or under any of the other Loan Documents, but will at all times take such actions as are necessary or appropriate in order to protect the rights of the Mortgagee hereunder and under the other Loan Documents.

-7-

(d)Schedules. The Mortgagor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Mortgaged Property and such other reports in connection with the Mortgaged Property as the Collateral Agent may reasonably request, all in reasonable detail.

5.Escrow Fund. At any time after the occurrence of an Event of Default hereunder, upon the request of the Collateral Agent, the Mortgagor shall pay to the Collateral Agent on the first day of each calendar month (a) one twelfth of an amount which would be sufficient to pay the Taxes imposed against the Mortgaged Property or any part thereof payable, or estimated by Collateral Agent to be payable, during the next ensuing twelve (12) months and (b) one-twelfth of an amount which would be sufficient to pay the premiums due for the renewal of the coverage afforded by the Policies upon the expiration thereof (said amounts in (a) and (b) above hereinafter called the “Escrow Fund”). Mortgagor hereby pledges to Mortgagee any and all monies now or hereafter deposited in the Escrow Fund as additional security for the payment of the Debt. Collateral Agent will apply the Escrow Fund to payments required to be made by Mortgagor pursuant to the provisions of this Mortgage. If the amount of the Escrow Fund shall exceed the amount due for the items described, Collateral Agent shall, in its discretion, (1) return any excess to Mortgagor, (2) credit such excess against the Debt in such priority and proportions as Collateral Agent in its discretion shall deem proper, or (3) credit such excess against future payments to be made to the Escrow Fund. If the Escrow Fund is not sufficient to pay the items set forth in (a) and (b) above, Mortgagor shall promptly pay to Collateral Agent, upon demand, an amount which Collateral Agent shall estimate in good faith as sufficient to make up the deficiency. The Escrow Fund shall not constitute a trust fund, and until expended or applied as above provided, any amounts in the Escrow Fund may be commingled with the general funds of the Collateral Agent and shall constitute additional security for the Debt. No earnings or interest on the Escrow Fund shall be payable to Mortgagor.

6.Condemnation. Mortgagor shall give Collateral Agent immediate notice of the actual or threatened commencement of any condemnation or eminent domain proceeding and shall deliver to Collateral Agent copies of any and all papers served in connection with such proceedings. Notwithstanding any taking by any public or quasi-public authority through eminent domain or otherwise, the Mortgagor shall continue to pay the Debt at the time and in the manner provided for its payment in the Notes and this Mortgage and the Debt shall not be reduced until any award or payment therefor shall have been actually received and applied by the Mortgagee to the discharge of the Debt. The Mortgagee may apply the entire amount of any such award or payment to the discharge of the Debt whether or not then due and payable in such order, priority and proportions as the Mortgagee in its or his discretion shall deem proper. If the Mortgaged Property is sold, through foreclosure or otherwise, prior to the receipt by the Mortgagee of such award or payment, the Mortgagee shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive such award or payment, or a portion thereof sufficient to pay the Debt, whichever is less. The Mortgagor shall file and prosecute its claim or claims for any such award or payment in good faith and with due diligence and cause the same to be collected and paid over to the Collateral Agent. The Mortgagor hereby irrevocably authorizes and empowers the Collateral Agent, in the name of the Mortgagor or otherwise, to collect and receipt for any such award or payment and to file and prosecute such claim or claims. Although it is hereby expressly agreed that the same shall not be necessary in any event, the Mortgagor shall, upon demand of the Collateral Agent, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or payment to the Mortgagee, free and clear of any encumbrances of any kind or nature whatsoever.

-8-

7.Leases and Rents. Mortgagor represents that there are no leases or tenancies with respect to the Mortgaged Property. Mortgagor has and hereby does assign to Mortgagee the Rents and Leases and Collateral Agent, on behalf of Mortgagee, shall have the right to enter the Mortgaged Property for the purposes of enforcing its interests in the Leases and the Rents. Nevertheless, subject to the terms of this paragraph 7, Collateral Agent waives the right to enter the Mortgaged Property for the purpose of collecting the Rents, and grants Mortgagor the right to collect the Rents. Mortgagor shall hold the Rents, or an amount sufficient to discharge all current sums due on the Debt, in trust for use in the payment of the Debt. The right of Mortgagor to collect the Rents may be revoked by Collateral Agent, on behalf of Mortgagee, upon any Event of Default (hereinafter defined). Upon or at any time after an Event or Default, Collateral Agent, on behalf of Mortgagee, may, with or without entering upon and taking possession of the Mortgaged Property, collect, retain and apply the Rents, less costs of operation and collection (included but not limited to employment of guard service and attorneys' fees), toward payment of the Debt in such priority and proportions as Collateral Agent in its discretion shall deem proper. Mortgagor shall furnish Collateral Agent with executed copies of all Leases. All proposed Leases shall be subject to the prior approval of Collateral Agent. Mortgagor shall submit to Collateral Agent all proposed Leases together with a summary of the proposed business terms of such Lease, a description and identification of the proposed tenant and such other information as Collateral Agent may thereafter request concerning the proposed Lease and proposed tenant thereunder. All Leases shall provide that they are subordinate to this Mortgage and that the lessee attorns to Mortgagee. Mortgagor shall not, without the consent of Collateral Agent, cancel, abridge or otherwise modify any Leases or accept prepayments of installments of Rent under any Lease for a period of more than one (1) month in advance or further assign the whole or any part of the Leases or the Rents without the consent of Collateral Agent. In respect of any Lease, Mortgagor will (a) fulfill or perform each and every provision thereof on the lessor's part to be fulfilled or performed; (b) promptly send copies to Collateral Agent of all notices of default which Mortgagor shall send or receive thereunder, and (c) enforce all of the terms, covenants and conditions contained in the Leases upon the lessee's part to be performed, short of termination thereof. In addition to the rights which Collateral Agent, on behalf of Mortgagee, may have herein, upon the occurrence of any Event of Default, Collateral Agent, at its option, may require Mortgagor to pay monthly in advance to Collateral Agent, on behalf of Mortgagee, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Mortgaged Property as may be in possession of Mortgagor and may require Mortgagor to vacate and surrender possession of the Mortgaged Property to Collateral Agent, or to such receiver and, in default thereof, Mortgagor may be evicted by summary proceedings or otherwise. Nothing contained in this paragraph shall be construed as imposing on the Mortgagee or Collateral Agent any of the obligations of the lessor under the Leases.

-9-

8.Maintenance of the Mortgaged Property. The Mortgagor shall cause the Mortgaged Property to be maintained in good condition and repair and will not commit or suffer to be committed any waste of the Mortgaged Property, and following validation or certification by the Food and Drug Administration (“FDA”) the Mortgagor shall cause the Mortgaged Property to be maintained in compliance with the Current Good Manufacturing Practice Regulations (“CGMP”) of the FDA for drug manufacture and processing. The Improvements and the Equipment shall not be removed, demolished or materially altered (except for normal replacement of the Equipment in the ordinary course of business), without the consent of the Collateral Agent. The Mortgagor shall promptly comply with all existing and future governmental laws, orders, ordinances, rules and regulations (including without limitation the FDA and CGMP) affecting the Mortgaged Property, or any portion thereof or the use thereof. The Mortgagor shall promptly repair, replace or rebuild any part of the Mortgaged Property which may be damaged or destroyed by fire or other property hazard or casualty (including any fire or other property hazard or casualty for which insurance was not obtained or obtainable) or which may be affected by any taking by any public or quasi-public authority through eminent domain or otherwise, and shall complete and pay for, within a reasonable time, any structure at any time in the process of construction or repair on the Premises. If such fire or other property hazard or casualty shall be covered by the Policies, the Mortgagor's obligation to repair, replace or rebuild such portion of the Mortgaged Property shall be contingent upon the Mortgagee paying the Mortgagor the proceeds of the Policies, or such portion thereof as shall be sufficient to complete such repair, replacement or rebuilding, whichever is less. The Mortgagor will not, without obtaining the prior consent of the Collateral Agent, initiate, join in or consent to any private restrictive covenant, zoning ordinance, or other public or private restrictions, limiting or affecting the uses which may be made of the Mortgaged Property or any part thereof

9.Environmental Provisions.

(a)For the purposes of this Section the following terms shall have the following meanings: (i) the term “Hazardous Material” shall mean any material or substance that, whether by its nature or use, is now or hereafter defined or regulated as a hazardous waste, hazardous substance, pollutant or contaminant under any Environmental Requirement, or which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous or which is or contains petroleum, gasoline, diesel fuel, another petroleum hydrocarbon product, asbestos, asbestos-containing materials or polychlorinated biphenyls, (ii) the “Environmental Requirements” shall collectively mean all present and future laws, statutes, common law, ordinances, rules, regulations, orders, codes, licenses, permits, decrees, judgments, directives or the equivalent of or by any Governmental Authority and relating to or addressing the protection of the environment or human health, and (iii) the term “Governmental Authority” shall mean the Federal government, or any state or other political subdivision, or any agency, court or body of the Federal government, any state or other political subdivision, exercising executive, legislative, judicial, regulatory or administrative functions.

(b)The Mortgagor hereby represents and warrants to the Mortgagee that (i) no Hazardous Material regulated or otherwise defined by any Governmental Authority is currently located at, on, in, under or about the Mortgaged Property which has not been generated, stored, handled, processed, disposed of, or otherwise used, by Mortgagor in compliance in all material respects with the Environmental Requirements, (ii) no releasing, emitting, discharging, leaching, dumping, disposing or transporting of any Hazardous Material from the Mortgaged Property onto any other property or from any other property onto or into the Mortgaged Property has occurred while the Mortgaged Property was owned by the Mortgagor or is occurring in violation of any Environmental Requirement and to the Mortgagor’s knowledge no releasing, emitting, discharging, leaching, dumping, disposing or transporting of any Hazardous Material from the Mortgaged Property onto any other property or from any other property onto or into the Mortgaged Property has occurred at any other time, (iii) no notice of violation, non-compliance, liability or potential liability, lien, complaint, suit, order or other notice with respect to the Mortgaged Property is presently outstanding under any Environmental Requirement, nor does the Mortgagor have knowledge or reason to believe that any such notice will be received or is being threatened, and (iv) the Mortgaged Property and the operation thereof are and will be in full compliance with all Environmental Requirements in all material respects.

-10-

(c)The Mortgagor shall comply, and shall cause all tenants or other occupants of the Mortgaged Property to comply, in all material respects with all Environmental Requirements, and will not generate, store, handle, process, dispose of or otherwise use, and will not permit any tenant or other occupant of the Mortgaged Property to generate, store, handle, process, dispose of or otherwise use, Hazardous Materials at, in, on, or about the Mortgaged Property in a manner that could lead or potentially lead to the imposition on the Mortgagor, the Mortgagee or the Mortgaged Property of any liability or lien of any nature whatsoever under any Environmental Requirement. The Mortgagor shall notify the Collateral Agent promptly in the event of any spill or other release of any Hazardous Material at, in, on, under or about the Mortgaged Property which is required to be reported to a Governmental Authority under any Environmental Requirement, will promptly forward to the Collateral Agent copies of any notices received by the Mortgagor relating to alleged violations of any Environmental Requirement or any potential liability under any Environmental Requirement and will promptly pay when due any fine or assessment against the Mortgagee, the Mortgagor or the Mortgaged Property relating to any Environmental Requirement. If at any time it is determined that the operation or use of the Mortgaged Property is in violation of any applicable Environmental Requirement or that there are Hazardous Materials located at, in, on, under or about the Mortgaged Property which violates any applicable Environmental Requirement or that there are Hazardous Materials located at, in, on, under or about the Mortgaged Property which, under any Environmental Requirement, require special handling in collection, storage, treatment or disposal, or any form of cleanup or corrective action, the Mortgagor shall, within thirty (30) days after receipt of notice thereof from any Governmental Authority or from the Collateral Agent, take, at the Mortgagor's sole cost and expense, such actions as may be necessary to fully comply in all respects with all Environmental Requirements, provided, however, that if such compliance cannot reasonably be completed within such thirty (30) day period, the Mortgagor shall commence such necessary action within such thirty (30) day period and shall thereafter diligently and expeditiously proceed to fully comply in all respects and in a timely fashion with all Environmental Requirements.

(d)If the Mortgagor fails to timely take, or to diligently and expeditiously proceed to complete in a timely fashion, any such action described in clause (c) above, the Collateral Agent, on the Mortgagee’s behalf, may, in its sole and absolute discretion, make advances or payments toward the performance or satisfaction of the same, but shall in no event be under any obligation to do so. All sums so advanced or paid by the Collateral Agent (including, without limitation, reasonable counsel and consultant fees and expenses, investigation and laboratory fees and expenses, and fines or other penalty payments) and all sums advanced or paid in connection with any judicial or administrative investigation or proceeding relating thereto, will immediately, upon demand, become due and payable from the Mortgagor and shall bear interest at the Default Rate from the date any such sums are so advanced or paid by the Collateral Agent until the date any such sums are repaid by the Mortgagor to the Collateral Agent. The Mortgagor will execute and deliver, promptly upon request, such instruments as the Collateral Agent reasonably may deem useful or necessary to permit the Collateral Agent to take any such action, and such additional notes and mortgages, as the Collateral Agent may require to secure all sums so advanced or paid by the Collateral Agent. If a lien is filed against the Mortgaged Property by any Governmental Authority resulting from the need to expend or the actual expending of monies arising from an action or omission, whether intentional or unintentional, of the Mortgagor or for which the Mortgagor is responsible, resulting in the releasing, spilling, leaking, leaching, pumping, emitting, pouring, emptying or dumping of any Hazardous Material into the waters or onto land located within or without the state where the Mortgaged Property is located, then the Mortgagor will, within thirty (30) days from the date that the Mortgagor is first given notice that such lien has been placed against the Mortgaged Property (or within such shorter period of time as may be specified by the Mortgagee if such Governmental Authority has commenced steps to cause the Mortgaged Property to be sold pursuant to such lien), either (a) pay the claim and remove the lien, or (b) furnish a cash deposit, bond, or such other security with respect thereto as is satisfactory in all respects to the Collateral Agent and is sufficient to effect a complete discharge of such lien on the Mortgaged Property.

-11-

(e)The Collateral Agent may, at its option, at intervals of not less than one year, or more frequently if the Collateral Agent reasonably believes that a Hazardous Material or other environmental condition violates or threatens to violate any Environmental Requirement, require Mortgagor to perform (at Mortgagor's expense) an environmental audit and, if deemed necessary by Collateral Agent, an environmental risk assessment, each of which must be satisfactory to Collateral Agent, with regard to the Mortgaged Property or with regard to the hazardous waste management practices and/or hazardous waste disposal sites used by Mortgagor in connection with the Mortgaged Property. Mortgagor shall cooperate in all reasonable ways with the Collateral Agent in connection with any such audit. Such audit and/or risk assessment must be by an environmental consultant satis-fac-tory to Collateral Agent. Should Mortgagor fail to perform any such environmental audit or risk assessment within thirty (30) days of the Collateral Agent’s written request, Collateral Agent shall have the right but not the obligation to retain an environmental consultant to perform any such environmental audit or risk assessment. All costs and expenses incurred by Collateral Agent in the exercise of such rights shall be secured by this Mortgage and shall be payable by Mortgagor upon demand or charged to Mortgagor's loan balance at the discretion of Collateral Agent.

(f)If this Mortgage is foreclosed, or if the Mortgaged Property is sold pursuant to the provisions of this Mortgage, or if the Mortgagor tenders a deed or assignment in lieu of foreclosure or sale, the Mortgagor shall deliver the Mortgaged Property to the purchaser at foreclosure or sale or to the Mortgagee, its nominee, or wholly-owned subsidiary, as the case may be, in a condition that complies in all respects with all Environmental Requirements.

(g)Except to the extent directly and solely caused by the gross negligence or willful misconduct of the Mortgagee or Collateral Agent or their employees, officers, directors, contractors, or authorized agents, the Mortgagor will defend, indemnify, and hold harmless the Mortgagee and Collateral Agent and their investors, participants, employees, agents, officers, and directors, from and against any and all claims, demands, penalties, causes of action, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, known or unknown, foreseen or unforeseen, contingent or otherwise (including, without limitation, reasonable counsel and consultant fees and expenses, investigation and laboratory fees and expenses, court costs, and litigation expenses) arising out of, or in any way related to, (i) any breach by the Mortgagor of any of the provisions of this Section 9, (ii) the presence, disposal, spillage, discharge, emission, leakage, release, or threatened release of any Hazardous Material which is at, in, on, under, about, from or affecting the Mortgaged Property, including, without limitation, any damage or injury resulting from any such Hazardous Material to or affecting the Mortgaged Property or the soil, water, air, vegetation, buildings, personal property, persons or animals located on the Mortgaged Property or on any other property or otherwise, (iii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to any such Hazardous Material, (iv) any lawsuit brought or threatened, settlement reached, or order or directive of or by any Governmental Authority relating to such Hazardous Material, (v) any violation of any Environmental Requirement by Mortgagor, or (vi) any enforcement of this indemnification. The aforesaid indemnification shall, notwithstanding any exculpatory or other provision of any other document or instrument now or hereafter executed and delivered in connection with the loan evidenced by the Notes and secured by this Mortgage, constitute the personal recourse undertakings, obligations and liabilities of the Mortgagor.

-12-

(h)The obligations and liabilities of the Mortgagor under this Section 9 shall survive and continue in full force and effect and shall not be terminated, discharged or released, in whole or in part, irrespective of whether the Debt has been paid in full and irrespective of any foreclosure of this Mortgage, sale of the Mortgaged Property pursuant to the provisions of this Mortgage or acceptance by the Mortgagee, its nominee or affiliate of a deed or assignment in lieu of foreclosure or sale and irrespective of any other fact or circumstance of any nature whatsoever.

10.Estoppel Certificates. After request by Collateral Agent, Mortgagor, within ten (10) days and at its expense, will furnish Collateral Agent with a statement, duly acknowledged and certified, setting forth the amount of the original principal amount of each of the Notes, the unpaid principal amount of each of the Notes, the rate of interest of the Notes, the date installments of interest and/or principal were last paid, any offsets or defenses to the payment of the Debt, and that the Notes and this Mortgage are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.

11.Transfer or Encumbrance of the Mortgaged Property. Except to the extent permitted and in accordance with the terms of Section 7.2(c) of the Purchase Agreement, no part of the Mortgaged Property nor any interest of any nature whatsoever therein (whether record, beneficial, or otherwise) shall in any manner be further encumbered, sold, transferred or conveyed, or permitted to be further encumbered, sold, transferred, assigned or conveyed without the prior consent of the Collateral Agent, which consent in any and all circumstances may be withheld in the sole and absolute discretion of the Collateral Agent. The provisions of the foregoing sentence of this paragraph shall apply to each and every such further encumbrance, sale, transfer, assignment or conveyance, regardless of whether or not the Collateral Agent has consented to, or waived by its action or inaction its rights hereunder with respect to, any such previous further encumbrance, sale, transfer, assignment or conveyance, and irrespective of whether such further encumbrance, sale, transfer, assignment or conveyance is voluntary, by reason of operation of law or is otherwise made. A sale, transfer or conveyance within the meaning of this para-graph shall be deemed to include (a) an installment sales agreement wherein Mortgagor agrees to sell the Mortgaged Property or any part thereof for a price to be paid in installments, and (b) an agreement by Mortgagor leasing all or a substantial part of the Mortgaged Property or a sale, assignment or other transfer of, or the grant of a security interest in, Mortgagor’s right, title and interest in and to any Leases or any Rents;

-13-

12.Notice. Any notice, request, demand, statement, authorization, approval or consent made hereunder shall be in writing and shall be hand delivered or sent by Federal Express, or other reputable courier service, or by postage pre-paid registered or certified mail, return receipt requested, and shall be deemed given (i) when received at the following addresses if hand delivered or sent by Federal Express, or other reputable courier service, and (ii) three (3) business days after being postmarked and addressed as follows if sent by registered or postage pre-paid certified mail, return receipt requested:

If to the Mortgagor:

NexMed (U.S.A.), Inc.

89 Twin Rivers Drive

East Windsor, NJ 08520

Fax: (609) 426-0340

Attention: Chief Financial Officer

With a copy to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022

Fax: (212) 940-6557

Attention: Robert Kohl, Esq.

If to the Collateral Agent or if to Mortgagee:

c/o The Tail Wind Fund Ltd.

c/o Tail Wind Advisory and Management Ltd.

77 Long Acre

London WC2E 9LB UK

Facsimile: 44-207- 420 3819

Attn:David Crook

-14-

With a copy to:

Peter J. Weisman, P.C.

153 East 53^rd Street, 29^th Floor

New York, NY 10022

Telephone: 212-433-1368

Facsimile: 212-433-1361

Each party to this Mortgage may designate a change of address by notice given, as herein provided, to the other party ten (10) days prior to the date such change of address is to become effective.

13.Sale of Mortgaged Property. If this Mortgage is foreclosed, the Mortgaged Property, or any interest therein, may, at the discretion of the Collateral Agent, on behalf of the Mortgagee, be sold in one or more parcels or in several interests or portions and in any order or manner.

14.Changes in Laws Regarding Taxation. In the event of the passage after the date of this Mortgage of any law which deducts from the value of real property for the purpose of taxation any lien or encumbrance thereon or changing in any way the laws for the taxation of mortgages or debts secured by mortgages for state or local purposes or the manner of the collection of any such taxes, and imposing a tax, either directly or indirectly, on this Mortgage, the Notes or the Debt, the Mortgagor shall pay any tax imposed as a result of any such law within the statutory period or within fifteen (15) days after demand by the Collateral Agent, whichever is less.

15.No Credits on Account of the Debt. The Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes assessed against the Mortgaged Property or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Mortgaged Property, or any part thereof, by reason of this Mortgage or the Debt. If at any time this Mortgage shall secure less than all of the principal amount of the Debt, it is expressly agreed that any repayment of the principal amount of the Debt shall not reduce the amount of the lien of this Mortgage until the lien amount shall equal the principal amount of the Debt outstanding.

16.Documentary Stamps. If at any time the United States of America, any state thereof, or any governmental subdivision of any such state, shall require revenue or other stamps to be affixed to the Note or this Mortgage, the Mortgagor will pay for the same, with interest and penalties thereon, if any.

17.Right of Entry. Upon reasonable prior notice, the Collateral Agent and its agents shall have the right to enter and inspect the Mortgaged Property at all reasonable times during normal business hours.

-15-

18.Books and Records. The Mortgagor will keep and maintain or will cause to be kept and maintained on a fiscal year basis in accordance with generally accepted accounting practices consistently applied proper and accurate books, records and accounts reflecting all of the financial affairs of the Mortgagor relating to the Mortgaged Property and all items of income and expense in connection with the operation of the Mortgaged Property or in connection with any services, equipment or furnishings provided in connection with the operation of the Mortgaged Property, whether such income or expense be realized by the Mortgagor or by any other person whatsoever excepting lessees unrelated to and unaffiliated with the Mortgagor who have leased from the Mortgagor portions of the Mortgaged Property for the purpose of occupying the same. The Collateral Agent shall have the right from time to time at all times during normal business hours after reasonable prior notice to Mortgagor to examine such books, records and accounts at the office of the Mortgagor or other person maintaining such books, records and accounts and to make copies or extracts thereof as the Collateral Agent shall desire; provided, however, that Mortgagor shall not provide any material non-public information to the Collateral Agent unless the Collateral Agent consents to same in advance and, if reasonably requested by Mortgagor, enters into a reasonable confidentiality agreement with the Mortgagor. The Mortgagor will furnish the Collateral Agent annually, within ninety (90) days next following the end of each fiscal year of the Mortgagor, a certificate signed by a duly authorized representative of the Mortgagor certifying on the date thereof either that there does or does not exist an event which constitutes, or which upon notice or lapse of time or both would constitute, a default or an Event of Default under this Mortgage and if such default or Event of Default exists, the nature thereof and the period of time it has existed.

19.Performance of Other Agreements. The Mortgagor shall observe and perform each and every term to be observed or performed by the Mortgagor pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Mortgaged Property.

20.Events of Default. The occurrence of any one or more of the following events (herein collectively referred to as “Events of Default”) shall be an Event of Default:

(a)if any portion of the Debt is not paid within three (3) days after notice by the Collateral Agent or Mortgagee to the Mortgagor that the same is past due;

(b)if the Mortgagor shall fail to pay on or before the due date, any installment of any assessment against the Mortgaged Property for local improvements heretofore or hereafter laid, which assessment is or may become payable in annual or periodic installments and is or may become a lien on the Mortgaged Property;

(c)if any of the Taxes are not paid when same are due and payable;

(d)if without the consent of the Collateral Agent (which consent in any and all circumstances may be withheld in the sole and absolute discretion of the Collateral Agent) any part of the Mortgaged Property or any interest of any nature whatsoever therein is in any manner, by operation of law or otherwise, whether directly or indirectly, further encumbered, sold, transferred, assigned or conveyed, and irrespective of whether any such further encumbrance, sale, transfer, assignment or conveyance is voluntary, by reason or operation of law or is otherwise made;

(e)if without the consent of the Collateral Agent any Improvement or the Equipment (except for the normal ordinary course of business replacement of the Equipment and the normal ordinary course of business removal of obsolete Equipment) is removed, demolished or materially altered, or if the Mortgaged Property is not kept in good condition and repair;

-16-

(f)if the Mortgagor shall fail to comply with any requirement or order or notice of violation of law or ordinance issued by any governmental department claiming jurisdiction over the Mortgaged Property, which failure could reasonably be expected to have a material adverse effect on the Mortgaged Property, within three (3) months from the issuance thereof, or the time period set forth therein, whichever is less;

(g)if the Policies are not kept in full force and effect, or if the Policies are not delivered to the Mortgagee upon request;

(h)if the Mortgagor shall fail to pay Collateral Agent or any Mortgagee on demand for all Premiums and/or Taxes paid by the Collateral Agent or Mortgagee pursuant to this Mortgage, together with any late payment charge and interest thereon calculated at the Default Rate;

(i)if without the consent of the Collateral Agent any Leases are made, cancelled or modified or if any portion of the Rents is paid for a period of more than one (1) month in advance or if any of the Rents are further assigned;

(j)if any representation or warranty of the Mortgagor or Parent herein, or in any certificate, report, financial statement or other instrument furnished in connection with the making of this Mortgage, shall prove false or misleading in any material respect;

(k)if the Mortgagor or Parent shall make an assignment for the benefit of creditors;

(l)if a court of competent jurisdiction enters a decree or order for relief with respect to the Mortgagor or Parent under Title 11 of the United States Code as now constituted or hereafter amended or under any other applicable Federal or state bankruptcy law or other similar law, or if such court enters a decree or order appointing a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of the Mortgagor or Parent, or of any substantial part of their respective properties, or if such court decrees or orders the winding up or liquidation of the affairs of the Mortgagor, Parent or any other guarantor;

(m)if the Mortgagor or Parent fails generally to pay its respective debts as such debts become due;

(n)if the Mortgagor or Parent shall be in default under any mortgage or deed of trust covering any part of the Mortgaged Property whether superior or inferior in lien to this Mortgage, and including, without limitation, any such mortgage or deed of trust now or hereafter held by the Mortgagee;

(o)if the Mortgaged Property shall become subject (i) to any tax lien, other than a lien for local real estate taxes and assessments not due and payable, or (ii) to any lis pendens, notice of pendency, stop order, notice of intention to file mechanic's or materialman's lien, mechanic's or materialman's lien or other lien of any nature whatsoever and the same shall not either be discharged of record or in the alternative effectively subordinated and insured over to the satisfaction of the Collateral Agent by a title company selected by Collateral Agent that will insure the lien of this Mortgage (at Mortgagor’s expense) within a period of thirty (30) days after the same is filed or recorded, and irrespective of whether the same is superior or subordinate in right or other priority to the lien of this Mortgage and irrespective of whether the same constitutes a perfected or inchoate lien or encumbered on the Mortgaged Property or is only a matter of record or notice;

-17-

(p)if the Mortgagor or Parent shall continue to be in default or breach under any of the other terms, covenants or conditions of this Mortgage, the Guaranty, the Purchase Agreement, the Registration Rights Agreement or the Notes (as such terms are defined in the Purchase Agreement), for thirty (30) days after notice from the Collateral Agent; or

(q)If an “Event of Default” occurs under any of the Notes (as defined therein).

21.Remedies. Upon the happening of any one or more of said Events of Default, the entire unpaid balance of the principal, and accrued interest, and all other sums secured by this Mortgage shall at the option of Collateral Agent, on behalf of the Mortgagee, become immediately due and payable without further notice or demand, and in any such Event of Default, the Mortgagee or the Collateral Agent on behalf of the Mortgagee, may forthwith undertake any one or more of the following:

(a)Declare the debt to be immediately due and payable, and thereupon the same shall become immediately due and payable;

(b)Recover judgment against Mortgagor for any debt; and neither the recovery of judgment nor the levy of execution thereof on any property, including the Premises, shall affect Mortgagee’s rights hereunder or the lien hereof;

(c)Enter upon and take possession of the Premises, or have a receiver appointed (as more fully provided for in the following Section), without proof of depreciation in the value of the Premises, inadequacy of the Premises, or insolvency of Mortgagor; and Mortgagee or the receiver may lease the Premises, in the name of Mortgagor, Collateral Agent, on behalf of the Mortgagee, or the receiver, and may receive the rents issues and profits and apply the same:

(i)To the payment of expenses of operating, maintaining, repairing and improving the Premises, including renting commission and rental collection commissions paid to an agent of Mortgagee or of the receiver; and/or

(ii)On account of the Notes, in such order and in such amounts as Collateral Agent, on behalf of the Mortgagee, or the receiver determines, but while in possession of the Premises, Collateral Agent or the receiver shall be liable to account only for the rents, issues and profits actually received; and/or

(d)Take such other action to protect and enforce Mortgagee’s rights hereunder and the lien hereof, as Mortgagee or Collateral Agent deems advisable, including without limitation:

-18-

(i)The foreclosure hereof, subject, at Mortgagee’s option, and upon the filing of a Complaint in Foreclosure, Mortgagee shall be entitled to the appointment of a receiver of the rents of the Premises without the necessity of either inadequacy of the security or insolvency of the Mortgagor or any person who may be legally or equitably liable to pay money secured by this Mortgage, and the Mortgagor and each person waive such proof and consent to the appointment of such receiver; and in any proceeding to enforce any liability of the debt, Mortgagor shall not assert as a defense that Mortgagee failed to foreclosure any such rights or that any such rights adversely affected the value of the Premises; and

(ii) The sale of the Premises, in a foreclosure proceeding, and without obligation to have the Premises marshaled.

22.Right to Cure Default. If default in the performance of any of the covenants of the Mortgagor herein occurs, the Collateral Agent, on behalf of the Mortgagee, may, at its discretion, remedy the same and for such purpose shall have the right to enter upon the Mortgaged Property or any portion thereof without thereby becoming liable to the Mortgagor or any person in possession thereof holding under the Mortgagor. If Collateral Agent shall remedy such a default or appear in, defend, or bring any action or proceeding to protect its interest in the Mortgaged Property or to foreclose this Mortgage or collect the Debt, the costs and expenses thereof (including reasonable attorneys' fees to the extent permitted by law), with interest as provided in this paragraph, shall be paid by the Mortgagor to the Collateral Agent upon demand. All such costs and expenses incurred by the Collateral Agent in remedying such default or in appearing in, defending, or bringing any such action or proceeding shall be paid by the Mortgagor to the Collateral Agent upon demand, with interest (calculated for the actual number of days elapsed between the incurrence thereof and Mortgagor’s reimbursement thereof on the basis of a 360-day year) at a rate per annum equal to 13% plus the rate of cash interest provided in the Notes (herein referred to as the “Default Rate”), provided, however, that the Default Rate shall in no event exceed the maximum interest rate which the Mortgagor may by law pay, for the period after notice from the Collateral Agent that such costs or expenses were incurred to the date of payment to the Collateral Agent. To the extent any of the aforementioned costs or expenses paid by the Collateral Agent after default by the Mortgagor shall constitute payment of (i) taxes, charges or assessments which may be imposed by law upon the Mortgaged Property, (ii) premiums on insurance policies covering the Mortgaged Property, (iii) expenses incurred in upholding the lien of this Mortgage, including, but not limited to, the costs and expenses of any litigation to collect the indebtedness secured by this Mortgage or to prosecute, defend, protect or preserve the rights and the lien created by this Mortgage, or (iv) any amount, cost or charge to which the Mortgagee becomes subrogated, upon payment, whether under recognized principles of law or equity, or under express statutory authority; then, and in each such event, such costs, expenses and amounts, together with interest thereon at the Default Rate, shall be added to the indebtedness secured by this Mortgage and shall be secured by this Mortgage.

23.Appointment of Receiver. The Collateral Agent, on behalf of the Mortgagee, in any action to foreclose this Mortgage or upon the actual or threatened waste to any part of the Mortgaged Property or upon the occurrence of any Event of Default hereunder, shall be at liberty, without notice, to apply for the appointment of a receiver of the Rents, and shall be entitled to the appointment of such receiver as a matter of right, without regard to the value of the Mortgaged Property as security for the Debt, or the solvency or insolvency of any person then liable for the payment of the Debt.

-19-

24.Non-Waiver. The failure of the Mortgagee or Collateral Agent to insist upon strict performance of any term of this Mortgage shall not be deemed to be a waiver of any term of this Mortgage. The Mortgagor shall not be relieved of the Mortgagor's obligation to pay the Debt at the time and in the manner provided for its payment in the Notes and this Mortgage by reason of (i) failure of the Mortgagee or Collateral Agent to comply with any request of the Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any of the provisions hereof or of the Notes or any other mortgage, instrument or document evidencing, securing or guaranteeing payment of the Debt or any portion thereof, (ii) the release, regardless of consideration, of the whole or any part of the Mortgaged Property or any other security for the Debt, or (iii) any agreement or stipulation between the Mortgagee or Collateral Agent and any subsequent owner or owners of the Mortgaged Property or other person extending the time of payment or otherwise modifying or supplementing the terms of the Notes, this Mortgage or any other mortgage, instrument or document evidencing, securing or guaranteeing payment of the Debt or any portion thereof, without first having obtained the consent of the Mortgagor, and in the latter event, the Mortgagor shall continue to be obligated to pay the Debt at the time and in the manner provided in the Notes and this Mortgage, as so extended, modified and supplemented, unless expressly released and discharged from such obligation by the Mortgagee in writing. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate lien, encumbrance, right, title or interest in or to the Mortgaged Property, the Mortgagee may release any person at any time liable for the payment of the Debt or any portion thereof or any part of the security held for the Debt and may extend the time of payment or otherwise modify the terms of the Notes or this Mortgage, including, without limitation, a modification of the interest rate payable on the principal balance of the Notes, without in any manner impairing or affecting this Mortgage or the lien thereof or the priority of this Mortgage, as so extended and modified, as security for the Debt over any such subordinate lien, encumbrance, right, title or interest. The Mortgagee may resort for the payment of the Debt to any other security held by the Mortgagee in such order and manner as the Mortgagee, in its discretion, may elect. The Mortgagee or the Collateral Agent may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of the Mortgagee thereafter to foreclose this Mortgage. The Mortgagee shall not be limited exclusively to the rights and remedies herein stated but shall be entitled to every additional right and remedy now or hereafter afforded by law. The rights of the Mortgagee under this Mortgage shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of any Mortgagee or the Collateral Agent shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision.

25.Liability. If the Mortgagor consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several.

-20-

26.Security Agreement. This Mortgage constitutes both a real property mortgage and a “security agreement” within the meaning of the Uniform Commercial Code, and the Mortgaged Property includes both real and personal property and all other rights and interest, whether tangible or intangible in nature, of the Mortgagor in the Mortgaged Property. If an Event of Default shall occur under the Notes or this Mortgage, the Mortgagee and the Collateral Agent on behalf of the Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Mortgaged Property or any part thereof, and to take such other measures as the Mortgagee or the Collateral Agent may deem necessary for the care, protection and preservation of the Mortgaged Property. Upon request or demand of the Collateral Agent, the Mortgagor shall at its expense assemble the Mortgaged Property and make it available to the Collateral Agent at a convenient place acceptable to the Collateral Agent. The Mortgagor shall pay to the Collateral Agent on demand any and all expenses, including reasonable legal expenses and attorneys' fees, incurred or paid by the Collateral Agent in enforcing or exercising its rights hereunder with respect to the Mortgaged Property. Any notice of sale, disposition or other intended action by the Mortgagee or Collateral Agent with respect to the Mortgaged Property sent to the Mortgagor in accordance with the provisions of this Mortgage at least seven (7) days prior to the date of any such sale, disposition or other action, shall constitute reasonable notice to the Mortgagor, and the method of sale or disposition or other intended action set forth or specified in such notice shall conclusively be deemed to be commercially reasonable within the meaning of the Uniform Commercial Code unless objected to in writing by the Mortgagor within five (5) days after receipt by the Mortgagor of such notice. The proceeds of any sale or disposition of the Mortgaged Property, or any part thereof, may be applied by the Mortgagee to the payment of the Debt in such order, priority and proportions as the Mortgagee in its discretion shall deem proper. If any change shall occur in the Mortgagor's name, the Mortgagor shall promptly cause to be filed at its own expense, new financing statements as required under the Uniform Commercial Code to replace those on file in favor of the Mortgagee or Collateral Agent on behalf of Mortgagee.

27.Filings. (a) Mortgagor forthwith upon the execution and delivery of this Mortgage and thereafter, from time to time, will cause this Mortgage, and any security instru-ment creating a lien or security interest or evidencing the lien hereof upon the Mortgaged Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in, order to publish notice of and fully protect and perfect the lien or security interest hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Upon such filings, the Mortgagee shall have a perfected first priority security interest in the Mortgaged Property.

(b)The Mortgagor will pay all Federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Mortgage, any mortgage supplemental hereto, any security instrument with respect to the Mortgaged Property or any instrument of further assurance. The Mortgagor shall hold harmless and indemnify the Mortgagee, its successors and assigns, against any liability incurred by reason of the imposition of any tax on the making and recording of this Mortgage.

28.Further Acts, etc. The Mortgagor will, at the cost of the Mortgagor, and without expense to the Mortgagee, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignments, transfers and assurances, including without limitation UCC-1 Financing Statements, as the Collateral Agent reasonably or any present or future law shall, from time to time, require for the better assuring, conveying, assigning, transferring protecting, preserving, perfecting and confirming unto the Mortgagee the property and rights hereby mortgaged or intended now or hereafter so to be, or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage or for filing, registering or recording this mortgage and, on demand, will execute and deliver and hereby authorizes the Collateral Agent and Mortgagee to execute in the name of the Mortgagor to the extent the Collateral Agent or Mortgagee may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments, to evidence more effectively the lien hereof upon the Mortgaged Property.

-21-

29.Headings. etc. The headings and captions of various paragraphs of this Mortgage are for convenience of reference only and are not to be construed as defined or limiting, in any way, the scope or intent of the provisions hereof.

30.Usury Laws. This Mortgage and the Notes are subject to the express condition that at no time shall the Mortgagor be obligated or required to pay interest on the principal balance due under the Notes at a rate which could subject the holders of the Notes to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Mortgagor is permitted by law to contract or agree to pay. If by the terms of this Mortgage, the Guaranty or the Notes, the Mortgagor is at any time required or obligated to pay interest on the principal balance due under the Notes at a rate in excess of such maximum rate, the rate of interest under the Notes shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of the Notes.

31.Sole Discretion of Mortgagee/Collateral Agent. Except as may otherwise be expressly provided to the contrary, wherever pursuant to the Notes, this Mortgage, or any other document or instrument now or hereafter executed and delivered in connection therewith or otherwise with respect to the loan secured hereby, the Mortgagee or the Collateral Agent exercises any right given to it or him to consent or not consent, or to approve or disapprove, or any arrangement or term is to be satisfactory to the Mortgagee or Collateral Agent, the decision of the Mortgagee or Collateral Agent to consent or not consent, or to approve or disapprove, or to decide that arrangements or terms are satisfactory or not satisfactory, shall be in the sole and absolute discretion of the Mortgagee and Collateral Agent and shall be final and conclusive, except as is otherwise required by applicable law.

32.Recovery of Sums Required To Be Paid. The Mortgagee shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of the Mortgagee thereafter to bring an action of foreclosure, or any other action, for a default or defaults by the Mortgagor existing at the time such earlier action was commenced.

33.Actions and Proceedings. The Collateral Agent shall have the right, at the expense of Mortgagor, to appear in and defend any action or proceeding brought with respect to the Mortgaged Property and to bring any action or proceeding, in the name and on behalf of the Mortgagor, which the Collateral Agent, in its reasonable discretion, determines should be brought to protect its interest in the Mortgaged Property.

-22-

34.Execution. This Mortgage may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument. This Mortgage, once executed by the Mortgagor, may be delivered by facsimile transmission, and a facsimile signature shall have the same force and effect as an original signature, provided that an original shall also be delivered to the Mortgagee.

35.Certain Definitions. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Mortgage shall be used interchangeably in singular or plural form; the word "Mortgagor" shall mean "each Mortgagor and/or any subsequent owner or owners of the Mortgaged Property or any part thereof or interest therein;" the word "Mortgagee" shall mean “Mortgagee or any subsequent holder of any of the Notes” and shall included each Mortgagee individually and collectively; the word "Notes" shall mean "the Notes or any other evidence of indebtedness secured by this Mortgage;" the word "person" shall include an individual, corpora-tion, partnership, trust, unincorporated association, govern-ment, governmental authority or other entity; the words "Mortgaged Property" shall include any portion of the Mortgaged Property or interest therein; the word "Debt" shall mean the principal balance of the Notes with interest thereon as provided in the Notes and this Mortgage and all other sums due pursuant to the Notes, the Guaranty and this Mortgage and secured by this Mortgage; and “Collateral Agent” shall mean the initial Collateral Agent and any subsequent person appointed by the Collateral Agent to act as Collateral Agent, provided such subsequent person accepts such appointment and the Mortgagor is notified of such appointment. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa.

36.Waiver of Notice. The Mortgagor shall not be entitled to any notices of any nature whatsoever from the Mortgagee or Collateral Agent except with respect to matters for which this Mortgage specifically and expressly provides for the giving of notice by the Mortgagee or Collateral Agent to the Mortgagor, and the Mortgagor hereby expressly waives the right to receive any notice from the Mortgagee or Collateral Agent with respect to any matter for which this Mortgage does not specifically and expressly provide for the giving of notice by the Mortgagee or Collateral Agent to the Mortgagor, except as is otherwise required by applicable law.

37.No Verbal Change. This Mortgage may only be modified, amended or changed by an agreement in writing signed by the Mortgagor and the Collateral Agent on behalf of the Mortgagee, and may only be released, discharged or satisfied of record by an agreement in writing signed by the Mortgagee or the Collateral Agent on behalf of the Mortgagee. No waiver of any term, covenant or provision of this Mortgage shall be effective unless given in writing by the Mortgagee or the Collateral Agent on behalf of the Mortgagee and if so given by the Mortgagee shall only be effective in the specific instance in which given. The Mortgagor acknowledges that the Notes, this Mortgage, and the other documents and instruments executed and delivered in connection therewith or otherwise in connection with the loan secured hereby set forth the entire agreement and understanding of the Mortgagor and the Mortgagee with respect to the loan secured hereby and that no oral or other agreements, understanding, representation or warranties exist with respect to the loan secured hereby other than those set forth in the Notes, this Mortgage and such other executed and delivered documents and instruments. In order for the Collateral Agent to act on behalf of the Mortgagee under this Section, it must obtain the prior consent of each person constituting Mortgagee.

-23-

38.Absolute and Unconditional Obligation. The Mortgagor acknowledges that the Mortgagor's and Parent’s obligation to pay the Debt in accordance with the provisions of the Notes, the Guaranty and this Mortgage is and shall at all times continue to be absolute and unconditional in all respects, and shall at all times be valid and enforceable irrespective of any other agreements or circumstances of any nature whatsoever which might otherwise constitute a defense to the Notes, the Guaranty or this Mortgage or the obligation of the Mortgagor thereunder to pay the Debt or the obligations of any other person relating to the Notes, the Guaranty or this Mortgage or the obligations of the Mortgagor under the Notes, the Guaranty or this Mortgage or otherwise with respect to the loan secured hereby, and the Mortgagor absolutely, unconditionally and irrevocably waives any and all right to assert any defense, offset, setoff, counterclaim (except mandatory counterclaims which must be asserted to avoid being deemed to have been waived in any separate action) or crossclaim of any nature whatsoever with respect to the obligation of the Mortgagor to pay the Debt in accordance with the provisions of the Notes, the Guaranty and this Mortgage or the obligations of any other person relating to the Notes, the Guaranty or this Mortgage or obligations of the Mortgagor under the Notes, the Guaranty or this Mortgage or otherwise with respect to the loan secured hereby in any action or proceeding brought by the Mortgagee to collect the Debt, or any portion thereof, or to enforce, foreclose and realize upon the lien and security interest created by this Mortgage or any other document or instrument securing repayment of the Debt, in whole or in part, and the Mortgagor agrees that it shall not interpose or assert any such defense, offset, setoff, counterclaim (except such mandatory counterclaims as described above) or crossclaim in any action or proceeding.

39.Release. At such time as the amounts outstanding under the Notes and the Debt are zero and no further amounts are due the Mortgagee hereunder (x) any additional proceeds received by the Mortgagor on account of the sale of the Mortgaged Property shall be retained by the Mortgagor and (y) the Mortgaged Property shall be released from the lien created under this Mortgage and the Mortgagee shall deliver to the Mortgagor, upon reasonable request therefor, and, at the Mortgagor’s expense, releases and satisfactions (to be prepared by the Mortgagor) of all financing statements related to such Mortgaged Property, and this Mortgage shall terminate.

40.Disposition of Proceeds. The proceeds of any sale or disposition of all or any part of the Mortgaged Property shall be applied by the Mortgagee in the following order: (i) to the payment in full of the costs and expenses of such sale or sales, collections, and the protection, declaration and enforcement of the mortgage granted hereunder, and to the payment in full of all other expenses, liabilities and advances made or incurred by the Mortgagee in connection therewith, all amounts for which the Mortgagee is entitled to indemnification hereunder, and all advances made by the Mortgagee hereunder for the account of the Mortgagor, including the reasonable compensation of or reimbursement of the Mortgagee’s agents and attorneys, including without limitation the Collateral Agent; (ii) to the payment of the Debt for the benefit of the holder thereof; and (iii) to the payment to the Mortgagor of any surplus then remaining from such proceeds, subject to the rights of any permitted holder of a lien on the Mortgaged Property of which the Mortgagee has received actual written notice. In the event that the proceeds of any sale or other disposition of the Mortgaged Property are insufficient to cover the principal of, and premium, if any, and interest on, and expenses and fees with respect to, the Debt secured thereby, plus costs and expenses of the sale or other disposition, the Mortgagor shall remain liable for any deficiency.

-24-

41.Expenses. The Mortgagor agrees that it shall pay all costs and expenses hereafter incurred in amending, implementing, perfecting, collecting, defending, declaring and enforcing and otherwise relating to the Mortgagee’s rights and security interests in the Mortgaged Property hereunder or under the Notes or any other instrument or agreement delivered in connection herewith or therewith, including, but not limited to, searches and filings after the date hereof, and the Mortgagee’s reasonable attorneys’ fees (regardless of whether any litigation is commenced, whether default is declared hereunder, and regardless of tribunal or jurisdiction); provided, however, that the Mortgagor shall not be responsible for any costs and expenses (including attorneys fees) incurred by the Mortgagee in connection with negotiating, execution and delivery of this Mortgage or any other Loan Document, except as may be provided elsewhere herein or therein. Further, the Mortgagor shall pay the costs of all title, UCC, judgment, lien and similar searches in connection with this Mortgage and the other Loan Documents, and shall pay all title insurance premiums on the Mortgaged Property in connection with Mortgagee’s title insurance policy. The Mortgagor shall obtain and deliver to the Collateral Agent an updated title survey of the Premises within 30 days following the date hereof.

42.Waiver of Statutory Rights. The Mortgagor shall not and will not apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws, or any so-called “Moratorium Laws,” now existing or hereafter enacted, in order to prevent or hinder the enforcement or foreclosure of this Mortgage, but hereby waives the benefit of such laws to the full extent that the Mortgagor may do so under applicable law. The Mortgagor for itself and all who may claim through or under it waives any and all right to have the property and estates comprising the Mortgaged Property marshaled upon any foreclosure of the lien of this Mortgage and agrees that any court having jurisdiction to foreclose such lien may order the Mortgaged Property sold as an entirety. The Mortgagor hereby waives for itself and all who may claim through or under it, and to the full extent the Mortgagor may do so under applicable law, any and all rights of redemption from sale under any order of decree of foreclosure of this Mortgage or granted under any statute now existing or hereafter enacted.

43.Indemnity. Anything in this Mortgage or the other Loan Documents (as defined below) to the contrary notwithstanding, the Mortgagor shall indemnify and hold the Mortgagee and the Collateral Agent harmless and defend the Mortgagee and the Collateral Agent at the Mortgagor's sole cost and expense against any loss or liability, cost or expense (including, without limitation, reasonable attorneys' fees and disbursements of the Mortgagee’s and the Collateral Agent’s counsel), and all claims, actions, procedures and suits arising out of or in connection with (i) any default by the Mortgagor or the Parent in connection with the transaction contemplated hereby, the Debt, this Mortgage, the Guaranty, the Purchase Agreement, the Registration Rights Agreement, any of the other document or instrument now or hereafter executed and/or delivered in connection with the Debt or the Purchase Agreement (the “Loan Documents”) and/or the Mortgaged Property, including, but not limited to, all costs of reappraisal of the Mortgaged Property or any part thereof after the date hereof, whether required by law, regulation, the Mortgagee the Collateral Agent, or any governmental or quasi-governmental authority, (ii) any amendment to, or restructuring of, the Debt and this Mortgage, the Notes or any of the other Loan Documents, (iii) any and all lawful action that may be taken by the Mortgagee or the Collateral Agent in connection with the enforcement of the provisions of this Mortgage or the Notes or any of the other Loan Documents, whether or not suit is filed in connection with the same, or in connection with the Mortgagor or the Parent becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding, (iv) any violation of any Environmental Requirements, any investigation or study with respect to Hazardous Materials or Environmental Requirements, and any costs, fees or expenses related to any of the foregoing, (v) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Mortgaged Property, and (vi) any enforcement of this indemnification. All sums so expended by the Mortgagee or Collateral Agent shall be payable on demand and, until reimbursed by the Mortgagor pursuant hereto, shall be deemed additional principal of the Debt and secured hereby and shall bear interest at the Default Rate. The obligations of the Mortgagor under this paragraph shall, notwithstanding any exculpatory or other provisions of any nature whatsoever set forth in the Loan Documents, constitute the personal recourse undertakings, obligations and liabilities of the Mortgagor.

-25-

44.Enforceability. Matters of construction, validity and performance, this Mortgage and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of New Jersey applicable to contracts made and performed in such State and any applicable laws of the United State of America. Whenever possible, each provision of this Mortgage shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Mortgage shall be unenforceable or prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such unenforceability, prohibition or invalidity, without invalidating the remaining provisions of this Mortgage.

45.Marshalling and Other Matters. Mortgagor hereby waives, to the extent permitted by law, the benefit of all appraise-ment, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Mortgaged Property or any part thereof or any interest therein. Further, Mortgagor hereby expressly waives any and all rights of redemp-tion from sale under any order or decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property subsequent to the date of this Mortgage and on behalf of all persons to the extent permitted by applicable law.

46.Waiver of Jury Trial. Mortgagor hereby waives any right to trial by jury in connection with any and all litigation involving the subject matter of this Mortgage.

47.Receipt of Mortgage. Mortgagor hereby acknowledges receipt of a true copy of this Mortgage without charge.

48.New Jersey Provisions. This Mortgage is subject to modification as provided in N.J.S.A 46:9-8.1, and with respect to any such modification, the priority of this Mortgage shall relate back to and remain as it was at the time of recording of this Mortgage as if the modification was included herein or as if the modification occurred at the time of the recording of this Mortgage.”

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-26-

IN WITNESS WHEREOF, the Mortgagor has duly executed this Mortgage the day and year first above written.

NEXMED (U.S.A.), INC.
By:	/s/ Vivian Liu
Name:	Vivian Liu
Title:	President and CEO

ACKNOWLEDGMENT

STATE OF New Jersey	)
	) ss.:
COUNTY OF Mercer	)

On this 30th day of June, 2008, before me, the undersigned, personally appeared Vivian Liu, the President and CEO of NEXMED (U.S.A.), INC., a Nevada corporation, who, I am satisfied, is the person who signed the foregoing instrument, and he did acknowledge under oath that he signed, sealed with the corporate seal, and delivered the same in his capacity as such officer and that the foregoing instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its board of directors.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

/s/ Gloria J. Lapsley

Notary Public

(Notarial Seal)

-27-

EXHIBIT A

All the real property located in the Township of East Windsor, County of Mercer, State of New Jersey and more particularly described as follows:

BEGINNING at a point situated along the southerly right of way line of Twin Rivers Drive (66 feet wide), said point being located 25.00 feet from the intersection of the westerly prolongation of the same and the northerly prolongation of the easterly right of way line of Milford Road (66 feet wide); thence running

1. South 85° 22' 26" East along the southerly right of way line of Twin Rivers Drive, 208.27 feet to a point; thence

2. Easterly along the same, along a curve to the right having a radius of 967.00 feet and an arc length of 242.60 feet to a point; thence

3. South 06° 55' 34" West along the common line of Lots 6 and 190 Block 20.06, 371.02 feet to a point; thence

4. North 80° 46' 41" West along the common line of Lots 4 and 6 Block 20.06, 293.02 feet to a point; thence

5. North 04° 37' 34" East along the common line of Lots 5 and 6 Block 20.06, 150.00 feet to a point; thence

6. North 80° 46' 41" West along the same, 166.90 feet to a point; thence

7. North 04° 37' 34" East along the easterly line of Milford Road, 189.14 feet to a point; thence

8. Easterly along the same, along a curve to the right having a radius of 25.00 feet and an arc length of 39.27 feet to the point and place of beginning.

NOTE: BEING Lot 6, Block 20.06, Tax Map of the Township of East Windsor, Mercer County, New Jersey,

BEING commonly known as 89 Twin Rivers Drive, East Windsor, New Jersey 08520,

BEING the same premises conveyed to the Mortgagor herein by deed dated October 17, 2000 and recorded on November 1, 2000 in the Mercer County Register’s Office in Deed Book 3937, page 254.

-28-

EXHIBIT B

All the real property located in the Township of East Windsor, County of Mercer, State of New Jersey and more particularly described as follows:

BEGINNING at a point in the centerline of Milford Road, said point being distant 246.20 feet southwestwardly from the intersection of the said centerline of Milford Road with the centerline of Twin Rivers Drive; thence running

1. Along Lot 6, South 73 degrees 15 minutes East, a distance of 200.00 feet to a point; thence

2. Along same, South 12 degrees 00 minutes West, a distance of 150.00 feet to a point in line with Lot 4; thence

3. Along the northeasterly line of a portion of Lot 4, North 73 degrees 15 minutes West, a distance of 200.00 feet to the point in the centerline of Milford Road; thence

4. Along the centerline of Milford Road, North 12 degrees 00 minutes East, a distance of 150.00 feet to the point and place of Beginning.

The above description was drawn in accordance with a survey prepared by Crest Engineering Associates, Inc., Daniel P. Hundley, P.L.S., dated February 8, 2002.

FOR INFORMATIONAL PURPOSES ONLY:

BEING ALSO KNOWN as Lot 5 in Block 20.06 on the Official Tax Map of the Township of East Windsor, Mercer County, NJ,

BEING commonly known as 113 Milford Road, East Windsor, New Jersey 08520.

-29-

EX-10.5

Exhibit 10.5

SUBSIDIARY GUARANTY

SUBSIDIARY GUARANTY, dated as of June 30, 2008, made by NexMed (U.S.A), Inc., a Delaware corporation (the “Guarantor”), in favor of each of the Holders (as defined below).

W I T N E S S E T H:

Whereas, pursuant to that certain Purchase Agreement (the “Purchase Agreement”) dated on or about the date hereof by and among NexMed, Inc., a Nevada corporation (the “Company”), and the Purchasers named therein (the “Purchasers”), the Company issued to the Purchasers the Company’s 7% Convertible Notes Due December 31, 2011 (the “Notes”); and

Whereas, the Guarantor is a wholly-owned subsidiary of the Company; and

Whereas, as a condition precedent to the Purchasers’ purchase of the Notes and in order to induce the Purchasers to purchase the Notes and make the loans evidenced by the Notes, the Company agreed that the Guarantor would guaranty the obligations under the Notes in accordance with the terms set forth in this Guaranty, the Notes, the Mortgage (as defined herein) and the Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to induce the Holders to make and maintain the loans evidenced by the Notes, Guarantor hereby agrees with the Holders as follows:

SECTION 1.DEFINED TERMS

1.1Definitions

(a)Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Notes or Purchase Agreement.

(b)The following terms shall have the following meanings:

“Guaranty” means this Subsidiary Guaranty, as the same may be amended, supplemented or otherwise modified from time to time.

“Holders” mean all of the Holders (as identified in each Note) of the Notes.

“Mortgage” means the Mortgage, Security Agreement and Assignment of Leases and Rents executed by the Guarantor in favor of the Purchasers on or about the date hereof, securing the Company’s Obligations under the Notes and the Guarantor’s obligations hereunder.

“Obligations” mean the collective reference to the unpaid principal of and default interest on the Notes and Accreted Amounts thereunder and all other obligations and liabilities of the Company to the Holders (including, without limitation, default interest accruing at the then applicable rate provided in the Notes after the maturity of the Notes and interest accruing at the then applicable rate after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, if a claim for post-filing or post-petition interest is allowed in such proceeding, and including, without limitation, the conversion of Notes into Common Stock), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Purchase Agreement, the Notes, this Guaranty, the Mortgage or the other Agreements, or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Holders that are required to be paid by the Company or the Guarantor pursuant to the terms of any of the foregoing agreements).

“Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

1.2Other Definitional Provisions.The words “hereof,” “herein”, “hereto” and “hereunder” and words of similar import when used in this Guaranty shall refer to this Guaranty as a whole and not to any particular provision of this Guaranty, and Section references are to this Guaranty unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2.GUARANTY

2.1Guaranty. The Guarantor hereby absolutely, unconditionally and irrevocably guarantees to the Holders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Company when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.

2.2Nature of Guaranty. Guarantor’s liability under this Guaranty shall be unlimited, open and continuous for so long as this Guaranty remains in force. Guarantor intends to guaranty at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration or otherwise, of all Obligations. Accordingly, no payments made upon the Obligations will discharge or diminish the continuing liability of Guarantor in connection with any remaining portions of the Obligations or any of the Obligations which subsequently arises or is thereafter incurred or contracted. No payment made by the Company, the Guarantor, any other guarantor or any other Person or received or collected by the Holders from the Company, the Guarantor, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder which shall, notwithstanding any such payment (other than payment and performance in full of the Obligations), remain liable for the Obligations until the Obligations are paid and performed in full.

2

2.3Duration of Guaranty. This Guaranty will take effect when received by the Holders without the necessity of any acceptance by the Holders, or any notice to Guarantor or to the Company, and will continue in full force until all the Obligations incurred or contracted shall have been fully and finally paid and satisfied and all other obligations of Guarantor under this Guaranty shall have been performed in full. All renewals, extensions, substitutions, and modifications of the Obligations, release of any other guarantor or termination of any other guaranty, of the Obligations shall not affect the liability of Guarantor under this Guaranty. This Guaranty is irrevocable and is binding upon Guarantor and Guarantor’s successors and assigns so long as any of the guaranteed Obligations remain unpaid.

2.4No Subrogation. Notwithstanding any payment made by the Guarantor hereunder or any set-off or application of funds of the Guarantor by the Holders, the Guarantor shall not be entitled to be subrogated to any of the rights of the Holders against the Company or any other guarantor or guaranty or right of offset held by the Holders for the payment of the Obligations, nor shall the Guarantor seek or be entitled to seek any contribution or reimbursement from the Company or any other guarantor in respect of payments made by the Guarantor hereunder, until all amounts owing to the Holders by the Company on account of the Obligations are paid in full. If any amount shall be paid to the Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid and performed in full, such amount shall be held in trust for the benefit of the Holders, segregated from other funds of the Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over to the Holders in the exact form received by such Guarantor (duly indorsed by the Guarantor to the Holders, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Holders may determine.

2.5Amendments, Etc. With Respect To The Obligations. Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any of the Holders may be rescinded by such Holder and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or guaranty therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Holders, and the Purchase Agreement, the Notes and the other Agreements and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Holders may deem advisable from time to time, and any guaranty or right of offset at any time held by the Purchasers for the payment of the Obligations may be sold, exchanged, waived, surrendered or released.

3

2.6Guaranty Absolute And Unconditional. Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Holders upon the guaranty contained in this Section 2 or acceptance of the guaranty contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the Guaranty contained in this Section 2; and all dealings between the Company and the Guarantor, on the one hand, and the Holders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guaranty contained in this Section 2. Guarantor hereby waives, to the extent permitted by law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or the Guarantor with respect to the Obligations. Guarantor understands and agrees that the guaranty contained in this Section 2 shall be construed as a continuing, absolute and unconditional Guaranty of payment and performance without regard to (a) the validity or enforceability of the Purchase Agreement, Notes or any of the other Agreements, any of the Obligations or any other guaranty or right of offset with respect thereto at any time or from time to time held by the Holders, (b) any defense, set-off or counterclaim (other than a defense of actual payment and performance of all Obligations) which may at any time be available to or be asserted by the Company or any other Person against the Holders, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of Guarantor under the guaranty contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against Guarantor, the Holders may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as they may have against the Company or any other Person or against any other guaranty for the Obligations or any right of offset with respect thereto, and any failure by the Holders to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company or any other Person or to realize upon any such other guaranty or to exercise any such right of offset, or any release of the Company or any other Person or any such other guaranty or right of offset, shall not relieve Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Holders against any Guarantor.

2.7Reinstatement. The guaranty contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Holders upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company, Guarantor or any other guarantor of the Obligations, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company, Guarantor or any other guarantor of the Obligations or any substantial part of its property, or otherwise, all as though such payments had not been made.

2.8Payments. Guarantor hereby guarantees that payments hereunder will be paid to the Holders without set-off or counterclaim in U.S. dollars at the addresses set forth or referred to on the signature pages to the Purchase Agreement (or as otherwise required by the Notes) or by wire transfer pursuant to instructions provided to the Guarantor by the Holders.

4

SECTION 3.REPRESENTATIONS AND WARRANTIES

Guarantor represents and warrants to the Holders that:

3.1Organization, Good Standing and Qualification. The Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and own its properties. The Guarantor is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or licensing necessary unless the failure to so qualify would not be reasonably likely to result in a Material Adverse Effect. The Guarantor does not have any subsidiaries, except for New Brunswick Medical Inc, a Delaware corporation which is a wholly-owned subsidiary of the Guarantor, which subsidiary does not own a material amount of assets. The Guarantor is a wholly-owned subsidiary of the Company and owns, and has good and marketable title to, all the Mortgaged Property (as defined in the Mortgage) free and clear of all liens, claims, encumbrances and defects except those that would not individually or in the aggregate materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof.

3.2Authorization. The Guarantor has full power and authority and has taken all requisite action on the part of the Guarantor, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of this Guaranty and the Mortgage, and (ii) authorization of the performance of all obligations of the Guarantor hereunder and thereunder. This Guaranty and the Mortgage constitute legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

3.3Consents. The execution, delivery and performance by the Company of this Guaranty and the Mortgage require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official, other than the filing of the Mortgage with the appropriate office in Mercer County in the State of New Jersey, the filing of a UCC-1 financing statement fixture filing with Mercer County in the State of New Jersey, the filing of a UCC-1 financing statement describing the Mortgaged Property (as defined in the Mortgage) with the Secretary of State of the State of Delaware, and the filing of the release and/or satisfaction of the mortgage on the Mortgaged Property currently held by Twin Rivers Associates LLC with the appropriate office in Mercer County in the State of New Jersey.

3.4No Conflict, Breach, Violation or Default; Compliance with Law. The execution, delivery and performance of this Guaranty and the Mortgage by the Guarantor will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Guarantor’s Certificate of Incorporation (including any certificates of designation) or the Guarantor’s Bylaws, both as in effect on the date hereof (copies of which have been provided to the Purchasers before the date hereof), or (ii) except where it would not have a Material Adverse Effect, (A) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Guarantor or any of its properties, or (B) any agreement or instrument to which the Guarantor is a party or by which the Guarantor is bound or to which any of the properties of the Guarantor is subject. Except where it would not have a Material Adverse Effect, the Guarantor (i) is not in violation of any statute, rule or regulation applicable to the Guarantor or its assets, (ii) is not in violation of any judgment, order or decree applicable to the Guarantor or its assets, and (iii) is not in breach or violation of any agreement, note or instrument to which it or its assets are a party or are bound or subject. The Guarantor has not received notice from any Person of any claim or investigation that, if adversely determined, would render the preceding sentence untrue or incomplete.

5

3.5Incorporation by Reference. All the representations and warranties made in Sections 4.6, 4.7, 4.8, 4.9, 4.12, 4.13, 4.14, 4.15, 4.16, 4.18, 4.19, 4.20 and 4.26 of the Purchase Agreement are true, accurate and complete as of the date hereof as such representations and warranties relate and apply to the Guarantor mutatis mutandis.

3.6No Limitation of Guaranty. No representations, warranties or agreements of any kind have been made to or with Guarantor which would limit or qualify in any way the terms of this Guaranty.

3.7Company’s Request. This Guaranty is executed at the Company’s request and not at the request of the Holders.

3.8Obtaining Company Information. Guarantor has established adequate means of obtaining from the Company on a continuing basis information regarding the Company’s financial condition.

3.9Solvency. As of the date hereof and after giving effect to the transactions contemplated hereby (a) the property of Guarantor, at a fair valuation, will exceed its debt; (b) the capital of Guarantor will not be unreasonably small to conduct its business; (c) Guarantor will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature; and (d) the present fair salable value of the assets of Guarantor will be greater than the amount that will be required to pay its probable liabilities (including debts) as they become absolute and matured. For purposes of this Section 3.9, “debt” means any liability on a claim, and “claim” means (i) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, undisputed, legal, equitable, secured or unsecured, or (ii) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, undisputed, secured or unsecured.

SECTION 4.COVENANTS

4.1Limitations on Transactions. So long as any Notes remain outstanding, the Guarantor shall not directly or indirectly, create, incur, assume or permit or suffer to exist any lien, mortgage, security interest or encumbrance (other than statutory liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof) upon any of the Mortgaged Property (as defined in the Mortgage) except for those created by the Mortgage and shall not directly or indirectly sell, transfer or lease any of the Mortgaged Property, subject to Section 7.2(c) of the Purchase Agreement.

6

4.2No Conflicting Agreements. The Guarantor will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the obligations to the Holders under the Agreements.

4.3Insurance. So long as any Notes remain outstanding, the Guarantor shall have in full force and effect (a) insurance reasonably believed by the Guarantor to be adequate on all assets and activities, covering property damage and loss of income by fire or other casualty, and (b) insurance reasonably believed to be adequate protection against all liabilities, claims and risks against which it is customary for companies similarly situated as the Guarantor to insure.

4.4Compliance with Laws. So long as any Notes remain outstanding, the Guarantor will use reasonable efforts to comply with all applicable laws, rules, regulations, orders and decrees of all governmental authorities, except to the extent non-compliance (in one instance or in the aggregate) would not have a Material Adverse Effect

4.5Corporate Existence; Merger and Consolidation. So long as any Notes remain outstanding, the Guarantor shall maintain its corporate existence. The Guarantor shall not consolidate with or merge with or into, or convey, transfer or lease all or substantially all its assets to, any Person, except to the same extent that the Company is so permitted, and in accordance with the same provisions applicable to the Company, in the Purchase Agreement or the Notes (with the assumption of obligations applying to the assumption of the obligations under this Guaranty).

4.7Taxes. The Guarantor shall pay, and shall cause each of its subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Guarantor or the Holders.

4.8Stay, Extension and Usury Laws. The Guarantor covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Guaranty; and the Guarantor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any right herein granted to the Holders, but shall suffer and permit the execution of every such right as though no such law has been enacted.

7

SECTION 5.SECURITY

5.1The Obligations and Guarantor’s obligations hereunder and under the other Agreements are secured by Mortgaged Property (as defined in the Mortgage) pursuant to the terms of the Mortgage (or the Escrow Funds (as defined in the Purchase Agreement), if the Mortgage is defeased pursuant to Section 7.2(c) of the Purchase Agreement).

SECTION 6.WAIVERS; SUBORDINATION

6.1Guarantor’s Waivers.

(a)Holder’s Actions. Notwithstanding any other waivers by the Guarantor pursuant to this Guaranty and except as prohibited by applicable law, the Guarantor waives any right to require a Holder to: (i) continue lending money or to extend other credit to the Company; (ii) resort for payment or to proceed directly or at once against any person, including the Company or any other guarantor; (iii) commit any act or omission of any kind at any time with respect to any matter whatsoever; or (iv) demand and/or enforce compliance with the terms of any agreement by any other party thereto.

(b)Insolvency. If now or hereafter the Company shall be or become insolvent and the Obligations under the Notes have not been paid and performed in full, Guarantor hereby waives and relinquishes in favor of the Holders and Company, and their respective successors and assigns (subject to Section 2.7 above, until all Obligations have been paid in full), any claim or right to payment Guarantor may now have or hereafter have or acquire against the Company, by subrogation or otherwise, such that at no time shall Guarantor be or become a “creditor” of the Company within the meaning of 11 U.S.C. Section 547(b) or any successor provision of the United States Federal bankruptcy laws.

(c)Guarantor’s Rights and Defenses. Guarantor also waives any and all rights or defenses arising by reason of (i) any “one action” or “anti-deficiency” law or any other law which may prevent the Holders from bringing any action, including a claim for deficiency, against the Guarantor, before or after the commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (ii) any election of remedies by the Holders which destroys or otherwise adversely affects the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Company for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Obligations; (iii) any disability or other defense of the Company, of any other guarantor, or of any other person, or by reason of the cessation of the Company’s liability from any cause whatsoever, other than payment in full in legal tender or by performance in full, of the Obligations; (iv) any statute of limitations, if at the time any action or suit brought by the Holders against the Guarantor is commenced there is outstanding Obligations which are not barred by any applicable statute of limitations; (v) any defenses given to guarantors at law or in equity other than actual payment and performance of the Obligations; or (vi) any act, omission, election or waiver by the Holders of the type set forth in this Guaranty.

8

(d)No Set-off, Counterclaim, Etc. Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of set-off, counterclaim, counter demand, recoupment or similar right.

6.2Guarantor’s Understanding With Respect to Waivers. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

6.3Subordination of the Company’s Debts to Guarantor. Guarantor agrees that the Obligations of the Company to the Holders, whether now existing or hereafter created, shall be prior to any claim that the Guarantor may now have or hereafter acquire against the Company, whether or not the Company becomes insolvent. Guarantor hereby expressly subordinates to the Obligations any claim Guarantor may have against the Company, upon any account whatsoever (including without limitation all intercompany obligations owing to Guarantor from the Company), to any claim that the Holders may now or hereafter have against the Company; provided, however, that the Company may make payments on such claims that represent bona fide claims for money lent or property transferred to the Company in the ordinary course of the business of the Guarantor and the Company unless and until an Event of Default (including without limitation any default under the Agreements which with notice or passage of time or both would become an Event of Default) shall have occurred under the Notes. In the event of any dissolution, winding up, liquidation, readjustment, reorganization or similar proceedings, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of the Company applicable to the payment of the claims of both the Holders and the Guarantor shall be paid to the Holders.

SECTION 7.MISCELLANEOUS

7.1Amendments In Writing. None of the terms or provisions of this Guaranty may be amended, supplemented or otherwise modified except by an instrument in writing signed by the Guarantor and 75% in interest of the Holders, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.

7.2Notices. All notices, requests and demands to or upon the Holders or Guarantor hereunder shall be effected in the manner provided for in Section 9.4 of the Purchase Agreement or Section 3(h) of the Notes; provided that any such notice, request or demand to or upon Guarantor shall be addressed to Guarantor at:

c/o NexMed, Inc.

89 Twin Rivers Drive

East Windsor, NJ 08520

Fax: (609) 426-0340

Attention: Chief Financial Officer

9

or at such other address as Guarantor may designate by ten days’ advance written notice to all Holders.

7.3No Waiver By Course Of Conduct; Cumulative Remedies.The Holders shall not by any act (except by a written instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Holders, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by any Holder of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such Holder would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

7.4Enforcement Expenses; Indemnification.

(a)Guarantor agrees to pay or reimburse the Holders for all their reasonable costs and expenses incurred in collecting against the Guarantor under the guaranty contained in Section 2 or otherwise enforcing or preserving any rights under this Guaranty and the other Agreements to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Holders.

(b)Guarantor agrees to pay, and to save the Holders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes (other than any taxes based upon any Holder’s net income) which may be payable or determined to be payable in connection with any of the transactions contemplated by this Guaranty.

(c)Guarantor agrees to pay, and to save the Holders harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Guaranty to the extent the Company would be required to do so pursuant to the Purchase Agreement or the other Agreements.

(d)The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Notes and the other Agreements.

7.5Successors And Assigns. This Guaranty shall be binding upon the successors and assigns of Guarantor and shall inure to the benefit of the Holders and their respective successors and assigns; provided that Guarantor may not assign, transfer or delegate any of its rights or obligations under this Guaranty without the prior written consent of the holders of 75% of the outstanding Principal Amount of Notes.

10

7.6Set-Off. Guarantor hereby irrevocably authorizes the Holders at any time and from time to time while an Event of Default shall have occurred and be continuing, without notice to Guarantor or any other guarantor of the Obligations, any such notice being expressly waived by Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Holders to or for the credit or the account of Guarantor, or any part thereof in such amounts as the Holders may elect, against and on account of the obligations and liabilities of Guarantor to the Holders hereunder and claims of every nature and description of the Holders against Guarantor, in any currency, whether arising hereunder, under the Notes, any of the other Agreements or otherwise, as the Holders may elect, whether or not the Holders have made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Holders shall notify such Guarantor promptly of any such set-off and the application made by the Holders of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Holders under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Holders may have.

7.7Facsimile. This Guaranty may be executed by facsimile.

7.8Severability. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

7.9Section Headings. The Section headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

7.10Integration. This Guaranty and the other Agreements represent the agreement of the Guarantor and the Purchasers with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Purchasers relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Agreements.

7.11Governing Law; Jurisdiction.

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

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

11

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

(c)No Jury Trial. The Guarantor and, by acceptance of the benefits hereof, each Holder, knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this Guaranty and for any counterclaim therein.

7.12Acknowledgements. Guarantor hereby acknowledges that:

(a)it has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the other Agreements to which it is a party;

(b)the Holders have no fiduciary relationship with or duty to Guarantor arising out of or in connection with this Guaranty or any of the other Agreements, and the relationship between the Guarantor, on the one hand, and the Holders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c)no joint venture is created hereby or by the other Agreements or otherwise exists by virtue of the transactions contemplated hereby among the Guarantors and the Holders.

[Signature Page Follows]

12

IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.

GUARANTOR:
NEXMED (U.S.A.), INC.
By:	/s/ Vivian Liu
Name:	Vivian Liu
Title:	Chief Executive Officer

ACKNOWLEDGMENT

STATE OF New Jersey	)
	) ss.:
COUNTY OF Mercer	)

On this 30th day of June, 2008, before me, the undersigned, personally appeared Vivian Liu, the Chief Executive Officer of NEXMED (U.S.A.), INC., a Delaware corporation, who, I am satisfied, is the person who signed the foregoing instrument, and he did acknowledge under oath that he signed, sealed with the corporate seal, and delivered the same in his capacity as such officer and that the foregoing instrument is the voluntary act and deed of such corporation, made by virtue of the authority of its board of directors.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

/s/ Gloria J. Lapsley

Notary Public

(Notarial Seal)

13