SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (“ Agreement ”) is made as of this 25th day of August, 2009 by and among Novelos Therapeutics, Inc., a Delaware corporation (the “ Company ”) and Purdue Pharma L.P., a Delaware limited partnership (“ Purdue ”).

A.           The Company desires, pursuant to this Agreement, to raise the Investment Amount (as defined below) through the issuance and sale, in the aggregate, of the following to Purdue (the “ Private Placement ”): (i) 13,636,364 shares (the “ Common Shares ”) of Common Stock, par value $0.00001 per share (the “ Common Stock ” ); and (ii) warrants to acquire shares of Common Stock equal to 35% of the aggregate number of shares of Common Stock to be issued and sold to Purdue pursuant to the Closings (as defined below) rounded up to the next even number at each Closing (as defined below), approximately 4,772,728 shares of Common Stock, with an exercise price of $0.66 per share, each to be in the form of Exhibit B annexed hereto and made a part hereof (the “ Warrants ”);

B.           Purdue desires to purchase from the Company, and the Company desires to issue and sell to Purdue, upon the terms and conditions stated in this Agreement, the Common Shares and the Warrant;

C.           Subject to the conditions hereinafter set forth, on each Closing Date, Purdue will purchase Common Shares and Warrants in the Private Placement for an aggregate purchase price equal to the portion of the Investment Amount to be delivered at the applicable Closing;

D.          The Company and Purdue are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“ Regulation D ”), as promulgated by the U.S. Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “ 1933 Act ”); and

E.           Contemporaneous with closing of the initial sale of the Common Shares and the Warrants hereunder (the “ Initial Closing ”), the Company and Purdue will enter into a Registration Rights Agreement, in the form attached hereto as Exhibit E (the “ Registration Rights Agreement ”);

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 set forth in this Section 1 :

“ 1933 Act ” has the meaning set forth in the Recitals.

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

“ 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.

“ Agreement ” has the meaning set forth in the Recitals.

“ Associated Company ” means, as to Purdue, any person, firm, trust, partnership, corporation, company or other entity or combination thereof, which directly or indirectly (i) controls (ii) is controlled by or (iii) is under common control with Purdue.  The terms “control” and “controlled” mean ownership of 50% or more, including ownership by trusts with substantially the same beneficial interests, of the voting and equity rights of such person, firm, trust, partnership, corporation, company or other entity or combination thereof or the power to direct the management of such person, firm, trust, partnership, corporation, company or other entity or combination thereof.

“ Business Combination ” means (i) the acquisition by a third party of a majority of the outstanding shares of capital stock of the Company by tender or exchange offer or otherwise where such third party shall have become, directly or indirectly, the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of the securities of the Company representing fifty percent (50%) or more of the Company’s capital stock, (ii) the effectiveness of any merger of the Company with or into a third party, in which the capital stock of the Company immediately prior to such merger represents less than fifty percent (50%) of the voting power (without regard to the effect of any so-called “blocker provisions” of any convertible securities) of the surviving entity (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such merger and (iii) the closing of any sale of all or substantially all of the assets of the Company.

“ Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

“ Buy-In Price ” has the meaning set forth in Section 8.14 .

“ Closing ” and “ Closings ” have the meaning set forth in Section 4.1 .

“ Closing Date ” has the meaning set forth in Section 4.1 .

“ Collaboration Agreement ” refers to that agreement between the Company and Mundipharma International Corporation Limited dated as of February 11, 2009.

“ Common Stock ” has the meaning set forth in the Recitals, and also includes any securities into which the Common Stock may be reclassified.

“ Common Stock Equivalents ” means any securities of the Company or the Subsidiaries which entitle the holder thereof to acquire Common Stock at any time, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“ Company ” has the meaning set forth in the Recitals.

“ Company Counsel ” means Foley Hoag LLP, counsel to the Company.

“ Company’s Knowledge, ” “ Knowledge of the Company ” or any like expression with respect to the Company means the actual knowledge of the officers of the Company and the knowledge that would be reasonably expected to be known by such individuals in the ordinary and usual course of the performance of their professional responsibilities to the Company.

“ Confidential Information ” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).

“ 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.

“ Deadline Date ” has the meaning set forth in Section 8.14 .

“ Disclosure Schedules ” has the meaning set forth in Section 5 .

“ Environmental Laws ” has the meaning set forth in Section 5.15 .

“ Exempt Issuance ” means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to (i) any existing stock or option plan, or (ii) any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, (b) options issued to new employees, (c) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of any such securities, and (d) securities issued pursuant to acquisitions or strategic transactions or in connection with a strategic alliance collaboration, joint venture, partnership, manufacturing, marketing, distributing or similar arrangement of the Company with another Person which strategic alliance, collaboration, joint venture, partnership manufacturing, marketing, distributing or similar arrangement relates to the Company’s business as conducted immediately prior thereto and which Person is engaged in a business similar or related to the business of the Company, provided any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“ Final Subsequent Closing ” shall mean a Subsequent Closing upon the occurrence of which the Company will have achieved the issuance and sale to Purdue, in the aggregate, of all Common Shares and Warrants issuable to Purdue pursuant to this Agreement.

“ Indebtedness ” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with United States generally accepted accounting principles.

“ Indemnified Person ” has the meaning set forth in Section 9.3 .

“ Initial Closing ” has the meaning set forth in the Recitals.

“ Intellectual Property ” means all of the following: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; (v) trade secrets, Confidential Information and know-how (including, but not limited to, ideas, formulae, compositions, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information); and (vi) computer software (including, but not limited to, data, data bases and documentation).

“ Investment Amount ” means an amount equal to $9,000,000.24.

“ License Agreements ” has the meaning set forth in Section 5.14(b) .

“ Losses ” has the meaning set forth in Section 9.2 .

“ Material Adverse Effect ” means a material adverse effect on (i) the assets and liabilities, prospects, results of operations, condition (financial or otherwise) or business of the Company, or (ii) the ability of the Company to issue and sell the Securities and to perform its obligations under the Transaction Documents; provided, however , that: (A) any adverse effect that results from general economic, business or industry conditions, the taking by the Company of any action permitted or required by the Agreement, or the announcement or pendency of transactions contemplated hereunder, shall not, in and of itself, constitute a "Material Adverse Effect" on the Company, and shall not be considered in determining whether there has been or would be a "Material Adverse Effect" on the Company and (B) a decline in the Company's stock price shall not, in and of itself, constitute a "Material Adverse Effect" on the Company and shall not be considered in determining whether there has been or would be a "Material Adverse Effect" on the Company.

“ Material Contract ” means any contract of the Company (i) that was required to be filed as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K of the 1933 Act, or (ii) the loss of which could reasonably be expected to have a Material Adverse Effect.

“ OTCBB ”  shall mean the OTC Bulletin Board.

“ Preferred Stock ” means the Company’s preferred stock, par value $0.00001 per share.

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

“ Press Release ” has the meaning set forth in Section 8.12 .

“ Private Placement ” has the meaning set forth in the Recitals.

“ Pro Rata Share ” means with respect to each capital raising transaction to which Section 10.1 applies an amount equal to the product obtained by multiplying (a) an amount equal to the securities being issued in such capital raising transaction times (b) a fraction of which the numerator is the number of shares of all Common Stock beneficially owned by Purdue and its Associated Companies at the time the Pro Rata Share is being determined (including shares of Common Stock issuable upon conversion of shares of Preferred Stock), and the denominator is all of the outstanding shares of Common Stock and shares of Common Stock issuable upon conversion of outstanding Preferred Stock.

“ Purdue Observer ” has the meaning set forth in Section 8.9 .

“ Registration Rights Agreement ” has the meaning set forth in the Recitals.

“ Regulation D ” has the meaning set forth in the Recitals.

“ Rule 144 ” has the meaning set forth in Section 8.13 .

“ SEC ” has the meaning set forth in the Recitals.

“ SEC Filings ” has the meaning set forth in Section 5.6 .

“ Securities ” means the Common Shares, the Warrant and the Warrant Shares.

“ Series E SPA ” means that certain Securities Purchase Agreement, dated as of February 11, 2009, by and among the Company and certain investors, including Purdue.

“ Subsequent Closing ” has the meaning set forth in Section 4.1 .

“ Transaction Documents ” means this Agreement, the Warrant and the Registration Rights Agreement.

“ United States ” shall mean the United States of America, its territories and possessions.

“ Warrant Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.

“ Warrant ” has the meaning set forth in the Recitals.

2.            Purchase and Sale of Securities .

Subject to the terms and conditions of this Agreement, including without limitation, the conditions set forth in Section 7 , there shall be Closings at which the Company shall issue and sell, and Purdue agrees to purchase Common Shares in the Private Placement by executing a counterpart to this Agreement, shall purchase, the Common Shares and the Warrants in exchange for the cash consideration consisting of such portion of the “Investment Amount” as shall be payable for the Common Shares and Warrants so issued and sold at each such Closing.

3.           [Reserved.]

4.            Closings .

5.            Representations and Warranties of the Company .  The Company hereby represents and warrants to Purdue on the date hereof and at each Closing, knowing and intending their reliance hereon, that, as of the date hereof except as set forth in the schedules delivered herewith (collectively, the “ Disclosure Schedules ”):

5.1.          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 to 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 its leasing of property makes such qualification or licensing necessary, unless the failure to so qualify would not have a Material Adverse Effect.  The Company has no subsidiaries.

5.2.          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 Transaction Documents, (ii) authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities relevant to each Closing as of the relevant Closing Date.  The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

5.3.          Capitalization .

(a)            Schedule 5.3 sets forth (i) the authorized capital stock of the Company on the date hereof, (ii) the number of shares of capital stock issued and outstanding, (iii) the number of shares of capital stock issuable pursuant to the Company’s stock plans, and (iv) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Securities) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company.  All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable law and any rights of third parties.  No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company.  Except as described on Schedule 5.3 , 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, the Company is not currently in negotiations for the issuance of any equity securities of any kind.  Except as described on Schedule 5.3 and except for the Registration Rights Agreement, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of its security holders relating to the securities of the Company.  Except as described on Schedule 5.3, the Company has not granted any Person the right to require the Company to register any of its securities 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.

(b)           Schedule 5.3 sets forth a true and complete table setting forth the pro forma capitalization of the Company on a fully diluted basis giving effect to (i) the issuance of the Common Shares and Warrants at the Initial Closing and at the Final Subsequent Closing, (ii) any adjustments in other securities resulting from the issuance of the Common Shares and Warrants at the Initial Closing and to the Final Subsequent Closing, and (iii) the exercise or conversion of all outstanding securities. Except as described on ²Schedule 5.3 ,  the issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than Purdue) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.

(c)          Except as set forth on Schedule 5.3 , the Company does not have outstanding stockholder purchase rights or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

5.4.          Valid Issuance .  The Common Shares relevant to each Closing have been duly and validly authorized as of the relevant Closing Date, and, when issued to Purdue in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable and shall be free and clear of all liens, claims, encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. The Warrants have been duly and validly authorized and, upon the due exercise of each Warrant, the applicable Warrant Shares will be validly issued, fully paid and non-assessable, and shall be free and clear of all liens, claims, encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.  The Company has reserved a sufficient number of shares of Common Stock for issuance upon exercise of the Warrants outstanding as of each Closing.

5.5.          Consents .   The execution, delivery and performance by the Company of the Transaction Documents and 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 those consents set forth on Schedule 5.5 and filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.  The Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii) the issuance of the Warrant Shares issuable upon due exercise of each Warrant, and (iii) the other transactions contemplated by the Transaction Documents from the provisions of any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject or any provision of the Company’s Certificate of Incorporation, Bylaws or any stockholder rights agreement that is or could become applicable to Purdue, as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by Purdue or the exercise of any right granted to Purdue pursuant to this Agreement or the other Transaction Documents.

5.6.          Delivery of SEC Filings; Business .  Copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2008, the Company’s quarterly reports on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009, and reports on Form 8-K filed by the Company from January 1, 2009 through the Initial Closing (collectively, the “ SEC Filings ”) are available on EDGAR.  The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period.  The Company is engaged only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company.

5.7.          No Material Adverse Change .  Except as contemplated herein or identified and described on Schedule 5.7(a) , since June 30, 2009, 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 SEC Filings, except for changes in the ordinary course of business which have not and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;

(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 its Subsidiaries;

(iv)         any waiver, not in the ordinary course of business, 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, prospects or business of the Company;

(vi)         any change or amendment to the Company's Certificate of Incorporation or Bylaws, or material change to any Material Contract or arrangement by which the Company is bound or to which any of its assets or properties is 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;

(ix)          the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company;

5.8.          SEC Filings .  At the time of filing thereof, 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 has not registered any of its securities with the SEC under Sections 12(b) or 12(g) of the 1934 Act and is not required to do so by any OTCBB regulations, 1934 Act or otherwise by SEC regulations.  The Company is required to file reports pursuant to Section 15(d) of the 1934 Act.  The Company is not (with or without the lapse of time or the giving of notice, or both) in breach or default of any Material Contract and, to the Company’s Knowledge, no other party to any Material Contract is (with or without the lapse of time or the giving of notice, or both) in breach or default of any Material Contract.  The Company has not received any notice of the intention of any party to terminate any Material Contract.

5.9.          No Conflict, Breach, Violation or Default .  The execution, delivery and performance of the Transaction Documents 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 Certificate of Incorporation or Bylaws, both as in effect on the date hereof (true and accurate copies of which have been provided to Purdue before the date hereof), or (ii)(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 respective assets or properties, or (b) except as set forth on Schedule 5.9, any agreement or instrument to which the Company is a party or by which it is bound or to which any of its assets or properties is subject.

5.10.        Tax Matters .  The Company has timely prepared and filed all tax returns required to have been filed by it with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it.  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 Company’s Knowledge, 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 for any assessment which is not material to the Company.  All 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, to the Company’s Knowledge, threatened against the Company or any of its assets or properties.  Except as described on Schedule 5.10 , there are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity.  The Company is not presently undergoing any audit by a taxing authority, nor has it waived or extended any statute of limitations at the request of any taxing authority.

5.11.        Title to Properties .  Except as disclosed in the SEC Filings or as set forth on Schedule 5.11 , the Company has 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 the Company; 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 the Company.

5.12.        Certificates, Authorities and Permits .  The Company possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and the Company 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, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate.

5.13.        No Labor Disputes .  No material labor dispute with the employees of the Company exists or, to the Company’s Knowledge, is imminent.

5.14.        Intellectual Property .

(a)          All Intellectual Property of the Company is currently in compliance with all legal requirements (including timely filings, proofs and payments of fees) and is valid and enforceable.  Except as listed on Schedule 5.14(a) , no Intellectual Property of the Company which is necessary for the conduct of Company’s businesses as currently conducted or as currently proposed to be conducted has been or is now involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no such action is threatened.  Except as listed on Schedule 5.14(a) , no patent of the Company has been or is now involved in any interference, reissue, re-examination or opposition proceeding.

(b)          All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary for the conduct of the Company’s business as currently conducted or as currently proposed to be conducted to which the Company is a party or by which any of its assets are bound (other than  generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $25,000 per license) (collectively, “ License Agreements ”) are valid and binding obligations of the Company and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, and there exists no event or condition which will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company under any such License Agreement.

(c)          The Company owns or has the valid right to use all of the Intellectual Property that is necessary for the conduct of the Company’s business as currently conducted or as currently proposed to be conducted, free and clear of all liens, encumbrances, adverse claims or obligations to license all such owned Intellectual Property and Confidential Information, other than licenses entered into in the ordinary course of the Company’s business.  The Company has a valid and enforceable right to use all third-party Intellectual Property and Confidential Information used or held for use in the respective business of the Company as currently conducted or as currently proposed to be conducted.

(d)          To the Company’s Knowledge, the conduct of the Company’s business as currently conducted and as currently proposed to be conducted does not and will not infringe any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party. To the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company which are necessary for the conduct of Company’s business as currently conducted or as currently proposed to be conducted are not being infringed by any third party.  Except as set forth on Schedule 5.14(d) , there is no litigation or order pending or outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property or Confidential Information of the Company and the Company’s use of any Intellectual Property or Confidential Information owned by a third party, and, to the Company’s Knowledge, there is no valid basis for the same.

(e)          The consummation of the transactions contemplated hereby will not result in the alteration, loss, impairment of or restriction on the Company’s ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of the Company’s respective business as currently conducted or as currently proposed to be conducted.

(f)           To the Company’s Knowledge, all software owned by the Company, and, to the Company’s Knowledge, all software licensed from third parties by the Company, (i) is free from any material defect, bug, virus, or programming, design or documentation error; (ii) operates and runs in a reasonable and efficient business manner; and (iii) conforms in all material respects to the specifications and purposes thereof.

(g)          The Company has taken reasonable steps to protect its rights in its Intellectual Property and Confidential Information.  Each employee, consultant and contractor who has had access to Confidential Information which is necessary for the conduct of Company’s business as currently conducted or as currently proposed to be conducted has executed an agreement to maintain the confidentiality of such Confidential Information and has executed appropriate agreements that are substantially consistent with the Company’s standard forms therefor.  To the Company’s Knowledge, there has been no material disclosure of any of the Company’s Confidential Information to any third party without the Company’s consent.

5.15.        Environmental Matters .  The Company (i) is not in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “ Environmental Laws ”), (ii) neither owns nor operates any real property contaminated with any substance that is subject to any Environmental Laws, (iii) is not liable for any off-site disposal or contamination pursuant to any Environmental Laws, and (iv) is not subject to any claim relating to any Environmental Laws; which violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim.

5.16.        Litigation .  Except as set forth in Section 5.16, there are no pending actions, suits or proceedings against or affecting the Company or any of its properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated.

5.17.        Financial Statements .  The financial statements of the Company included in the SEC Filings fairly present 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 United States 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 not incurred any liabilities, contingent or otherwise, except those which, individually or in the aggregate, have not had or could not reasonably be expected to have a Material Adverse Effect.

5.18.        Insurance Coverage .  The Company maintains in full force and effect insurance coverage and the Company reasonably believes such insurance coverage is adequate.  The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s lines of business.

5.19.        Brokers and Finders .  Except as disclosed in Schedule 5.19 , no Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or Purdue for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company.

5.20.        No Directed Selling Efforts or General Solicitation .  Neither the Company nor any Affiliate, nor any Person acting on its behalf has conducted any “general solicitation” or “general advertising” (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.

5.21.        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 Company security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act, which would require the registration of any such securities under the 1933 Act or under the rules and regulations of the OTCBB on which any of the securities of the company are listed or designated, including circumstances that would adversely affect reliance by the Company on Section 4(2) of the 1933 Act for the exemption from the registration requirements imposed under Section 5 of the 1933 Act for the transactions contemplated hereby or would require such registration the 1933 Act.

5.22.        Private Placement .  Subject to the accuracy of the representations and warranties of Purdue contained in Section 6 hereof, the offer and sale of the Securities to Purdue as contemplated hereby is exempt from the registration requirements of the 1933 Act.

5.23.        Questionable Payments .   Neither the Company nor, to the Company’s Knowledge, any of its current or former stockholders, directors, officers, employees, agents or other Persons acting on its behalf, has on behalf of the Company or in connection with the Company’s business: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company; (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature; or (f) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

5.24.        Transactions with Affiliates .  Except as set forth on Schedule 5.24, none of the officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction, or presently contemplated transaction, with the Company (other than for services as employees, officers and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the 1933 Act.

5.25.        Trading Compliance .  The Common Stock is traded on the OTCBB and the Company has taken no action designed to, or which to the Company’s Knowledge is likely to have the effect of, causing the Common Stock not to continue to be traded on the OTCBB.  No order ceasing or suspending trading in any securities of the Company or prohibiting the issuance and/or sale of the Securities is in effect and no proceedings for such purpose are pending or threatened.  The Company is in compliance with all OTCBB rules and regulations in effect as of the Initial Closing necessary to ensure that the Common Stock is authorized to be traded on the OTCBB.  To the extent such OTCBB rules and regulations have been materially amended or revised since the Initial Closing, the Company has used its best efforts to comply with such amendments and revisions in order to ensure that the Common Stock is authorized to be traded on the OTCBB.

5.27.        Sarbanes-Oxley; Internal Accounting Controls .  The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Initial Closing.  The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with United States general accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the 1934 Act, as the case may be, is being prepared.  The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the date prior to the filing date of the most recently filed periodic report under the 1934 Act (such date, the “ Evaluation Date ”).  The Company presented in its most recently filed periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 307(b) of Regulation S-K under the 1934 Act) or, to the Knowledge of the Company, in other factors that could significantly affect the Company’s internal controls.

5.28.        Solvency .  Based on the financial condition of the Company as of each Closing after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof.  The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt).  Assuming that the Company receives the entire Investment Amount as provided in this Agreement, it has no present intention to, nor does it have a present belief that it will need to, file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction.   Schedule 5.28 sets forth all outstanding secured and unsecured Indebtedness of the Company, or for which the Company has commitments.  The Company is not in default with respect to any Indebtedness.

6.            Representations and Warranties of Purdue.   Purdue hereby represents and warrants to the Company on and as of each Closing, knowing and intending that the Company rely thereon, that:

6.1.          Authorization .  The execution, delivery and performance by Purdue of the Transaction Documents to which Purdue is a party have been duly authorized and will each constitute the valid and legally binding obligation of Purdue, enforceable against Purdue in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

6.2.          Purchase Entirely for Own Account .  The Securities to be received by Purdue hereunder will be acquired for Purdue’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 the 1933 Act, and Purdue has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act.  Purdue is not a registered broker dealer or an entity engaged in the business of being a broker dealer.

6.3.          Investment Experience .  Purdue 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 that it is capable of evaluating the merits and risks of the investment contemplated hereby.  Purdue has significant experience in making private investments, similar to the purchase of the Securities hereunder.

6.4.          Disclosure of Information .  Purdue has had an opportunity to receive all additional information related to the Company requested by it 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.  Purdue acknowledges receipt of copies of and its satisfactory review of the SEC Filings.  Neither such inquiries nor any other due diligence investigation conducted by Purdue shall modify, amend or affect Purdue’s right to rely on the Company’s representations and warranties contained in this Agreement.

6.5.          Restricted Securities .  Purdue 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 and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.

6.6.          Legends .

(a)          It is understood that, except as provided below, certificates evidencing such Securities may bear the following or any similar legend:

“THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (II) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.”

(b)          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.

(c)          From and after the first anniversary of the Initial Closing in the case of the Common Shares and the first anniversary of the date of exercise of a Warrant in the case of the Warrant Shares, provided, in each case, that Purdue is not an Affiliate of the Company and has not been an Affiliate for a period of ninety days, the Company shall, upon Purdue's written request, promptly cause certificates evidencing such Securities to be replaced with certificates which do not bear such restrictive legends.  When the Company is required to cause unlegended certificates to replace previously issued legended certificates, if unlegended certificates are not delivered to an Investor within three (3) Business Days of submission by Purdue of legended certificate(s) to the Company’s transfer agent together with a representation letter in customary form, the Company shall be liable to Purdue for liquidated damages equal to 1.5% of the aggregate purchase price of the Securities evidenced by such certificate(s) for each 30-day period (or portion thereof) beyond such three (3) Business Day-period that the unlegended certificates have not been so delivered.

6.7.          Accredited Investor .  Purdue is an “accredited investor” as defined in Rule 501(a) of Regulation D.

6.8.          No General Solicitation .  Purdue did not learn of the investment in the Securities as a result of any “general advertising” or “general solicitation” as those terms are contemplated in Regulation D.

6.9.          Brokers and Finders .  Other than as disclosed on Schedule 5.19 , no Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or Purdue for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of Purdue.

7.1.          Conditions to Purdue’s Obligations . The obligation of Purdue to purchase the Securities at each Closing is subjec