SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of March 3, 2010,
is entered into by and between Wound Management Technologies, Inc., (the
“Company”), a Texas corporation, having its address at 777 Main Street, Suite
3100, Fort Worth, TX  76102, and each entity named on the signature page hereto
as a buyer and the permitted assigns of such entity (each, a “Buyer”) (each
agreement with a Buyer being deemed a separate and independent agreement between
the Company and such Buyer, except that each Buyer acknowledges and consents to
the rights granted to each other Buyer under this Agreement and the Transaction
Documents (as defined below).

WITNESSETH:

WHEREAS, the Company and the Buyers are executing and delivering this Agreement
in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”),
and/or Section 4(2) of the Securities Act; and
 
WHEREAS, the Buyers severally, and not jointly, wish to purchase, upon the terms
and subject to the conditions of this Agreement, a minimum aggregate amount of
$50,000 and a maximum aggregate amount of $1,000,000 of Convertible Debentures
of the Company (the “Debentures”), in the form of Exhibit A hereto, which will
be convertible into shares of the Company’s Common Stock, par value $0.001 per
share (the “Common Stock”), upon the terms and subject to the conditions of the
Debentures, and subject to acceptance of this Agreement by the Company;
 
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
 
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
 
a. Purchase.
 
(i) The undersigned Buyers hereby severally agree to purchase the Debentures
from the Company on the terms and conditions set forth below in this Agreement
and the other Transaction Documents (as defined below).
 
(ii) Subject to the terms and conditions of this Agreement and the other
Transaction Documents the Buyers will purchase the Debentures at one or more
closings (each, a “Closing”) to be held on the respective Closing Dates (as
defined below).
 
(iii) The purchase price to be paid respectively by the Buyers shall equal 100%
of the face amount of the Debentures being purchased on the Closing Date by each
Buyer as set forth on the signature page to this Agreement.
 
b. Certain Definitions.
 

 
 

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c.   As used herein, each of the following terms has the meaning set forth
below, unless the context otherwise requires:
 
(i) “Affiliate” means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
 
(ii) “Certificates” means the relevant Debentures duly executed on behalf of the
Company and issued in the name of the respective Buyer.
 
(iii) “Closing Date” means the respective dates on which the Closings referred
to in this Agreement are held.
 
(iv) “Conversion Shares” means the shares of Common Stock issuable upon
conversion of the Debentures.
 
(v) “Dollars” or “$” means United States Dollars.
 
(vi) “Effective Date” means the effective date of the Registration Statement
covering the Registrable Securities (as those terms are defined in the
Registration Rights Agreement defined below) for the Debentures issued
hereunder.
 
(vii) “Escrow” means the Escrow Account maintained at Branch Banking and Trust
Company in connection with the purchase and sale of the Debentures hereunder.
 
(viii) “Existing Liens” shall have the meaning ascribed to such term in Section
4(i).
 
(ix) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(x) “Final Closing Date” shall have the meaning ascribed to such term in Section
6(a).
 
(xi) “Person” means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
 
(xii) “Placement Agent” means Divine Capital Markets, LLC.
 
(xiii) “Placement Agent Shares” shall have the meaning ascribed to such term in
Section 12(a).
 
(xiv) “Purchase Price” means the purchase price for the Debentures.
 
(xv) “Registration Rights Agreement” shall have the meaning ascribed to such
term in Section 3(d).
 
(xvi) “Securities” means the Debentures and the Shares.
 

 
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(xvii) “Shares” means the Conversion Shares and the shares issued to the
Placement Agent or any of its designees in connection with its services in
connection with this offering of Debentures.
 
(xviii) “Subsidiary” shall have the meaning ascribed to such term in Section
3(b).
 
(xix) “Transaction Documents” means, collectively, this Agreement, the
Debentures, the Registration Rights Agreement and the other agreements,
documents and instruments contemplated hereby or thereby.
 
(xx) “Transfer Agent” shall have the meaning ascribed to such term in Section
4(a).
 
c. Form of Payment; Delivery of Certificates.
 
(i) Each of the Buyers shall pay the Purchase Price for the Debentures to be
purchased by such Buyer by delivering immediately available good funds in United
States Dollars to the Escrow prior to the respective Closing on the applicable
Closing Date, determined as provided in Section 6.
 
(ii) Promptly following payment to the Company from the Escrow of the Purchase
Price to be paid for the purchase of the Debentures being purchased by such
Buyer, the Company shall deliver to the Buyers the Certificates purchased at
such Closing.
 
d. Payment to the Escrow.  All payments to the Escrow for the purchase of the
Debentures shall be made at or prior to the Closing by wire transfer of funds to
the Escrow, as follows:

 
Beneficiary Account Name:  Wound Management Technologies, Inc. - Special Escrow
Account

FBO: For the benefit of Purchasers of Debentures of
          Wound Management Technologies, Inc.
Beneficiary Account No.:
________________________
ABA/Transit No.:
________________________
Beneficiary Bank:
________________________

 
 
2. BUYERS REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
 
Each Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
 
a. Without limiting any Buyer’s right to sell the Common Stock pursuant to the
Registration Statement, each Buyer is purchasing the Debentures and will be
acquiring the Conversion Shares for its own account for investment only and not
with a view towards the public sale or distribution thereof and not with a view
to or for sale in connection with any distribution thereof.
 
 
 
 
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b. Each Buyer is (i) an “accredited investor” as that term is defined in Rule
501 of the General Rules and Regulations under the Securities Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
 
c. All subsequent offers and sales of the Securities by each Buyer shall be made
pursuant to registration of the Shares under the Securities Act or pursuant to
an exemption from registration and compliance with applicable states’ securities
laws.
 
d. Each Buyer understands that the Securities are being offered and sold to it
in reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyers set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyers to acquire the Securities.
 
e. Each Buyer and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by
the Buyer.  Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries.  Without limiting the generality of
the foregoing, each Buyer has also had the opportunity to obtain and to review
the Company’s (1) Annual Report on Form 10-K for the fiscal year ended December
31, 2008, filed March 31, 2009, (2) Quarterly Reports on Form 10-Q for the
fiscal quarter ended September 30, 2009, filed November 20, 2009, the fiscal
quarter ended June 30, 2009, filed August 14, 2009, and the fiscal quarter ended
March 31, 2009, filed May 15, 2009 and (3) Current Reports on Form 8-K filed
March 1, 2010, February 9, 2010, January 14, 2010, October 2, 2009,
September  21, 2009 (as amended by Amendment No. 1, filed February 26, 2010),
June 18, 2009, June 16, 2009 and January 20, 2009 (collectively, the “SEC
Documents”).
 
f. Each Buyer understands that its investment in the Securities involves a high
degree of risk, including the risk of loss of the Buyer’s entire investment.
 
g. Each Buyer understands that no United States federal or state agency or any
other government or governmental agency has passed on or made any recommendation
or endorsement of the Securities.
 
h. Each Buyer is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.  This Agreement and the other
Transaction Documents have been duly and validly authorized, executed and
delivered on behalf of the Buyer and create a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors’ rights generally.
 
 

 
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i. The state in which any offer to purchase shares hereunder was made to or
accepted by such Buyer is the state shown as the Buyer’s address on the
signature page hereof.
 
j. Each Buyer understands that the Placement Agent is acting as the Company’s
agent in this Offering and is being compensated by the Company for such services
(as detailed in Section 12(a)).  Moreover, each Buyer understands and agrees
that, to the extent such Buyer utilizes the brokerage services of the Placement
Agent in respect of Securities (whether in the form of Debentures or Shares),
the Placement Agent shall do so at the direction of such Buyer and the Placement
Agent shall not have investment power or investment discretion over such
Securities. Each Buyer further represents, acknowledges and agrees that its
decision to invest in the securities of the Company was arrived at in the sole
discretion of such Buyer, and that, unless and until a separate familial,
contractual or other relationship exists between or among specific Buyers
providing the basis for such Buyers to be Affiliates of each other, the Buyers
have exercised, and shall continue to exercise, their investment power and
investment discretion independently of one another.
 
k. Each Buyer acknowledges and agrees that (i) upon funding the Purchase Price
for the Debentures it agrees to purchase hereunder into the Escrow, Buyer shall
not be entitled to withdraw from the Escrow such funds without the written
consent of the Company and the Placement Agent, even though a Closing with
respect to such purchase has not yet occurred, (ii) funds representing the
Purchase Price furnished into the Escrow may be held for an indefinite period of
time, pending the purchase and sale of Debentures at a subsequent Closing and
(iii) the Buyer’s funding of the Purchase Price into the Escrow shall not
constitute its purchase of Debentures unless and until the funds are released
from Escrow at a Closing, and accordingly, the Buyer will not own Debentures,
and will not be deemed to have invested in Debentures (and accordingly, the
holding period for purposes of determining the availability of an exemption from
registration under Rule 144 promulgated pursuant to the Securities Act in
connection with any Securities will not commence) unless and until the purchase
and sale of Debentures occurs at a Closing with respect to such funds.

3. COMPANY REPRESENTATIONS, ETC.
 
  The Company represents and warrants to the Buyers that:
 
a. Concerning the Debentures and the Shares.  There are no preemptive rights of
any stockholder of the Company to acquire the Debentures or the Shares.
 
 
 
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b. Organization; Subsidiaries; Reporting Company Status.  Attached hereto as
Schedule 3(b) is an organizational chart describing the Company’s majority-owned
subsidiaries (the “Subsidiaries”) and the relationships among the Company and
such Subsidiaries, including as to each Subsidiary its jurisdiction of
organization and the percentage of ownership held by the Company, and the parent
company of the Company, including the percentage of ownership of the Company
held by it.  The Company and each Subsidiary is a corporation or other form of
businesses entity duly organized, validly existing and in good standing under
the laws its respective jurisdiction of organization, and each of them has the
requisite corporate or other power to own its properties and to carry on its
business as now being conducted.  The Company and each Subsidiary is duly
qualified as a foreign corporation or other entity to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or condition (financial or otherwise)
or results of operation of the Company taken as a whole, including, without
limitation, a finding that the Company or any Subsidiary, or any of their
respective customers, in using any product or service provided by the Company or
any Subsidiary, has violated any provision of the Health Insurance Portability
and Accountability Act or any regulation promulgated thereunder, irrespective of
any finding of fault, magnitude of liability (or lack of financial liability) or
purported lack of materiality (it being understood that the mere finding of any
such violation is in itself material and adverse (each, a “Material Adverse
Effect”).  The Company has registered its Common Stock pursuant to Section 12 of
the Exchange Act, and the Common Stock is listed and traded on the OTC Bulletin
Board Market of the National Association of Securities Dealers, Inc. (trading
symbol:  WNDM.otcbb).  The Company has received no notice, either oral or
written, with respect to the continued eligibility of the Common Stock for such
listing, and the Company has maintained all requirements for the continuation of
such listing.
 
c. Authorized Shares.  The following table sets fort all capital stock and
derivative securities of the Company is that are authorized for issuance and
that are issued and outstanding:
 

  Capitalization Table Wound Management Technologies, Inc. as of March 3, 2010  
(stated on a common stock basis)        
Common Stock
     
Authorized
100,000,000  
Par value
$0.001 per share
Issued and Outstanding
32,933,221 (1)          
Preferred Stock
     
Authorized
5,000,000  
Par value
$5.00 per share
Issued and Outstanding:  zero
     
 
Common Stock Equivalents
     
Plan Options                  Authorized
0    
                                        Granted
0            
Non-Options/Other
0                    
Warrants
0            
Convertible Debt
69,231 (2)                  
TOTALOUTSTANDING
(Fully Diluted)
33,002,452    

 
 
 
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(1)  Excludes Common Stock to be issued to the Placement Agent in connection
with the sale of the Common Stock to the Investors.  See Section 12(a).
 
(2)  $45,000 principal amount of convertible debt, convertible at 65% of the
average of the lowest three closing prices over the ten trading day period prior
to conversion.
 
All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable.  The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect the
issuance of the Shares, assuming the prior issuance and exercise, exchange or
conversion, as the case may be, of all  derivative securities authorized, as
indicated in the above table.  The Shares have been duly authorized and, when
issued upon conversion of, or as interest on, the Debentures, the Shares will be
duly and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder.  At all
times, the Issuer shall keep available and reserved for issuance to the holders
of the Debentures Common Stock duly authorized for issuance against the
Debentures.
 
d. Registration Rights Agreement.  This Agreement and the Registration Rights
Agreement, dated as of the date hereof, between the Company and the Buyers,
substantially in the form of Exhibit B annexed hereto (the “Registration Rights
Agreement”), and the issuance of the Debentures (including without limitation
the incurrence of indebtedness thereunder) and the other transactions
contemplated by the Transaction Documents, have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company.  Each of the Transaction Documents, when executed and delivered by the
Company, are and will be, valid, legal and binding agreements of the Company,
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors’
rights generally.

e. Non-contravention.  The execution and delivery of the Transaction Documents,
the issuance of the Securities and the consummation by the Company of the other
transactions contemplated by this Agreement, the Registration Rights Agreement
and the Debentures (including without limitation the incurrence of indebtedness
thereunder) do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock, except as herein set forth or an event which results in the creation of
any lien, charge or encumbrance upon any assets of the Company or the triggering
of any preemptive or anti-dilution rights or rights of first refusal or first
offer on the part of holders of the Company’s securities, (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company’s listing agreement for its Common Stock (if applicable), except such
conflict, breach or default which would not have a Material Adverse Effect.
 
 
 
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f. Approvals.  No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company is required to be obtained by the
Company for the entering into and performing this Agreement and the other
Transaction Documents (including without limitation the issuance and sale of the
Securities to the Buyers as contemplated by this Agreement) except such
authorizations, approvals and consents that have been obtained, or such
authorizations, approvals and consents, the failure of which to obtain would not
have a Material Adverse Effect.
 
g. SEC Filings.  None of the SEC Documents contained, at the time they were
filed, any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein in light of the circumstances under which they were made, not
misleading.  The Company timely filed all requisite forms, reports and exhibits
thereto with the SEC as required as required.  The Company is not aware of any
event occurring on or prior to a Closing Date or the Delivery Date (other than
the transactions effected hereby) that would require the filing of, or with
respect to which the Company intends to file, a Form 8-K after such date.
 
h. Absence of Certain Changes.  Since September 30, 2009, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, except as disclosed in the SEC Documents. Since
September 30, 2009, except as provided in the SEC Documents, the Company has not
(i) incurred or become subject to any material liabilities (absolute or
contingent) except liabilities incurred in the ordinary course of business
consistent with past practices; (ii) discharged or satisfied any material lien
or encumbrance or paid any material obligation or liability (absolute or
contingent), other than current liabilities paid in the ordinary course of
business consistent with past practices; (iii) declared or made any payment or
distribution of cash or other property to stockholders with respect to its
capital stock, or purchased or redeemed, or made any agreements to purchase or
redeem, any shares of its capital stock; (iv) sold, assigned or transferred any
other tangible assets, or canceled any debts or claims, except in the ordinary
course of business consistent with past practices; (v) suffered any substantial
losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of existing
business; (vi) made any changes in employee compensation, except in the ordinary
course of business consistent with past practices; or (vii) experienced any
material problems with labor or management in connection with the terms and
conditions of their employment.
 
i. Full Disclosure.  There is no fact known to the Company (other than general
economic conditions known to the public generally or as disclosed in the SEC
Documents) that has not been disclosed in writing to the Buyers that (i) would
reasonably be expected to have a Material Adverse Effect, (ii) would reasonably
be expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Transaction Documents, or (iii) would
reasonably be expected to materially and adversely affect the value of the
rights granted to the Buyers in the Transaction Documents.
 
j. Absence of Litigation.  Except as described in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a Material Adverse Effect or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Documents.  The Company is
not a party to or subject to the provisions of, any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality which
could reasonably be expected to have a Material Adverse Effect.
 
k. Absence of Events of Default.  No Event of Default (or its equivalent term),
as defined in the respective agreement, indenture, mortgage, deed of trust or
other instrument, to which the Company is a party, and no event which, with the
giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such document), has occurred
and is continuing, which would have a Material Adverse Effect.
 
 
l. No Undisclosed Liabilities or Events.  The Company has no liabilities or
obligations other than those disclosed in the SEC Documents or those incurred in
the ordinary course of the Company’s business since September 30, 2009, and
which individually or in the aggregate, do not or would not have a Material
Adverse Effect.  No event or circumstances has occurred or exists with respect
to the Company or its properties, business, condition (financial or otherwise),
or results of operations, which, under applicable law, rule or regulation,
requires public disclosure or announcement prior to the date hereof by the
Company but which has not been so publicly announced or disclosed.  There are no
proposals currently under consideration or currently anticipated to be under
consideration by the Board of Directors or the executive officers of the Company
which proposal would (x) change the articles of incorporation, by-laws or any
other charter document of the Company, each as currently in effect, with or
without shareholder approval, which change would reduce or otherwise adversely
affect the rights and powers of the shareholders of the Common Stock or (y)
materially or substantially change the business, assets or capital of the
Company.

m. No Integrated Offering.  Neither the Company nor any of its affiliates nor
any Person acting on its or their behalf has, directly or indirectly, at any
time during the six month period immediately prior to the date of this Agreement
made any offer or sales of any security or solicited any offers to buy any
security under circumstances that would eliminate the availability of the
exemption from registration under Rule 506 of Regulation D in connection with
the offer and sale of the Securities as contemplated hereby.
 
n. Dilution.  The number of Shares issuable upon conversion of the Debentures
may increase substantially in certain circumstances, including, but not
necessarily limited to, the circumstance wherein the market price of the Common
Stock declines prior to the conversion of the Debentures.  The Company’s
executive officers and directors have studied and fully understand the nature of
the securities being sold hereby and recognize that they have a potential
dilutive effect and further that the conversion of the Debentures and/or sale of
the Conversion Shares may have an adverse effect on the market price of the
Common Stock.  The board of directors of the Company has concluded, in its good
faith business judgment that such issuance is in the best interests of the
Company.  The Company specifically acknowledges that its obligation to issue the
Conversion Shares upon conversion of the Debentures is binding upon the Company
and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
 
 
 
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o. Regulatory Permits.  The Company has all such permits, easements, consents,
licenses, franchises and other governmental and regulatory authorizations from
all appropriate federal, state, local or other public authorities (“Permits”) as
are necessary to own and lease its properties and conduct its businesses in all
material respects in the manner described in the SEC Documents and as currently
being conducted.  All such Permits are in full force and effect and the Company
has fulfilled and performed all of its material obligations with respect to such
Permits, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination thereof or will result in any other
material impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be disclosed in the Prospectus.  Such
Permits contain no restrictions that would materially impair the ability of the
Company to conduct businesses in the manner consistent with its past
practices.  The Company has not received notice or otherwise has knowledge of
any proceeding or action relating to the revocation or modification of any such
Permit.
 
p. Hazardous Materials.  The Company is in compliance with all applicable
Environmental Laws in all respects except where the failure to comply does not
have and could not reasonably be expected to have a Material Adverse
Effect.  For purposes of the foregoing:
 
“Environmental Laws” means, collectively, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act,
as amended, the Clean Water Act, as amended, any other “Superfund” or
“Superlien” law or any other applicable federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, the environment or any
Hazardous Material.

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste,
substance or material, the generation, handling, storage, disposal, treatment or
emission of which is subject to any Environmental Law.

q. Independent Public Accountants. Pritchett, Siler & Hardy, PC, who has
certified the consolidated financial statements of the Company, including the
notes thereto, included in the Company’s Annual Report on Forms 10-K for the
year ended December 31, 2008, is an independent registered public accounting
firm with respect to the Company, as required by the Securities Act, the
Exchange Act and the rules and regulations promulgated thereunder.
 
r. Internal Accounting Controls.  The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (1)
transactions are executed in accordance with management’s general or specific
authorization; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (3) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (4) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
 
s.      Brokers.  The Company engaged the Placement Agent in connection with the
offering of the Debentures and the Shares to the Buyers hereunder.  No Person
(other than the Placement Agent and its principals, employees and agents) is
entitled to receive any consideration from the Company or any Buyer arising from
any finder’s agreement, brokerage agreement or other agreement to which the
Company is a party.

4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
 
a. Transfer Restrictions.  The parties acknowledge and agree that:
 
(1) the Debentures have not been and are not being registered under the
provisions of the Securities Act and, except as provided in the Registration
Rights Agreement, the Shares have not been and are not being registered under
the Securities Act, and may not be transferred unless (A) subsequently
registered thereunder or (B) the Securities to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration under
applicable law;
 
(2) any sale of the Securities made in reliance on Rule 144 promulgated under
the Securities Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller, or the Person through whom the sale is made,
may be deemed to be an underwriter, as that term is used in the Securities Act,
may require compliance with some other exemption under the Securities Act or the
rules and regulations of the SEC thereunder;
 
(3) at the request of any Buyer, the Company shall, from time to time, within
two (2) business days of such request, at the sole cost and expense of the
Company, either (i) deliver to its transfer agent and registrar for the Common
Stock (the “Transfer Agent”) a written letter (“Company Instructions”)
instructing and authorizing the Transfer Agent to process transfers of the
Shares at such time as the Buyer has held the Securities for the minimum holding
period permitted under Rule 144 (currently, six (6) months), subject to the
Buyer’s providing to the Transfer Agent certain customary representations
contemporaneously with any requested transfer, or (ii) an opinion of the
Company’s counsel (a “Company Trading Opinion”) in favor of the Buyer and the
Transfer Agent, reasonably satisfactory in form, scope and substance to the
Buyer and the Transfer Agent, to the effect that registration in connection with
a resale by such Buyer of any of the Securities in accordance with clause (1)(B)
of this Section 4(a) is not required under the Securities Act, the Company shall
(except as otherwise provided in clause (2) of this Section 4(a)) permit the
transfer of the Securities and, in the case of the Shares, instruct the
Company’s Transfer Agent to issue one or more certificates for Common Stock
without any restrictive legend in such name and in such denominations as
specified by the Buyer; and
 
 
 
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(4) neither the Company nor any other Person is under any obligation to register
the Securities (other than pursuant to the Registration Rights Agreement) under
the Securities Act or to comply with the terms and conditions of any exemption
thereunder.
 
b. Restrictive Legend.  The Buyers acknowledge and agree that the Debentures,
and, unless Company Instructions or a Trading Opinion has been issued in respect
of the Shares or the Shares have been registered under the Securities Act as
contemplated by the Registration Rights Agreement and sold in accordance with an
effective Registration Statement, certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
 
THESE SECURITIES (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
 
c. Registration Rights Agreement.  The parties hereto agree to enter into the
Registration Rights Agreement on or before the Closing Date.
 
d. Securities Filings.  The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Buyers required
under any United States laws and regulations applicable to the Company
(including without limitation a Form D filing under Regulation D promulgated
pursuant to the Securities Act and any filings required under state “blue sky”
laws), or by any domestic securities exchange or trading market, and to provide
copies thereof to any Buyer upon their request.

e. Reporting Status; Public Trading Market.  So long as any of the Buyers
beneficially own any Securities and any Shares are outstanding, (i) the Company
shall timely file, prior to or on the date when due, all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination, (ii) the Company shall not be operated
as, or report, to the SEC or any other Person, that the Company is a “shell
company” or indicate to the contrary to the SEC or any other Person, (iii) the
Company shall take all other action under its control necessary to ensure the
availability of Rule 144 under the Securities Act for the sale of Shares by the
Buyers.  Except as otherwise set forth in Transaction Documents, the Company
shall take all action under its control necessary to obtain and to continue the
listing and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the OTC Bulletin Board Market (“OTCBB”) of the
National Association of Securities Dealers, Inc. and will comply in all material
respects with the Company’s reporting, filing and other obligations under the
by-laws or rules of the National Association of Securities Dealers, Inc.
(“NASD”).  If, so long as any of the Buyers beneficially own any of the
 
 
 
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Securities,  the Company receives any written notice from the OTCBB, NASD or the
SEC with respect to either any alleged deficiency in the Company’s compliance
with applicable rules and regulations (including without limitation any comments
from the SEC on any of the Company’s documents filed (or the failure to have
made any such filing)  under the Securities Act or the Exchange Act) (each, a
“Regulatory Notice”), then the Company shall promptly, and in any event within
two business days, provide copies of the Regulatory Notice to the Buyers, and
shall promptly, and in any event , respond in writing to the OTCBB, NASD and/or
SEC (as the case may be)(the “Regulatory Response”),  within the time period
requested in the Regulatory Notice, setting forth the Company’s explanation
and/or response to the issues raised in the Regulatory Notice, with a view
towards maintaining and/or regaining full compliance with the applicable rules
and regulations of the OTCBB, NASD and/or SEC and maintaining or regaining good
standing of the Company with the OTCBB, NASD and/or SEC, as the case may be, the
intent being to ensure that the Company maintain its reporting company status
with the SEC and that its Common Stock be and remain available for trading on
the OTCBB (excluding the “pink sheets”).
 
f. Use of Proceeds.   The Company will use the proceeds from the sale of the
Debentures (excluding amounts paid by the Company for legal fees in connection
with the sale of the Debentures) for internal working capital purposes.  Except
in connection with the possible redemption of Placement Agent Shares as
described in Section 12(a), absent the prior written approval of a majority of
the principal amount of the Debentures then outstanding, the Company shall not
use any portion of the proceeds of the sale of the Debentures to (i) repay any
indebtedness or other obligation of the Company incurred prior to the date of
this Agreement outside the normal course of business, (ii) pay any dividends or
redemption amount on any of the Company’s equity or equity equivalents or (iii)
pay deferred compensation or any compensation to any of the directors or
officers of the Company in excess of the rate or amount paid or accrued during
the fiscal year ended December 31, 2009, other than modest increases consistent
with prior practice that are approved by the Company’s Board of Directors.
 
g. Available Shares.  The Company shall have at all times authorized and
reserved for issuance to the Holders of Debentures, free from preemptive rights,
shares of Common Stock equal to three hundred percent (300%) of the number of
shares of Common Stock issuable upon conversion of the then-outstanding
Debentures (including accrued interest thereon) as may be required to satisfy
the conversion rights of the Buyers pursuant to the terms and conditions of the
Debentures.  The Company shall monitor the foregoing on an ongoing basis.  If at
any time the Company does not have available an amount of authorized and
unissued Shares required to be so reserved, then the Company shall, without
notice or demand by the Buyers, call within thirty (30) days of such occurrence
and hold within sixty (60) days of such occurrence a special meeting of
shareholders, for the sole purpose of increasing the number of shares of Common
Stock authorized for issuance..  At the meeting, management of the Company shall
recommend to shareholders that they vote in favor of increasing the number of
shares of Common Stock authorized.  Members of the Company’s Management shall
also vote all of their own shares in favor of increasing the number of shares of
Common Stock authorized at the meeting.  If the increase in authorized shares is
approved by the stockholders at the meeting, the Company shall implement the
increase in authorized shares within one (1) business day following approval at
such meeting.  Alternatively, to the extent permitted by applicable law, in lieu
of calling and holding a meeting of stockholders as described above, within
thirty (30) days of the date when the Company does not have available an amount
of authorized and non-issued Shares required to be reserved as described above,
the Company may procure the written consent of stockholders to approve the
increase the number of shares of Common Stock authorized and provide the
stockholders with notice thereof as may be required under applicable law
(including without limitation Section 14(c) of the Exchange Act and Regulation
14C thereunder).  Upon obtaining stockholder approval as aforesaid, the Company
shall implement the appropriate increase in its authorized shares of Common
Stock within one (1) business day or as soon thereafter as permitted by
applicable law.
 
h. Reimbursement.  If (i) any Buyer, other than by reason of its gross
negligence, willful misconduct or breach of law, becomes a party defendant in
any capacity in any action or proceeding brought by any stockholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by the Transaction Documents, or if such Buyer is
impleaded in any such action, proceeding or investigation by any Person, or (ii)
any Buyer, other than by reason of its gross negligence, willful misconduct or
breach of law, becomes a party defendant in any capacity in any action or
proceeding brought by the SEC against or involving the Company or in connection
with or as a result of the consummation of the transactions contemplated by the
Transaction Documents, or if such Buyer is impleaded in any such action,
proceeding or investigation by any Person, then in any such case, the Company
will reimburse such Buyer for its reasonable legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliates of the Buyers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling Persons (if any), as the case may
be, of the Buyers and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Buyers and any such Affiliate and any such Person.  Except as
otherwise set
 
i.  forth in the Transaction Documents, the Company also agrees that neither any
Buyer nor any such Affiliate, partners, directors, agents, employees or
controlling Persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the
 

 
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k. Company in connection with or as a result of the consummation of the
Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of such Buyer or  from a breach of the representations,
covenants and conditions contained herein or from a breach of law.
 
j. No New Indebtedness or Liens.  So long as any of the Debentures remain
outstanding, the Company shall not, absent the prior written consent of the
holders of all Debentures then outstanding, enter into, create, incur, assume or
suffer to exist any indebtedness or liens of any kind, on or with respect to any
of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, or pari passu
with, in any respect, the Company’s obligations under the Debentures, other than
purchase money security interests granted to suppliers to the Company and any of
the foregoing that are made in the ordinary course of business of the Company
and its Subsidiaries.  Schedule 4(j) hereto sets forth all liens and
encumbrances upon the assets of the Company as of the date hereof (the “Existing
Liens”).  Notwithstanding the restrictions set forth above in this Section 4(j),
the Existing Liens shall be permitted to remain in place until the Company’s
underlying obligations have been satisfied, provided, however, that the
incurrence of additional indebtedness or other obligations of the Company in
connection with the Existing Liens shall not be permitted.  For example, if a
creditor has an Existing Lien on certain assets of the Company to secure an
obligation consisting of $100,000 indebtedness of the Company, then the Company
shall not be permitted to increase the amount of indebtedness above the amount
extant on the date of this Agreement (inclusive of interest which may accrue
under the terms of such indebtedness) or to transfer or continue the Existing
Lien in alternate indebtedness, notwithstanding any agreement between the
Company and such creditor to do so.
 
 
 
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k. No Payments to Affiliates or Related Parties.  So long as any of the
Debentures remain outstanding, the Company shall not, absent the prior written
consent of the holders of all Debentures then outstanding, make any payments
using any portion of the gross proceeds from any Closing, to any of the
Company’s or the Subsidiaries’ respective affiliates or related parties,
including without limitation payments or prepayments of principal or interest
accrued on any indebtedness or obligation in favor of affiliates or related
parties as described in the SEC Documents.
 
l. Notice of Material Adverse Effect.  The Company shall notify the Buyers (and
any subsequent holder of the Debentures), as soon as practicable and in no event
later than five (5) business days of the Company’s knowledge of any Material
Adverse Effect on the Company.  For purposes of the foregoing, “knowledge” means
the earlier of the Company’s actual knowledge or the Company’s constructive
knowledge upon due inquiry.
 
5. TRANSFER AGENT INSTRUCTIONS.
 
a. The Company shall at all times while any Debentures are outstanding engage a
Transfer Agent.  As of the date of this Agreement, the Transfer Agent is
Securities Transfer Corporation. Within five (5) business days following the
purchase by the Buyers of the Debentures in accordance with Section 1(c) hereof,
the Company will irrevocably instruct its Transfer Agent in writing (with copies
to be provided to the Placement Agent) to (i) reserve that number of shares of
Common Stock as is equal to three hundred percent (300%) of the number of shares
of Common Stock issuable upon conversion of the then-outstanding Debentures
(including accrued interest thereon) as may be required to satisfy the
conversion rights of the Buyers pursuant to the terms and conditions of the
Debentures, and (ii) issue Common Stock from time to time upon conversion of the
Debentures in such amounts as specified from time to time by the Company to the
Transfer Agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the Securities Act,
registered in the name of the respective Buyer or its permitted assigns and in
such denominations to be specified by such Buyer in its Conversion Notice (as
defined in the Debenture) given in connection with each conversion of the
Debentures, provided, that if at the time of delivery of a Conversion Notice,
(i) the Buyer requests, or there has previously been delivered to the Transfer
Agent, either (a) Company Instructions or (b) a Company Trading Opinion, or (ii)
any Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company (a “Buyer Trading Opinion” and, together with a
Company Trading Opinion, a “Trading Opinion”) that registration of a resale by
such Buyer of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the Securities Act, the Company
shall permit the transfer of the Securities and, in the case of the Converted
Shares, instruct the Company’s Transfer Agent to issue one or more certificates
for Common Stock without legend in such name and in such denominations as
specified by the Buyer.
 
b. Periodically, if and to the extent necessary to increase the number of
reserved shares to remain at 300% to account for any decrease in the market
price of the Common Stock, the Company shall notify its registrar and Transfer
Agent in writing of the reservation of such additional shares.  The Company
shall provide the Placement Agent with a copy of such written instructions to
the Company’s Transfer Agent simultaneously with the issuance of such
instructions to the Transfer Agent.  The Company agrees that if the Buyer is not
in breach of its representations and warranties contained in this Agreement, no
instruction other than such instructions referred to in this Section 5 and stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Converted Shares under the Securities Act, will be
given by the Company to the Transfer Agent and that the Converted Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Registration Rights Agreement,
Company Instructions or any Trading Opinion and applicable law.  Nothing in this
Section 5(a) shall affect in any way the Buyers’ obligations and agreement to
comply with all applicable securities laws upon resale of the Securities.
 
c. (i)      The Company will permit the Buyers to exercise their rights to
convert the Debentures by telecopying or delivering an executed and completed
Notice of Conversion to the Company.  The Company will within two (2) business
days respond with its endorsement so as to confirm the outstanding principal
amount of any Debenture submitted for conversion or shall reconcile any
difference with the Buyer promptly after receiving such Notice of Conversion.
 
(ii) The term “Conversion Date” means, with respect to any conversion elected by
the holder of the Debentures, the date specified in the Notice of Conversion,
provided the copy of the Notice of Conversion is given either via mail or
facsimile to or otherwise delivered to the Company in accordance with the
provisions hereof so that it is received by the Company on or before such
specified date.

(iii) The Company will transmit the certificates representing the Converted
Shares issuable upon conversion of any Debentures (together, unless otherwise
instructed by the Buyer, with Debentures not being so converted) to the Buyer at
the address specified in the Notice of Conversion (which may be the Buyer’s
address for notices as contemplated by Section 12 hereof or a different address)
via express courier, by electronic transfer or otherwise, within five (5)
business days if the address for delivery is in the United States and within
seven (7) business days if the address for delivery is outside the United States
(such fifth business day or seventh business day, as the case may be, the
“Delivery Date”) after (A) the business day on which the Company has received
the Notice of Conversion (by facsimile or other delivery) or (B) the date on
which payment of interest and principal on the Debentures, which the Company has
elected to pay by the issuance of Common Stock, as contemplated by the
Debentures, was due, as the case may be.
 
 
 
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d. From and after the date on which the Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement, the failure
to issue unrestricted, freely tradable Conversion Shares to the Buyers upon
Conversion shall be considered an Event of Default, which if not cured after
five (5) days, shall entitle the Buyer(s) whose Debentures are being converted
to demand that the Debentures held by such Buyer(s) be immediately redeemed in
full by a cash payment equal to 130% of the aggregate of the unpaid principal
amount of and accrued interest on such Debentures (whether or not the terms of
such Debentures expressly permit the redemption thereof).  The Company
acknowledges that its failure to honor a Notice of Conversion shall cause
definable financial hardship on the Buyer(s).
 
e. The Company shall inform the Transfer Agent of the reservation of shares
contemplated by Section 4(g) and this Section 5, and shall keep current in its
payment obligations to the Transfer Agent such that the Transfer Agent will
continue to process share transfers and the initial issuance of shares of Common
Stock upon the conversion of Debentures.  The Company hereby authorizes the
Transfer Agent to correspond and otherwise communicate with the Buyers or their
representatives in connection with the foregoing and other matters related to
the Common Stock.  Further, the Company hereby authorizes the Buyers or their
representatives to provide instructions to the Transfer Agent that are
consistent with the foregoing and instructs the Transfer Agent to honor any such
instructions.  Should the Company fail for any reason to keep current in its
payment obligations to the Transfer Agent, the Buyers may pay such amounts as
are necessary to return the Company to good standing with the Transfer Agent,
and all amounts so paid shall be promptly reimbursed by the Company.  If not so
reimbursed within thirty (30) days, such amounts shall, at the option of the
Buyer(s) who paid amounts to the Transfer Agent but without prior notice to or
consent of the Company, be added to the principal amount due under the
Debenture(s) held by such Buyer(s), whereupon interest will begin to accrue on
such amounts at the rate specified in the Debentures.
 
f. Each Buyer shall be entitled to exercise its conversion privilege with
respect to the Debentures notwithstanding the commencement of any case under 11
U.S.C. §101 et seq. (the “Bankruptcy Code”).  In the event the Company is a
debtor under the Bankruptcy Code, the Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. §362 in
respect of such Buyer’s conversion privilege.  The Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362
in respect of the conversion of the Debentures.  The Company agrees, without
cost or expense to such Buyer, to take or to consent to any and all action
necessary to effectuate relief under 11 U.S.C. §362.
 
6. CLOSING DATES.
 
a. The purchases and sales of Debentures will occur at one or more Closings
under this Agreement, the first of which will occur after Buyers have deposited
not less than $50,000 of the Purchase Price in the Escrow for the transactions
contemplated under this Agreement, on a Closing Date determined by the Placement
Agent and the Company.  Subsequent Closing(s) under this Agreement will occur
after Buyers who will purchase the balance or a portion thereof of the
Debentures to be purchased and sold under this Agreement have deposited
the  amount of their Purchase Prices in the Escrow, with the Closing Date(s)
from time to time.  The final Closing shall occur after the Buyers who will
purchase the balance of the Debentures to be purchased and sold under this
Agreement (which may be in any amount up to $1,000,000, in the aggregate) have
deposited the full amount of their Purchase Prices in the Escrow, with the
Closing Date of such final
 
 
 
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Closing (the “Final Closing Date”) to occur on the date determined by the
Placement Agent or the Company; provided, that should no additional amounts be
deposited into the Escrow, the Final Closing Date shall be a date determined by
the Placement Agent, acting in its sole discretion.  If any of the conditions
precedent to Closing set forth in Sections 7 or 8 are not satisfied and are not
waived within thirty (30) days by the party which benefits from such conditions
(i.e., the Company, in the case of those conditions set forth in Section 7 and
the Buyer(s), in the case of those conditions set forth in Section 8), then the
Offering shall terminate, and the Company shall provide written notice of
termination to the escrow agent administering the Escrow so stating and
instructing the escrow agent to return to the Buyer(s) the amounts held in the
Escrow furnished by the Buyer(s), provided, that if the Company does not
promptly so furnish such notice and instructions, then the Placement Agent may,
in the Company’s stead, provide such notice and instructions, which shall for
all purposes be construed as if the same was provided by the Company.
 
b. In the case of each Closing, the Closing Date shall occur after each of the
conditions contemplated by Sections 7 and 8 hereof shall have either been
satisfied or been waived by the party in whose favor such conditions run.  It is
anticipated that the initial Closing will occur as soon as reasonably practical
after the minimum investment in the Offering has been deposited into the
Escrow.  Following the initial Closing, assuming additional funds representing
the Purchase Price of Debentures sought to be acquired are furnished by Buyers
into the Escrow, absent a contrary agreement by the Placement Agent and the
Company, subsequent Closing(s) will occur on or about the second-to-last last
business day of each month while the Offering is being made, prior to the final
Closing.
 
c. In the case of each Closing, the Closing of the purchase and issuance of
Debentures shall occur on the respective Closing Date at the offices of the
Placement Agent’s counsel, Zabatta Group, LLP, 91 Central Park West, Suite 1H,
New York, NY  10023, and shall take place no later than 3:00 P.M., New York
time, on such day or at such other place, date or time as is mutually agreed
upon by the Company and the Buyers (acting through the Placement Agent).

7. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
 
The Company’s obligation to sell the Debentures to the Buyer pursuant to this
Agreement on each Closing Date is conditioned upon:
 
a. Delivery from the Escrow to the Company of good funds as payment in full of
an amount equal to the Purchase Price for the Debentures in accordance with this
Agreement;
 
b. The accuracy on the Closing Date of the representations and warranties of the
Buyers contained in this Agreement, each as if made on such date, and the
performance by the Buyers on or before such date of all covenants and agreements
of the Buyers required to be performed on or before such date; and
 
 
 
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c. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
 
8. CONDITIONS TO THE BUYERS’ OBLIGATION TO PURCHASE.
 
The Buyer’s obligation of those Buyers who are purchasing Debentures at a
particular closing to purchase the Debentures on the applicable Closing Date is
conditioned upon:
 
a. The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company;
 
b. Delivery by the Company to the Buyers of the Debentures to be purchased in
accordance with this Agreement;
 
c. Delivery by the Company to the Buyers of an opinion of counsel to the
Company, substantially in the form attached hereto as Exhibit D and dated as of
the Closing Date;
 
d. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
 
e. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and
 
f. From and after the date hereof to and including the Closing Date, (i) the
trading of the Common Stock shall not have been suspended by the SEC or the NASD
and trading in securities generally on OTCBB shall not have been suspended or
limited, nor shall minimum prices been established for securities traded on the
OTCBB, (ii) there shall not have occurred any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyers
makes it impracticable or inadvisable to purchase the Debentures.  Additionally,
in the event of each Closing following the initial Closing, it shall be a
condition precedent to such Closing that no material adverse change to the
Company’s financial condition or operations shall have occurred in the interim
period following the immediately preceding Closing.
 
9. GOVERNING LAW; MISCELLANEOUS.
 
a. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws.  Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City and County of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.  To the extent determined by such court, the Company shall
reimburse the Buyers for any reasonable legal fees and disbursements incurred by
the Buyers in enforcement of or protection of any of its rights under any of the
Transaction Documents.
 
 
 
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b. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
 
c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
 
d. All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
 
e. A facsimile transmission of this signed Agreement shall be legal and binding
on all parties hereto.
 
f. This Agreement may be signed in one or more counterparts, each of which shall
be deemed an original.
 
g. The headings of this Agreement are for convenience of reference and shall not
form part of, or affect the interpretation of, this Agreement.
 
h. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
 
i. This Agreement may be amended only by the written consent of a majority in
interest of the holders of the Debentures and an instrument in writing signed by
the Company.
 
j. This Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.

10. NOTICES.
 
  Any notice required or permitted hereunder shall be given in writing (unless
otherwise specified herein) and shall be deemed effectively given on the
earliest of:
 
a. the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,
 
b. the seventh business day after deposit, postage prepaid, in the United States
Postal Service by registered or certified mail, or
 
c. the third business day after mailing by next-day express courier, with
delivery costs and fees prepaid, in each case, addressed to each of the other
parties thereunto entitled at the following addresses (or at such other
addresses as such party may designate by ten (10) days’ advance written notice
similarly given to each of the other parties hereto):
 
 
 
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COMPANY:
Wound Management Technologies, Inc.
 
777 Main Street, Suite 3100
 
Fort Worth, TX  76102
 
Fax No.  888-746-7566
Attention:  Scott Haire, Chief Executive Officer
   
BUYERS:
At the address set forth on the signature pages of this Agreement.
     
With copies to:
 
Divine Capital Markets, LLC
 
39 Broadway, 36th Floor
New York, NY  10006
 
Fax No. 212-509-5867
Attention:  Jason Goldstein, Senior Vice President

11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s and the Buyers’
representations and warranties herein shall survive for a period of fifteen (15)
months after the execution and delivery of this Agreement and shall inure to the
benefit of the Buyers and the Company and their respective successors and
assigns.
 
12. FEES; EXPENSES.
 
a. At each Closing, the Placement Agent shall receive cash compensation
(inclusive of expenses) equal to thirteen percent (13%) of the gross proceeds of
the Debentures (payable at each Closing), and in addition, at the initial
Closing under this Offering, the Company shall at each Closing issue shares of
Common Stock (the “Placement Agent Shares”) in an amount equal to twenty percent
(20%) of the gross proceeds of the Debentures issued and sold at such Closing
(calculated using the closing bid price on the day of Closing), in the form of
restricted securities and appropriately legended, to be issued to the Placement
Agent or to such Persons as the Placement Agent shall designate to the Company
in writing.  The Company shall also reimburse the Placement Agent for expenses
it incurs in connection with its services to the Company in its capacity as
Placement Agent in accordance with the terms of the agreement, dated February 9,
2010 between the Company and the Placement Agent.  The cash compensation and
expenses shall be deducted from the proceeds of the sale of the Debentures at
each Closing.
 
b. The Company will pay the legal fees of the Placement Agent in the amount of
$12,500 and will pay the 100% of the disbursements actually incurred by counsel
to the Placement Agent.  The Company will pay $12,500 to such counsel at the
initial Closing under this Offering, and in that connection the Company and the
Placement Agent shall authorize the deduction of such amount from the Escrow at
the initial Closing and disbursement of the same to the Placement Agent’s legal
counsel at the initial Closing.  The Company will pay disbursements of the
Placement Agent’s legal counsel within ten (10) days of invoice therefor.  The
$12,500 in respect of fees of the Placement Agent’s counsel shall include only
those fees paid for services rendered up to the Final Closing Date, and any
other reasonable legal fees incurred by the Placement Agent’s counsel in
connection with the Transaction Documents (including enforcement of the
Company’s obligations or the exercise of the Placement Agent’s or the Buyers’
remedies thereunder) or, if requested by the Placement Agent, review of the
Registration Statement (including review and comment on drafts thereof and
advice concerning sales of Registrable Securities (as defined in the
Registration Rights Agreement) shall be payable by the Company to such counsel
within ten (10) days of the invoice therefor.
 
[Signature Page Follows]
 

 
18

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IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyers and the
Company as of the date set forth below.
 
Date:           As of March 3, 2010
 

 
COMPANY:
 
 
Wound Management Technologies, Inc.
 
 
 
By:   /s/ Scott Haire
 
Name:  Scott Haire
Title:    Chief Executive Officer
         
BUYER:
 
 
Name:
 
 
By:                                                                        
 
                       (Signature of Authorized Person)
 
Print Name:
 
 
Date Signed:
 
Address:
 
 
Telephone:
 
Facsimile:
 
Principal Amount of Debentures to be Purchased:
$_______________
 
Tax ID No.  _____________________

 

 

 
[Signature Page to Securities Purchase Agreement]
 

 
 

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Exhibit A
FORM OF DEBENTURE

 
Exhibit B
REGISTRATION RIGHTS AGREEMENT

 
Exhibit C
FORM OF OPINION OF COUNSEL

 
 

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

 

EXHIBIT A

 
DEBENTURE
 
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.  THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
 
$_____________

 
WOUND MANAGEMENT TECHNOLOGIES, INC.
 
CONVERTIBLE DEBENTURE DUE [_________________, 2013]
[THIRD ANNIVERSARY OF FINAL CLOSING DATE]
 
Date of Issuance:  [_________________] [CLOSING DATE OF THIS BUYER’S FUNDING]

FOR VALUE RECEIVED, WOUND MANAGEMENT TECHNOLOGIES, INC., a corporation organized
and existing under the laws of the State of Texas (the "Company"), hereby
promises to pay to [________________], having its address at
[_________________________________________] or its assigns (the "Holder" and
together with the other holders of Debentures issued pursuant to the Securities
Purchase Agreement (as defined below), the "Holders"), the principal sum of
[___________________] and 00/100 Dollars ($_______________) on [___________,
2013] [THIRD ANNIVERSARY OF FINAL CLOSING DATE] (the "Maturity Date") and to pay
simple interest on the principal sum outstanding from time to time in arrears
(i) upon conversion as provided herein or (ii) on the Maturity Date, at the rate
of six percent (6%) per annum (subject to adjustment pursuant to Section 10
hereof).  Interest shall commence to accrue on this Debenture on the first such
business day to occur after the date hereof and shall continue on a daily basis
until payment in full of the principal sum has been made or duly provided for or
until the full outstanding amount of this Debenture has been converted in
accordance with the provisions hereof.  The Company has the option to redeem
this Debenture prior to the Maturity Date pursuant to Section 2(b).  All unpaid
principal and interest due and payable on the Maturity Date shall be paid in the
form of Common Stock of the Company, par value $0.001 per share ("Common Stock")
pursuant to Section 3.  The Holder has the option to cause any outstanding
principal and interest on this Debenture to be converted into Common Stock at
any time prior to the Redemption Date (as defined below) or the Maturity Date
pursuant to Section 2(a).
 
This Debenture is the Debenture referred to in the Securities Purchase Agreement
(the "Securities Purchase Agreement") dated as of March 3, 2010, between the
Company and the Holder, is subject to the provisions of the Securities Purchase
Agreement and further is subject to the following additional provisions:
 

 
 

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

 

 
1. This Debenture has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only (a) with the
Company’s prior written consent, which consent the Company may grant or
withhold, in its sole discretion, and (b) in compliance with the Securities Act
and other applicable state and foreign securities laws.  In the event of any
proposed transfer of this Debenture to which the Company has granted its
consent, the Company may require, prior to issuance of a new Debenture in the
name of such other Person, that it receive reasonable transfer documentation
including legal opinions that the issuance of the Debenture in such other name
does not and will not cause a violation of the Securities Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Debenture to which the Company has consented, the Company and any agent of the
Company may treat the Person in whose name this Debenture is duly registered on
the Company's Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
 
2. Conversion at Holder’s Option; Redemption at Company’s Option.
 
a.           The Holder is entitled to, at any time or from time to time,
convert the Conversion Amount into shares of Common Stock, at a conversion price
for each share of Common Stock (the “Conversion Price") equal to seventy percent
(70%) of the lowest closing bid price per share (as reported by Bloomberg LP) of
Common Stock for the twenty (20) trading days immediately preceding the date of
conversion (subject to equitable adjustments resulting from any stock splits,
stock dividends, recapitalizations or similar events occurring during such
20-day period).  Notwithstanding the foregoing, the Holder shall not be entitled
to convert any part of this Debenture as to which the Company has previously
issued to the Holder a Redemption Notice in accordance with Section 2(b).  If
the Debenture is the subject of an acceleration following the occurrence of an
Event of Default, the delivery by a Holder of a Conversion Notice following such
acceleration shall be deemed a waiver of such Event of Default by such Holder
only, which waiver shall only be applicable to the amount of the Debenture that
is sought to be converted pursuant to the Conversion Notice, with the
unconverted balance of the indebtedness represented by such Debenture remaining
subject to the Event of Default and acceleration notwithstanding such
waiver.  The Conversion Price will be adjusted as provided in Section 6.  For
purposes of this Debenture, the following terms have the meanings indicated
below:
 
(i) “Conversion Amount” shall mean the sum of (A) all or any portion of the
outstanding principal amount of this Debenture, as designated by the Holder upon
exercise of its right of conversion plus (B) all interest that has accrued on
the portion of the principal amount that has been designated for payment
pursuant to (A).
 
(ii) “Market Price of the Common Stock” means (x) the closing bid price of the
Common Stock for the period indicated in the relevant provision hereof (unless a
different relevant period is specified in the relevant provision), as reported
by Bloomberg, LP or, if not so reported, as reported on the over-the-counter
market or (y) if the Common Stock is listed on a stock exchange, the closing
price on such exchange, as reported in The Wall Street Journal.
 

 
2

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(iii) “Trading Day” shall mean any day on which the New York Stock Exchange is
open for business.
 
Conversion shall be effectuated by delivering by facsimile or other delivery to
the Company of the completed form of conversion notice attached hereto as
Exhibit A, executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion hereof.  No
fractional shares of Common Stock or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to
the nearest whole share.  The date on which notice of conversion is given (the
"Conversion Date") shall be deemed to be the date on which the Company receives
by fax or by mail the conversion notice (“Notice of Conversion”), substantially
in the form annexed hereto as Exhibit A, duly executed, to the
Company.  Facsimile delivery of the Notice of Conversion shall be accepted by
the Company at facsimile number 888-746-7566, Attention: Corporate Secretary (or
to such other facsimile number as the Company may hereafter advise the Holder in
writing).  Certificates representing Common Stock upon conversion (and, if
applicable, a Trading Opinion) must be delivered to the Holder within five (5)
business days from the date of delivery of the Notice of Conversion.

Notwithstanding the foregoing, unless the Holder delivers to the Company written
notice at least sixty-one (61) days prior to the effective date of such notice
that the provisions of this paragraph (the “Limitation on Ownership”) shall not
apply to such Holder, in no event shall a holder of Debentures have the right to
convert Debentures into, nor shall the Company issue to such Holder, shares of
Common Stock to the extent that such conversion would result in the Holder and
its affiliates together beneficially owning more than 4.99% of the then issued
and outstanding shares of Common Stock.  For purposes hereof, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.

 
b.           So long as no Event of Default (as defined in Section 10) shall
have occurred and be continuing, the Company may at its option call for
redemption all or part of the Debentures prior to the Maturity Date, as follows:
 
 
(i)  
The Debentures called for redemption shall be redeemable for an amount (the
“Redemption Price”) equal to (x) if this Debenture is called for redemption
prior to the date which is earlier than six months from the Issuance Date set
forth on the first page of this Debenture (the “Issuance Date”), one hundred
twenty percent (120%), or if this Debenture is called for redemption on or after
the date that is six months from the Issuance Date, one hundred thirty one
percent (131%), in either case of the principal amount called for redemption,
plus (y) interest accrued through the day immediately preceding the date of
redemption (the “Redemption Date”).

 
 
(ii)  
If fewer than all outstanding Debentures are to be redeemed, then all Debentures
shall be partially redeemed on a pro rata basis.

 
 
(iii)  
Prior to the Redemption Date, the Company shall deposit into escrow an amount
sufficient for the payment of the aggregate Redemption Price of the Debentures
being called for redemption and shall make such funds
available on and after the Redemption Date for payment to the Holders who
present their Debentures and otherwise comply with the Company’s instructions
contained in the Redemption Notice (as defined below).
 

 

 
3

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

 
 
(v)  
On the Redemption Date, the Company shall cause the Holders whose Debentures
have been presented for redemption to be issued payment of the Redemption
Price.  In the case of a partial redemption, the Company shall also issue new
Debentures to the Holders for the principal amount remaining outstanding after
the Redemption Date promptly after the Holders’ presentation of the Debentures
called for redemption.

 
 
(vi)  
Not less than ten (10) days prior to the Redemption Date, the Company shall
issue a notice (the “Redemption Notice”) to each Holder setting forth the
following:

 
 
1.  
the Redemption Date;

 
 
2.  
the Redemption Price;

 
 
3.  
the aggregate principal amount of the Debentures being called for redemption;

 
 
4.  
a statement instructing the Holders to surrender their Debentures for redemption
and payment of the Redemption Price, including the name and address of the
Company or, if applicable, the paying agent of the Company, where Debentures are
to be surrendered for redemption;

 
 
5.  
a statement advising the Holders that (x) interest will cease to accrue on the
Debentures (or, in the case of a partial redemption, that portion of the
Debentures being called for redemption) as of the Redemption Date, and (y) that
the Debentures (or, in the case of a partial redemption, that portion of the
Debentures being called for redemption) as of the Redemption Date will cease to
be convertible into Common Stock as of the Redemption Date; and

 
 
6.  
in the case of a partial redemption, a statement advising the Holders that after
the Redemption Date a substitute Debenture will be issued by the Company after
deduction the portion thereof called for redemption, at no cost to the Holder.

 
 
3. Unless demand has otherwise been made by the Holder in writing for payment in
cash as provided hereunder, any Debentures not previously tendered to the
Company for conversion as of the Maturity Date shall be deemed to have been
surrendered for conversion, without further action of any kind by the Company or
any of its agents, employees or representatives, as of the Maturity Date at the
Conversion Price applicable on the Maturity Date (“Mandatory Conversion”).
 

 
4

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

 

4.  No provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional to convert this Debenture into
Common Stock, at the time, place, and rate herein prescribed.  This Debenture is
a direct obligation of the Company.
 
5. If the Company (a) merges or consolidates with another corporation or
business entity and the Company is not the surviving entity or (b) sells or
transfers all or substantially all of its assets to another Person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee will agree that this Debenture may thereafter
be converted on the terms and subject to the conditions set forth above into the
kind and amount of stock, securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of shares of Common
Stock into which this Debenture might have been converted immediately before
such merger, consolidation, sale or transfer, subject to adjustments which shall
be as nearly equivalent as may be practicable.  In the event of any (i) proposed
merger or consolidation where the Company is not the surviving entity or (ii)
sale or transfer of all or substantially all of the assets of the Company (in
either such case, a "Sale"), the Holder shall have the right to convert by
delivering a Notice of Conversion to the Company within fifteen (15) days of
receipt of notice of such Sale from the Company.
 
6. If, at any time while any portion of this Debenture remains outstanding, the
Company effectuates a stock split or reverse stock split of its Common Stock or
issues a dividend on its Common Stock consisting of shares of Common Stock or
otherwise recapitalizes its Common Stock, the Conversion Price shall be
equitably adjusted to reflect such action.  By way of illustration, and not in
limitation, of the foregoing (i) if the Company effectuates a 2:1 split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such split, the Conversion Price
shall be deemed to be one-half of what it had been calculated to be immediately
prior to such split; (ii) if the Company effectuates a 1:10 reverse split of its
Common Stock, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such reverse split, the Conversion
Price shall be deemed to be the amount of such Conversion Price calculated
immediately prior to the record date multiplied by 10; and (iii) if the Company
declares a stock dividend of one share of Common Stock for every 10 shares
outstanding, thereafter, with respect to any conversion for which the Company
issues the shares after the record date of such dividend, the Conversion Price
shall be deemed to be the amount of such Conversion Price calculated immediately
prior to such record date multiplied by a fraction, of which the numerator is
the number of shares for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon.
 
7. All payments contemplated hereby to be made “in cash” shall be made by wire
transfer of immediately available funds in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.  All payments of cash and each delivery of shares of
Common Stock issuable to the Holder as contemplated hereby shall be made to the
Holder to an account designated by the Holder to the Company and if the Holder
has not designated any such accounts at the address last appearing on the
Debenture Register of the Company as designated in writing by the Holder from
time to time; except that the Holder may designate, by notice to the Company, a
different delivery address for any one or more specific payments or deliveries.
 

 
5

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8.  The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the Shares of Common Stock
issuable upon conversion thereof except in compliance with the terms of the
Securities Purchase Agreement and the Registration Rights Agreement and under
circumstances which will not result in a violation of the Securities Act or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale
of securities.
 
 
9. This Debenture shall be governed by and construed in accordance with the laws
of the State of New York. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City and County of New
York in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.  To the extent determined by such court, the Company
shall reimburse the Holder for any reasonable legal fees and disbursements
incurred by the Holder in enforcement of or protection of any of its rights
under this Debenture or the Securities Purchase Agreement.
 
10. The following shall constitute an "Event of Default":
 
a.           The Company fails in the payment of principal or interest on this
Debenture as required to be paid in cash hereunder, and payment shall not have
been made for a period of two (2) business days following the payment due date;
or

b.           Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Registration Rights Agreement,
dated as of March 3, 2010, between the Company and the Investors therein (the
"Registration Rights Agreement"), or in any certificate or financial or other
written statements heretofore or hereafter furnished by the Company to in
connection with the execution and delivery of this Debenture, the Securities
Purchase Agreement or the Registration Rights Agreement, shall be false or
misleading (including without limitation by way of the misstatement of a
material fact or the omission of a material fact) in any material respect at the
time made; or
 
c.           The Company (i) fails to timely file required SEC reports when due,
becomes, is deemed to be or asserts that it is a “shell company” for purposes of
the Securities Act, and Rule 144 promulgated thereunder or otherwise takes any
action, or refrains from taking any action, the result of which makes Rule 144
under the Securities Act unavailable to the Buyers for the sale of their
Securities, (ii) fails to issue shares of Common Stock to the Holder or to cause
its Transfer Agent to issue shares of Common Stock upon exercise by the Holder
of the conversion rights of the Holder in accordance with the terms of this
Debenture (as to which no cure period shall apply), (iii) fails to transfer or
to cause its Transfer Agent to transfer any certificate for shares of Common
Stock issued to the Holder upon conversion of this Debenture as and when
required by this Debenture or the Registration Rights Agreement, and such
transfer is otherwise lawful or (iv) fails to remove any restrictive legend or
to cause its Transfer Agent to transfer any certificate or any shares of Common
Stock issued to the Holder upon conversion of this Debenture as and when
required by this Debenture, the Agreement or the Registration Rights Agreement
and such legend removal is otherwise lawful, and in the case of clauses (iii)
and (iv) such failure shall continue uncured for two (2) business days (matters
set forth in clauses (i) and (ii) having no cure period); or
 

 
6

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d.           The Company shall fail to perform or observe, in any material
respect (i) any other covenant, term, provision, condition, agreement or
obligation of the Debenture, provided that, other than in the case of such
failure under Section 5 hereof, as to which no cure period shall apply, such
failure shall continue uncured for a period of thirty (30) days after written
notice from the holder of such failure, or (ii) any covenant, term, provision,
condition, agreement or obligation of the Company under the Securities Purchase
Agreement or the Registration Rights Agreement and such failure shall continue
uncured for a period of either (a) three (3) days after the occurrence of the
Company’s failure under Section 4(d), (e) (except as described in clause (i) of
Section 10(c), as to which Section 10(c) shall control), (f), (g) or (h) of the
Securities Purchase Agreement, or (b) thirty (30) days after the occurrence of
the Company’s failure under any other provision of the Securities Purchase
Agreement or of the Registration Rights Agreement, as the case may be; or
 
e.           The Company shall (1) admit in writing its inability to pay its
debts generally as they mature; (2) make an assignment for the benefit of
creditors or commence proceedings for its dissolution; or (3) apply for or
consent to the appointment of a trustee, liquidator or receiver for its or for a
substantial part of its property or business; or
 
f.           A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or
 
g.           Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company and
shall not be dismissed within sixty (60) days thereafter; or
 
h.           Any final money judgment, writ or warrant of attachment, or similar
process (including an arbitral determination), not subject to appeal, in excess
of Fifty Thousand Dollars ($50,000) in the aggregate shall be entered or filed
against the Company or any of its properties or other assets and shall remain
unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days or in
any event later than five (5) days prior to the date of any proposed sale
thereunder; or
 
i.           The occurrence of an event of default under the terms of any
indebtedness of the Company or any subsidiary (including but not limited to any
Subsidiary) of the Company in the aggregate amount of $50,000 or more which is
not waived by the creditors under such indebtedness (as to which no cure period
shall apply); or
 
j.           Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such proceeding;
or
 
k.           The issuance of an order, ruling, finding or similar adverse
determination by the Securities and Exchange Commission, the Secretary of State
of the State of Nevada, the National Association of Securities Dealers, Inc. or
any other securities regulatory body (whether in the United States, Canada or
elsewhere) having proper jurisdiction that the Company and/or any of its past or
present directors or officers have committed a material violation of applicable
securities laws or regulations; or
 

 
7

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l.           The Company shall have its Common Stock suspended or delisted from
an exchange for a period in excess of five (5) trading days; or
 
m.           Any of the following shall occur:  (i) any promissory notes or
other indebtedness to any related party of the Company shall be repaid in an
amount equal to $50,000 or more, singly or in the aggregate, (ii) any of the
other commitments, contingencies or notes payable described in the SEC Documents
which remain outstanding as of the date of the Securities Purchase Agreement
shall be paid in cash or shall become immediately due and payable by the
Company, in each case in an amount equal to $50,000 or more, singly or in the
aggregate or (iii) any other event, circumstance or combination thereof shall
have occurred which, singly or when taken as a whole, result in a Material
Adverse Effect.
 
Then, or at any time thereafter, the Company shall immediately give written
notice of the occurrence of such Event of Default to the Holders of all
Debentures then outstanding, and in each and every such case, unless such Event
of Default shall have been waived in writing by a majority in interest of the
Holders of the Debentures (which waiver shall not be deemed to be a waiver of
any subsequent default), then at the option of a majority in interest of the
Holders and in the discretion of a majority in interest of the Holders, (i) the
interest rate applicable to the Debentures shall be increased to the lesser of
eighteen percent (18%) per annum and the maximum interest rate allowable under
applicable law, and (ii) the Holder may at its option and discretion declare
this Debenture, together with all accrued and unpaid interest thereon, in an
amount equal to 130% of the principal plus accrued and unpaid interest (the
“Acceleration Amount”), to be immediately due and payable, without presentment,
demand, protest or notice of any kinds, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding.  A majority in interest of the Holders may immediately
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.  Notwithstanding the foregoing, in the
case of a default under Section 10(c), the Holder of the Debenture sought to be
converted, transferred or de-legended, as the case may be, acting singly, shall
have the sole and absolute discretion to increase the applicable interest rate
on the Debentures held by such Holder and/or to declare the Debenture(s) held by
such Holder to be immediately due and payable.  The Company expressly
acknowledges and agrees that the Acceleration Amount as so increased in the
event of a default is reasonable and appropriate due to the inability to define
the financial hardship that the Company’s default would impose on the
Holders.  For the avoidance of doubt, for purposes of the foregoing, notices and
other communications may be made on behalf of the Holders by the Holders’
Representative (as defined in the Registration Rights Agreement).
 
11. Nothing contained in this Debenture shall be construed as conferring upon
the Holder the right to vote or to receive dividends or to consent or receive
notice as a shareholder in respect of any meeting of shareholders or any rights
whatsoever as a shareholder of the Company, unless and to the extent converted
in accordance with the terms hereof.
 
12. This Debenture may be amended only by the written consent of the parties
hereto. Notwithstanding the foregoing, the principal amount of this Debenture
shall automatically be reduced by any and all Conversion Amounts (to the extent
that the same relate to principal hereof).  In the absence of manifest error,
the outstanding principal amount of the Debenture on the Company’s book and
records shall be the correct amount.
 
13. No waivers or consents in regard to any provision of this Debenture may be
given other than by an instrument in writing signed by the Holder.
 

 
8

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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by
an officer thereunto duly authorized.
 
WOUND MANAGEMENT TECHNOLOGIES, INC.

By:  _____________________________
        Scott Haire
        Chief Executive Officer

[Signature Page to Convertible Debenture]

 

 
 

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EXHIBIT A
 
NOTICE OF CONVERSION
 
(To Be Executed by the Registered Holder in order to Convert the Debenture)
 
The undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Debenture into Shares of Common Stock of Wound
Care Technologies, Inc. (the "Company") according to the conditions hereof, as
of the date written below.  After giving effect to the conversion requested
hereby, the outstanding principal amount of such debenture is $
____________________, absent manifest error.

Conversion Date

 

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Applicable Conversion Price

 

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

Signature
 

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

Print Name
 

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Address

 

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EXHIBIT B
 
REGISTRATION RIGHTS AGREEMENT
 
 
(CONVERTIBLE DEBENTURES)
 
THIS REGISTRATION RIGHTS AGREEMENT, dated as of (this "Agreement"), is made by
and between Wound Care Management Technologies, Inc., a Texas corporation, with
headquarters located at 777 Main Street, Suite 3100, Fort Worth, TX 76102 (the
“Company”), and each entity named on the signature page hereto as “Investors”
(each, an “Investor”).
 
W I T N E S S E T H:
 
WHEREAS, upon the terms and subject to the conditions of the Securities Purchase
Agreement, dated as of March 3, 2010, between the Buyers listed therein and the
Company (the "Securities Purchase Agreement"; terms not otherwise defined herein
shall have the meanings ascribed to them in the Securities Purchase Agreement),
the Company has agreed to issue and sell to the Investors one or more debentures
of the Company, in a minimum aggregate principal amount of $50,000 and a maximum
aggregate amount of $1,000,000 (the "Debentures"); and
 
WHEREAS, the Debentures are convertible into shares of Common Stock (the
"Conversion Shares"; which term, for purposes of this Agreement, shall be 300%
of that number of shares of Common Stock into which the Debentures, including
without limitation all shares of Common Stock issuable by the Company in lieu of
accrued interest on conversion as contemplated by the Debentures) upon the terms
and subject to the conditions contained in the Debentures.
 
WHEREAS, to induce the Investors to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), with respect to the Conversion Shares;
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
 
1. Definitions.                           As used in this Agreement, the
following terms shall have the following meanings:
 
a. “Holders’ Representative” means the Person appointed as the Holders’
Representative by the Investors pursuant to Section 11 hereof.
 
b. "Investor" means a Buyer and any permitted transferee or assignee of a Buyer
who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof and who holds Debentures or Registrable Securities.
 

 
 

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c. "Potential Material Event" means any of the following: (i) the possession by
the Company of material information not ripe for disclosure in a registration
statement, which shall be evidenced by determinations in good faith by the Board
of Directors of the Company that disclosure of such information in the
registration statement would be detrimental to the business and affairs of the
Company; or (ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the Company, be
adversely affected by disclosure in a registration statement at such time, which
determination shall be accompanied by a good faith determination by the Board of
Directors of the Company that the registration statement would be materially
misleading absent the inclusion of such information.
 
d. "Register," "Registered," and "Registration" refer to a registration effected
by preparing and filing a Registration Statement or Statements in compliance
with the Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
 
e. "Registrable Securities" means the Conversion Shares and, to the extent
applicable, any other shares of capital stock or other securities of the Company
or any successor to the Company that are issued upon exchange of the Conversion
Shares.
 
f. "Registration Statement" means a registration statement of the Company under
the Securities Act.
 
g. “SEC” means the United States Securities and Exchange Commission.
 
2. Piggy-back Registration.  From and after the date that is ninety (90) days
after the date of this Agreement and until the  third anniversary of the Closing
Date, for so long as any of the Registrable Securities are outstanding and are
not the subject of an effective registration statement, if the Company
contemplates making an offering of Common Stock (or other equity securities
convertible into or exchangeable for Common Stock) registered for sale under the
Securities Act or proposes to file a Registration Statement covering any of its
securities other than (i) a registration on Form S-8 or S-4, or any successor or
similar forms; and (ii) a shelf registration under Rule 415 for the sole purpose
of registering shares to be issued in connection with the acquisition of assets,
the Company will at each such time give prompt written notice to the Holders’
Representative and the Investors of its intention to do so and of the Investor’s
rights under this Agreement.  Upon the written request of any Investor made
within thirty (30) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration of all Registrable Securities which the
Company has been so requested to register by the Investors, to the extent
requisite to permit the disposition (in accordance with the intended methods of
disposition) of the Registrable Securities by the Investors requesting
registration, by inclusion of such Registrable Securities in the Registration
Statement which covers the securities which the Company proposes to register;
provided, that if the Company is unable to register the full amount of
Registrable Securities in an “at the market offering” under Commission rules and
regulations due to the high percentage of
 

 
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 the Company’s Common Stock the Registrable Securities represents (giving effect
to all other securities being registered in the Registration Statement), then
the Company may reduce, on a pro rata basis, the amount of Registrable
Securities subject to the Registration Statement to a lesser amount which equals
the maximum number of Registrable Securities that the Company is permitted to
register in an “at the market offering”; and provided, further, that if, at any
time after giving written notice of its intention to register any Registrable
Securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company shall determine for any reason
either not to register or to delay registration of such Registrable Securities,
the Company may, at its election, give written notice of such determination to
the Holders’ Representative and the Investors requesting registration and,
thereupon, (i) in the case of a determination not to register, the Company shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
expenses of registration in connection therewith), and (ii) in the case of a
determination to delay registering such Registrable Securities, shall be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities.
 
3. Obligations of the Company.  In connection with the registration of the
Registrable Securities, the Company shall do each of the following:
 
(a)           Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement as set
forth in Section 2 and the prospectus used in connection with the Registration
Statement as may be necessary to keep the Registration Statement effective at
all times during the period through the earliest of (i) the date that is five
(5) years after the last day of the calendar month following the month in which
the Registration Statement so filed is declared effective by the SEC, (ii) the
date when the Investors may sell all Registrable Securities under Rule 144, or
(iii) the date the Investors no longer own any of the Registrable Securities
(the “Registration Period”), Registration Period, comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
of the Company covered by the Registration Statement until such time as all of
such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement;
 
(b)           The Company shall permit a single firm of legal counsel designated
by the Holders’ Representative (the “Investors’ Counsel”) to review drafts of
the Registration Statement and all amendments and supplements thereto a
reasonable period of time (but not less than three (3) business days) prior to
their filing with the SEC, and not file any document in a form to which such
Investors’ Counsel reasonably objects.  If the Investors’ Counsel objects, the
Company shall take under advisement such objections and shall endeavor to
promptly make such revisions to the Registration Statement (or ancillary
documents and/or SEC filings in connection therewith) as are necessary to
satisfy the objections of the Investors’ Counsel;
 
(c)           Notify the Holders’ Representative and the Investors’ Counsel, and
any managing underwriters immediately (and, in the case of (i)(A) below, not
less than five (5) days prior to the contemplated date of such filing) and (if
requested by any the Holders' Representative) confirm such notice in writing no
later than one (1) business day following the
 

 
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day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a “review” of  Registration
Statement; (C) whenever the Company receives (or a representative of the Company
receives on its behalf) any oral or written comments from the SEC relating to a
Registration Statement (copies or, in the case of oral comments, summaries of
such comments shall be promptly furnished by the Company to the Holders’
Representative and the Investor’s Counsel); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of the Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) if at any time the Company has actual
knowledge that any of the representations or warranties of the Company contained
in any agreement (including any underwriting agreement) contemplated hereby
ceases to be true and correct in all material respects; (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  In addition, the Company shall respond to the SEC in
writing to comments on the Registration Statement by the SEC within fifteen (15)
business days of the Company’s receipt thereof, plus any additional time
reasonably required by the Company’s independent auditors to respond to
accounting comments and, if requested by the Holders' Representative and the
Investors’ counsel, the Company shall furnish the Holders' Representative with
copies of all intended written responses to the comments contemplated in clause
(C) of this Section 3(c) not later than one (1) business day in advance of the
filing of such responses with the SEC so that the Holders’ Representative and
the Investors’ Counsel shall have the opportunity to comment thereon;
 
(d)          Furnish to the Holders’ Representative and the Investors’ Counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary Prospectus and Prospectus, and each amendment or supplement
thereto, and (ii) if so requested by any Investor, such number of copies of a
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)           As promptly as practicable after becoming aware thereof, notify
the Holders’ Representative of the happening of any event of which the Company
has actual knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement or other
appropriate filing with the SEC to correct such untrue statement or omission,
and deliver a number of copies of such supplement or amendment to the Holders'
Representative and each Investor as such Investor may reasonably request;
 

 
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(f)           As promptly as practicable (and in any event not later than one
(1) business day) after becoming aware thereof, notify the Holders’
Representative of the issuance by the SEC of a Notice of Effectiveness or any
notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time;
 
(g)           Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of a Registration Statement, the Company
notifies the Holders’ Representative in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written notice from the
Company that such Potential Material Event either has been disclosed to the
public or no longer constitutes a Potential Material Event; provided, however,
that the Company may not so suspend the right to such Holders of Registrable
Securities for more than two twenty (20) business day periods in the aggregate
during any 12-month period ("Suspension Period") with at least a ten (10)
business day interval between such periods, during the periods the Registration
Statement is required to be in effect;
 
(h)           Use its  reasonable efforts to secure and maintain the designation
of all the Registrable Securities covered by the Registration Statement on the
NASDAQ/National Market System or the "OTC Bulletin Board Market" or any
successor thereto of the National Association of Securities Dealers Automated
Quotations System ("NASDAQ") within the meaning of Rule 11Aa2-1 of the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
quotation of the Registrable Securities on The NASDAQ National Market System;
and further use its efforts to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities;
 
(i)           Provide a Transfer Agent and registrar, which may be a single
entity, for the Registrable Securities not later than one (1) business day after
the effective date of the Registration Statement;
 
(j)           Cooperate with the Investors to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts as the case may
be, as the Investors may reasonably request, and, within five (5) business days
after a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the Transfer Agent for the Registrable
Securities (with copies to theInvestors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel;
 

 
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(k)           Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement;
 
(l)           Not take, or omit to take, any actions that would preclude the
filing or effectiveness of the Registration Statement or require the withdrawal
of the Registration Statement;
 
(m)           If the Registration Statement has been filed but has not been
declared effective by the SEC, not complete any acquisitions or business
combinations until the SEC has declared effective the Registration Statement
that registers the Registrable Securities.
 
4. Payments by the Company.  Unless the Company's performance is waived in
writing by the Holders' Representative:
 
(i) If the Company fails to satisfy its obligations under Sections 2 or 3, then
the Company shall immediately pay to the Investors without demand therefor a
cash amount equal to 2% per month of the outstanding principal amount of the
Debentures and, until such time as all such obligations shall have been
satisfied, the same amount shall accrue and become payable to the Investors
within three days on each subsequent month until such obligations shall have
been satisfied.  In light of the difficulty of ascertaining the amount of damage
that the Investors will suffer as a result of the Company’s failure to comply
with its obligations under Sections 2 or 3, all amounts payable under this
Section 4 shall be payable as liquidated damages, and not as a penalty.  The
Company shall keep the Registration Statement effective throughout the
Registration Period.
 
(ii) The parties acknowledge that the damages which may be incurred by the
Investors if the Company fails to satisfy any of its obligations under Sections
2 or 3 may be difficult to ascertain.  The parties agree that the payments to be
paid to the Investors under this Section 4 represent a reasonable estimate on
the part of the parties, as of the date of this Agreement, of the amount of such
damages.
 
5. Obligations of the Investors.  In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
 
(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 of a particular Investor that such Investor shall furnish
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 ten (10) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of such Investor's Registrable Securities included in the Registration
Statement.  If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive Investor;
 

 
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(b) Each Investor, by such Investor's 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 the Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from the Registration Statement; and
 
(c) Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(d) or 3(e), above,
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(d) or 3(e) and, if so directed by the
Company, such 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 such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
 
(d) Each holder of Registrable Securities that sells Registrable Securities
pursuant to a registration under this Agreement agrees that in connection with
registration as follows:
 
(i) Such seller shall cooperate as reasonably requested by the Company with the
Company in connection with the preparation of the registration statement, and
for as long as the Company is obligated to file and keep effective the
registration statement, shall provide to the Company, in writing, for use in the
registration statement, all such information regarding such seller and its plan
of distribution of the Registrable Securities as may reasonably be necessary to
enable the Company to prepare the registration statement and prospectus covering
the Registrable Securities, to maintain the currency and effectiveness thereof
and otherwise to comply with all applicable requirements of law in connection
therewith; and
 
(ii) During such time as such seller may be engaged in a distribution of the
Registrable Securities, such seller shall comply with Rules 10b-6 and 10b-7
promulgated under the Securities Exchange Act and pursuant thereto it shall,
among other things; (x) not engage in any stabilization activity in connection
with the securities of the Company in contravention of such rules; (y)
distribute the Registrable Securities under the registration statement solely in
the manner described in the registration statement; and (z) cease distribution
of such Registrable Securities pursuant to such registration statement upon
written notice from the Company that the prospectus covering the Registrable
Securities contains any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein not misleading.
 
 

 
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6. Expenses of Registration.
 
(a) All reasonable expenses (other than underwriting discounts and commissions
of the Investors) incurred for the Registration Statement covering the
Registrable Securities applicable to the Debentures shall be borne by the
Company, up to an aggregate amount of $75,000 in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, a fee for the Investors’
Counsel of not more than $10,000 and including, without limitation, all
registration, listing, and qualifications fees, printers, legal and accounting
fees and the fees and disbursements of counsel for the Company.
 
(b) The Company does not have, as of the date hereof, and neither the Company
nor any of its subsidiaries (including but not limited to any Subsidiary) shall
have, on or after the date of this Agreement, entered into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Investors in this Agreement or otherwise conflicts with the provisions
hereof.  Except as disclosed in the Securities Purchase Agreement or the other
documents entered into simultaneously therewith, the Company has not previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person.  Without limiting the generality of the
foregoing, without the written consent of the Investors holding a majority of
the Registrable Securities, the Company shall not grant to any Person the right
to request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject in all respects to the
prior rights in full of the Investors set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement and the other
Transaction Documents.
 
7. Indemnification.  In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
 
(a) To the extent permitted by law, the Company will indemnify and hold harmless
the Holders’ Representative, the Investor’s Counsel and each Investor who holds
such Registrable Securities, the directors, managers, partners, stockholders and
members, if any, of the Holders’ Representative, the Investor’s Counsel or such
Investor, the officers and employees, if any, of the Holders’ Representative,
the Investor’s Counsel or such Investor, and each Person, if any, who controls
the Holders’ Representative, the Investors Counsel or any Investor within the
meaning of the Securities Act or the Exchange Act (each, an "Indemnified Person"
or "Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue
 

 
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statement or alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading or (iii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations").  Subject to clause (b) of this Section 7, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim.  Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 7(a) shall not (I) apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant to Section
3(b) hereof;  (II) be available to the extent such Claim is based on a failure
of the Investor to deliver or cause to be delivered the prospectus made
available by the Company;  (III) apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; or (IV) apply to any
violation or alleged violation by an Indemnified Person of the Securities Act,
the Exchange Act, any state securities laws or any rule or regulation under the
Securities Act, the Exchange Act, or any state securities laws.   Each Investor
will indemnify the Company and its officers, directors and agents (each, an
"Indemnified Person" or "Indemnified Party") against any claims arising out of
or based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company, by or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions as are
applicable to the Indemnification provided by the Company to this Section
7.  Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors.
 
(b) Promptly after receipt by an Indemnified Person or Indemnified Party under
this Section 7 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 7, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be.  In case
any such action is brought against any Indemnified Person or Indemnified Party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such Indemnified Person or Indemnified
Party of its election so to assume the defense thereof, the indemnifying party
will
 

 
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 not be liable to such Indemnified Person or Indemnified Party under this
Section 7 for any legal or other reasonable out-of-pocket expenses subsequently
incurred by such Indemnified Person or Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion.  The
Indemnified Person or Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Person or Indemnified Party. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 7, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.  The indemnification required by this Section 7 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable.
 
8. Contribution.  To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 7 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 7; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation; and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
 
9. Reports under Exchange Act.  With a view to making available to the Investors
the benefits of Rule 144 promulgated under the Securities Act or any other
similar rule or regulation of the SEC that may at any time permit the Investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
 
a. make and keep public information available, as those terms are understood and
defined in Rule 144;
 
b. file with the SEC in a timely manner all reports and other documents required
of the Company under the Securities Act and the Exchange Act;
 
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and documents so filed by the Company and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without registration; and
 
d.   cause its counsel to deliver to its Transfer Agent such opinions of law as
shall be required to remove restrictive legends on the shares to be sold in the
standard form then employed for such purpose by such counsel or in such other
form as is reasonably acceptable to such Transfer Agent.
 

 
10

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10. Amendment of Registration Rights.  Any provision of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a fifty (50%) percent
interest of the Registrable Securities.  Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
 
11. Appointment and Indemnification of Holders’ Representative.  Each of the
Investors hereby appoints as the Holders’ Representative Divine Capital Markets,
LLC to so act until such time as all Registrable Securities have become
Registered and there shall be no Debentures issued and outstanding, or such time
as a successor to the then-acting Holders’ Representative is appointed in
writing signed by the Investors representing greater than 50% of the
then-outstanding Debentures and Registrable Securities.  The Holders’
Representative shall have full discretion and authority, without consultation
with the Holders, to accept and give notices on behalf of the Holders, to
communicate with the Holders at such times and in such manner as the Holders’
Representative in its discretion determines is appropriate and to grant
extensions of deadlines or waive any payment obligations set forth in Sections 2
and 3 hereof.  The Holders' Representative shall not have discretion or
authority to exercise any investment discretion over the Debentures, including
causing the conversion of any Debentures, absent a Holder's express written
authority.  Notwithstanding any provision to the contrary contained elsewhere
herein or in the Securities Purchase Agreement or the Debentures, the Holders’
Representative shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Holders’ Representative have or be
deemed to have any fiduciary relationship with any Holder, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the Securities Purchase Agreement or Debentures
or otherwise exist against the Holders’ Representative.  The Holders shall
indemnify upon demand the Holders’ Representative (to the extent not reimbursed
by or on behalf of the Company and without limiting the obligation of the
Company to do so under Section 7 hereof or under any other agreement or
applicable law), pro rata, and hold harmless the Holders’ Representative from
and against any and all against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Holders’ Representative’s
Claims") incurred by it; provided, however, that no Holder shall be liable for
the payment to the Holders’ Representative of any portion of such Holders’
Representative’s Claims to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from the Holders’
Representative’s own gross negligence or willful misconduct; provided, however,
that no action taken in accordance with the directions of the Holders shall be
deemed to constitute gross negligence or willful misconduct for purposes of this
Section 11.  Without limitation of the foregoing, each Holder shall reimburse
the Holders’ Representative upon demand for its ratable share of any costs or
out-of-pocket expenses incurred by the Holders’ Representative in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, the Securities Purchase Agreement, the Debentures, or any
document contemplated by or referred to herein, to the extent that the Holders’
Representative is not reimbursed for such expenses by or on behalf of the
Company.
 

 
11

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12 Miscellaneous.
 
a. A Person or entity is deemed to be a holder of Registrable Securities
whenever such Person or entity owns of record such Registrable Securities.  If
the Company receives conflicting instructions, notices or elections from two or
more Persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
 
b. Notices required or permitted to be given hereunder shall be given in the
manner contemplated by the Securities Purchase Agreement, (i) if to the Company
or to the Investors, to their respective address contemplated by the Securities
Purchase Agreement, and (iii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
12(b).
 
c. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
 
d. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws.  Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions.  To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under this Agreement.
 
e. If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
 
f. Subject to the requirements of Section 9 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto.
 
g. All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
 
h. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning thereof.
 

 
12

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i. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement.  This Agreement, once executed by a party, may be delivered to the
other party hereto by telephone line facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
 
j. The Company acknowledges that any failure by the Company to perform its
obligations under Sections 2 or 3 or any delay in such performance could result
in loss to the Investors, and the Company agrees that, in addition to any other
liability the Company may have by reason of such failure or delay, the Company
shall be liable for all direct damages caused by any such failure or delay,
unless the same is the result of force majeure.  Neither party shall be liable
for consequential damages.
 
k. This Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to
herein.  This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement thereof.
 

 
[Signature Page Follows]
 

 
13

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
 

 
COMPANY:
         
Wound Management Technologies, Inc.
         
By:   _______________________
   
       Name:  Scott Haire
           Title:           Chief Executive Officer        
INVESTOR:
 
           
Print Name of Investor Above
         
By:                                                       
           Investor Signature Above             Print Name of
Signatory:  _______________             Title of
Signatory:   ____________________   

[Signature Page to Registration Rights Agreement]

 
 

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SCHEDULE I
 

Buyer Name and Address
Amount Invested (Principal Amount of Debentures Purchased)
Closing Date
           
     TOTAL
$
 

 
 
 
 
 
 
 
 
 
 
 
 

 
 

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Buyer Name and Address
Amount Invested (Principal Amount of Debentures Purchased)
Closing Date
           
     TOTAL
$
 

 

 
 

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