THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933



 

 

THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
    HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
    EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT
    DATED AS OF JANUARY 24, 2005, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES
    MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
    REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT OR, AN OPINION OF
    COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN
    COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
    UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.

  

Right to Purchase 

1,140,000 

Shares of 

Common Stock, 

par value $.0001 

per share


STOCK PURCHASE WARRANT

        THIS CERTIFIES THAT, for value
received, AJW QUALIFIED PARTNERS, LLC or its registered assigns, is entitled to
purchase from MODERN TECHNOLOGY CORP., a Nevada corporation (the "Company"), at
any time or from time to time during the period specified in Paragraph 2 hereof,
One Million One Hundred Forty Thousand (1,140,000) fully paid and nonassessable
shares of the Company's Common Stock, par value $.0001 per share (the "Common
Stock"), at an exercise price per share equal to $.40 (the "Exercise Price").
The term "Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof. The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated January 24, 2005, by and among the Company and the
Buyers listed on the execution page thereof (the "Securities Purchase
Agreement"). 

        This Warrant is subject to the
following terms, provisions, and conditions: 


        1.     
Manner of Exercise. Subject
to the provisions hereof, this Warrant may be exercised by the holder hereof, in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or official bank check or by wire transfer for the
account of the Company of the Exercise Price for the Warrant Shares specified in
the Exercise Agreement or (ii) if the resale of the Warrant Shares by the holder
is not then registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), delivery to the
Company of a written notice of an election to effect a "Cashless Exercise" (as
defined in Section 11(c) below) for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to the
holder hereof or such holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered, and
payment shall have been made for such shares as set forth above. Certificates
for the Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding three (3) business days, after this
Warrant shall have been so exercised. The certificates so delivered shall be in
such denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be designated
by such holder. If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised. In addition to all other available remedies at law or
in equity, if the Company fails to deliver certificates for the Warrant Shares
within three (3) business days after this Warrant is exercised, then the Company
shall pay to the holder in cash a penalty (the "Penalty") equal to 2% of the
number of Warrant Shares that the holder is entitled to multiplied by the Market
Price (as hereinafter defined) for each day that the Company fails to deliver
certificates for the Warrant Shares. For example, if the holder is entitled to
100,000 Warrant Shares and the Market Price is $2.00, then the Company shall pay
to the holder $4,000 for each day that the Company fails to deliver certificates
for the Warrant Shares. The Penalty shall be paid to the holder by the fifth day
of the month following the month in which it has accrued.

        Notwithstanding anything in this
Warrant to the contrary, in no event shall the holder of this Warrant be
entitled to exercise a number of Warrants (or portions thereof) in excess of the
number of Warrants (or portions thereof) upon exercise of which the sum of (i)
the number of shares of Common Stock beneficially owned by the holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised Warrants and the unexercised or
unconverted portion of any other securities of the Company (including the Notes
and Preferred Shares (as such terms are defined in the Securities Purchase
Agreement)) subject to a limitation on conversion or exercise analogous to the
limitation contained herein) and (ii) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portions thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, 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, except as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein, the
limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.


        2.     
Period of Exercise.


        This Warrant is exercisable at
any time or from time to time on or after the date on which this Warrant is
issued and delivered pursuant to the terms of the Securities Purchase Agreement
and before 6:00 p.m., New York, New York time on the fifth (5th)
anniversary of the date of issuance (the "Exercise Period").


        3.     
Certain Agreements of the Company.


        The Company hereby covenants and
agrees as follows:


               
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.


               
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.


               
(c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.


               
(d) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.


               
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.


        4.     
Antidilution Provisions. 


        During the Exercise Period, the
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4.

        In the event that any adjustment
of the Exercise Price as required herein results in a fraction of a cent, such
Exercise Price shall be rounded up to the nearest cent.


               
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of Common
Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e) hereof,
if and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with Paragraph 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price on the date of issuance (a "Dilutive Issuance"), then immediately
upon the Dilutive Issuance, the Exercise Price will be reduced to a price
determined by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal
to the sum of (x) the number of shares of Common Stock actually outstanding
immediately prior to the Dilutive Issuance, plus (y) the quotient of the
aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Market Price
in effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance. 


               
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:


                       
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible Securities")
(such warrants, rights and options to purchase Common Stock or Convertible
Securities are hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options is less than
the Market Price on the date of issuance or grant of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.


                       
(ii) Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.


                       
(iii) Change in Option Price or Conversion Rate. If there is a change
at any time in (i) the amount of additional consideration payable to the Company
upon the exercise of any Options; (ii) the amount of additional consideration,
if any, payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock (other than under or by
reason of provisions designed to protect against dilution), the Exercise Price
in effect at the time of such change will be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold.


                       
(iv) Treatment of Expired Options and Unexercised Convertible Securities.
If, in any case, the total number of shares of Common Stock issuable upon
exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.


                       
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or securities
will be determined in good faith by the Board of Directors of the Company.


                       
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to the
Exercise Price will be made (i) upon the exercise of any warrants, options or
convertible securities granted, issued and outstanding on the date of issuance
of this Warrant; (ii) upon the grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee benefit plan, stock
option plan or restricted stock plan of the Company now existing or to be
implemented in the future, so long as the issuance of such stock or options is
approved by a majority of the independent members of the Board of Directors of
the Company or a majority of the members of a committee of independent directors
established for such purpose; or (iii) upon the exercise of the Warrants.


               
(c) Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.


               
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.


               
(e) Consolidation, Merger or Sale. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.


               
(f) Distribution of Assets. In case the Company shall declare or make
any distribution of its assets (including cash) to holders of Common Stock as a
partial liquidating dividend, by way of return of capital or otherwise, then,
after the date of record for determining shareholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.


               
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Financial Officer of the Company.


               
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.


               
(i) No Fractional Shares. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.


               
(j) Other Notices. In case at any time:


                       
(i) the Company shall declare any dividend upon the Common Stock payable in
shares of stock of any class or make any other distribution (including dividends
or distributions payable in cash out of retained earnings) to the holders of the
Common Stock;


                       
(ii) the Company shall offer for subscription pro rata to the holders of the
Common Stock any additional shares of stock of any class or other rights;


                       
(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all its assets to, another
corporation or entity; or


                       
(iv) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company; then, in each such case, the Company shall give to
the holder of this Warrant (a) notice of the date on which the books of the
Company shall close or a record shall be taken for determining the holders of
Common Stock entitled to receive any such dividend, distribution, or
subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice shall also specify the date on which the holders of Common Stock
shall be entitled to receive such dividend, distribution, or subscription rights
or to exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.


               
(k) Certain Events. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.


               
(l) Certain Definitions. 


                       
(i) "Common Stock Deemed Outstanding" shall mean the number of shares
of Common Stock actually outstanding (not including shares of Common Stock held
in the treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof,
the maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any. 


                       
(ii) "Market Price," as of any date, (i) means the average of the
last reported sale prices for the shares of Common Stock on the OTCBB for the
five (5) Trading Days immediately preceding such date as reported by Bloomberg,
or (ii) if the OTCBB is not the principal trading market for the shares of
Common Stock, the average of the last reported sale prices on the principal
trading market for the Common Stock during the same period as reported by
Bloomberg, or (iii) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the Company
or, at the option of a majority-in-interest of the holders of the outstanding
Warrants by (b) an independent investment bank of nationally recognized standing
in the valuation of businesses similar to the business of the corporation. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.


                       
(iii) "Common Stock," for purposes of this Paragraph 4, includes the
Common Stock, par value $.0001 per share, and any additional class of stock of
the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $.0001 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.


        5.     
Issue Tax.


        The issuance of certificates for
Warrant Shares upon the exercise of this Warrant shall be made without charge to
the holder of this Warrant or such shares for any issuance tax or other costs in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than the holder of this Warrant.


        6.     
No Rights or Liabilities as a Shareholder.


        This Warrant shall not entitle the
holder hereof to any voting rights or other rights as a shareholder of the
Company. No provision of this Warrant, in the absence of affirmative action by
the holder hereof to purchase Warrant Shares, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such holder for the Exercise Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.


        7.     
Transfer, Exchange, and Replacement of Warrant.


               
(a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated January 24, 2005, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").


               
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.


               
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.


               
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.


               
(e) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.


               
(f) Exercise or Transfer Without Registration. If, at the time of the
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder), shall not be registered under the Securities Act of
1933, as amended (the "Securities Act") and under applicable state securities or
blue sky laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof. 


        8.     
Registration Rights. 


        The initial holder of this Warrant
(and certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in Section 2 of the
Registration Rights Agreement.


        9.     
Notices.


        All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
holder of this Warrant shall be in writing, and shall be personally delivered,
or shall be sent by certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to such holder at the address shown for
such holder on the books of the Company, or at such other address as shall have
been furnished to the Company by notice from such holder. All notices, requests,
and other communications required or permitted to be given or delivered
hereunder to the Company shall be in writing, and shall be personally delivered,
or shall be sent by certified or registered mail or by recognized overnight mail
courier, postage prepaid and addressed, to the office of the Company at 1420
Lamar Boulevard, Oxford, Mississippi 38655, Attention: Chief Executive Officer,
or at such other address as shall have been furnished to the holder of this
Warrant by notice from the Company. Any such notice, request, or other
communication may be sent by facsimile, but shall in such case be subsequently
confirmed by a writing personally delivered or sent by certified or registered
mail or by recognized overnight mail courier as provided above. All notices,
requests, and other communications shall be deemed to have been given either at
the time of the receipt thereof by the person entitled to receive such notice at
the address of such person for purposes of this Paragraph 9, or, if mailed by
registered or certified mail or with a recognized overnight mail courier upon
deposit with the United States Post Office or such overnight mail courier, if
postage is prepaid and the mailing is properly addressed, as the case may be.


        10.     
Governing Law.  THIS
WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY
DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.


        11.     
Miscellaneous.


               
(a) Amendments. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.


               
(b) Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.


               
(c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For example, if the holder is exercising
100,000 Warrants with a per Warrant exercise price of $0.75 per share through a
cashless exercise when the Common Stock's current Market Price per share is
$2.00 per share, then upon such Cashless Exercise the holder will receive 62,500
shares of Common Stock.


               
(d) Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

        

 

 

 

 

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        IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized officer.


                          MODERN
                          TECHNOLOGY CORP.

                          
                           

                           

                          By: 
                          /s/ Anthony K. Welch                   
                          

                          Anthony
                            K. Welch

                            Chief
                            Executive Officer

                          
                        
                      
                    
                  
                
              
            
          
        
      
    
  

Dated as of January 24, 2005



 


FORM OF EXERCISE
AGREEMENT


                                                                                                                                                                           
Dated: ________ __, 200_

 

To: ______________________

 

 

The undersigned, pursuant to the
provisions set forth in the within Warrant, hereby agrees to purchase ________
shares of Common Stock covered by such Warrant, and makes payment herewith in
full therefor at the price per share provided by such Warrant in cash or by
certified or official bank check in the amount of, or, if the resale of such
Common Stock by the undersigned is not currently registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
by surrender of securities issued by the Company (including a portion of the
Warrant) having a market value (in the case of a portion of this Warrant,
determined in accordance with Section 11(c) of the Warrant) equal to $_________.
Please issue a certificate or certificates for such shares of Common Stock in
the name of and pay any cash for any fractional share to:

Name:
                            ______________________________

                             

                            
                            Signature: 

                            
                            Address:____________________________

                            
                            _____________________________

                             

                            
                                    Note: The above signature should correspond
                                    exactly with the name on the face of the
                                    within Warrant, if applicable.

                                  
                                
                              
                            
                          
                        
                      
                    
                  
                
              
            
          
        
      
    
  

and, if said number
of shares of Common Stock shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
covering the balance of the shares purchasable thereunder less any fraction of a
share paid in cash.



 


FORM OF ASSIGNMENT


 


FOR VALUE RECEIVED,
the undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares of
Common Stock covered thereby set forth hereinbelow, to:


Name of Assignee Address
No of Shares


 

 

, and hereby irrevocably constitutes
and appoints ___________________________________ as agent and attorney-in-fact
to transfer said Warrant on the books of the within-named corporation, with full
power of substitution in the premises.

 

                                                                                                                                                                           
Dated: ________ __, 200_

 

In the presence of:
______________________________


                        Name:______________________________

                        
                        Signature:_________________________

                        Title of
                        Signing Officer or Agent (if any):

                        
                        ______________________________

                        Address:
                        ______________________________

                        
                        ______________________________

                         

                        Note:
                                The above signature should correspond exactly
                                with the name on the face of the within Warrant,
                                if applicable.