SECURITIES PURCHASE AGREEMENT




SECURITIES PURCHASE AGREEMENT




SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of January
24, 2005, by and among Modern Technology Corp., a Nevada corporation, with
headquarters located at 1420 N. Lamar Boulevard, Oxford, Mississippi 38655 (the
"Company"), and each of the purchasers set forth on the signature pages
hereto (the "Buyers").


WHEREAS:

A. The Company and the Buyers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");


B. The Company has authorized a new series of
preferred stock, designated as Series A Convertible Preferred Stock, having the
rights, preferences and privileges set forth in the Certificate of Designations,
Rights and Preferences attached hereto as Exhibit "A" (the "Certificate
of Designation");


C. The Series A Convertible Preferred Stock is
convertible into shares of common stock, $.0001 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designation;


D. Buyers desire to purchase and the Company
desires to issue and sell, upon the terms and conditions set forth in this
Agreement (i) 8% secured convertible notes of the Company, in the form attached
hereto as Exhibit "B", in the aggregate principal amount of Two Million
Dollars ($2,000,000) (together with any note(s) issued in replacement thereof or
as a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the "Notes"), convertible into shares of Common Stock,
upon the terms and subject to the limitations and conditions set forth in such
Notes, (ii) an aggregate of One Thousand Five Hundred (1,500) shares of Series A
Convertible Preferred Stock (such shares, together with any Series A Convertible
Preferred Stock issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, being
hereinafter collectively referred to as the "Preferred Shares" and
collectively with the Notes, the "Convertible Securities"), and
(iii) warrants, in the form attached hereto as Exhibit "C", to purchase
an aggregate of 3,000,000 shares of Common Stock (the "Warrants"), for an
aggregate purchase price of Three Million Five Hundred Thousand Dollars
($3,500,000).


E. Each Buyer wishes to purchase, upon the terms
and conditions stated in this Agreement, such principal amount of Notes, the
number of Preferred Shares and number of Warrants as is set forth immediately
below its name on the signature pages hereto; and


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


NOW, THEREFORE, the Company and each of the
Buyers severally (and not jointly) hereby agree as follows:


1. 
PURCHASE AND SALE OF NOTES, PREFERRED SHARES AND WARRANTS.


a. 
Purchase of Notes, Preferred Shares and Warrants. On the Closing Date
(as defined below), the Company shall issue and sell to each Buyer and each
Buyer severally agrees to purchase from the Company such principal amount of
Notes, the number of Preferred Shares and number of Warrants as is set forth
immediately below such Buyer's name on the signature pages hereto.


b. 
Form of Payment. On the Closing Date (as defined below), (i) each
Buyer shall pay the purchase price for the Notes, the Preferred Shares and the
Warrants to be issued and sold to it at the Closing (as defined below) (the "Purchase
Price") by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against delivery of
the Notes in the principal amount equal to the amount as is set forth
immediately below such Buyer's name on the signature pages hereto, duly executed
certificates representing such number of Preferred Shares as is set forth
immediately below such Buyer's name on the signature pages hereto, and the
number of Warrants as is set forth immediately below such Buyer's name on the
signature pages hereto, and (ii) the Company shall deliver such Notes, Preferred
Shares and Warrants duly executed on behalf of the Company, to such Buyer,
against delivery of the Purchase Price.


c. 
Closing Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes, Preferred Shares and the Warrants
pursuant to this Agreement (the "Closing Date") shall be 12:00 noon,
Eastern Standard Time on January 24, 2005, or such other mutually agreed upon
time. The closing of the transactions contemplated by this Agreement (the "Closing")
shall occur on the Closing Date at such location as may be agreed to by the
parties.


2. 
BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not
jointly) represents and warrants to the Company solely as to such Buyer that:


a. 
Investment Purpose. As of the date hereof, the Buyer is purchasing
the Convertible Securities and the shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Convertible Securities (including,
without limitation, such additional shares of Common Stock, if any, as are
issuable (i) on account of interest on the Notes, (ii) as a result of the events
described in Sections 1.3 and 1.4(g) of the Notes, (iii) as a result of the
events described in Section 2(c) of the Registration Rights Agreement; (iv) as a
result of the events described in Articles V, VI.D(b) or VI.E of the Certificate
of Designation; or (v) in payment of the Standard Liquidated Damages Amount (as
defined in Section 2(f) below) pursuant to this Agreement, such shares of Common
Stock being collectively referred to herein as the "Conversion Shares")
and the Warrants and the shares of Common Stock issuable upon exercise thereof
(the "Warrant Shares" and, collectively with the Convertible Securities,
Warrants and Conversion Shares, the "Securities") for its own account and
not with a present view towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 1933 Act.


b. 
Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").


c. 
Reliance on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon 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 Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.


d. 
Information. The Buyer and its advisors, if any, have been, and for
so long as the Convertible Securities and Warrants remain outstanding will
continue to be, 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 or its advisors. The Buyer
and its advisors, if any, have been, and for so long as the Convertible
Securities and Warrants remain outstanding will continue to be, afforded the
opportunity to ask questions of the Company. Notwithstanding the foregoing, the
Company has not disclosed to the Buyer any material nonpublic information and
will not disclose such information unless such information is disclosed to the
public prior to or promptly following such disclosure to the Buyer. Neither such
inquiries nor any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. The Buyer understands that its investment in the Securities involves a
significant degree of risk.


e. 
Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.


f. 
Transfer or Re-sale. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that shall be in form, substance and scope customary for
opinions of counsel in comparable transactions to the effect that the Securities
to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of the
Buyer who agrees to sell or otherwise transfer the Securities only in accordance
with this Section 2(f) and who is an Accredited Investor, (d) the Securities are
sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation
S under the 1933 Act (or a successor rule) ("Regulation S"), and the
Buyer shall have delivered to the Company an opinion of counsel that shall be in
form, substance and scope customary for opinions of counsel in corporate
transactions, which opinion shall be accepted by the Company; (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any re-sale
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 defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin
account or other lending arrangement. In the event that the Company does not
accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or
Regulation S, within three (3) business days of delivery of the opinion to the
Company, the Company shall pay to the Buyer liquidated damages equal to the sum
of (x) 1.6% of the outstanding amount of the Notes per month plus accrued and
unpaid interest on the Notes, prorated for partial months, plus (y) 1.4% of the
outstanding amount of Preferred Shares per month plus accrued and unpaid
dividends on the Preferred Shares prorated for partial months, in cash or shares
at the option of the Company ("Standard Liquidated Damages Amount"). If
the Company elects to be pay the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price (as defined in
the respective Convertible Securities) at the time of payment.


g. 
Legends. The Buyer understands that the Convertible Securities and
the Warrants and, until such time as the Conversion Shares and Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement or otherwise may be sold pursuant to Rule 144 or Regulation S
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares and Warrant Shares may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):

"The securities represented by
this certificate have not been registered under the Securities Act of 1933, as
amended. The securities may not be sold, transferred or assigned in the absence
of an effective registration statement for the 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 said
Act or unless sold pursuant to Rule 144 or Regulation S under said Act."

The legend set forth above shall be removed and the
Company shall issue a certificate without such legend to the holder of any
Security upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) such Security is registered for sale under an
effective registration statement filed under the 1933 Act or otherwise may be
sold pursuant to Rule 144 or Regulation S without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
or (b) such holder provides the Company with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may
be made without registration under the 1933 Act, which opinion shall be accepted
by the Company so that the sale or transfer is effected or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
pursuant to Rule 144 or Regulation S. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery requirements, if any.


h. 
Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized. This Agreement has been
duly executed and delivered on behalf of the Buyer, and this Agreement
constitutes, and upon execution and delivery by the Buyer of the Registration
Rights Agreement, such agreement will constitute, valid and binding agreements
of the Buyer enforceable in accordance with their terms.


i. 
Residency. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.


3. 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Buyer that:


a. 
Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. Schedule 3(a) sets
forth a list of all of the Subsidiaries of the Company and the jurisdiction in
which each is incorporated. The Company and each of its Subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Material Adverse Effect" means any material adverse effect on
the business, operations, assets, financial condition or prospects of the
Company or its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith. "Subsidiaries" means any corporation or other
organization, whether incorporated or unincorporated, in which the Company owns,
directly or indirectly, any equity or other ownership interest.


b. 
Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Convertible Securities and the Warrants and
to consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Certificate of Designation, the Registration
Rights Agreement, the Convertible Securities and the Warrants by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Convertible Securities and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares issuable upon conversion or exercise thereof) have
been duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative is
the true and official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon execution and
delivery by the Company of the Certificate of Designation, the Registration
Rights Agreement, the Convertible Securities and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.


c. 
Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) 150,000,000 shares of Common Stock, of which
15,078,631 shares are issued and outstanding, no shares are reserved for
issuance pursuant to the Company's stock option plans, no shares are reserved
for issuance pursuant to securities (other than the Convertible Securities and
the Warrants) exercisable for, or convertible into or exchangeable for shares of
Common Stock and 40,760,968 shares are reserved for issuance upon conversion of
the Convertible Securities and exercise of the Warrants (subject to adjustment
pursuant to the Company's covenant set forth in Section 4(h) below); and (ii)
20,000,000 shares of preferred stock, of which no shares are issued and
outstanding. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and nonassessable.
No shares of capital stock of the Company are subject to preemptive rights or
any other similar rights of the shareholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries,
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act (except the Registration Rights Agreement) and
(iii) there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Convertible Securities,
the Warrants, the Conversion Shares or Warrant Shares. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation
as in effect on the date hereof ("Articles of Incorporation"), the
Company's By-laws, as in effect on the date hereof (the "By-laws"), and
the terms of all securities convertible into or exercisable for Common Stock of
the Company and the material rights of the holders thereof in respect thereto.
The Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.


d. 
Issuance of Shares. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances with respect to the issue thereof and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company and
will not impose personal liability upon the holder thereof. The Conversion
Shares and Warrant Shares are duly authorized and reserved for issuance and,
upon conversion of the Convertible Securities and exercise of the Warrants in
accordance with their respective terms, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not impose personal
liability upon the holder thereof.


e. 
Acknowledgment of Dilution. The Company understands and acknowledges
the potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Convertible
Securities or exercise of the Warrants. The Company further acknowledges that
its obligation to issue Conversion Shares and Warrant Shares upon conversion of
the Convertible Securities or exercise of the Warrants in accordance with this
Agreement, the Certificate of Designation, the Convertible Securities and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.


f. 
No Conflicts. The execution, delivery and performance of this
Agreement, the Certificate of Designation, the Registration Rights Agreement,
the Convertible Securities and the Warrants by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares) will not (i) conflict with or result in a violation
of any provision of the Articles of Incorporation or By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act
and any applicable state securities laws, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court, governmental agency, regulatory agency, self regulatory organization
or stock market or any third party in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Certificate of
Designation, the Registration Rights Agreement, the Convertible Securities or
the Warrants in accordance with the terms hereof or thereof or to issue and sell
the Convertible Securities and Warrants in accordance with the terms hereof and
to issue the Conversion Shares upon conversion of the Convertible Securities and
the Warrant Shares upon exercise of the Warrants. Except as disclosed in 
Schedule 3(f), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company is not in violation of the listing requirements of the Over-the-Counter
Bulletin Board (the "OTCBB") and does not reasonably anticipate that the
Common Stock will be delisted by the OTCBB in the foreseeable future. The
Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.


g. 
SEC Documents; Financial Statements. Except as disclosed in 
Schedule 3(g), the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (all of the foregoing filed prior to the date hereof and
all exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC Documents").
The Company has delivered to each Buyer true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to June 30, 2004, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under generally accepted accounting principles to be
reflected in such financial statements, which, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.


h. 
Absence of Certain Changes. Since June 30, 2004, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations or prospects of the Company or any of its Subsidiaries.


i. 
Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company
or any of its Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect. Schedule 3(i) contains a
complete list and summary description of any pending or threatened proceeding
against or affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect. The Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.


j. 
Patents, Copyrights, etc.


(i)
The Company and each of its Subsidiaries owns or possesses the
requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights ("Intellectual
Property") necessary to enable it to conduct its business as now operated
(and, except as set forth in Schedule 3(j) hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened, which challenges the right of the
Company or of a Subsidiary with respect to any Intellectual Property necessary
to enable it to conduct its business as now operated (and, except as set forth
in Schedule 3(j) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); to the best of the
Company's knowledge, the Company's or its Subsidiaries' current and intended
products, services and processes do not infringe on any Intellectual Property or
other rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and
each of its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual Property.


(ii)
All of the Company's computer software and computer hardware, and
other similar or related items of automated, computerized or software systems
that are used or relied on by the Company in the conduct of its business or that
were, or currently are being, sold or licensed by the Company to customers
(collectively, "Information Technology"), are Year 2000 Compliant. For
purposes of this Agreement, the term "Year 2000 Compliant" means, with
respect to the Company's Information Technology, that the Information Technology
is designed to be used prior to, during and after the calendar Year 2000, and
the Information Technology used during each such time period will accurately
receive, provide and process date and time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the 20th
and 21st centuries, including the years 1999 and 2000, and leap-year
calculations, and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of the date or time data, to the extent that other
information technology, used in combination with the Information Technology,
properly exchanges date and time data with it. The Company has delivered to the
Buyers true and correct copies of all analyses, reports, studies and similar
written information, whether prepared by the Company or another party, relating
to whether the Information Technology is Year 2000 Compliant, if any.


k. 
No Materially Adverse Contracts, Etc. Neither the Company nor any of
its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.


l. 
Tax Status. Except as set forth on Schedule 3(l), the Company
and each of its Subsidiaries has made or filed all federal, state and foreign
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. Except as set forth on Schedule 3(l),
none of the Company's tax returns is presently being audited by any taxing
authority.


m. 
Certain Transactions. Except as set forth on Schedule 3(m) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.


n. 
Disclosure. All information relating to or concerning the Company or
any of its Subsidiaries set forth in this Agreement and provided to the Buyers
pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports filed under the
1934 Act are being incorporated into an effective registration statement filed
by the Company under the 1933 Act).


o. 
Acknowledgment Regarding Buyers' Purchase of Securities. The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm's length purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that no Buyer is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any
statement made by any Buyer or any of their respective representatives or agents
in connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to the Buyers' purchase
of the Securities. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.


p. 
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers. The issuance of the
Securities to the Buyers will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any shareholder
approval provisions applicable to the Company or its securities.


q. 
No Brokers. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions contemplated hereby.


r. 
Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and
there is no action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits. Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since June 30, 2004,
neither the Company nor any of its Subsidiaries has received any notification
with respect to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Material Adverse Effect.


s. 
Environmental Matters.

(i)
Except as set forth in Schedule 3(s), there are, to the
Company's knowledge, with respect to the Company or any of its Subsidiaries or
any predecessor of the Company, no past or present violations of Environmental
Laws (as defined below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar federal, state, local or foreign laws and
neither the Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The term "Environmental
Laws" means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants contaminants, or toxic or
hazardous substances or wastes (collectively, "Hazardous Materials") into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.


(ii)
Other than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are contained on or about
any real property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business.


(iii)
Except as set forth in Schedule 3(s), there are no underground
storage tanks on or under any real property owned, leased or used by the Company
or any of its Subsidiaries that are not in compliance with applicable law.


t. 
Title to Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(t) or
such as would not have a Material Adverse Effect. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.


u. 
Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect. The Company has provided to Buyer true and correct copies of all
policies relating to directors' and officers' liability coverage, errors and
omissions coverage, and commercial general liability coverage.


v. 
Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.


w. 
Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.


x. 
Solvency. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a fair
market value in excess of the amount required to pay its probable liabilities on
its existing debts as they become absolute and matured) and currently the
Company has no information that would lead it to reasonably conclude that the
Company would not, after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any action that would
impair its ability to, pay its debts from time to time incurred in connection
therewith as such debts mature. The Company did not receive a qualified opinion
from its auditors with respect to its most recent fiscal year end and, after
giving effect to the transactions contemplated by this Agreement, does not
anticipate or know of any basis upon which its auditors might issue a qualified
opinion in respect of its current fiscal year.


y. 
No Investment Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not be an
"investment company" required to be registered under the Investment Company Act
of 1940 (an "Investment Company"). The Company is not controlled by an
Investment Company.


z. 
Breach of Representations and Warranties by the Company. If the
Company breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the Buyers
pursuant to this Agreement, the Company shall pay to the Buyer the Standard
Liquidated Damages Amount in cash or in shares of Common Stock at the option of
the Company, until such breach is cured. If the Company elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.


4. 
COVENANTS.


a. 
Best Efforts. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this Agreement.


b. 
Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.


c. 
Reporting Status; Eligibility to Use Form S-3, SB-2 or Form S-1. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. The
Company represents and warrants that it meets the requirements for the use of
Form S-3 (or if the Company is not eligible for the use of Form S-3 as of the
Filing Date (as defined in the Registration Rights Agreement), the Company may
use the form of registration for which it is eligible at that time) for
registration of the sale by the Buyer of the Registrable Securities (as defined
in the Registration Rights Agreement). So long as the Buyer beneficially owns
any of the Securities, the Company shall timely file all reports required to be
filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate
its status as an issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would permit such termination.
The Company further agrees to file all reports required to be filed by the
Company with the SEC in a timely manner so as to become eligible, and thereafter
to maintain its eligibility, for the use of Form S-3. The Company shall issue a
press release describing the materials terms of the transaction contemplated
hereby as soon as practicable following the Closing Date but in no event more
than two (2) business days of the Closing Date, which press release shall be
subject to prior review by the Buyers. The Company agrees that such press
release shall not disclose the name of the Buyers unless expressly consented to
in writing by the Buyers or unless required by applicable law or regulation, and
then only to the extent of such requirement.


d. 
Use of Proceeds. The Company shall use the proceeds from the sale of
the Convertible Securities and the Warrants in the manner set forth in 
Schedule 4(d) attached hereto and made a part hereof and shall not, directly
or indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
its currently existing direct or indirect Subsidiaries)


e. 
Future Offerings. Subject to the exceptions described below, the
Company will not, without the prior written consent of a majority-in-interest of
the Buyers, not to be unreasonably withheld, negotiate or contract with any
party to obtain additional equity financing (including debt financing with an
equity component) that involves (A) the issuance of Common Stock at a discount
to the market price of the Common Stock on the date of issuance (taking into
account the value of any warrants or options to acquire Common Stock issued in
connection therewith) or (B) the issuance of convertible securities that are
convertible into an indeterminate number of shares of Common Stock or (C) the
issuance of warrants during the period (the "Lock-up Period") beginning
on the Closing Date and ending on the later of (i) two hundred seventy (270)
days from the Closing Date and (ii) one hundred eighty (180) days from the date
the Registration Statement (as defined in the Registration Rights Agreement) is
declared effective (plus any days in which sales cannot be made thereunder). In
addition, subject to the exceptions described below, the Company will not
conduct any equity financing (including debt with an equity component) ("Future
Offerings") during the period beginning on the Closing Date and ending two
(2) years after the end of the Lock-up Period unless it shall have first
delivered to each Buyer, at least twenty (20) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the aggregate principal amount of
Notes purchased by it hereunder bears to the aggregate principal amount of Notes
purchased hereunder) of the securities being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively referred to as
the "Capital Raising Limitations"). In the event the terms and
conditions of a proposed Future Offering are amended in any respect after
delivery of the notice to the Buyers concerning the proposed Future Offering,
the Company shall deliver a new notice to each Buyer describing the amended
terms and conditions of the proposed Future Offering and each Buyer thereafter
shall have an option during the fifteen (15) day period following delivery of
such new notice to purchase its pro rata share of the securities being offered
on the same terms as contemplated by such proposed Future Offering, as amended.
The foregoing sentence shall apply to successive amendments to the terms and
conditions of any proposed Future Offering. The Capital Raising Limitations
shall not apply to any transaction involving (i) issuances of securities in a
firm commitment underwritten public offering (excluding a continuous offering
pursuant to Rule 415 under the 1933 Act) or (ii) issuances of securities as
consideration for a merger, consolidation or purchase of assets, or in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company. The Capital
Raising Limitations also shall not apply to the issuance of securities upon
exercise or conversion of the Company's options, warrants or other convertible
securities outstanding as of the date hereof or to the grant of additional
options or warrants, or the issuance of additional securities, under any Company
stock option or restricted stock plan approved by the shareholders of the
Company.


f. 
Expenses. At the Closing, the Company shall reimburse Buyers for
expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith ("Documents"), including, without
limitation, attorneys' and consultants' fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of restructuring the transactions contemplated by the Documents. When
possible, the Company must pay these fees directly, otherwise the Company must
make immediate payment for reimbursement to the Buyers for all fees and expenses
immediately upon written notice by the Buyer or the submission of an invoice by
the Buyer If the Company fails to reimburse the Buyer in full within three (3)
business days of the written notice or submission of invoice by the Buyer, the
Company shall pay interest on the total amount of fees to be reimbursed at a
rate of 15% per annum.


g. 
Financial Information. The Company agrees to send the following
reports to each Buyer until such Buyer transfers, assigns, or sells all of the
Securities: (i) within ten (10) days after the filing with the SEC, a copy of
its Annual Report on Form 10-KSB its Quarterly Reports on Form 10-QSB and any
Current Reports on Form 8-K; (ii) within one (1) day after release, copies of
all press releases issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the shareholders of the
Company, copies of any notices or other information the Company makes available
or gives to such shareholders.


h. 
Authorization and Reservation of Shares. The Company shall at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock to provide for the full conversion or exercise
of the outstanding Convertible Securities and Warrants and issuance of the
Conversion Shares and Warrant Shares in connection therewith (based on the
Conversion Price of the Convertible Securities or Exercise Price of the Warrants
in effect from time to time) and as otherwise required by the Convertible
Securities. The Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of Convertible Securities and exercise of
the Warrants without the consent of each Buyer. The Company shall at all times
maintain the number of shares of Common Stock so reserved for issuance at an
amount ("Reserved Amount") equal to no less than two (2) times the number
that is then actually issuable upon full conversion of the Convertible
Securities and upon exercise of the Warrants (based on the Conversion Price of
the Convertible Securities or the Exercise Price of the Warrants in effect from
time to time). If at any time the number of shares of Common Stock authorized
and reserved for issuance ("Authorized and Reserved Shares") is below the
Reserved Amount, the Company will promptly take all corporate action necessary
to authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of shareholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case of
an insufficient number of authorized shares, obtain shareholder approval of an
increase in such authorized number of shares, and voting the management shares
of the Company in favor of an increase in the authorized shares of the Company
to ensure that the number of authorized shares is sufficient to meet the
Reserved Amount. If the Company fails to obtain such shareholder approval within
thirty (30) days following the date on which the number of Reserved Amount
exceeds the Authorized and Reserved Shares, the Company shall pay to the
Borrower the Standard Liquidated Damages Amount, in cash or in shares of Common
Stock at the option of the Buyer. If the Buyer elects to be paid the Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
at the Conversion Price at the time of payment. In order to ensure that the
Company has authorized a sufficient amount of shares to meet the Reserved Amount
at all times, the Company must deliver to the Buyer at the end of every month a
list detailing (1) the current amount of shares authorized by the Company and
reserved for the Buyer; and (2) amount of shares issuable upon conversion of the
Notes and upon exercise of the Warrants and as payment of interest accrued on
the Notes for one year. If the Company fails to provide such list within five
(5) business days of the end of each month, the Company shall pay the Standard
Liquidated Damages Amount, in cash or in shares of Common Stock at the option of
the Buyer, until the list is delivered. If the Buyer elects to be paid the
Standard Liquidated Damages Amount in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.


i. 
Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares 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) and, so long as any Buyer owns
any of the Securities, shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares and Warrant
Shares from time to time issuable upon conversion of the Convertible Securities
or exercise of the Warrants. The Company will obtain and, so long as any Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock
on the OTCBB or any equivalent replacement exchange, the Nasdaq National Market
("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX")
and will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall
promptly provide to each Buyer copies of any notices it receives from the OTCBB
and any other exchanges or quotation systems on which the Common Stock is then
listed regarding the continued eligibility of the Common Stock for listing on
such exchanges and quotation systems.


j. 
Corporate Existence. So long as a Buyer beneficially owns any
Convertible Securities or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for trading on the
OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.


k. 
No Integration. The Company shall not make any offers or sales of any
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.


l. 
Key Man Insurance. The Company shall use its best efforts to obtain,
on or before five (5) business days from the date hereof, key man life insurance
on all of the Company's officers and division heads.


m. 
Breach of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies available to the
Buyers pursuant to this Agreement, the Company shall pay to the Buyers the
Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the
option of the Company, until such breach is cured. If the Company elects to pay
the Standard Liquidated Damages Amount in shares, such shares shall be issued at
the Conversion Price at the time of payment.


5. 
TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Convertible Securities or exercise of the Warrants in
accordance with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold, all
such certificates shall bear the restrictive legend specified in Section 2(g) of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop
transfer instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares and Warrant Shares, prior to registration of the Conversion
Shares and Warrant Shares under the 1933 Act or the date on which the Conversion
Shares and Warrant Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date that can then
be immediately sold), will be given by the Company to its transfer agent and
that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Certificate of Designation and the Registration Rights Agreement. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable prospectus delivery
requirements, if any, upon re-sale of the Securities. If a Buyer provides the
Company with (i) an opinion of counsel in form, substance and scope customary
for opinions in comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates,
free from restrictive legend, in such name and in such denominations as
specified by such Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers, by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 may be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other security being
required.


6. 
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the
Company hereunder to issue and sell the Convertible Securities and Warrants to a
Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions thereto, provided that these conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion:


a. 
The applicable Buyer shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Company.


b. 
The applicable Buyer shall have delivered the Purchase Price in accordance
with Section 1(b) above.


c. 
The representations and warranties of the applicable Buyer shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the applicable Buyer shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.


d. 
No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.


7. 
CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of
each Buyer hereunder to purchase the Convertible Securities and Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions, provided that these conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:


a. 
The Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.


b. 
The Company shall have delivered to such Buyer duly executed Notes (in such
denominations as the Buyer shall request) and Warrants in accordance with
Section 1(b) above.


c. 
The Certificate of Designation shall have been accepted for filing with the
Secretary of State of the State of Nevada, and a copy thereof certified by such
Secretary of State shall have been delivered to the Buyer.


d. 
The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyers, shall have been delivered
to and acknowledged in writing by the Company's Transfer Agent.


e. 
The representations and warranties of the Company shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at such time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer including, but not
limited to certificates with respect to the Company's Articles of Incorporation,
By-laws and Board of Directors' resolutions relating to the transactions
contemplated hereby.


f. 
No litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.


g. 
No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect on the Company.


h. 
The Conversion Shares and Warrant Shares shall have been authorized for
quotation on the OTCBB and trading in the Common Stock on the OTCBB shall not
have been suspended by the SEC or the OTCBB.


i. 
The Buyer shall have received an opinion of the Company's counsel, dated as
of the Closing Date, in form, scope and substance reasonably satisfactory to the
Buyer and in substantially the same form as Exhibit "E" attached hereto.


j. The Buyer shall have received an
officer's certificate described in Section 3(c) above, dated as of the Closing
Date.


8. 
GOVERNING LAW; MISCELLANEOUS.


a. 
Governing Law. THIS AGREEMENT 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 AGREEMENT, 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 AGREEMENT
SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS' FEES,
INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.


b. 
Counterparts; Signatures by Facsimile. 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 and shall become effective
when counterparts have been signed by each party and delivered to the other
party. This Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.


c. 
Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.


d. 
Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.


e. 
Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.


f. 
Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:


  
    
      
        
          
            If to the Company:

            
              
                Modern Technology Corp.

                1420 N. Lamar Boulevard

                Oxford, Mississippi 38655

                Attention: Chief Executive Officer

                Telephone: 662-236-5928

                Facsimile: 662-236-7662

              

            

          

        

      

    

  



With a copy to:

            Sichenzia Ross Friedman Ference LLP

                1065 Avenue of the Americas

                New York, NY 10018

                Attention: Gregory Sichenzia, Esq.

                Telephone: 212-930-9700

                Facsimile: 212-930-9725

              
            
          
        
      
    
  

If to a Buyer: To the address set forth immediately
below such Buyer's name on the signature pages hereto.


  
    
      
        
          
            With copy to:

            
              
                Ballard Spahr Andrews & Ingersoll, LLP

                1735 Market Street, 51st Floor

                Philadelphia, Pennsylvania 19103

                Attention: Gerald J. Guarcini, Esq.

                Telephone: 215-864-8625

                Facsimile: 215-864-8999

                Email: guarcini@ballardspahr.com

              

            

          

        

      

    

  



Each party shall provide notice to the other party of
any change in address.


g. 
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights hereunder to any person that purchases Securities in a private
transaction from a Buyer or to any of its "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.


h. 
Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.


i. 
Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by
or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers, directors, employees and agents for
loss or damage arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and covenants set forth
in Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement, the Certificate of Designation or the Registration Rights Agreement,
including advancement of expenses as they are incurred.


j. 
Publicity. The Company and each of the Buyers shall have the right to
review a reasonable period of time before issuance of any press releases, SEC,
OTCBB or NASD filings, or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, OTCBB (or other applicable trading market) or
NASD filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).


k. 
Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


l. 
No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.


m. Remedies. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers 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 Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyers 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 Agreement and to enforce specifically
the terms and provisions hereof, without the necessity of showing economic loss
and without any bond or other security being required.





[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 



 


IN WITNESS WHEREOF, the undersigned Buyers and
the Company have caused this Agreement to be duly executed as of the date first
above written.

 


MODERN TECHNOLOGY CORP.


 





/s/ Anthony K. Welch                       


Anthony K. Welch

Chief Executive Officer

 


 

AJW PARTNERS, LLC


By: SMS Group, LLC

 





/s/ Corey S. Ribotsky                           


Corey S. Ribotsky

Manager

 

RESIDENCE: Delaware

ADDRESS:  1044 Northern
Boulevard

Suite 302

Roslyn, New York
11576

Facsimile: (516)
739-7115

Telephone: (516)
739-7110

 

AGGREGATE SUBSCRIPTION AMOUNT:


  Aggregate Principal Amount of
  Notes:                                
  $300,000

  Number of Preferred Shares                                                       
  225

  Number of Warrants:                                                           
  450,000

  Aggregate Purchase Price:                                                 
  $525,000



 

 

 


AJW OFFSHORE, LTD.


By: First Street Manager II, LLC

 







/s/ Corey S. Ribotsky                   


Corey S. Ribotsky

Manager

 

 

RESIDENCE:            
Cayman Islands

 

ADDRESS:                
AJW Offshore, Ltd.

                                  
P.O. Box 32021 SMB

                                  
Grand Cayman, Cayman Island, B.W.I.


  AGGREGATE SUBSCRIPTION AMOUNT:

  Aggregate Principal Amount of
  Notes:                                            
  $900,000

  Number of Preferred Shares                                                                   
  675

  Number of Warrants:                                                                    
  1,350,000

  Aggregate Purchase Price:                                                           
  $1,575,000



 

 

 


AJW QUALIFIED PARTNERS, LLC

By: AJW Manager, LLC

 





s/ Corey S. Ribotsky                               


Corey S. Ribotsky

Manager

 

 

RESIDENCE:                
New York

ADDRESS:                   
1044 Northern Boulevard

                                      
Suite 302

                                      
Roslyn, New York 11576

                                      
Facsimile: (516) 739-7115

                                      
Telephone: (516) 739-7110

 

AGGREGATE SUBSCRIPTION AMOUNT:


  
    Aggregate Principal Amount of
    Notes:                                
    $760,000

    Number of Preferred Shares                                                       
    570

    Number of Warrants:                                                        
    1,140,000

    Aggregate Purchase Price:                                               
    $1,330,000

  



 

 

 


NEW MILLENNIUM CAPITAL PARTNERS II,
LLC 

By: First Street Manager II, LLP

 





/s/ Corey S. Ribotsky               


Corey S. Ribotsky

Manager

 

 

RESIDENCE:                        
New York

ADDRESS:                            
1044 Northern Boulevard

                                              
Suite 302

                                              
Roslyn, New York 11576

                                              
Facsimile: (516) 739-7115

                                              
Telephone: (516) 739-7110

 

AGGREGATE SUBSCRIPTION AMOUNT:


  
    Aggregate Principal Amount of
    Notes:                        
    $40,000

    Number of Preferred Shares                                               
    30

    Number of Warrants:                                                   
    60,000

    Aggregate Purchase Price:                                         
    $70,000