REGISTRATION RIGHTS
AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this " Agreement "), dated
as of April 10, 2007, 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 undersigned (together with their respective affiliates
and any assignee or transferee of all of their respective rights
hereunder, the " Initial Investors ").
WHEREAS:
A. In connection with the Securities Purchase Agreement
by and among the parties hereto of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, upon the
terms and subject to the conditions contained therein, to issue and
sell to the Initial Investors secured convertible notes in the
aggregate principal amount of up to One Hundred Sixty-Five Thousand
Dollars ($165,000) (the "Notes") that are convertible into shares
of the Company's common stock (the "Common Stock"), upon the terms
and subject to the limitations and conditions set forth in such
Notes and warrants (the "Warrants") to acquire an aggregate of
20,000,000 shares of Common Stock, upon the terms and conditions
and subject to the limitations and conditions set forth in the
Warrants; and
B. To induce the Initial Investors to execute and deliver
the Securities Purchase Agreement, the Company has agreed to
provide certain registration rights under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the " 1933 Act "),
and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each of the Initial Investors hereby
agree as follows:
1.
DEFINITIONS.
a. As used in this Agreement, the following terms shall
have the following meanings:
(i) " Investors " means the Initial Investors and
any transferee or assignee who agrees to become bound by the
provisions of this Agreement in accordance with Section 9
hereof.
(ii) " register ," " registered ," and "
registration " refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance
with the 1933 Act and pursuant to Rule 415 under the 1933 Act or
any successor rule providing for offering securities on a
continuous basis (" Rule 415 "), and the declaration or
ordering of effectiveness of such Registration Statement by the
United States Securities and Exchange Commission (the " SEC
").
(iii) " Registrable Securities " means the
Conversion Shares issued or issuable upon conversion or otherwise
pursuant to the Notes including, without limitation, Damages Shares
(as defined in the Notes) issued or issuable pursuant to the Notes,
shares of Common Stock issued or issuable in payment of the
Standard Liquidated Damages Amount (as defined in the Securities
Purchase Agreement), shares issued or issuable in respect of
interest or in redemption of the Notes in accordance with the terms
thereof) and any shares of capital stock issued or issuable as a
dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) " Registration Statement " means a
registration statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the
Securities Purchase Agreement or the Convertible Note.
2.
REGISTRATION.
a. Mandatory Registration . The Company shall
prepare, and, on or prior to thirty (30) days from the date of
Closing (as defined in the Securities Purchase Agreement) (the "
Filing Date "), file with the SEC a Registration Statement
on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent
of the Initial Investors, which consent will not be unreasonably
withheld) covering the resale of the Registrable Securities
underlying the Notes and Warrants issued or issuable pursuant to
the Securities Purchase Agreement, which Registration Statement, to
the extent allowable under the 1933 Act and the rules and
regulations promulgated thereunder (including Rule 416), shall
state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may
become issuable upon conversion of or otherwise pursuant to the
Notes and exercise of the Warrants to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The
number of shares of Common Stock initially included in such
Registration Statement shall be no less than an amount equal to two
(2) times the sum of the number of Conversion Shares that are then
issuable upon conversion of the Notes and Additional Notes (based
on the Variable Conversion Price as would then be in effect and
assuming the Variable Conversion Price is the Conversion Price at
such time), and the number of Warrant Shares that are then issuable
upon exercise of the Warrants, without regard to any limitation on
the Investor's ability to convert the Notes or exercise the
Warrants. The Company acknowledges that the number of shares
initially included in the Registration Statement represents a good
faith estimate of the maximum number of shares issuable upon
conversion of the Notes and upon exercise of the Warrants.
b. Underwritten Offering . If any offering
pursuant to a Registration Statement pursuant to Section 2(a)
hereof involves an underwritten offering, the Investors who hold a
majority in interest of the Registrable Securities subject to such
underwritten offering, with the consent of a majority-in-interest
of the Initial Investors, shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers
to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the
Company.
c. Payments by the Company . The Company shall use
its best efforts to obtain effectiveness of the Registration
Statement as soon as practicable. If the Registration Statement(s)
covering the Registrable Securities required to be filed by the
Company pursuant to Section 2(a) hereof is not filed by the Filing
Date or declared effective by the SEC on or prior to ninety
(90)days from the date of Closing (as defined in the Securities
Purchase Agreement), or after the Registration Statement has been
declared effective by the SEC, sales of all of the Registrable
Securities cannot be made pursuant to the Registration Statement,
or the Common Stock is not listed or included for quotation on the
Nasdaq National Market (" Nasdaq "), the Nasdaq SmallCap
Market (" Nasdaq SmallCap "), the New York Stock Exchange
(the " NYSE ") or the American Stock Exchange (the "
AMEX ") after being so listed or included for quotation, or
the Common Stock ceases to be traded on the Over-the-Counter
Bulletin Board (the "OTCBB" ) or any equivalent replacement
exchange prior to being listed or included for quotation on one of
the aforementioned markets, then the Company will make payments to
the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or
reduction of their ability to sell the Registrable Securities
(which remedy shall not be exclusive of any other remedies
available at law or in equity). The Company shall pay to each
holder of the Notes or Registrable Securities an amount equal to
the then outstanding principal amount of the Notes (and, in the
case of holders of Registrable Securities, the principal amount of
Notes from which such Registrable Securities were converted) ("
Outstanding Principal Amount "), multiplied by the
Applicable Percentage (as defined below) times the sum of: (i) the
number of months (prorated for partial months) after the Filing
Date or the end of the aforementioned ninety (90)day period and
prior to the date the Registration Statement is declared effective
by the SEC, provided, however, that there shall be excluded from
such period any delays which are solely attributable to changes
required by the Investors in the Registration Statement with
respect to information relating to the Investors, including,
without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the
Registration Statement pursuant to Section 3(h) below in a
reasonably prompt manner; (ii) the number of months (prorated for
partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the
Registration Statement has been declared effective (including,
without limitation, when sales cannot be made by reason of the
Company's failure to properly supplement or amend the prospectus
included therein in accordance with the terms of this Agreement,
but excluding any days during an Allowed Delay (as defined in
Section 3(f)); and (iii) the number of months (prorated for partial
months) that the Common Stock is not listed or included for
quotation on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX or
that trading thereon is halted after the Registration Statement has
been declared effective. The term " Applicable Percentage "
means two hundredths (.02). (For example, if the Registration
Statement becomes effective one (1) month after the end of such
ninety (90) day period, the Company would pay $5,000 for each
$250,000 of Outstanding Principal Amount. If thereafter, sales
could not be made pursuant to the Registration Statement for an
additional period of one (1) month, the Company would pay an
additional $5,000 for each $250,000 of Outstanding Principal
Amount.) Such amounts shall be paid in cash or, at the Company's
option, in shares of Common Stock priced at the Conversion Price
(as defined in the Notes) on such payment date.
d. Piggy-Back Registrations . Subject to the last
sentence of this Section 2(d), if at any time prior to the
expiration of the Registration Period (as hereinafter defined) the
Company shall determine to file with the SEC a Registration
Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other
bona fide , employee benefit plans), the Company
shall send to each Investor who is entitled to registration rights
under this Section 2(d) written notice of such determination and,
if within fifteen (15) days after the effective date of such
notice, such Investor shall so request in writing, the Company
shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered,
except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof
shall impose a limitation on the number of shares of Common Stock
which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution,
then the Company shall be obligated to include in such Registration
Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion
hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the
number of Registrable Securities sought to be included by such
Investors; provided , however , that the Company
shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are
not entitled to inclusion of such securities in such Registration
Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided , further ,
however , that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be
made pro rata with holders of other securities having the right to
include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in
such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under
this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection
with which an Investor is entitled to registration under this
Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement
shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this
Agreement, on the same terms and conditions as other shares of
Common Stock included in such underwritten offering.
Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(d)
shall only be available in the event the Company fails to timely
file, obtain effectiveness or maintain effectiveness of any
Registration Statement to be filed pursuant to Section 2(a) in
accordance with the terms of this Agreement.
e. Eligibility for Form S-3, SB-2 or S-1; Conversion to
Form S-3 . The Company represents and warrants that it
meets the requirements for the use of Form S-3, SB-2 or S-1 for
registration of the sale by the Initial Investors and any other
Investors of the Registrable Securities. The Company agrees to file
all reports required to be filed by the Company with the SEC in a
timely manner so as to remain eligible or become eligible, as the
case may be, and thereafter to maintain its eligibility, for the
use of Form S-3. If the Company is not currently eligible to use
Form S-3, not later than five (5) business days after the Company
first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for
registration of the offer and sale by the Initial Investors and any
other Investors of Registrable Securities, the Company shall file a
Registration Statement on Form S-3 (or such successor form) with
respect to the Registrable Securities covered by the Registration
Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) (and include in such Registration
Statement on Form S-3 the information required by Rule 429 under
the 1933 Act) or convert the Registration Statement on Form SB-2 or
Form S-1, whichever is applicable, filed pursuant to Section 2(a)
to a Form S-3 pursuant to Rule 429 under the 1933 Act and cause
such Registration Statement (or such amendment) to be declared
effective no later than thirty (30) days after filing. In the event
of a breach by the Company of the provisions of this Section 2(e),
the Company will be required to make payments pursuant to Section
2(c) hereof.
3.
OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable
Securities, the Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the
SEC not later than the Filing Date, a Registration Statement with
respect to the number of Registrable Securities provided in Section
2(a), and thereafter use its best efforts to cause such
Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing but in no event
later than ninety (90)days from the date of Closing), and keep the
Registration Statement effective pursuant to Rule 415 at all times
until such date as is the earlier of (i) the date on which all of
the Registrable Securities have been sold and (ii) the date on
which the Registrable Securities (in the opinion of counsel to the
Initial Investors) may be immediately sold to the public without
registration or restriction (including, without limitation, as to
volume by each holder thereof) under the 1933 Act (the "
Registration Period "), which Registration Statement
(including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to
the Registration Statements and the prospectus used in connection
with the Registration Statements as may be necessary to keep the
Registration Statements effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration
Statements until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares
available under a Registration Statement filed pursuant to this
Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of the Notes and
exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable,
but in any event within fifteen (15) days after the necessity
therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to
rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof, but in any event
within thirty (30) days after the date on which the Company
reasonably first determines (or reasonably should have determined)
the need therefor. The provisions of Section 2(c) above shall be
applicable with respect to such obligation, with the ninety
(90)days running from the day the Company reasonably first
determines (or reasonably should have determined) the need
therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement and
its legal counsel promptly (but in no event more than two (2)
business days) after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of each
Registration Statement and any amendment thereto, each preliminary
prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration Statement referred to in
Section 2(a), each letter written by or on behalf of the Company to
the SEC or the staff of the SEC, and each item of correspondence
from the SEC or the staff of the SEC, in each case relating to such
Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and promptly (but in no event more than two (2)
business days) after the Registration Statement is declared
effective by the SEC, such number of copies of a prospectus,
including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor. The Company will
immediately notify each Investor by facsimile of the effectiveness
of each Registration Statement or any post-effective amendment. The
Company will promptly respond to any and all comments received from
the SEC (which comments shall promptly be made available to the
Investors upon request), with a view towards causing each
Registration Statement or any amendment thereto to be declared
effective by the SEC as soon as practicable, shall promptly file an
acceleration request as soon as practicable (but in no event more
than two (2) business days) following the resolution or clearance
of all SEC comments or, if applicable, following notification by
the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall, if required by SEC
Rules, promptly file with the SEC a final prospectus as soon as
practicable (but in no event more than two (2) business days)
following receipt by the Company from the SEC of an order declaring
the Registration Statement effective. In the event of a breach by
the Company of the provisions of this Section 3(c), the Company
will be required to make payments pursuant to Section 2(c)
hereof.
d. The Company shall use reasonable efforts to register
and qualify the Registrable Securities covered by the Registration
Statements under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investors who hold a
majority in interest of the Registrable Securities being offered
reasonably request, prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period,
take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided , however , that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3(d), subject itself to general taxation in any such
jurisdiction, file a general consent to service of process in any
such jurisdiction, provide any undertakings that cause the Company
undue expense or burden, or make any change in its charter or
bylaws, which in each case the Board of Directors of the Company
determines to be contrary to the best interests of the Company and
its shareholders.
e. In the event Investors who hold a majority-in-interest
of the Registrable Securities being offered in the offering (with
the approval of a majority-in-interest of the Initial Investors)
select underwriters for the offering, the Company shall enter into
and perform its obligations under an underwriting agreement, in
usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters
of such offering.
f. As promptly as practicable after becoming aware of
such event, the Company shall notify each Investor of the happening
of any event, of which the Company has knowledge, as a result of
which the prospectus included in any Registration Statement, as
then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and use
its best efforts promptly to prepare a supplement or amendment to
any Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably
