GUARANTY

This GUARANTY AGREEMENT (“Agreement”), dated as of March 14, 2008 is made by
each of the undersigned (each a "Guarantor", and collectively, the
"Guarantors"), in favor of YA GLOBAL INVESTMENTS, L.P. (the “Secured Party”).

WHEREAS, in connection with the Securities Purchase Agreement by and among
HOMELAND SECURITY CAPITAL CORPORATION, a Delaware corporation (the "Company")
and the Secured Party of even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue to the Secured Party
(i) an aggregate original principal amount of $13,060,000 of senior secured
notes (the “Notes”); and (ii) warrants (the “Warrants”) to be exercisable to
acquire shares of common stock of the Company (the “Warrants Shares”);

WHEREAS, the Secured Party is the holder of certain secured convertible
debentures issued by the Company to the Secured Party, (as may be amended,
supplemented and restated from time to time, the “Convertible Debentures”),
which Convertible Debentures are being issued for Notes and other securities of
the Company pursuant to the Securities Purchase Agreement;

WHEREAS, the Secured Party and certain of the Grantors are parties to prior
security agreements, guaranty agreements, pledge agreements and other agreements
or documents in connection with the Convertible Debentures (the “Prior Debt
Security Documents”);

WHEREAS, each of the Guarantors except for Safety & Ecology Holdings Corporation
are executing and delivering a Security Agreement dated the date hereof (the
“Security Agreement”) granting a lien in all of the Pledged Property (as defined
in the Security Agreement) to the Secured Party;

WHEREAS, it is a condition precedent to the Secured Party purchasing the Notes
and Warrants pursuant to the Securities Purchase Agreement that the Guarantors
shall have executed and delivered to the Secured Party this Agreement
guaranteeing all of the obligations of the Company under the Transaction
Documents (as defined in the Securities Purchase Agreement, the “Transaction
Documents”; 

WHEREAS, each Guarantor has determined that the execution, delivery and
performance of this Guaranty directly benefits, and is in the best interest of,
such Guarantor;

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Secured Party to perform under the Securities Purchase
Agreement, each Guarantor hereby agrees with the Secured Party as follows:

SECTION 1. Definitions. Reference is hereby made to the Securities Purchase
Agreement and the Notes issued pursuant thereto for a statement of the terms
thereof. All terms used in this Guaranty, which are defined in the Securities
Purchase Agreement or the Notes and not otherwise defined herein, shall have the
same meanings herein as set forth therein.
 
 
 

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SECTION 2. Guaranty. The Guarantors, jointly and severally, hereby
unconditionally and irrevocably, guaranty the punctual payment, as and when due
and payable, by stated maturity or otherwise, of all Obligations (as defined in
the Security Agreement) of the Company from time to time owing by it to the
Secured Party (such obligations, to the extent not paid by the Company, being
the "Guaranteed Obligations"), and agrees to pay any and all expenses (including
reasonable counsel fees and expenses) reasonably incurred by the Secured Party
in enforcing any rights under this Guaranty. Without limiting the generality of
the foregoing, each Guarantor's liability hereunder shall extend to all amounts
that constitute part of the Guaranteed Obligations and would be owed by the
Company to the Secured Party but for the fact that they are unenforceable or not
allowable due to the existence of an insolvency proceeding involving any
Guarantor or the Company (each, a "Transaction Party").

SECTION 3. Guaranty Absolute; Continuing Guaranty; Assignments.

(a)  The Guarantors, jointly and severally, guaranty that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the
Transaction Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Secured Party with respect thereto. The obligations of each
Guarantor under this Guaranty are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted against any Guarantor
to enforce such obligations, irrespective of whether any action is brought
against any Transaction Party or whether any Transaction Party is joined in any
such action or actions. The liability of any Guarantor under this Guaranty shall
be irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives, to the extent permitted by law, any defenses it may
now or hereafter have in any way relating to, any or all of the following:

(i) any lack of validity or enforceability of any Transaction Document or any
agreement or instrument relating thereto;

(ii) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations, or any other amendment or waiver
of or any consent to departure from any Transaction Document, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to any Transaction Party or otherwise;

(iii) any taking, exchange, release or non-perfection of any Pledged Property
(as defined in the Security Documents), or any taking, release or amendment or
waiver of or consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;

(iv) any change, restructuring or termination of the corporate, limited
liability company or partnership structure or existence of any Transaction
Party; or

(v) any other circumstance (including any statute of limitations) or any
existence of or reliance on any representation by the Secured Party that might
otherwise constitute a defense available to, or a discharge of, any Transaction
Party or any other guarantor or surety.
 
 
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This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Secured Party or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.

(b)  This Guaranty is a continuing guaranty and shall (i) remain in full force
and effect until the indefeasible cash payment in full of the Guaranteed
Obligations (other than inchoate indemnity obligations) and (ii) be binding upon
each Guarantor and its respective successors and assigns. This Guaranty shall
inure to the benefit of and be enforceable by the Secured Party and its
successors, and permitted pledgees, transferees and assigns. Without limiting
the generality of the foregoing sentence, the Secured Party may pledge, assign
or otherwise transfer all or any portion of its rights and obligations under and
subject to the terms of any Transaction Document to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Secured Party herein or otherwise, in each case as
provided in the Securities Purchase Agreement or such Transaction Document.

(c)  Pursuant to Section 6.12 of the Security Agreement, each subsidiary of the
Guarantors that is formed or acquired after the execution of this Guaranty is
required to execute the Guaranty. Such subsidiary shall become a Guarantor
hereunder with the same force and effect as if originally named as a Guarantor
herein. The execution and delivery of any instrument adding an additional
Guarantor as a party to this Guaranty shall not require the consent of any other
Guarantor hereunder. The rights and obligations of each Guarantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Guarantor as a party to this Guaranty

SECTION 4. Waivers. To the extent permitted by applicable law, each Guarantor
hereby waives promptness, diligence, notice of acceptance and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Secured Party exhaust any right or take any action against
any Transaction Party or any other Person or any Pledged Property. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantors
hereby waive any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.

SECTION 5. Subrogation. No Guarantor may exercise any rights that it may now or
hereafter acquire against any Transaction Party or any other guarantor that
arise from the existence, payment, performance or enforcement of any Guarantor's
obligations under this Guaranty, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of the Secured Party against any
Transaction Party or any other guarantor or any Pledged Property, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from any
Transaction Party or any other guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security solely
on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations (other than inchoate indemnity obligations) and all other
amounts payable under this Guaranty (other than inchoate indemnity obligations)
shall have indefeasibly been paid in full in cash. If any amount shall be paid
to the Guarantor in violation of the immediately preceding sentence at any time
prior to the later of the payment in full in cash of the Guaranteed Obligations
and all other amounts payable under this Guaranty, such amount shall be held in
trust for the benefit of the Secured Party and shall forthwith be paid to the
Secured Party to be credited and applied to the Guaranteed Obligations and all
other amounts payable under this Guaranty, whether matured or unmatured, in
accordance with the terms of the Transaction Document, or to be held as Pledged
Property for any Guaranteed Obligations or other amounts payable under this
Guaranty thereafter arising. If (a) any Guarantor shall make payment to the
Secured Party of all or any part of the Guaranteed Obligations, and (b) all of
the Guaranteed Obligations (other than inchoate indemnity obligations) and all
other amounts payable under this Guaranty (other than inchoate indemnity
obligations) shall indefeasibly be paid in full in cash, the Secured Party will,
at such Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by such
Guarantor.
 
 
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SECTION 6. Representations, Warranties and Covenants.

(a) Each Guarantor hereby represents and warrants as of the date first written
above as follows:

(i) The Guarantor (A) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (B) has all corporate, limited
liability company or limited partnership power and authority to conduct its
business as now conducted and as presently contemplated and to execute and
deliver this Guaranty and each other Transaction Document to which the Guarantor
is a party, and to consummate the transactions contemplated hereby and thereby
and (C) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary
except where the failure to be so qualified would not result in a Material
Adverse Effect.

(ii) The execution, delivery and performance by the Guarantor of this Guaranty
and each other Transaction Document to which the Guarantor is a party (A) have
been duly authorized by all necessary corporate, limited liability company or
limited partnership action, (B) do not and will not contravene its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, or any applicable law or
any contractual restriction binding on the Guarantor or its properties (except
where the contravention of such contractual restriction would not result in a
Material Adverse Effect), (C) do not and will not result in or require the
creation of any lien (other than pursuant to any Transaction Document) upon or
with respect to any of its properties, and (D) do not and will not result in any
default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any material permit, license, authorization or approval applicable
to it or its operations or any of its properties.
 
 
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(iii) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority is required in connection with the due
execution, delivery and performance by the Guarantor of this Guaranty or any of
the other Transaction Documents to which the Guarantor is a party (other than
expressly provided for in any of the Transaction Documents).

(iv) Each of this Guaranty and the other Transaction Documents to which the
Guarantor is or will be a party, when delivered, will be, a legal, valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, suretyship or
other similar laws and equitable principles (regardless of whether enforcement
is sought in equity or at law).

(v) There is no pending or, to the knowledge of the Guarantor, threatened
action, suit or proceeding against the Guarantor or to which any of the
properties of the Guarantor is subject, before any court or other governmental
authority or any arbitrator that (A) if adversely determined, could reasonably
be expected to have a Material Adverse Effect or (B) relates to this Guaranty or
any of the other Transaction Documents to which the Guarantor is a party or any
transaction contemplated hereby or thereby.

(vi) The Guarantor (A) has read and understands the terms and conditions of the
Securities Purchase Agreement and the other Transaction Documents, and (B) now
has and will continue to have independent means of obtaining information
concerning the affairs, financial condition and business of the Company and the
other Transaction Parties, and has no need of, or right to obtain from the
Secured Party, any credit or other information concerning the affairs, financial
condition or business of the Company or the other Transaction Parties that may
come under the control of the Secured Party.

SECTION 7. Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default, the Secured Party may, and is hereby authorized to, at any
time and from time to time, without notice to the Guarantors (any such notice
being expressly waived by each Guarantor) and to the fullest extent permitted by
law, set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Secured Party to or for the credit or the account of any Guarantor
against any and all obligations of the Guarantors now or hereafter existing
under this Guaranty or any other Transaction Document, irrespective of whether
or not the Secured Party shall have made any demand under this Guaranty or any
other Transaction Document and although such obligations may be contingent or
unmatured. The Secured Party agrees to notify the relevant Guarantor promptly
after any such set-off and application made by the Secured Party, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Secured Party under this Section 7 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Secured Party may have under this Guaranty or any
other Transaction Document in law or otherwise.

SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to any Guarantor, to it at its address set forth on the signature page hereto,
or if to the Secured Party, to it at its respective address set forth in the
Securities Purchase Agreement; or as to either such Person at such other address
as shall be designated by such Person in a written notice to such other Person
complying as to delivery with the terms of this Section 8. All such notices and
other communications shall be effective (i) if mailed (by certified mail,
postage prepaid and return receipt requested), when received or three Business
Days after deposited in the mails, whichever occurs first; (ii) if telecopied,
when transmitted and confirmation is received, provided same is on a Business
Day and, if not, on the next Business Day; or (iii) if delivered by hand, upon
delivery, provided same is on a Business Day and, if not, on the next Business
Day.
 
 
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SECTION 9. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. The parties further agree that any action
between them shall be heard in Hudson County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Hudson County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.

SECTION 10. WAIVER OF JURY TRIAL, ETC. EACH GUARANTOR HEREBY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY AMENDMENT,
WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN
THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM
ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY OR THE
OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH GUARANTOR
CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE SECURED
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE SECURED PARTY WOULD NOT,
IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. EACH GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE SECURED PARTY ENTERING INTO THIS AGREEMENT.

SECTION 11. Miscellaneous.

(a)  Each Guarantor will make each payment hereunder in lawful money of the
United States of America and in immediately available funds to the Secured
Party, at such address specified by the Secured Party from time to time by
notice to the Guarantors.

(b)  No amendment or waiver of any provision of this Guaranty and no consent to
any departure by any Guarantor therefrom shall in any event be effective unless
the same shall be in writing and signed by each Guarantor and the Secured Party,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
 
 
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(c)  No failure on the part of the Secured Party to exercise, and no delay in
exercising, any right hereunder or under any other Transaction Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder or under any Transaction Document preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
the Secured Party provided herein and in the other Transaction Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Secured Party under any Transaction Document
against any party thereto are not conditional or contingent on any attempt by
the Secured Party to exercise any of their respective rights under any other
Transaction Document against such party or against any other Person.

(d)  Any provision of this Guaranty that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.

(e)  This Guaranty shall (i) be binding on each Guarantor and its respective
successors and assigns, and (ii) inure, together with all rights and remedies of
the Secured Party hereunder, to the benefit of the Secured Party and their
respective successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, the Secured Party may
assign or otherwise transfer its rights and obligations under the Securities
Purchase Agreement or any other Transaction Document to any other Person in
accordance with the terms thereof, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Secured Party,
as the case may be, herein or otherwise. None of the rights or obligations of
any Guarantor hereunder may be assigned or otherwise transferred without the
prior written consent of Secured Party.

(f)  This Guaranty reflects the entire understanding of the transaction
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, entered into before the date hereof.

(g)  Existing Guaranty. The Guaranty is intended to be supplemental to, and not
in limitation of, any existing guaranty in favor of the Secured Party to secure
the Obligations, whether under the Prior Debt Security Documents or otherwise.
All such existing guaranty, and any rights of the Secured Party in connection
therewith, shall remain in full force and effect in accordance with their
respective terms, provided, however, that in the event of a conflict between the
terms of this Agreement and of any such prior guaranty, or the documents
evidencing the same, the terms of this Agreement shall control.

(h)  Section headings herein are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by
its respective duly authorized officer, as of the date first above written.

 
COMPANY:
     
HOMELAND SECURITY CAPITAL CORPORATION
             
By: 
       
Name: 
     
Title: 
   

 

 
GUARANTOR:
     
HOMELAND SECURITY ADVISORY SERVICES, INC.
             
By: 
       
Name: 
     
Title: 
   

 
 

 
GUARANTOR:
     
CELERITY SYSTEMS, INC.
             
By: 
       
Name: 
     
Title: 
   

 

 
GUARANTOR:
     
NEXUS TECHNOLOGIES GROUP, INC.
             
By: 
       
Name: 
     
Title: 
   

 
 
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