Unassociated Document


    EXHIBIT
      10.7

    Letter
      Agreement

    


    


    June
      1,
      2006

    


    


    Cornell
      Capital Partners, LP

    101
      Hudson Street, Suite 3606

    Jersey
      City, New Jersey 07302

    


    Dear
      Ladies and Gentlemen:

    


    We
      are
      providing you with this Letter Agreement in connection with the Purchase
      Agreement, dated as of February 6, 2006 (the “February
      Purchase Agreeement”),
      between Homeland Security Capital Corporation (the “Company”)
      and
      Cornell Capital Partners, LP (the “Investor”)
      and
      the Securities Purchase Agreement, dated as of August 22, 2006, between the
      Company and the Investor (the “August
      Purchase Agreement”;
      and
      together with the February Purchase Agreement, the “Purchase
      Agreements”),
      pursuant to which the Company issued secured convertible debentures to the
      Investor pursuant to the Secured Convertible Debenture, dated as of February
      6,
      2006, issued by the Company to the Investor (the “February
      Debenture”)
      and
      the Secured Convertible Debenture, dated as of August 22, 2006, issued by the
      Company to the Investor (the “August
      Debenture”;
      and
      together with the February Debenture, the “Debentures”).
      In
      connection with the issuance of the Debentures, the Company provided certain
      registration rights pursuant to the Investor Registration Rights Agreement,
      dated as of February 6, 2006, between the Company and the Investor (the
“February
      Registration Rights Agreement”)
      and
      the Investor Registration Rights Agreement, dated as of August 22, 2006, between
      the Company and the Investor (the “August
      Registration Rights Agreement”;
      and
      together with the February Registration Rights Agreement, the “Registration
      Rights Agreements”).
      Capitalized terms not otherwise defined in this Letter Agreement shall have
      the
      meanings specified in the Purchase Agreements.

     

    1. The
      Company and the Investor agree that the Interest
      paragraph of each of the February Debenture and the August Debenture is amended
      and restated to read in its entirety as follows:

    


    “Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to ten percent (10%). Interest shall be calculated on the basis
      of a
      365-day year and the actual number of days elapsed, to the extent permitted
      by
      applicable law. Interest hereunder will be paid to the Holder or its assignee
      (as defined in Section 5) in whose name this Debenture is registered on the
      records of the Obligor regarding registration and transfers of Debentures (the
      “Debenture
      Register”).”


    
      
         

      

      
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    2. The
      Investor hereby waives any breach prior to the date hereof by the Company of
      Sections 2(a) and 2(b) of the February Registration Rights Agreement and
      forgives any liquidated damages owed by the Company, prior to the date hereof,
      to the Investor as a result of any such breach pursuant to Sections 2(c) and
      2(d) of the February Registration Rights Agreement. The Investor hereby waives
      any breach by the Company prior to the date hereof of Sections 2(a) and 2(b)
      of
      the August Registration Rights Agreement and forgives any liquidated damages
      owed by the Company to the Investor as a result of any such breach pursuant
      to
      Sections 2(c) and 2(d) of the August Registration Rights Agreement.

    


    3. The
      Company and the Investor agree that Sections 2(a) and 2(b) of the February
      Registration Rights Agreement are amended and restated to read in their entirety
      as follows:

    


    “(a) Subject
      to the terms and conditions of this Agreement, the Company shall prepare and
      file, no later than ninety (90) days from the date upon which the Company
      receives written demand of registration from any Investor (the “Scheduled
      Filing Deadline”),
      with
      the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
      then
      eligible, on Form S-3) under the Securities Act (the “Initial
      Registration Statement”)
      for
      the resale by the Investors of the Registrable Securities, which includes at
      least 717,389,652 shares of Common Stock to be issued upon conversion of the
      Convertible Debentures and the Series G Preferred Shares (inclusive of any
      Buyer’s Shares). The Company shall cause the Registration Statement to remain
      effective until all of the Registrable Securities have been sold. Prior to
      the
      filing of the Registration Statement with the SEC, the Company shall furnish
      a
      copy of the Initial Registration Statement to the Investors for their review
      and
      comment. The Investors shall furnish comments on the Initial Registration
      Statement to the Company within twenty-four (24) hours of the receipt thereof
      from the Company.

     

    (b) Effectiveness
      of the Initial Registration Statement.
      The
      Company shall use its best efforts (i) to have the Initial Registration
      Statement declared effective by the SEC no later than one hundred eighty (180)
      days after the date upon which the Company receives written demand of
      registration from any Investor (the “Scheduled
      Effective Deadline”)
      and
      (ii) to insure that the Initial Registration Statement and any subsequent
      Registration Statement remains in effect until all of the Registrable Securities
      have been sold, subject to the terms and conditions of this Agreement. It shall
      be an event of default hereunder if the Initial Registration Statement is not
      declared effective by the SEC within one hundred eighty (180) days after the
      date upon which the Company receives written demand of registration from any
      Investor.”

     

    4. The
      Company and the Investor agree that Sections 2(a) and 2(b) of the August
      Registration Rights Agreement are amended and restated to read in their entirety
      as follows:

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    


    “(a) Subject
      to the terms and conditions of this Agreement, the Company shall prepare and
      file, no later than ninety (90) days from the date upon which the Company
      receives written demand of registration from any Investor (the “Scheduled
      Filing Deadline”),
      with
      the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
      then
      eligible, on Form S-3) under the Securities Act (the “Initial
      Registration Statement”)
      for
      the resale by the Investors of the Registrable Securities, which includes at
      least 717,389,652 shares of Common Stock to be issued upon conversion of the
      Convertible Debentures as well as one hundred million (100,000,000) Warrant
      Shares. The Company shall cause the Registration Statement to remain effective
      until all of the Registrable Securities have been sold. Prior to the filing
      of
      the Registration Statement with the SEC, the Company shall furnish a copy of
      the
      Initial Registration Statement to the Investors for their review and comment.
      The Investors shall furnish comments on the Initial Registration Statement
      to
      the Company within twenty-four (24) hours of the receipt thereof from the
      Company.

     

    (b) Effectiveness
      of the Initial Registration Statement.
      The
      Company shall use its best efforts (i) to have the Initial Registration
      Statement declared effective by the SEC no later than one hundred eighty (180)
      days from the date upon which the Company receives written demand of
      registration from any Investor (the “Scheduled
      Effective Deadline”)
      and
      (ii) to insure that the Initial Registration Statement and any subsequent
      Registration Statement remains in effect until all of the Registrable Securities
      have been sold, subject to the terms and conditions of this
      Agreement.”

     

    5. The
      Company and the Investor agree that except for the changes and amendments to
      the
      Debentures and the Registration Rights Agreements noted herein, the Debentures
      and the Registration Rights Agreements shall remain unchanged and in full force
      and effect.

    


    This
      Letter Agreement may be executed in any number of counterparts and by different
      parties hereto on separate counterparts, each complete set of which, when so
      executed and delivered by all parties, shall be an original, but all such
      counterparts shall together constitute but one and the same instrument. This
      Letter Agreement may be executed by telefacsimile transmission, and such
      telefacsimile signatures shall be binding, of full force and effect, and treated
      as original signatures. This Letter Agreement shall be governed by the
      substantive laws (other than conflict laws) of the State of Delaware. Any
      provision of this Letter Agreement held by a court of competent jurisdiction
      to
      be invalid or unenforceable shall not impair or invalidate the remainder of
      this
      Letter Agreement, and the effect thereof shall be confined to the provision
      so
      held to be invalid or unenforceable.

     

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    Please
      confirm your agreement with the foregoing by signing and returning the enclosed
      copy of this Letter Agreement to the undersigned, whereupon this Letter
      Agreement shall become a binding agreement among the Company and the
      Investor.

    


    


    
      	 	
              Homeland
                Security Capital Corporation

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By:

            	
              /s/
                C. Thomas McMillen

            
	 	 	
              Name:
                C. Thomas McMillen

            
	 	 	
              Title:
                Chief Executive Officer

            


    

     

     

    Accepted
      and Agreed to as of the 1st

    day
      of
      June, 2007.

    


    


    Cornell
      Capital Partners, LP

    


    
      	
              By:

            	
              Yorkville
                Advisors, LLC

            


    

    
      	
              Its:

            	
              Investment
                Manager

            


    

    


    


    
      	
              By:

            	
              /s/
                Mark
                Angelo                                           
                

            


    

    
      	 	
              Name:
                Mark Angelo

            


    

    
      	 	
              Title:
                Portfolio Manager

            


    

     

    
      
         

      

      
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