Document:

REGISTRATION
      RIGHTS AGREEMENT

    

    THIS
      REGISTRATION RIGHTS AGREEMENT
      (this
“Agreement”),
      dated
      as of March 14, 2008, by and among HOMELAND
      SECURITY CAPITAL CORPORATION,
      a
      Delaware corporation (the “Company”),
      and
      the undersigned Buyers listed on Schedule I attached hereto (each, a
“Buyer”
and
      collectively, the “Buyers”).

    

    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 of the
      Securities Purchase Agreement, to issue and sell to the Buyers (i) share of
      Series H Preferred Stock (the “Preferred
      Stock”)
      which
      shall be convertible into shares of the Company’s common stock, par value $0.001
      per share (the “Common
      Stock,”
as
      converted, the “Conversion
      Shares”)
      in
      accordance with the terms of the Certificate of Designations of the Series
      H
      Preferred Stock, and (ii) warrants (the “Warrants”),
      which
      will be exercisable to purchase shares of Common Stock (as exercised,
      collectively, the “Warrant
      Shares”).
      Capitalized terms not defined herein shall have the meaning ascribed to them
      in
      the Securities Purchase Agreement.

    

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain demand registration rights under the Securities
      Act of 1933, as amended, and the rules and regulations thereunder, or any
      similar successor statute (collectively, the “Securities
      Act”),
      and
      applicable state securities laws and other rights as provided for
      herein.

    

    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 the Buyers hereby agree as
      follows:

    

    1. DEFINITIONS.

    

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

    

    (a) “Demand
      Notice”
means
      a
      written notice from a Buyer to the Company to file a Registration Statement
      and
      stating the number of Registrable Securities to be included on such Registration
      Statement.

    

    (b) “Effectiveness
      Deadline”
means,
      with respect to a Registration Statement filed hereunder, the 120th calendar
      day
      following the date of the applicable Demand Notice, provided, however, in the
      event the Company is notified by the U.S. Securities and Exchange Commission
      (“SEC”)
      that
      one of the above Registration Statements will not be reviewed or is no longer
      subject to further review and comments, the Effectiveness Date as to such
      Registration Statement shall be the fifth Trading Day following the date on
      which the Company is so notified if such date precedes the dates required
      above.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c) “Filing
      Deadline”
means,
      with respect to a Registration Statement required hereunder, the 45th calendar
      day following the date the Company receives a Damand Notice.

    

    (d) “Person”
means
      a
      corporation, a limited liability company, an association, a partnership, an
      organization, a business, an individual, a governmental or political subdivision
      thereof or a governmental agency.

    

    (e) “Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

    

    (f) “Registrable
      Securities”
means
      all of (i) the Conversion Shares issuable upon conversion of the Preferred
      Stock, (ii) the Warrant Shares issued or issuable upon exercise of the Warrants,
      (iii) any additional shares issuable in connection with any anti-dilution
      provisions in the Warrants or the Preferred Stock (without giving effect to
      any
      limitations on exercise set forth in the Warrants or Preferred Stock) and (v)
      any shares of Common Stock issued or issuable with respect to the Conversion
      Shares, the Preferred Stock, the Warrant Shares, or the Warrants as a result
      of
      any stock split, dividend or other distribution, recapitalization or similar
      event or otherwise, without regard to any limitations on the conversion of
      the
      Convertible Debentures or exercise of the Warrants.

    

    (g) “Registration
      Statement”
means
      the registration statements required to be filed hereunder (including any
      additional registration statements contemplated by Section 2(e)), including
      (in
      each case) the Prospectus, amendments and supplements to such registration
      statement or Prospectus, including pre- and post-effective amendments, all
      exhibits thereto, and all material incorporated by reference or deemed to be
      incorporated by reference in such registration statement.

    

    (h) “Rule
      415”
means
      Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule
      may
      be amended from time to time, or any similar rule or regulation hereafter
      adopted by the SEC having substantially the same purpose and effect as such
      Rule.

    

    2. REGISTRATION.

    

    (a) The
      Company’s registration obligations set forth in this Section 2 including its
      obligations to file Registration Statements upon receipt of a Demand Notice,
      obtain effectiveness of Registration Statements, and maintain the continuous
      effectiveness of Registration Statement that have been declared effective shall
      begin on the date hereof and continue until all the Registrable Securities
      have
      been sold or may permanently be sold without any restrictions pursuant to Rule
      144, as determined by the counsel to the Company pursuant to a written opinion
      letter to such effect, addressed and acceptable to the Company’s transfer agent
      and the affected Holders (the “Registration
      Period”).
      

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (b) Anytime
      during the Registration Period, the Buyer shall have the right to deliver to
      the
      Company a Demand Notice which shall trigger the Company’s obligations to file a
      Registration Statement as set forth below. 

    

    (c) After
      receipt of a Demand Notice, the Company shall, on or prior to the Filing
      Deadline, prepare and file with the SEC a Registration Statement on Form S-1
      (or, if the Company is then eligible, on Form S-3) covering the resale by the
      Buyer of all of the Registrable Securities set forth in such Demand Notice.
      Each
      Registration Statement shall contain the “Selling
      Stockholders”
and
      “Plan
      of Distribution”
      sections in substantially the form attached hereto as Exhibit
      A
      and
      contain all the required disclosures set forth on Exhibit
      B.
      The
      Company shall use its best efforts to have each Registration Statement declared
      effective by the SEC as soon as practicable, but in no event later than the
      Effectiveness Deadline. By 9:30 am on the date following the date of
      effectiveness, the Company shall file with the SEC in accordance with Rule
      424
      under the 1933 Act the final Prospectus to be used in connection with sales
      pursuant to such Registration Statement. Prior to the filing of the Registration
      Statement with the SEC, the Company shall furnish a draft of the Registration
      Statement to the Buyer for their review and comment. The Buyer shall furnish
      comments on the Registration Statement to the Company within twenty-four (24)
      hours of the receipt thereof from the Company.

    

    (d) During
      the Registration Period, the Company shall (i) promptly prepare and file with
      the SEC such amendments (including post-effective amendments) and
      supplements to a Registration Statement and the Prospectus used in connection
      with a Registration Statement, which Prospectus is to be filed pursuant to
      Rule
      424 promulgated under the Securities Act, as may be necessary to keep such
      Registration Statement effective at all times during the Registration Period,
      (ii) prepare and file with the SEC additional Registration Statements in order
      to register for resale under the Securities Act all of the Registrable
      Securities; (ii) cause the related Prospectus to be amended or supplemented
      by
      any required Prospectus supplement (subject to the terms of this Agreement),
      and
      as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond
      as
      promptly as reasonably possible to any comments received from the SEC with
      respect to a Registration Statement or any amendment thereto and as promptly
      as
      reasonably possible provide the Buyers true and complete copies of all
      correspondence from and to the SEC relating to a Registration Statement
      (provided that the Company may excise any information contained therein which
      would constitute material non-public information as to any Buyer which has
      not
      executed a confidentiality agreement with the Company); and (iv) comply with
      the
      provisions of the Securities Act with respect to the disposition of all
      Registrable Securities of the Company covered by such Registration Statement
      until such time as all of such Registrable Securities shall have been disposed
      of in accordance with the intended methods of disposition by the seller or
      sellers thereof as set forth in such Registration Statement. In the case of
      amendments and supplements to a Registration Statement which are required to
      be
      filed pursuant to this Agreement (including pursuant to this Section 2(e))
      by
      reason of the Company’s filing a report on Form 10-KSB, Form 10-QSB or Form 8-K
      or any analogous report under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”), the Company shall incorporate such report by
      reference into the Registration Statement, if applicable, or shall file such
      amendments or supplements with the SEC on the same day on which the Exchange
      Act
      report is filed which created the requirement for the Company to amend or
      supplement the Registration Statement. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (e) Reduction
      of Registrable Securities Included in a Registration Statement.
      Notwithstanding anything contained herein, in the event that the SEC requires
      the Company to reduce the number of Registrable Securities to be included in
      a
      Registration Statement in order to allow the Company to rely on Rule 415 with
      respect to a Registration Statement, then the Company shall be obligated to
      include in such Registration Statement (which may be a subsequent Registration
      Statement if the Company needs to withdraw a Registration Statement and refile
      a
      new Registration Statement in order to rely on Rule 415) only such limited
      portion of the Registrable Securities as the SEC shall permit. Any Registrable
      Securities that are excluded in accordance with the foregoing terms are
      hereinafter referred to as “Cut
      Back Securities.”
To
      the
      extent Cut Back Securities exist, as soon as may be permitted by the SEC, the
      Company shall be required to file a Registration Statement covering the resale
      of the Cut Back Securities (subject also to the terms of this Section) and
      shall
      use best efforts to cause such Registration Statement to be declared effective
      as promptly as practicable thereafter.

    

    (f) Failure
      to File or Obtain Effectiveness of the Registration Statement or Remain
      Current.
      If: (i)
      a Registration Statement is not filed on or prior to its Filing Date, or (ii)
      the Company fails to file with the SEC a request for acceleration in accordance
      with Rule 461 promulgated under the Securities Act, within five Trading Days
      of
      the date that the Company is notified (orally or in writing, whichever is
      earlier) by the SEC that a Registration Statement will not be “reviewed,” or not
      subject to further review, or (iii) a Registration Statement filed or required
      to be filed hereunder is not declared effective by the SEC by its Effectiveness
      Deadline, or (iv) after the effectiveness, a Registration Statement ceases
      for
      any reason to remain continuously effective as to all Registrable Securities
      for
      which it is required to be effective, or the Holders are otherwise not permitted
      to utilize the Prospectus therein to resell such Registrable Securities for
      more
      than 30 consecutive calendar days or more than an aggregate of 40 calendar
      days
      during any 12-month period (which need not be consecutive calendar days), or
      (v)
      if after the six month anniversary of the date hereof, the Company does not
      have
      available adequate current public information as set forth in Rule 144(c) (any
      such failure or breach being referred to as an “Event”),
      then
      in addition to any other rights the holders of the Convertible Debentures may
      have hereunder or under applicable law, on each such Event date and on each
      monthly anniversary of each such Event date (if the applicable Event shall
      not
      have been cured by such date) until the applicable Event is cured, the Company
      shall pay to each holder of Convertible Debentures an amount in cash, as partial
      liquidated damages (“Liquidated
      Damages”)
      and
      not as a penalty, equal to 1.0% of the aggregate liquidation amount for any
      Preferred Stock then held by such holder. The parties agree that (1) the Company
      shall not be liable for Liquidated Damages under this Agreement with respect
      to
      any Warrants or Warrant Shares and (2) the maximum aggregate Liquidated Damages
      payable to a holder of Convertible Debentures under this Agreement shall be
      twenty-four percent (24%) of the aggregate liquidation amount of all the
      Preferred Stock issued and outstanding. The partial Liquidated Damages pursuant
      to the terms hereof shall apply on a daily pro-rata basis for any portion of
      a
      month prior to the cure of an Event.

    

    (g) Liquidated
      Damages.
      The
      Company and the Buyer hereto acknowledge and agree that the sums payable under
      subsection 2(f) above shall constitute liquidated damages and not penalties
      and
      are in addition to all other rights of the Buyer, including the right to call
      a
      default. The parties further acknowledge that (i) the amount of loss or damages
      likely to be incurred is incapable or is difficult to precisely estimate, (ii)
      the amounts specified in such subsections bear a reasonable relationship to,
      and
      are not plainly or grossly disproportionate to, the probable loss likely to
      be
      incurred in connection with any failure by the Company to obtain or maintain
      the
      effectiveness of a Registration Statement, (iii) one of the reasons for the
      Company and the Buyer reaching an agreement as to such amounts was the
      uncertainty and cost of litigation regarding the question of actual damages,
      and
      (iv) the Company and the Buyer are sophisticated business parties and have
      been
      represented by sophisticated and able legal counsel and negotiated this
      Agreement at arm’s length. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    3. RELATED
      OBLIGATIONS.

    

    (a) The
      Company shall, not less than three (3) Trading Days prior to the filing of
      each
      Registration Statement and not less than one (1) Trading Day prior to the filing
      of any related amendments and supplements to all Registration Statements (except
      for annual reports on Form 10-K or Form 10-KSB), furnish to each Buyer copies
      of
      all such documents proposed to be filed, which documents (other than those
      incorporated or deemed to be incorporated by reference) will be subject to
      the
      reasonable and prompt review of such Buyers, The Company shall not file a
      Registration Statement or any such Prospectus or any amendments or supplements
      thereto to which the Buyers shall reasonably object in good faith; provided
      that,
      the Company is notified of such objection in writing no later than two (2)
      Trading Days after the Buyers have been so furnished copies of a Registration
      Statement.

    

    (b) The
      Company shall furnish to each Buyer whose Registrable Securities are included
      in
      any Registration Statement, without charge, (i) at least one (1) copy of such
      Registration Statement as declared effective by the SEC and any amendment(s)
      thereto, including financial statements and schedules, all documents
      incorporated therein by reference, all exhibits and each preliminary prospectus,
      (ii) ten (10) copies of the final prospectus included in such Registration
      Statement and all amendments and supplements thereto (or such other number
      of
      copies as such Buyer may reasonably request) and (iii) such other documents
      as
      such Buyer may reasonably request from time to time in order to facilitate
      the
      disposition of the Registrable Securities owned by such Buyer.

    

    (c) The
      Company shall use its best efforts to (i) register and qualify the Registrable
      Securities covered by a Registration Statement under such other securities
      or
“blue sky” laws of such jurisdictions in the United States as any Buyer
      reasonably requests, (ii) 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, (iii) take such other
      actions as may be necessary to maintain such registrations and qualifications
      in
      effect at all times during the Registration Period, and (iv) 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 (w) make any
      change to its articles of incorporation or by-laws, (x) qualify to do business
      in any jurisdiction where it would not otherwise be required to qualify but
      for
      this Section 3(d), (y) subject itself to general taxation in any such
      jurisdiction, or (z) file a general consent to service of process in any such
      jurisdiction. The Company shall promptly notify each Buyer who holds Registrable
      Securities of the receipt by the Company of any notification with respect to
      the
      suspension of the registration or qualification of any of the Registrable
      Securities for sale under the securities or “blue sky” laws of any jurisdiction
      in the United States or its receipt of actual notice of the initiation or threat
      of any proceeding for such purpose.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (d) As
      promptly as practicable after becoming aware of such event or development,
      the
      Company shall notify each Buyer in writing of the happening of any event as
      a
      result of which the Prospectus included in a 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, in light of the circumstances under which they were made, not
      misleading (provided that in no event shall such notice contain any material,
      nonpublic information), and promptly prepare a supplement or amendment to such
      Registration Statement to correct such untrue statement or omission, and deliver
      ten (10) copies of such supplement or amendment to each Buyer. The Company
      shall
      also promptly notify each Buyer in writing (i) when a Prospectus or any
      Prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to each Buyer by
      facsimile on the same day of such effectiveness), (ii) of any request by the
      SEC
      for amendments or supplements to a Registration Statement or related prospectus
      or related information, and (iii) of the Company’s reasonable determination
      that a post-effective amendment to a Registration Statement would be
      appropriate.

    

    (e) The
      Company shall use its best efforts to prevent the issuance of any stop order
      or
      other suspension of effectiveness of a Registration Statement, or the suspension
      of the qualification of any of the Registrable Securities for sale in any
      jurisdiction within the United States of America and, if such an order or
      suspension is issued, to obtain the withdrawal of such order or suspension
      at
      the earliest possible moment and to notify each Buyer who holds Registrable
      Securities being sold of the issuance of such order and the resolution thereof
      or its receipt of actual notice of the initiation or threat of any proceeding
      for such purpose.

    

    (f) If,
      after
      the execution of this Agreement, a Buyer believes, after consultation with
      its
      legal counsel, that it could reasonably be deemed to be an underwriter of
      Registrable Securities, at the request of any Buyer, the Company shall furnish
      to such Buyer, on the date of the effectiveness of the Registration Statement
      and thereafter from time to time on such dates as a Buyer may reasonably request
      (i) a letter, dated such date, from the Company’s independent certified public
      accountants in form and substance as is customarily given by independent
      certified public accountants to underwriters in an underwritten public offering,
      and (ii) an opinion, dated as of such date, of counsel representing the Company
      for purposes of such Registration Statement, in form, scope and substance as
      is
      customarily given in an underwritten public offering, addressed to the
      Buyers.

    

    (g) If,
      after
      the execution of this Agreement, a Buyer believes, after consultation with
      its
      legal counsel, that it could reasonably be deemed to be an underwriter of
      Registrable Securities, at the request of any Buyer, the Company shall make
      available for inspection by (i) any Buyer and (ii) one (1) firm of
      accountants or other agents retained by the Buyers (collectively, the
“Inspectors”)
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the “Records”),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company’s
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree,
      and
      each Buyer hereby agrees, to hold in strict confidence and shall not make any
      disclosure (except to a Buyer) or use any Record or other information which
      the
      Company determines in good faith to be confidential, and of which determination
      the Inspectors are so notified, unless (a) the disclosure of such Records is
      necessary to avoid or correct a misstatement or omission in any Registration
      Statement or is otherwise required under the Securities Act, (b) the release
      of
      such Records is ordered pursuant to a final, non-appealable subpoena or order
      from a court or government body of competent jurisdiction, or (c) the
      information in such Records has been made generally available to the public
      other than by disclosure in violation of this or any other agreement of which
      the Inspector and the Buyer has knowledge. Each Buyer agrees that it shall,
      upon
      learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (h) The
      Company shall hold in confidence and not make any disclosure of information
      concerning a Buyer provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent
      jurisdiction, or (iv) such information has been made generally available to
      the
      public other than by disclosure in violation of this Agreement or any other
      agreement. The Company agrees that it shall, upon learning that disclosure
      of
      such information concerning a Buyer is sought in or by a court or governmental
      body of competent jurisdiction or through other means, give prompt written
      notice to such Buyer and allow such Buyer, at the Buyer’s expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

    

    (i) The
      Company shall use its best efforts either to cause all the Registrable
      Securities covered by a Registration Statement (i) to be listed on each
      securities exchange on which securities of the same class or series issued
      by
      the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange or (ii) the
      inclusion for quotation on the National Association of Securities Dealers,
      Inc.
      OTC Bulletin Board for such Registrable Securities. The Company shall pay all
      fees and expenses in connection with satisfying its obligation under this
      Section 3(j).

    

    (j) The
      Company shall cooperate with each Buyer who holds Registrable Securities being
      offered and, to the extent applicable, to facilitate the timely preparation
      and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Buyers may reasonably request and registered in such names as the
      Buyers may request.

    

    (k) The
      Company shall use its best efforts to cause the Registrable Securities covered
      by the applicable Registration Statement to be registered with or approved
      by
      such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (l) The
      Company shall otherwise use its best efforts to comply with all applicable
      rules
      and regulations of the SEC in connection with any registration
      hereunder.

    

    (m) Within
      two (2) business days after a Registration Statement which covers Registrable
      Securities is declared effective by the SEC, the Company shall deliver, and
      shall cause legal counsel for the Company to deliver, to the transfer agent
      for
      such Registrable Securities (with copies to the Buyer whose Registrable
      Securities are included in such Registration Statement) confirmation that such
      Registration Statement has been declared effective by the SEC in the form
      attached hereto as Exhibit
      C.

    

    (n) The
      Company shall take all other reasonable actions necessary to expedite and
      facilitate disposition by each Buyer of Registrable Securities pursuant to
      a
      Registration Statement.

    

    4. OBLIGATIONS
      OF THE BUYERS.

    

    (a) Each
      Buyer agrees that, upon receipt of any notice from the Company of the happening
      of any event of the kind described in Section 3(d) such Buyer will immediately
      discontinue disposition of Registrable Securities pursuant to any Registration
      Statement covering such Registrable Securities until such Buyer’s receipt of the
      copies of the supplemented or amended prospectus contemplated by Section 3(d)
      or
      receipt of notice that no supplement or amendment is required. Notwithstanding
      anything to the contrary, the Company shall cause its transfer agent to deliver
      unlegended certificates for shares of Common Stock to a transferee of a Buyer
      in
      accordance with the terms of the Securities Purchase Agreement in connection
      with any sale of Registrable Securities with respect to which a Buyer has
      entered into a contract for sale prior to the Buyer’s receipt of a notice from
      the Company of the happening of any event of the kind described in Section
      3(d)
      and for which the Buyer has not yet settled.

    

    (b) Each
      Buyer covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it or an exemption therefrom
      in connection with sales of Registrable
      Securities pursuant to the Registration Statement.

    

    5. EXPENSES
      OF REGISTRATION.

    

    All
      expenses incurred in connection with registrations, filings or qualifications
      pursuant to Sections 2 and 3, including, without limitation, all registration,
      listing and qualifications fees, printers, legal and accounting fees shall
      be
      paid by the Company. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    6. INDEMNIFICATION.

    

    With
      respect to Registrable Securities which are included in a Registration Statement
      under this Agreement:

    

    (a) To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Buyer, the directors, officers, partners,
      employees, agents, representatives of, and each Person, if any, who controls
      any
      Buyer within the meaning of the Securities Act or the Exchange Act (each, an
      “Indemnified
      Person”),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
      expenses, joint or several (collectively, “Claims”)
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto (“Indemnified
      Damages”),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other “blue sky” laws of any jurisdiction in
      which Registrable Securities are offered (“Blue
      Sky Filing”),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading; (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      final prospectus (as amended or supplemented, if the Company files any amendment
      thereof or supplement thereto with the SEC) or the omission or alleged omission
      to state therein any material fact necessary to make the statements made
      therein, in light of the circumstances under which the statements therein were
      made, not misleading; or (iii) any violation or alleged violation by the Company
      of the Securities Act, the Exchange Act, any other law, including, without
      limitation, any state securities law, or any rule or regulation there under
      relating to the offer or sale of the Registrable Securities pursuant to a
      Registration Statement (the matters in the foregoing clauses (i) through (iii)
      being, collectively, “Violations”).
      The
      Company shall reimburse the Buyers and each such controlling person promptly
      as
      such expenses are incurred and are due and payable, for any legal fees or
      disbursements or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      expressly for use in connection with the preparation of the Registration
      Statement or any such amendment thereof or supplement thereto; (y) shall not
      be
      available to the extent such Claim is based on a failure of the Buyer to deliver
      or to cause to be delivered the prospectus made available by the Company, if
      such prospectus was timely made available by the Company pursuant to Section
      3(c); and (z) shall not apply to amounts paid in settlement of any Claim if
      such settlement is effected without the prior written consent of the Company,
      which consent shall not be unreasonably withheld. Such indemnity shall remain
      in
      full force and effect regardless of any investigation made by or on behalf
      of
      the Indemnified Person and shall survive the transfer of the Registrable
      Securities by the Buyers pursuant to Section 9 hereof.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (b) In
      connection with a Registration Statement, each Buyer agrees to severally and
      not
      jointly indemnify, hold harmless and defend, to the same extent and in the
      same
      manner as is set forth in Section 6(a), the Company, each of its directors,
      each
      of its officers, employees, representatives, or agents and each Person, if
      any,
      who controls the Company within the meaning of the Securities Act or the
      Exchange Act (each an “Indemnified
      Party”),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the Securities Act, the Exchange Act or otherwise, insofar as
      such Claim or Indemnified Damages arise out of or is based upon any Violation,
      in each case to the extent, and only to the extent, that such Violation occurs
      in reliance upon and in conformity with written information furnished to the
      Company by such Buyer expressly for use in connection with such Registration
      Statement; and, subject to Section 6(d), such Buyer will reimburse any legal
      or
      other expenses reasonably incurred by them in connection with investigating
      or
      defending any such Claim; provided, however, that the indemnity agreement
      contained in this Section 6(b) and the agreement with respect to contribution
      contained in Section 7 shall not apply to amounts paid in settlement of any
      Claim if such settlement is effected without the prior written consent of such
      Buyer, which consent shall not be unreasonably withheld; provided, further,
      however, that the Buyer shall be liable under this Section 6(b) for only that
      amount of a Claim or Indemnified Damages as does not exceed the net proceeds
      to
      such Buyer as a result of the sale of Registrable Securities pursuant to such
      Registration Statement. Such indemnity shall remain in full force and effect
      regardless of any investigation made by or on behalf of such Indemnified Party
      and shall survive the transfer of the Registrable Securities by the Buyers
      pursuant to Section 9. Notwithstanding anything to the contrary contained
      herein, the indemnification agreement contained in this Section 6(b) with
      respect to any prospectus shall not inure to the benefit of any Indemnified
      Party if the untrue statement or omission of material fact contained in the
      prospectus was corrected and such new prospectus was delivered to each Buyer
      prior to such Buyer’s use of the prospectus to which the Claim
      relates.

     

    (c) Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided, however, that an Indemnified Person or Indemnified Party
      shall have the right to retain its own counsel with the fees and expenses of
      not
      more than one (1) counsel for such Indemnified Person or Indemnified Party
      to be
      paid by the indemnifying party, if, in the reasonable opinion of counsel
      retained by the indemnifying party, the representation by such counsel of the
      Indemnified Person or Indemnified Party and the indemnifying party would be
      inappropriate due to actual or potential differing interests between such
      Indemnified Person or Indemnified Party and any other party represented by
      such
      counsel in such proceeding. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      fully apprised at all times as to the status of the defense or any settlement
      negotiations with respect thereto. No indemnifying party shall be liable for
      any
      settlement of any action, claim or proceeding effected without its prior written
      consent; provided, however, that the indemnifying party shall not unreasonably
      withhold, delay or condition its consent. No indemnifying party shall, without
      the prior written consent of the Indemnified Party or Indemnified Person,
      consent to entry of any judgment or enter into any settlement or other
      compromise which does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to such Indemnified Party or Indemnified Person of
      a
      release from all liability in respect to such claim or litigation. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (d) The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

    

    (e) The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of action or similar right of the Indemnified Party or Indemnified Person
      against the indemnifying party or others, and (ii) any liabilities the
      indemnifying party may be subject to pursuant to the law.

    

    7. CONTRIBUTION.

    

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided, however, that: (i) no seller of
      Registrable Securities guilty of fraudulent misrepresentation (within the
      meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any seller of Registrable Securities who was not guilty of
      fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
      Securities shall be limited in amount to the net amount of proceeds received
      by
      such seller from the sale of such Registrable Securities.

    

    8. REPORTS
      UNDER THE EXCHANGE ACT.

    

    With
      a
      view to making available to the Buyers the benefits of Rule 144 promulgated
      under the Securities Act or any similar rule or regulation of the SEC that
      may
      at any time permit the Buyers to sell securities of the Company to the public
      without registration (“Rule
      144”),
      and
      as a material inducement to the Buyer’s purchase of the Convertible Debentures,
      the Company represents, warrants, and covenants to the following: 

    

    (a) The
      Company is subject to the reporting requirements of section 13 or 15(d) of
      the
      Exchange Act and has filed all required reports under section 13 or 15(d) of
      the
      Exchange Act during the 12 months prior to the date hereof (or for such shorter
      period that the issuer was required to file such reports), other than Form
      8-K
      reports

    

    (b) During
      the Registration Period, the Company shall file with the SEC in a timely manner
      all required reports under section 13 or 15(d) of the Exchange Act (it being
      understood that nothing herein shall limit the Company’s obligations under the
      Securities Purchase Agreement) and such reports shall conform to the requirement
      of the Exchange Act and the SEC for filing thereunder. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (c) The
      Company shall furnish to each Buyer so long as such Buyer owns Registrable
      Securities, promptly upon request, (i) a written statement by the Company that
      it has complied with the reporting requirements of Rule 144, (ii) a copy of
      the
      most recent annual or quarterly report of the Company and such other reports
      and
      documents so filed by the Company, and (iii) such other information as may
      be
      reasonably requested to permit the Buyers to sell such securities pursuant
      to
      Rule 144 without registration.

    

    9. AMENDMENT
      OF REGISTRATION RIGHTS.

    

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and Buyers who
      then
      hold at least two-thirds (2/3) of the Registrable Securities. Any amendment
      or
      waiver effected in accordance with this Section 9 shall be binding upon
      each Buyer and the Company. No such amendment shall be effective to the extent
      that it applies to fewer than all of the holders of the Registrable Securities.
      No consideration shall be offered or paid to any Person to amend or consent
      to a
      waiver or modification of any provision of any of this Agreement unless the
      same
      consideration also is offered to all of the parties to this
      Agreement.

    

    10. MISCELLANEOUS.

    

    (a) A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities or owns the right to
      receive the Registrable Securities. If the Company receives conflicting
      instructions, notices or elections from two (2) or more Persons with respect
      to
      the same Registrable Securities, the Company shall act upon the basis of
      instructions, notice or election received from the registered owner of such
      Registrable Securities.

    

    (b) No
      Piggyback on Registrations.
      Except
      as set forth on Schedule
      10(b)
      attached
      hereto, neither the Company nor any of its security holders (other than the
      Buyers in such capacity pursuant hereto) may include securities of the Company
      in the initial Registration Statement other than the Registrable Securities.
      The
      Company shall not file any other registration statements until the initial
      Registration Statement required hereunder is declared effective by the SEC,
      provided that this Section 10(b) shall not prohibit the Company from filing
      amendments to registration statements already filed.

    

    (c) Piggy-Back
      Registrations.
      If at
      any time there is not an effective Registration Statement covering all of the
      Registrable Securities and the Company shall determine to prepare and file
      with
      the SEC a registration statement relating to an offering for its own account
      or
      the account of others under the Securities Act of any of its equity securities,
      other than on Form S-4 or Form S-8 (each as promulgated under the Securities
      Act) 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 the stock option or other employee
      benefit plans, then the Company shall send to each Buyer a written notice of
      such determination and, if within fifteen (15) days after the date of such
      notice, any such Buyer shall so request in writing, the Company shall include
      in
      such registration statement all or any part of such Registrable Securities
      such
      Buyer requests to be registered; provided,
      however,
      that,
      the Company shall not be required to register any Registrable Securities
      pursuant to this Section 10(c) that are eligible for resale pursuant to Rule
      144
      promulgated under the Securities Act or that are the subject of a then effective
      Registration Statement.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

    

    (d) Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) business day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

     

    
      	
              If
                to the Company, to:

            	
              Mr.
                C. Thomas McMillen

            
	 	
              Chief
                Executive Officer

            
	 	
              Homeland
                Security Capital Corporation

            
	 	
              1005
                N. Glebe Road, Ste. 550

            
	 	
              Arlington,
                VA 22201

            
	 	
              Facsimile:
                (703) 528-0956

            
	 	 
	
              With
                Copy to:

            	
              Martin
                T. Schrier, Esq.

            
	 	
              Kirkpatrick
                & Lockhart Preston Gates Ellis LLP

            
	 	
              200
                S. Biscayne Blvd., Suite 2000

            
	 	
              Miami,
                FL 33131

            
	 	
              Facsimile:
                (305) 358-7095

            

    

     

    If
      to an
      Buyer, to its address and facsimile number on the Schedule of Buyers attached
      hereto, with copies to such Buyer’s representatives as set forth on the Schedule
      of Buyers or to such other address and/or facsimile number and/or to the
      attention of such other person as the recipient party has specified by written
      notice given to each other party five (5) days prior to the effectiveness of
      such change. Written confirmation of receipt (A) given by the recipient of
      such
      notice, consent, waiver or other communication, (B) mechanically or
      electronically generated by the sender’s facsimile machine containing the time,
      date, recipient facsimile number and an image of the first page of such
      transmission or (C) provided by a courier or overnight courier service shall
      be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

    

    (e) Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (f) The
      laws
      of the State of Delaware shall govern all issues concerning the relative rights
      of the Company and the Buyers as its stockholders. All other questions
      concerning the construction, validity, enforcement and interpretation of this
      Agreement shall be governed by the internal laws of the State of New Jersey,
      without giving effect to any choice of law or conflict of law provision or
      rule
      (whether of the State of New Jersey or any other jurisdiction) that would cause
      the application of the laws of any jurisdiction other than the State of New
      Jersey. Each party hereby irrevocably submits to the non-exclusive jurisdiction
      of the Superior Courts of the State of New Jersey, sitting in Hudson County,
      New
      Jersey and federal courts for the District of New Jersey sitting Newark, New
      Jersey, for the adjudication of any dispute hereunder or in connection herewith
      or with any transaction contemplated hereby or discussed herein, and hereby
      irrevocably waives, and agrees not to assert in any suit, action or proceeding,
      any claim that it is not personally subject to the jurisdiction of any such
      court, that such suit, action or proceeding is brought in an inconvenient forum
      or that the venue of such suit, action or proceeding is improper. Each party
      hereby irrevocably waives personal service of process and consents to process
      being served in any such suit, action or proceeding by mailing a copy thereof
      to
      such party at the address for such notices to it under this Agreement and agrees
      that such service shall constitute good and sufficient service of process and
      notice thereof. Nothing contained herein shall be deemed to limit in any way
      any
      right to serve process in any manner permitted by law. If any provision of
      this
      Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
      or unenforceability shall not affect the validity or enforceability of the
      remainder of this Agreement in that jurisdiction or the validity or
      enforceability of any provision of this Agreement in any other jurisdiction.
      EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
      TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    (g) This
      Agreement shall inure to the benefit of and be binding upon the permitted
      successors and assigns of each of the parties hereto.

    

    (h) The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

    

    (i) This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      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.

    

    (j) 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.

    

    (k) 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.

    

    (l) 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.

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

    

      
        	 	
                COMPANY:

              
	 	
                HOMELAND
                  SECURITY CAPITAL CORPORATION

              
	 	 	 	 	 	 
	 	
                By:

              	   
	 
	 	
                Name:

              	 	 
	 	
                Title:

              	 	 

      

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      each
      Buyer and the Company have caused their signature page to this Registration
      Rights Agreement to be duly executed as of the date first above
      written.

     

    
      
        
          
            	 	
                    BUYER:

                  
	 	
                    YA
                      GLOBAL INVESTMENTS, L.P. 

                  
	 	 	 	 	 
	 	
                    By:
                      

                  	 	
                    Yorkville
                      Advisors, LLC 

                  	 
	 	
                    Its:

                  	 	
                    Investment
                      Manager

                  	 
	 	 	 	 	 
	 	 	 	 	 
	 	
                    By:

                  	      
                    	 
	 	
                    Name:

                  	
                    Mark
                      Angelo

                  	 
	 	
                    Its:

                  	
                    Portfolio
                      Manager

                  	 

          

        

         

        
          
             

          

          
            16

            
              

            

          

          
             

          

        

      

    

     

    SCHEDULE
      I

     

    SCHEDULE
      OF BUYERS

    

    
      	
              Buyer

            	 	
              Address/Facsimile
                

              Number
                of Buyer

            	 	
              Address/Facsimile
                

              Number
                of Buyer’s Representative

            
	 	 	 	 	 
	 	 	 	 	 
	
              YA
                Global Investments, L.P.

            	 	
              101
                Hudson Street - Suite 3700

            	 	
              101
                Hudson Street - Suite 3700

            
	 	 	
              Jersey
                City, NJ 07302

            	 	
              Jersey
                City, NJ 07303

            
	 	 	
              Facsimile:                (201)
                985-8266

            	 	
              Facsimile:             
                (201)
                985-8266

            
	 	 	 	 	
              Attention:
                David Gonzalez, Esq.

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    EXHIBIT
      A

    

    SELLING
      STOCKHOLDERS 

    

    AND
      PLAN OF DISTRIBUTION

    

    Selling
      Stockholders

    

    The
      shares of Common Stock being offered by the selling stockholders are issuable
      upon conversion of the convertible debentures and upon exercise of the warrants.
      For additional information regarding the issuance of those convertible notes
      and
      warrants, see “Private Placement of Convertible Debentures and Warrants” above.
      We are registering the shares of Common Stock in order to permit the selling
      stockholders to offer the shares for resale from time to time. Except as
      otherwise notes and except for the ownership of the convertible Debentures
      and
      the warrants issued pursuant to the Securities Purchase Agreement, the selling
      stockholders have not had any material relationship with us within the past
      three years.

    

    The
      table
      below lists the selling stockholders and other information regarding the
      beneficial ownership of the shares of Common Stock by each of the selling
      stockholders. The second column lists the number of shares of Common Stock
      beneficially owned by each selling stockholder, based on its ownership of the
      convertible debentures and warrants, as of ________, 200_, assuming conversion
      of all convertible debentures and exercise of the warrants held by the selling
      stockholders on that date, without regard to any limitations on conversions
      or
      exercise.

    

    The
      third
      column lists the shares of Common Stock being offered by this prospectus by
      the
      selling stockholders.

    

    In
      accordance with the terms of a registration rights agreement with the selling
      stockholders, this prospectus generally covers the resale of at least
      ___________ shares of common stock issued or issuable to the selling
      stockholders pursuant to the Securities Purchase Agreement.
      Because
      the conversion price of the convertible debentures and the exercise price of
      the
      warrants may be adjusted, the number of shares that will actually be issued
      may
      be more or less than the number of shares being offered by this prospectus.
      The
      fourth column assumes the sale of all of the shares offered by the selling
      stockholders pursuant to this prospectus.

    

    Under
      the
      terms of the convertible debentures and the warrants, a selling stockholder
      may
      not convert the convertible debentures or exercise the warrants to the extent
      such conversion or exercise would cause such selling stockholder, together
      with
      its affiliates, to beneficially own a number of shares of Common Stock which
      would exceed 4.99% of our then outstanding shares of Common Stock following
      such
      conversion or exercise, excluding for purposes of such determination shares
      of
      Common Stock issuable upon conversion of the convertible debentures which have
      not been converted and upon exercise of the warrants which have not been
      exercised. The number of shares in the second column does not reflect this
      limitation. The selling stockholders may sell all, some or none of their shares
      in this offering. See "Plan of Distribution."

    

    
      
         

      

      
        A-1

        
          

        

      

      
         

      

    

    

      
        	
                 

                Name
                  of Selling Stockholder

              	 	
                Number
                  of Shares Owned Prior to Offering

              	 	
                Maximum
                  Number of Shares to be Sold Pursuant to this
                  Prospectus

              	 	
                Number
                  of Shares Owned After Offering

              
	 	 	 	 	 	 	 
	
                YA
                  Global Investments, L.P. (1)

              	 	 	 	 	 	 

      

    

     

    (1) YA
      Global
      Investments, L.P. is a Cayman Island exempt limited partnership. YA Global
      is
      managed by Yorkville Advisors, LLC. Investment decisions for Yorkville Advisors
      are made by Mark Angelo, its portfolio manager. 

    

    
      
         

      

      
        A-2

        
          

        

      

      
         

      

    

    Plan
      of
      Distribution

    

    Each
      Selling Stockholder (the “Selling
      Stockholders”)
      of the
      common stock and any of their pledgees, assignees and successors-in-interest
      may, from time to time, sell any or all of their shares of common stock on
      the
      __________ or any other stock exchange, market or trading facility on which
      the
      shares are traded or in private transactions. These sales may be at fixed or
      negotiated prices. A Selling Stockholder may use any one or more of the
      following methods when selling shares:

    

    
      	 	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

    

    
      	 	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

    

    
      	 	
              ·

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

    

    
      	 	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

    

    
      	 	
              ·

            	
              privately
                negotiated transactions;

            

    

    

    
      	 	
              ·

            	
              broker-dealers
                may agree with the Selling Stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

    

    
      	 	
              ·

            	
              through
                the writing or settlement of options or other hedging transactions,
                whether through an options exchange or otherwise;
                

            

    

    

    
      	 	
              ·

            	
              a
                combination of any such methods of sale;
                or

            

    

    

    
      	 	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

    

    The
      Selling Stockholders may also sell shares under Rule 144 under the Securities
      Act of 1933, as amended (the “Securities
      Act”),
      if
      available, rather than under this prospectus.

    

    Broker-dealers
      engaged by the Selling Stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the Selling Stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated, but,
      except as set forth in a supplement to this Prospectus, in the case of an agency
      transaction not in excess of a customary brokerage commission in compliance
      with
      NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
      in compliance with NASDR IM-2440. 

    

    In
      connection with the sale of the common stock or interests therein, the Selling
      Stockholders may enter into hedging transactions with broker-dealers or other
      financial institutions, which may in turn engage in short sales of the Common
      Stock in the course of hedging the positions they assume. The Selling
      Stockholders may also enter into option or other transactions with
      broker-dealers or other financial institutions or the creation of one or more
      derivative securities which require the delivery to such broker-dealer or other
      financial institution of shares offered by this prospectus, which shares such
      broker-dealer or other financial institution may resell pursuant to this
      prospectus (as supplemented or amended to reflect such
      transaction).

     

    
      
         

      

      
        A-3

        
          

        

      

      
         

      

    

     

    The
      Selling Stockholders and any broker-dealers or agents that are involved in
      selling the shares may be deemed to be “underwriters” within the meaning of the
      Securities Act in connection with such sales. In such event, any commissions
      received by such broker-dealers or agents and any profit on the resale of the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act. Each Selling Stockholder has informed the
      Company that it does not have any written or oral agreement or understanding,
      directly or indirectly, with any person to distribute the Common Stock. In
      no
      event shall any broker-dealer receive fees, commissions and markups which,
      in
      the aggregate, would exceed eight percent (8%).

    

    The
      Company is required to pay certain fees and expenses incurred by the Company
      incident to the registration of the shares. The Company has agreed to indemnify
      the Selling Stockholders against certain losses, claims, damages and
      liabilities, including liabilities under the Securities Act. 

    

    Because
      Selling Stockholders may be deemed to be “underwriters” within the meaning of
      the Securities Act, they will be subject to the prospectus delivery requirements
      of the Securities Act including Rule 172 thereunder. In addition, any securities
      covered by this prospectus which qualify for sale pursuant to Rule 144 under
      the
      Securities Act may be sold under Rule 144 rather than under this prospectus.
      There is no underwriter or coordinating broker acting in connection with the
      proposed sale of the resale shares by the Selling Stockholders.

    

    We
      agreed
      to keep this prospectus effective until the earlier of (i) the date on which
      the
      shares may be resold by the Selling Stockholders without registration and
      without regard to any volume limitations by reason of Rule 144(k) under the
      Securities Act or any other rule of similar effect or (ii) all of the shares
      have been sold pursuant to this prospectus or Rule 144 under the Securities
      Act
      or any other rule of similar effect. The resale shares will be sold only through
      registered or licensed brokers or dealers if required under applicable state
      securities laws. In addition, in certain states, the resale shares may not
      be
      sold unless they have been registered or qualified for sale in the applicable
      state or an exemption from the registration or qualification requirement is
      available and is complied with.

    

    Under
      applicable rules and regulations under the Exchange Act, any person engaged
      in
      the distribution of the resale shares may not simultaneously engage in market
      making activities with respect to the common stock for the applicable restricted
      period, as defined in Regulation M, prior to the commencement of the
      distribution. In addition, the Selling Stockholders will be subject to
      applicable provisions of the Exchange Act and the rules and regulations
      thereunder, including Regulation M, which may limit the timing of purchases
      and
      sales of shares of the common stock by the Selling Stockholders or any other
      person. We will make copies of this prospectus available to the Selling
      Stockholders and have informed them of the need to deliver a copy of this
      prospectus to each purchaser at or prior to the time of the sale (including
      by
      compliance with Rule 172 under the Securities Act).

    

    
      
         

      

      
        A-4

        
          

        

      

      
         

      

    

    EXHIBIT
      B

    

    OTHER
      DISCLOSURES 

    

    

    [See
      attachment provided]

     

    
      
         

      

      
        B-1

        
          

        

      

      
         

      

    

     

    EXHIBIT
      C

    

    FORM
      OF NOTICE OF EFFECTIVENESS

    OF
      REGISTRATION STATEMENT

    

    

    Attention: 

    

    
      	 	
              Re:

            	
              HOMELAND
                SECURITY CAPITAL
                CORPORATION

            

    

    

    Ladies
      and Gentlemen:

    

    We
      are
      counsel to Homeland Security Capital Corporation, a Delaware corporation (the
      “Company”),
      and
      have represented the Company in connection with that certain Securities Purchase
      Agreement (the “Securities
      Purchase Agreement”)
      entered into by and among the Company and the Buyers named therein
      (collectively, the “Buyers”)
      pursuant to which the Company issued to the Buyers shares of its Common Stock,
      par value $0.001 per share (the “Common
      Stock”).
      Pursuant to the Purchase Agreement, the Company also has entered into a
      Registration Rights Agreement with the Buyers (the “Registration
      Rights Agreement”)
      pursuant to which the Company agreed, among other things, to register the
      Registrable Securities (as defined in the Registration Rights Agreement) under
      the Securities Act of 1933, as amended (the “Securities
      Act”).
      In
      connection with the Company’s obligations under the Registration Rights
      Agreement, on ____________ ____, the Company filed a Registration Statement
      on
      Form ________ (File No. 333-_____________) (the “Registration
      Statement”)
      with
      the Securities and Exchange Commission (the “SEC”)
      relating to the Registrable Securities which names each of the Buyers as a
      selling stockholder there under.

    

    In
      connection with the foregoing, we advise you that a member of the SEC’s staff
      has advised us by telephone that the SEC has entered an order declaring the
      Registration Statement effective under the Securities Act at [ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and we
      have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
      any stop order suspending its effectiveness has been issued or that any
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      the Registrable Securities are available for resale under the Securities Act
      pursuant to the Registration Statement.

     

    
      	 	Very truly yours,	 
	 	 	 	 
	 	[Law
              Firm]	 
	 	 	 	 
	 	By:	   
              	 

    

     

    
      	cc:	
              [LIST
                NAMES OF BUYERS]

            

    

    

    
      
         

      

      
        C-1Unassociated Document

    

    SECURITY
      AGREEMENT

    

    THIS
      SECURITY AGREEMENT
      (the
“Agreement”), is
      entered into and made effective as of March 14, 2008, by and between
HOMELAND
      SECURITY CAPITAL CORPORATION, a
      Delaware corporation with its principal place of business located at 1005 N.
      Glebe Road, Ste. 550, Arlington, VA 22201 (the “Company”),
      each
      subsidiary and affiliate of the Companies listed on Schedule
      1
      attached
      hereto (the “Guarantors,”
      collectively with the Companies, the “Grantors”),
      in
      favor YA
      GLOBAL INVESTMENTS, L.P.
      (the
“Secured
      Party”).

    

    WHEREAS,
      in
      connection with the Securities Purchase Agreement by and among 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 (other than the Company) has executed and delivered a Guaranty
      dated the date hereof (the “Guaranty”)
      in
      favor of the Secured Party, with respect to the Company’s obligations under the
      Securities Purchase Agreement, the Notes, and the Transaction Documents (as
      defined below); and

    

    WHEREAS,
      each of
      the Guarantors shall receive a direct benefit from the Secured Party entering
      into the Securities Purchase Agreement, the Notes, and the Transaction
      Documents; and

    

    WHEREAS,
      it
      is a
      condition precedent to the Secured Party purchasing the Notes and Warrants
      pursuant to the Securities Purchase Agreement that the Grantors shall have
      executed and delivered to the Secured Party this Agreement providing for the
      grant to the Secured Party of a security interest in all personal property
      of
      each Grantor, including, without limitation, each Grantor’s ownership interest
      of each of its subsidiaries, to secure all of the Company's obligations under
      the “Transaction Documents” (as that term is defined in the Securities Purchase
      Agreement) (the “Transaction
      Documents”)
      and
      the Guarantors’ obligations under the Guaranty; 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOW,
      THEREFORE, in
      consideration of the promises and the mutual covenants herein contained, and
      for
      other good and valuable consideration, the adequacy and receipt of which are
      hereby acknowledged, the parties hereto hereby agree as follows:

    

    ARTICLE
      1.

     

    DEFINITIONS
      AND INTERPRETATIONS

    

    Section
      1.1. Recitals.
      The
      above recitals are true and correct and are incorporated herein, in their
      entirety, by this reference.

    

    Section
      1.2. Interpretations.
      Nothing
      herein expressed or implied is intended or shall be construed to confer upon
      any
      person other than the Secured Party any right, remedy or claim under or by
      reason hereof.

    

    Section
      1.3. Definitions. Reference
      is hereby made to the Securities Purchase Agreement and the Notes for a
      statement of the terms thereof. All capitalized terms used in this Agreement
      and
      the recitals hereto and not defined herein shall have the meanings set forth
      in
      the Securities Purchase Agreement, the Notes, or in Articles 8 or 9 of the
      Uniform Commercial Code as in effect from time to time in the State of New
      Jersey (the "Code").

    

    Section
      1.4. Other
      Definitions.
      As used
      in this Agreement, the following terms shall have the respective meanings
      indicated below, such meanings to be applicable equally to both the singular
      and
      plural forms of such terms:

    

    “Event
      of Default”
shall
      be deemed to have occurred under this Agreement upon an Event of Default under
      and as defined in the Notes.

    

    “Permitted
      Indebtedness”
means:
      (i) indebtedness evidenced by Notes; (ii) indebtedness described on the
      Disclosure Schedule to the Securities Purchase Agreement; (iii) indebtedness
      incurred solely for the purpose of financing the acquisition or lease of any
      equipment by the Company, including capital lease obligations with no recourse
      other than to such equipment; (iv) indebtedness (A) the repayment of which
      has
      been subordinated to the payment of the Notes on terms and conditions acceptable
      to the Secured Party, including with regard to interest payments and repayment
      of principal, (B) which does not mature or otherwise require or permit
      redemption or repayment prior to or on the 91st
      day
      after the maturity date of any Notes then outstanding; and (C) which is not
      secured by any assets of the Company; (v) indebtedness solely between the
      Grantor and/or one of its domestic subsidiaries, on the one hand, and the
      Grantor and/or one of its domestic subsidiaries, on the other which indebtedness
      is not secured by any assets of the Grantor or any of its subsidiaries, provided
      that (x) in each case a majority of the equity of any such domestic subsidiary
      is directly or indirectly owned by the Grantor, such domestic subsidiary is
      controlled by the Grantor and such domestic subsidiary has executed a security
      agreement in the form of this Agreement and (y) any such loan shall be evidenced
      by an intercompany note that is pledged by the Grantor or its subsidiary, as
      applicable, as collateral pursuant to this Agreement; (vi) reimbursement
      obligations in respect of letters of credit issued for the account of the
      Grantor or any of its subsidiaries for the purpose of securing performance
      obligations of the Grantor or its subsidiaries incurred in the ordinary course
      of business so long as the aggregate face amount of all such letters of credit
      does not exceed $500,000 at any one time; and (vii) renewals, extensions and
      refinancing of any indebtedness described in clauses (i) or (iii) of this
      subsection.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Permitted
      Liens” means: (1) the security interest created by this Agreement, (2) any prior
      security interest granted to the Secured Party, (3) existing Liens which have
      been disclosed by the Company to the Secured Party on Schedule 4.2 attached
      hereto; (4) inchoate Liens for taxes, assessments or governmental charges or
      levies not yet due, as to which the grace period, if any, related thereto has
      not yet expired, or being contested in good faith and by appropriate proceedings
      for which adequate reserves have been established in accordance with GAAP;
      (5)
      Liens of carriers, materialmen, warehousemen, mechanics and landlords and other
      similar Liens which secure amounts which are not yet overdue or which are being
      contested in good faith by appropriate proceedings for which adequate reserves
      have been established in accordance with GAAP; (6) licenses, sublicenses, leases
      or subleases granted to other Persons not materially interfering with the
      conduct of the business of the Company; (7) Liens securing capitalized lease
      obligations and purchase money indebtedness incurred solely for the purpose
      of
      financing an acquisition or lease; (8) easements, rights-of-way, restrictions,
      encroachments, municipal zoning ordinances and other similar charges or
      encumbrances, and minor title deficiencies, in each case not securing debt
      and
      not materially interfering with the conduct of the business of the Company
      and
      not materially detracting from the value of the property subject thereto; (9)
      Liens arising out of the existence of judgments or awards which judgments or
      awards do not constitute an Event of Default; (10) Liens incurred in the
      ordinary course of business in connection with workers compensation claims,
      unemployment insurance, pension liabilities and social security benefits and
      Liens securing the performance of bids, tenders, leases and contracts in the
      ordinary course of business, statutory obligations, surety bonds, performance
      bonds and other obligations of a like nature (other than appeal bonds) incurred
      in the ordinary course of business (exclusive of obligations in respect of
      the
      payment for borrowed money); (11) Liens in favor of a banking institution
      arising by operation of law encumbering deposits (including the right of
      set-off) and contractual set-off rights held by such banking institution and
      which are within the general parameters customary in the banking industry and
      only burdening deposit accounts or other funds maintained with a creditor
      depository institution; (12) usual and customary set-off rights in leases and
      other contracts; and (13) escrows in connection with acquisitions and
      dispositions. Except for the Permitted Liens, (i) the security interest granted
      to the Secured Party hereunder shall be a first priority security interest
      subject to no other Liens, and (ii) no financing statement covering any of
      the
      Collateral or any proceeds thereof is on file in any public office.

    

    ARTICLE
      2.

     

    PLEDGED
      PROPERTY

    

    Section
      2.1. Grant
      of Security Interest.

    

    (a) As
      collateral security for all of the Obligations (as defined in Section
      2.2
      hereof),
      each Grantor hereby pledges and assigns to the Secured Party, and grants to
      the
      Secured Party for its benefit, a continuing security interest in and to all
      personal property of each Grantor, wherever located and whether now or
      hereinafter existing and whether now owned or hereafter acquired, of every
      kind
      and description, tangible or intangible, including without limitation, all
      Goods, Inventory, Equipment, Fixtures, Instruments (including promissory notes),
      Documents, Accounts (including health-care-insurance receivables, and license
      fees), Contracts, Contract Rights, Chattel Paper (whether tangible or
      electronic), Deposit Accounts (and in and to any deposits or other sums at
      any
      time credited to each such Deposit Account), Money, Letters of Credit and
      Letter-of-Credit Rights (whether or not the letter of credit is evidenced by
      a
      writing), Commercial Tort Claims, Securities and all other Investment Property,
      General Intangibles (including payment intangibles and software), Farm Products,
      all books and records relating to any of the foregoing, and all supporting
      obligations, and any and all proceeds and products of any thereof, including
      proceeds of insurance covering any or all of the foregoing, wherever located,
      whether now owned, or now due, in which a Grantor has an interest or the power
      to transfer rights, or hereafter acquired, arising, or to become due, or in
      which a Grantor obtains an interest, or the power to transfer rights, and as
      more particularly described on Exhibit
      A
      attached
      hereto (collectively, the Pledged Property).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (b) Simultaneously
      with the execution and delivery of this Agreement, each Grantor shall make,
      execute, acknowledge, file, record and deliver to the Secured Party such
      documents, instruments, and agreements, including, without limitation, financing
      statements, certificates, affidavits and forms as may, in the Secured Party’s
      reasonable judgment, be necessary to effectuate, complete or perfect, or to
      continue and preserve, the security interest of the Secured Party in the Pledged
      Property.

    

    Section
      2.2 Security
      for Obligations.
      The
      security interest created hereby in the Pledged Property constitutes continuing
      collateral security for all of the following obligations, whether now existing
      or hereinafter incurred (collectively, the “Obligations”):

    

    (a)
      (i)
      the payment by the Company, as and when due and payable (by scheduled maturity,
      acceleration, demand or otherwise), of all amounts from time to time owing
      by it
      in respect of the Notes, the other Transaction Documents, or any other amounts
      owing by it to the Secured Party, whether or not now in existence or hereinafter
      incurred, or (ii) in the case of any Guarantor, the payment by such Guarantor,
      as and when due and payable of all “Guaranteed Obligations” under (and as
      defined in) the Guaranty; and

    

    (b)
      the
      due performance and observance by the each Grantor of all of its other
      obligations from time to time existing in respect of any of the Transaction
      Documents.

    

    ARTICLE
      3.

     

    ATTORNEY-IN-FACT;
      PERFORMANCE

    

    Section
      3.1. Secured
      Party Appointed Attorney-In-Fact.
      The
      Grantors hereby appoint the Secured Party as its attorney-in-fact, with full
      authority in the place and stead of the Grantor and in the name of the Grantor
      or otherwise, exercisable after and during the continuance of an Event of
      Default, from time to time in the Secured Party’s discretion to take any action
      and to execute any instrument which the Secured Party may reasonably deem
      necessary to accomplish the purposes of this Agreement, including, without
      limitation, to (a) receive and collect all instruments made payable to the
      Grantor representing any payments in respect of the Pledged Property or any
      part
      thereof and to give full discharge for the same; (b) demand, collect, receipt
      for, settle, compromise, adjust, sue for, foreclose, or realize on the Pledged
      Property as and when the Secured Party may determine, and (c) to facilitate
      collection, the Secured Party may notify account debtors and obligors on any
      Pledged Property to make payments directly to the Secured Party. The foregoing
      power of attorney is a power coupled with an interest and shall be irrevocable
      until all Obligations are paid and performed in full. The Grantors agree that
      the powers conferred on the Secured Party hereunder are solely to protect the
      Secured Party’s interests in the Pledged Property and shall not impose any duty
      upon the Secured Party to exercise any such powers.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      3.2. Secured
      Party May Perform.
      If a
      Grantor fails to perform any agreement contained herein, the Secured Party,
      at
      its option, may itself perform, or cause performance of, such agreement, and
      the
      expenses of the Secured Party incurred in connection therewith shall be included
      in the Obligations secured hereby and payable by such Grantor under
      Section 8.3.

    

    ARTICLE
      4.

     

    REPRESENTATIONS
      AND WARRANTIES

    

    Section
      4.1. Authorization;
      Enforceability.
      Each of
      the parties hereto represents and warrants that it has taken all action
      necessary to authorize the execution, delivery and performance of this Agreement
      and the transactions contemplated hereby; and upon execution and delivery,
      this
      Agreement shall constitute a valid and binding obligation of the respective
      party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
      and similar laws affecting creditors’ rights or by the principles governing the
      availability of equitable remedies.

    

    Section
      4.2. Ownership
      of Pledged Property.
      Each
      Grantor represents and warrants that it is the legal and beneficial owner of
      the
      Pledged Property free and clear of any lien, security interest, option or other
      charge or encumbrance (each, a “Lien”) except for the security interest created
      by this Agreement and other Permitted Liens. 

    

    Section
      4.3 Location
      of Pledged Property.
      The
      Collateral is or will be kept at the address(es) of each Grantor set forth
      on
Schedule
      4.3
      attached
      hereto. Unless otherwise provided herein, the Grantors will not remove any
      Collateral from such locations without the prior written consent of the Secured
      Party which consent shall not be unreasonably withheld.

    

    Section
      4.4 Location,
      State of Incorporation and Name of Grantors.
      Each
      Grantor’s principal place of business; state of incorporation, organization or
      formation; organization id; and exact legal name is set forth on Schedule
      4.4
      attached
      hereto. 

    

    Section
      4.5 Priority
      of Security Interest. The
      security interest granted to the Secured Party hereunder shall be a first
      priority security interest subject to no other Liens. Except for the Permitted
      Liens, no financing statement covering any of the Pledged Property or any
      proceeds thereof is on file in any public office. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      5.

     

    DEFAULT;
      REMEDIES

    

    Section
      5.1 Method
      of Realizing Upon the Pledged Property: Other Remedies.

     

    If
      any
      Event of Default shall have occurred and be continuing:

    

    (a) The
      Secured Party may exercise in respect of the Pledged Property, in addition
      to
      any other rights and remedies provided for herein or otherwise available to
      it,
      all of the rights and remedies of a secured party upon default under the Code
      (whether or not the Code applies to the affected Pledged Property), and also
      may
      (i) take absolute control of the Pledged Property, including, without
      limitation, transfer into the Secured Party's name or into the name of its
      nominee or nominees (to the extent the Secured Party has not theretofore done
      so) and thereafter receive, for the benefit of the Secured Party, all payments
      made thereon, give all consents, waivers and ratifications in respect thereof
      and otherwise act with respect thereto as though it were the outright owner
      thereof, (ii) require each Grantor to assemble all or part of the Pledged
      Property as directed by the Secured Party and make it available to the Secured
      Party at a place or places to be designated by the Secured Party that is
      reasonably convenient to both parties, and the Secured Party may enter into
      and
      occupy any premises owned or leased by a Grantor where the Pledged Property
      or
      any part thereof is located or assembled for a reasonable period in order to
      effectuate the Secured Party's rights and remedies hereunder or under law,
      without obligation to the Grantor in respect of such occupation, and
      (iii) without notice except as specified below and without any obligation
      to prepare or process the Pledged Property for sale, (A) sell the Pledged
      Property or any part thereof in one or more parcels at public or private sale,
      at any of the Secured Party's offices or elsewhere, for cash, on credit or
      for
      future delivery, and at such price or prices and upon such other terms as the
      Secured Party may deem commercially reasonable and/or (B) lease, license or
      dispose of the Pledged Property or any part thereof upon such terms as the
      Secured Party may deem commercially reasonable. Each Grantor agrees that, to
      the
      extent notice of sale or any other disposition of the Pledged Property shall
      be
      required by law, at least ten (10) days' notice to the Grantor of the time
      and
      place of any public sale or the time after which any private sale or other
      disposition of the Pledged Property is to be made shall constitute reasonable
      notification. The Secured Party shall not be obligated to make any sale or
      other
      disposition of any Pledged Property regardless of notice of sale having been
      given. The Secured Party may adjourn any public or private sale from time to
      time by announcement at the time and place fixed therefor, and such sale may,
      without further notice, be made at the time and place to which it was so
      adjourned. Each Grantor hereby waives any claims against the Secured Party
      arising by reason of the fact that the price at which the Pledged Property
      may
      have been sold at a private sale was less than the price which might have been
      obtained at a public sale or was less than the aggregate amount of the
      Obligations, even if the Secured Party accepts the first offer received and
      does
      not offer such Pledged Property to more than one offeree, and waives all rights
      that the Grantor may have to require that all or any part of such Pledged
      Property be marshaled upon any sale (public or private) thereof. Each Grantor
      hereby acknowledges that (i) any such sale of the Pledged Property by the
      Secured Party may be made without warranty, (ii) the Secured Party may
      specifically disclaim any warranties of title, possession, quiet enjoyment
      or
      the like, and (iii) such actions set forth in clauses (i) and (ii)
      above shall not adversely affect the commercial reasonableness of any such
      sale
      of Pledged Property. 

    

    (b) Any
      cash
      held by the Secured Party as Pledged Property and all cash proceeds received
      by
      the Secured Party in respect of any sale of or collection from, or other
      realization upon, all or any part of the Pledged Property shall be applied
      (after payment of any amounts payable to the Secured Party pursuant to Section
      8.3 hereof) by the Secured Party against, all or any part of the Obligations
      in
      such order as the Secured Party shall elect, consistent with the provisions
      of
      the Securities Purchase Agreement. Any surplus of such cash or cash proceeds
      held by the Secured Party and remaining after the indefeasible payment in full
      in cash of all of the Obligations shall be paid over to whomsoever shall be
      lawfully entitled to receive the same or as a court of competent jurisdiction
      shall direct.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c) In
      the
      event that the proceeds of any such sale, collection or realization are
      insufficient to pay all amounts to which the Secured Party is legally entitled,
      each Grantor shall be liable for the deficiency, together with interest thereon
      at the rate specified in the Notes for interest on overdue principal thereof
      or
      such other rate as shall be fixed by applicable law, together with the costs
      of
      collection and the reasonable fees, costs, expenses and other client charges
      of
      any attorneys employed by the Secured Party to collect such
      deficiency.

    

    (d) Each
      Grantor hereby acknowledges that if the Secured Party complies with any
      applicable state, provincial, or federal law requirements in connection with
      a
      disposition of the Pledged Property, such compliance will not adversely affect
      the commercial reasonableness of any sale or other disposition of the Pledged
      Property.

    

    (e) The
      Secured Party shall not be required to marshal any present or future collateral
      security (including, but not limited to, this Agreement and the Pledged
      Property) for, or other assurances of payment of, the Obligations or any of
      them
      or to resort to such collateral security or other assurances of payment in
      any
      particular order, and all of the Secured Party's rights hereunder and in respect
      of such collateral security and other assurances of payment shall be cumulative
      and in addition to all other rights, however existing or arising. To the extent
      that the Grantor lawfully may, each Grantor hereby agrees that it will not
      invoke any law relating to the marshaling of collateral which might cause delay
      in or impede the enforcement of the Secured Party's rights under this Agreement
      or under any other instrument creating or evidencing any of the Obligations
      or
      under which any of the Obligations is outstanding or by which any of the
      Obligations is secured or payment thereof is otherwise assured, and, to the
      extent that it lawfully may, the Company hereby irrevocably waives the benefits
      of all such laws.

    

    Section
      5.2 Duties
      Regarding Pledged Property.
      The
      Secured Party shall have no duty as to the collection or protection of the
      Pledged Property or any income thereon or as to the preservation of any rights
      pertaining thereto, beyond the safe custody and reasonable care of any of the
      Pledged Property actually in the Secured Party’s possession.

    

    ARTICLE
      6.

     

    AFFIRMATIVE
      COVENANTS

    

    So
      long
      as any of the Obligations shall remain outstanding, unless the Secured Party
      shall otherwise consent in writing:

    

    Section
      6.1. Existence,
      Properties, Etc. Each
      Grantor shall do, or cause to be done, all things, or proceed with due diligence
      with any actions or courses of action, that may be reasonably necessary
      (i) to maintain Grantor’s due organization, valid existence and good
      standing under the laws of its state of incorporation, and (ii) to preserve
      and keep in full force and effect all qualifications, licenses and registrations
      in those jurisdictions in which the failure to do so could have a Material
      Adverse Effect (as defined below); and (b) each Grantor shall not do, or
      cause to be done, any act impairing the Grantor’s corporate power or authority
      (i) to carry on the Grantor’s business as now conducted, and (ii) to
      execute or deliver this Agreement or any other document delivered in connection
      herewith, including, without limitation, any UCC-1 Financing Statements required
      by the Secured Party (which other loan instruments collectively shall be
      referred to as the “Loan
      Instruments”) to
      which it is or will be a party, or perform any of its obligations hereunder
      or
      thereunder. For purpose of this Agreement, the term “Material
      Adverse Effect”
shall
      mean any material and adverse affect as determined by Secured Party in its
      reasonable discretion, whether individually or in the aggregate, upon
      (a) the Grantor’s assets, business, operations, properties or condition,
      financial or otherwise; (b) the Grantor’s ability to make payment as and
      when due of all or any part of the Obligations; or (c) the Pledged
      Property.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    Section
      6.2. Financial
      Statements and Reports.
      Each
      Grantor shall furnish to the Secured Party within a reasonable time such
      financial data as the Secured Party may reasonably request.

    

    Section
      6.3. Accounts
      and Reports.
      Each
      Grantor shall maintain a standard system of accounting in accordance with
      generally accepted accounting principles consistently applied (“GAAP”) and
      provide, at its sole expense, to the Secured Party the following:

    

    (a) as
      soon
      as available, a copy of any notice or other communication alleging any
      nonpayment or other material breach or default, or any foreclosure or other
      action respecting any material portion of its assets and properties, received
      respecting any of the indebtedness of the Grantor in excess of $500,000 (other
      than the Obligations), or any demand or other request for payment under any
      guaranty, assumption, purchase agreement or similar agreement or arrangement
      respecting the indebtedness or obligations of others in excess of $500,000;
      and

    

    (b) within
      fifteen (15) days after the making of each submission or filing, a copy of
      any report, financial statement, notice or other document, whether periodic
      or
      otherwise, submitted to the shareholders of the Grantor, or submitted to or
      filed by the Grantor with any governmental authority involving or affecting
      (i)
      the Grantor that could reasonably be expected to have a Material Adverse Effect;
      (ii) the Obligations; (iii) any part of the Pledged Property; or
      (iv) any of the transactions contemplated in this Agreement or the Loan
      Instruments (except, in each case, to the extent any such submission, filing,
      report, financial statement, notice or other document is posted on EDGAR
      Online).

    

    Section
      6.4. Maintenance
      of Books and Records; Inspection.
      Each
      Grantor shall maintain its books, accounts and records in accordance with GAAP,
      and permit the Secured Party, its officers and employees and any professionals
      designated by the Secured Party in writing, at any time during normal business
      hours and upon reasonable notice to visit and inspect any of its properties
      (including but not limited to the collateral security described in the
      Transaction Documents and/or the Loan Instruments), corporate books and
      financial records, and to discuss its accounts, affairs and finances with any
      employee, officer or director thereof (it being agreed that, unless an Event
      of
      Default shall have occurred and be continuing, there shall be no more than
      two
      (2) such visits and inspections in any Fiscal Year).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Section
      6.5. Maintenance
      and Insurance.

    

    (a) Each
      Grantor shall maintain or cause to be maintained, at its own expense, all of
      its
      material assets and properties in good working order and condition, ordinary
      wear and tear excepted, making all necessary repairs thereto and renewals and
      replacements thereof.

    

    (b) Each
      Grantor shall maintain or cause to be maintained, at its own expense, insurance
      in form, substance and amounts (including deductibles), which the Grantor deems
      reasonably necessary to the Company’s business, (i) adequate to insure all
      assets and properties of the Grantor of a character usually insured by persons
      engaged in the same or similar business against loss or damage resulting from
      fire or other risks included in an extended coverage policy; (ii) against
      public liability and other tort claims that may be incurred by the Grantor;
      (iii) as may be required by the Transaction Documents and/or applicable law
      and (iv) as may be reasonably requested by Secured Party, all with financially
      sound and reputable insurers.

    

    Section
      6.6. Contracts
      and Other Collateral.
      Each
      Grantor shall perform all of its obligations under or with respect to each
      instrument, receivable, contract and other intangible included in the Pledged
      Property to which the Grantor is now or hereafter will be party on a timely
      basis and in the manner therein required, including, without limitation, this
      Agreement, except to the extent the failure to so perform such obligations
      would
      not reasonably be expected to have a Material Adverse Effect.

    

    Section
      6.7. Defense
      of Collateral, Etc.
      Each
      Grantor shall defend and enforce its right, title and interest in and to any
      part of: (a) the Pledged Property; and (b) if not included within the
      Pledged Property, those assets and properties whose loss would reasonably be
      expected to have a Material Adverse Effect, each against all manner of claims
      and demands on a timely basis to the full extent permitted by applicable law
      (other than any such claims and demands by holders of Permitted
      Liens).

    

    Section
      6.8. Taxes
      and Assessments.
      Each
      Grantor shall (a) file all material tax returns and appropriate schedules
      thereto that are required to be filed under applicable law, prior to the date
      of
      delinquency (taking into account any extensions of the original due date),
      (b) pay and discharge all material taxes, assessments and governmental
      charges or levies imposed upon the Grantor, upon its income and profits or
      upon
      any properties belonging to it, prior to the date on which penalties attach
      thereto, and (c) pay all material taxes, assessments and governmental
      charges or levies that, if unpaid, might become a lien or charge upon any of
      its
      properties; provided,
      however,
      that
      the Grantor in good faith may contest any such tax, assessment, governmental
      charge or levy described in the foregoing clauses (b) and (c) so long as
      appropriate reserves are maintained with respect thereto if and to the extent
      required by GAAP. 

    

    Section
      6.9. Compliance
      with Law and Other Agreements.
      Each
      Grantor shall maintain its business operations and property owned or used in
      connection therewith in compliance with (a) all applicable federal, state
      and local laws, regulations and ordinances governing such business operations
      and the use and ownership of such property, and (b) all agreements,
      licenses, franchises, indentures and mortgages to which the Grantor is a party
      or by which the Grantor or any of its properties is bound, except where the
      failure to so comply would not reasonably be expected to have a Material Adverse
      Effect.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Section
      6.10. Notice
      of
      Default. The Grantors will immediately notify the Secured Party of any event
      causing a substantial loss or diminution in the value of all or any material
      part of the Pledged Property and the amount or an estimate of the amount of
      such
      loss or diminution. The Grantors shall promptly notify the Secured Party of
      any
      condition or event which constitutes, or would constitute with the passage
      of
      time or giving of notice or both, an Event of Default, and promptly inform
      the
      Secured Party of any events or changes in the financial condition of any Grantor
      occurring since the date of the last financial statement of such Grantor
      delivered to the Secured Party, which individually or cumulatively when viewed
      in light of prior financial statements, which might reasonably be expected
      to
      have a Material Adverse Effect on the business operations or financial condition
      of the Grantor.

    

    Section
      6.11. Notice
      of Litigation.
      Each
      Grantor shall give notice, in writing, to the Secured Party of (a) any
      actions, suits or proceedings wherein the amount at issue is in excess of
      $250,000, instituted by any persons against the Grantor, or affecting any of
      the
      assets of the Company, and (b) any dispute, not resolved within fifteen
      (15) days of the commencement thereof, between the Grantor on the one hand
      and
      any governmental or regulatory body on the other hand, which might reasonably
      be
      expected to have a Material Adverse Effect on the business operations or
      financial condition of the Grantor.

    

    Section
      6.13. Future
      Subsidiaries.
      Schedule
      6.13
      attached
      hereto has all the subsidiaries of the Grantors. If any Grantor shall hereafter
      create or acquire any subsidiary, simultaneously with the creation or
      acquisition of such subsidiary, such Grantor shall cause such subsidiary to
      become a party to this Agreement as an additional "Grantor" hereunder, and
      to
      duly execute and deliver a guaranty of the Obligations in favor of the Secured
      Party in form and substance reasonably acceptable to the Secured Party, and
      to
      duly execute and/or deliver such opinions of counsel and other documents, in
      form and substance reasonably acceptable to the Secured Party, as the Secured
      Party shall reasonably request with respect thereto.

    

    Section
      6.14. Changes
      to Identity.
      Each
      Grantor will (a) give the Secured Party at least 30 days' prior written notice
      of any change in such Grantor's name, identity or organizational structure,
      (b)
      maintain its jurisdiction of incorporation, organization or formation as set
      forth on its respective signature page attached hereto, (C) immediately notify
      the Secured Party upon obtaining an organizational identification number, if
      on
      the date hereof such Grantor did not have such identification
      number.

    

    Section
      6.15. Establishment
      of Deposit Account, Account Control Agreements. 
      

    

    (a) In
      connection with the execution of this Agreement, each Grantor, the Secured
      Party, and each applicable bank or other depository institution shall enter
      into
      a an account control agreement (the “Account
      Control Agreement”)
      in the
      form of Exhibit
      B
      attached
      hereto with respect to each of the Grantor’s deposit accounts, including,
      without limitation, all savings, passbook, money market or other depository
      accounts, and all certificates of deposit, maintained by each Grantor with
      any
      bank, savings and loan association, credit union or other depository institution
      maintained or used by each Grantor (the “Deposit
      Accounts”)
      providing dominion and control over such accounts to the Secured Party such
      that
      upon notice by the Secured Party to such bank or other depository institution
      of
      the occurrence of an Event of Default all actions under such account shall
      be
      taken solely at the Secured Party’s direction. Each Grantor’s current Deposit
      Accounts are set forth on Schedule
      6.15
      attached
      hereto. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (b) Each
      Grantor shall cause all cash, all collections and proceeds from accounts
      receivable, all receipts from credit card payments, and all proceeds from the
      sale of any Pledged Property to be deposited only into its Deposit Accounts
      in
      the ordinary course of business and consistent with past practices. Each Grantor
      shall have valid and effective Account Control Agreements in place at all times
      with respect to all of its Deposit Accounts. No Deposit Account shall be
      established, used or maintained by the Company unless it first enters into
      an
      Account Control Agreement. 

    

    (c) With
      respect to each Deposit Account, from an after the occurrence of an Event of
      Default, the Secured Party shall have the right, at any time and from time
      to
      time, to exercise its rights under such Account Control Agreement, including,
      for the avoidance of any doubt, the exclusive right to give instructions to
      the
      financial institution at which such Deposit Account is maintained as to the
      disposition of funds or other property on deposit therein or credited thereto.
      The Secured Party hereby covenants and agrees that it will not send any such
      notice to a financial institution at which any such Deposit Account is
      maintained directing the disposition of funds or other property therein unless
      and until the occurrence of an Event of Default 

    

    (d) In
      connection with the foregoing, each Grantor hereby authorizes and directs each
      bank or other depository institution which maintains any Deposit Account to
      pay
      or deliver to the Secured Party upon the Secured Party’s written demand thereof
      made at any time after the occurrence of an Event of Default has occurred all
      balances in each Deposit Account with such depository for application to the
      Obligations then outstanding. 

    

    Section
      6.16 Perfection
      of Security Interests.

    

    (a) Financing
      Statements.
      The
      Grantors hereby irrevocably authorize the Secured Party, at the sole cost and
      expense of the Grantors, at any time and from time to time to file in any filing
      office in any jurisdiction any initial financing statements and amendments
      thereto that (a) indicate the Pledged Property (i) as all assets of Grantors
      or
      words of similar effect, regardless of whether any particular asset comprised
      in
      the Pledged Property falls within the scope of Article 9 of the Code of such
      jurisdiction, or (ii) as being of an equal or lesser scope or with greater
      detail, and (b) contain any other information required by Part 5 of Article
      9 of
      the Code for the sufficiency or filing office acceptance of any financing
      statement or amendment, including (i) whether such Grantor is an organization,
      the type of organization and any organization identification number issued
      to
      such Grantor, and (ii) in the case of a financing statement filed as a fixture
      filing, a sufficient description of real property to which the Pledged Property
      relates. Grantors agree to furnish any such information to the Secured Party
      promptly upon request. Grantors also ratify their authorization for the Secured
      Party to have filed in any jurisdiction any initial financing statements or
      amendments thereto if filed prior to the date hereof. The Grantors acknowledge
      that they are not authorized to file any financing statement or amendment or
      termination statement with respect to any financing statement without the prior
      written consent of the Secured Party and agree that they will not do so without
      the prior written consent of the Secured Party. The Grantors acknowledge and
      agree that this Agreement constitutes an authenticated record.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (b) Possession.
      The
      Grantors (i) shall have possession of the Pledged Property, except where
      expressly otherwise provided in this Agreement or where the Secured Party
      chooses to perfect its security interest by possession in addition to the filing
      of a financing statement; and (ii) will, where Pledged Property is in the
      possession of a third party, join with the Secured Party in notifying the third
      party of the Secured Party’s security interest and obtaining an acknowledgment
      from the third party that it is holding the Pledged Property for the benefit
      of
      the Secured Party.

    

    (c) Control. In
      addition to the provisions set forth in Section 6.15 above, the Grantors will
      cooperate with the Secured Party in obtaining control with respect to the
      Pledged Property consisting of (i) Investment Property, (ii) Letters of Credit
      and Letter-of-Credit Rights and (iii) electronic Chattel Paper.

    

    (d) Chattel
      Paper. Marking
      of Chattel Paper. The Grantors will not create any Chattel Paper without placing
      a legend on the Chattel Paper acceptable to the Secured Party indicating that
      the Secured Party has a security interest in the Chattel Paper.

    

    Section
      6.17 Notice
      of Commercial Tort Claims.
      If any
      Grantor shall at any time acquire a Commercial Tort Claim, such Grantor shall
      immediately notify the Secured Party in a writing signed by such Grantor which
      shall (a) provide brief details of said claim and (b) grant to the Secured
      Party
      a security interest in said claim and in the proceeds thereof, all upon the
      terms of this Agreement, in such form and substance satisfactory to the Secured
      Party.

    

    ARTICLE
      7.

     

    NEGATIVE
      COVENANTS

    

    So
      long
      as any of the Obligations shall remain outstanding, unless the Secured Party
      shall otherwise consent in writing each Grantor covenants and agrees that it
      shall not:

    

    Section
      7.1. Transfers,
      Liens and Encumbrances.

    

    (a) Sell,
      assign (by operation of law or otherwise), lease, license, exchange or otherwise
      transfer or dispose of any of the Pledged Property, except Grantor may (i)
      sell
      or dispose of Inventory in the ordinary course of business, and (ii) sell or
      dispose of assets the Grantor has determined, in good faith, not to be useful
      in
      the conduct of its business, and (iii) sell or dispose of accounts in the course
      of collection in the ordinary course of business consistent with past
      practice.

    

    (b) Directly
      or indirectly make, create, incur, assume or permit to exist any Lien in, to
      or
      against any part of the Pledged Property other than Permitted
      Liens.

    
 

    Section
      7.2. Restriction
      on Redemption and Cash Dividends.
      Directly or indirectly, redeem, repurchase or declare or pay any cash dividend
      or distribution on its capital stock without the prior express written consent
      of the Secured Party.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
      7.3. Incurrence
      of Indebtedness.
      Directly or indirectly, incur or guarantee, assume or suffer to exist any
      indebtedness, other than the indebtedness evidenced by the Notes and other
      Permitted Indebtedness. 

    

    Section
      7.4. Places
      of Business.
      Change
      the location of its chief place of business, chief executive office or any
      place
      of business disclosed to the Secured Party, unless such change in location
      is to
      a different location within the United States and the Grantor provides notice
      to
      the Secured Party of new location within 10 days’ of such change in
      location.

    

    ARTICLE
      8.

     

    MISCELLANEOUS

    

    Section
      8.1. Notices.

    

    All
      notices or other communications required or permitted to be given pursuant
      to
      this Agreement shall be in writing and shall be considered as duly given on:
      (a) the date of delivery, if delivered in person or by nationally
      recognized overnight delivery service or (b) five (5) days after
      mailing if mailed from within the continental United States by certified mail,
      return receipt requested to the party entitled to receive the same:

     

    

      
        	
                If
                  to the Secured Party:

              	
                YA
                  Global Investments, L.P.

              
	 	
                101
                  Hudson Street-Suite 3700 

              
	 	
                Jersey
                  City, New Jersey 07302 

              
	 	
                Attention:

              	
                Mark
                  Angelo

              
	 	 	
                Portfolio
                  Manager

              
	 	
                Telephone:

              	
                (201)
                  986-8300

              
	 	
                Facsimile:

              	
                (201)
                  985-8266

              
	 	 	 
	
                With
                  a copy to:

              	
                David
                  Gonzalez, Esq.

              
	 	
                101
                  Hudson Street, Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone:

              	
                (201)
                  985-8300

              
	 	
                Facsimile:

              	
                (201)
                  985-8266

              

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      
        	
                If
                  to the Company:

              	
                Mr.
                  C. Thomas McMillen

              
	 	
                Chief
                  Executive Officer

              
	 	
                Homeland
                  Security Capital Corporation

              
	 	
                1005
                  N. Glebe Road, Ste. 550

              
	 	
                Arlington,
                  VA 22201

              
	 	
                Telephone:

              	
                (703)
                  528-7073

              
	 	
                Facsimile:

              	
                (703)
                  528-0956

              
	 	 	 
	
                With
                  a copy to:

              	
                Martin
                  T. Schrier, Esq.

              
	 	
                Kirkpatrick
                  & Lockhart Preston Gates Ellis LLP

              
	 	
                200
                  S. Biscayne Blvd., Suite 2000

              
	 	
                Miami,
                  FL 33131

              
	 	
                Facsimile:

              	
                (305)
                  539-3300

              
	 	
                Facsimile:

              	
                (305)
                  358-7095

              
	 	 	 
	
                If
                  to any other Grantor

              	
                To
                  the address listed on the respective signature pages attached
                  hereto

              

      

    

     

    Any
      party
      may change its address by giving notice to the other party stating its new
      address. Commencing on the tenth (10th) day
      after the giving of such notice, such newly designated address shall be such
      party’s address for the purpose of all notices or other communications required
      or permitted to be given pursuant to this Agreement.

    

    Section
      8.2. Severability.
      If any
      provision of this Agreement shall be held invalid or unenforceable, such
      invalidity or unenforceability shall attach only to such provision and shall
      not
      in any manner affect or render invalid or unenforceable any other severable
      provision of this Agreement, and this Agreement shall be carried out as if
      any
      such invalid or unenforceable provision were not contained herein.

    

    Section
      8.3. Expenses.
      In the
      event of an Event of Default, the Company will pay to the Secured Party the
      amount of any and all reasonable out-of-pocket expenses, including the
      reasonable fees and expenses of its counsel, which the Secured Party may incur
      in connection with: (i) the custody or preservation of, or the sale,
      collection from, or other realization upon, any of the Pledged Property;
      (ii) the exercise or enforcement of any of the rights of the Secured Party
      hereunder or (iii) the failure by the Grantor to perform or observe any of
      the provisions hereof.

    

    Section
      8.4. Waivers,
      Amendments, Etc.
      The
      Secured Party’s delay or failure at any time or times hereafter to require
      strict performance by Grantor of any undertakings, agreements or covenants
      shall
      not waive, affect, or diminish any right of the Secured Party under this
      Agreement to demand strict compliance and performance herewith. Any waiver
      by
      the Secured Party of any Event of Default shall not waive or affect any other
      Event of Default, whether such Event of Default is prior or subsequent thereto
      and whether of the same or a different type. None of the undertakings,
      agreements and covenants of the Grantor contained in this Agreement, and no
      Event of Default, shall be deemed to have been waived by the Secured Party,
      nor
      may this Agreement be amended, changed or modified, unless such waiver,
      amendment, change or modification is evidenced by an instrument in writing
      specifying such waiver, amendment, change or modification and signed by the
      Secured Party in the case of any such waiver, and signed by the Secured Party
      and the Grantor in the case of any such amendment, change or modification.
      Further, no such document, instrument, and/or agreement purported to be executed
      on behalf of the Secured Party shall be binding upon the Secured Party unless
      executed by a duly authorized representative of the Secured Party.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Section
      8.5. Continuing
      Security Interest.
      This
      Agreement shall create a continuing security interest in the Pledged Property
      and shall: (i) remain in full force and effect so long as any of the
      Obligations shall remain outstanding; (ii) be binding upon each Grantor and
      its successors and assigns; and (iii) inure to the benefit of the Secured
      Party and its successors and assigns. Upon the payment or satisfaction in full
      of the Obligations, this Agreement and the security interest created hereby
      shall terminate, and, in connection therewith, each Grantor shall be entitled
      to
      the return, at its expense, of such of the Pledged Property as shall not have
      been sold in accordance with Section 5.2 hereof or otherwise applied
      pursuant to the terms hereof and the Secured Party shall deliver to the Grantor
      such documents as the Grantor shall reasonably request to evidence such
      termination.

    

    Section
      8.6. Independent
      Representation.
      Each
      party hereto acknowledges and agrees that it has received or has had the
      opportunity to receive independent legal counsel of its own choice and that
      it
      has been sufficiently apprised of its rights and responsibilities with regard
      to
      the substance of this Agreement.

    

    Section
      8.7. Applicable
      Law: Jurisdiction.
      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,
provided,
      however,
      that
      nothing herein shall prevent the Secured Party from enforcing its rights and
      remedies (including, without limitation, by filing a civil action) with respect
      to the Pledged Property and/or the Grantors in any other jurisdiction in which
      the Pledged Property and/or the Grantors may be located.

    

    Section
      8.8. Waiver
      of Jury Trial.
      AS A
      FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
      MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES
      ANY
      RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
      AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

    

    Section
      8.9 Right
      of Set Off.
      The
      Grantors each hereby grant to the Secured Party, a lien, security interest
      and
      right of setoff as security for all liabilities and obligations to the Secured
      Party, whether now existing or hereafter arising, upon and against all deposits,
      credits, collateral and property, now or hereafter in the possession, custody,
      safekeeping or control of the Secured Party or any of its affiliates, or any
      entity under the control of the Secured Party, or in transit to any of them.
      At
      any time, without demand or notice, the Secured Party may set off the same
      or
      any part thereof and apply the same to any liability or obligation of the
      Grantors even though unmatured and regardless of the adequacy of any other
      collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE THE SECURED
      PARTY TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
      WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
      RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE GRANTORS, ARE HEREBY
      KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Section
      8.10. Waiver
      of Claims.
      The
      Grantors acknowledge and agree that they have no offsets, defenses, claims,
      or
      counterclaims against the Secured Party or its officers, directors, employees,
      attorneys, representatives, parents, affiliates, predecessors, successors,
      or
      assigns with respect to the Obligations, the Prior Debt Security Documents
      or
      otherwise, and that if the Grantors now has, or ever did have, any offsets,
      defenses, claims, or counterclaims against the Secured Party or its officers,
      directors, employees, attorneys, representatives, affiliates, predecessors,
      successors, or assigns, whether known or unknown, at law or in equity, from
      the
      beginning of the world through this date and through the time of execution
      of
      this Agreement, all of them are hereby expressly WAIVED,
      and the
      Grantors hereby RELEASE
      the
      Secured Party and its officers, directors, employees, attorneys,
      representatives, affiliates, predecessors, successors, and assigns from any
      liability therefor.

    

    Section
      8.11. Existing
      Security Interests. The
      security interests granted herein are intended to be supplemental to, and not
      in
      limitation of, any existing security interests granted to the Secured Party
      to
      secure the Obligations, whether under the Prior Debt Security Documents or
      otherwise. All such existing security interests, 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 security interests, or the documents evidencing the same, the terms of
      this Agreement shall control.

    

    Section
      8.12. Ratification
      of Prior Documents.
      Each
      Grantor hereby ratifies, confirms and reaffirms all and singular the terms
      and
      conditions of the Prior Debt Security Documents, the Convertible Debentures
      and
      any other or related documents or agreements (the “Prior
      Documents”),
      as
      the same may be amended and in effect as of the date hereof. The Grantors
      further acknowledge and agree that except as the Prior Documents may be
      specifically affected by this Agreement, the Securities Purchase Agreement,
      and/or any of the other documents executed in connection herewith, all terms
      and
      conditions of the Prior Documents, as the same may be amended and in effect
      as
      of the date hereof, shall remain in full force and effect.

    

    Section
      8.13 Entire
      Agreement.
      This
      Agreement constitutes the entire agreement among the parties and supersedes
      any
      prior agreement or understanding among them with respect to the subject matter
      hereof.

    

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement 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:

                      	 	 

              

            

             

            
              
                
                

              

              
                17

                
                  

                

              

              
                
                

              

               

            

          

        

      

    

    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement as of the date first above
      written.

     

    
      

        
          	 	
                  BUYER:

                
	 	 
	 	
                  YA
                    GLOBAL INVESTMENTS, L.P. 

                
	 	 	 	 	 
	 	
                  By:

                	 	
                  Yorkville
                    Advisors, LLC 

                	 
	 	
                  Its:

                	 	
                  Investment
                    Manager

                	 
	 	 	 	 	 
	 	 	 	 	 
	 	
                  By:

                	     
                  	 
	 	
                  Name:

                	
                  Mark
                    Angelo

                	 
	 	
                  Its:

                	
                  Portfolio
                    Manager

                	 

        

      

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

     

    EXHIBIT
      A

    DEFINITION
      OF PLEDGED PROPERTY

    

      For
        the
        purpose of securing prompt and complete payment and performance by the Grantor
        of all of the Obligations, the Grantors each unconditionally and irrevocably
        hereby grant to the Secured Party a continuing security interest in and to,
        and
        lien upon, the following Pledged Property of each Grantor (all capitalized
        terms
        used herein shall have the respective meanings ascribed thereto in the
        Code):

      

      All
        personal property of each Grantor, wherever located and whether now or
        hereinafter existing and whether now owned or hereafter acquired, of every
        kind
        and description, tangible or intangible, including without limitation,
        all:

      

      1. Goods;

      

      2.
         Inventory,
        including, without limitation, all goods, merchandise and other personal
        property now owned or hereafter acquired by the Grantor which are held for
        sale
        or lease, or are furnished or to be furnished under any contract of service
        or
        are raw materials, work-in-process, supplies or materials used or consumed
        in
        the Grantor’s business, and all products thereof, and all substitutions.
        replacements, additions or accessions therefor and thereto; and any cash
        or
        non-cash Proceeds of all of the foregoing;

      

      3.
         Equipment,
        including, without limitation, all machinery, equipment, furniture, parts,
        tools
        and dies, of every kind and description, of the Grantor (including automotive
        equipment and motor vehicles), now owned or hereafter acquired by the Grantor,
        and used or acquired for use in the business of the Grantor, together with
        all
        accessions thereto and all substitutions and replacements thereof and parts
        therefor and all cash or non-cash Proceeds of the foregoing;

      

      4. Fixtures,
        including, without limitation, all goods which are so related to particular
        real
        estate that an interest in them arises under real estate law and all accessions
        thereto, replacements thereof and substitutions therefor, including, but
        not
        limited to, plumbing, heating and lighting apparatus, mantels, floor coverings,
        furniture, furnishings, draperies, screens, storm windows and doors, awnings,
        shrubbery, plants, boilers, tanks, machinery, stoves, gas and electric ranges,
        wall cabinets, appliances, furnaces, dynamos, motors, elevators and elevator
        machinery, radiators, blinds and all laundry, refrigerating, gas, electric,
        ventilating, air-refrigerating, air-conditioning, incinerating and sprinkling
        and other fire prevention or extinguishing equipment of whatsoever kind and
        nature and any replacements, accessions and additions thereto, Proceeds thereof
        and substitutions therefor;

      

      5. Instruments
        (including promissory notes);

      

      6. Documents;

      

      7. Accounts,
        including, without limitation, all Contract Rights and accounts receivable,
        health-care-insurance receivables, and license fees; any other obligations
        or
        indebtedness owed to the Grantor from whatever source arising; all rights
        of
        Grantor to receive any payments in money or kind; all guarantees of Accounts
        and
        security therefor; all cash or non-cash Proceeds of all of the foregoing;
        all of
        the right, title and interest of Grantor in and with respect to the goods,
        services or other property which gave rise to or which secure any of the
        accounts and insurance policies and proceeds relating thereto, and all of
        the
        rights of the Grantor as an unpaid seller of goods or services, including,
        without limitation the rights of stoppage in transit, replevin, reclamation
        and
        resale and all of the foregoing, whether now existing or hereafter created
        or
        acquired;

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

       

      8.
         Contracts
        and Contract Rights, including, to the extent not included in the definition
        of
        Accounts, all rights to payment or performance under a contract not yet earned
        by performance and not evidenced by an Instrument or Chattel Paper;

      

      9.
         Chattel
        Paper (whether tangible or electronic);

      

      10. Deposit
        Accounts (and in and to any deposits or other sums at any time credited to
        each
        such Deposit Account);

      

      11. Money,
        cash and cash equivalents;

      

      12. Letters
        of Credit and Letter-of-Credit Rights (whether or not the Letter of Credit
        is
        evidenced by a writing);

      

      13. Commercial
        Tort Claims;

      

      14. Securities
        Accounts, Security Entitlements, Securities, Financial Assets and all other
        Investment Property, including, without limitation, all ownership or membership
        interests in any subsidiaries or affiliates (whether or not controlled by
        the
        Grantor);

      

      15. General
        Intangibles, including, without limitation, all payment intangibles, tax
        refunds
        and other claims of the Grantor against any governmental authority, and all
        choses in action, insurance proceeds, goodwill, patents, copyrights, trademarks,
        tradenames, customer lists, formulae, trade secrets, licenses, permits,
        franchises, designs, computer software, research and literary rights now
        owned
        or hereafter acquired;

      

      16. Farm
        Products;

      

      17. All
        books
        and records (including all ledger sheets, files, computer programs, tapes
        and
        related data processing software) evidencing an interest in or relating to
        any
        of the foregoing;

      

      18. To
        the
        extent not already included above, all supporting obligations, and any and
        all
        cash and non-cash Proceeds, products, accessions, and/or replacements of
        any of
        the foregoing, including proceeds of insurance covering any or all of the
        foregoing. 

      

      
        
          
          

        

        
          A-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]