Document:

Unassociated Document

    

    WARRANT

    

    THE
      SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
      SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
      SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR
      APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
      SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
      OR
      APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
      SAID
      ACT. 

    

    HOMELAND
      SECURITY CAPITAL CORPORATION

    

    Warrant
      To Purchase Common Stock

     

    
      	
              Warrant
                No.: HOMS-5-1

            	
              Number
                of Shares:

            	
              83,333,333

            
	 	
              Warrant
                Exercise Price:

            	
              $0.03

            
	 	
              Expiration
                Date:

            	
              March
                14, 2013

            

    

    

    Date
      of
      Issuance: March 14, 2008

    

    Homeland
      Security Capital Corporation, a Delaware corporation (the “Company”),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, YA
      Global Investments, L.P.
      (the
“Holder”),
      the
      registered holder hereof or its permitted assigns, is entitled, subject to
      the
      terms set forth below, to purchase from the Company upon surrender of this
      Warrant, at any time or times on or after the date hereof, but not after
      11:59 P.M. Eastern Time on the Expiration Date (as defined herein) up to
      83,333,333 fully paid and nonassessable shares of Common Stock (as defined
      herein) of the Company (the “Warrant
      Shares”)
      at the
      exercise price per share provided in Section 1(b) below or as subsequently
      adjusted; provided, however, that in no event shall the holder be entitled
      to
      exercise this Warrant for a number of Warrant Shares in excess of that number
      of
      Warrant Shares which, upon giving effect to such exercise, would cause the
      aggregate number of shares of Common Stock beneficially owned by the holder
      and
      its affiliates to exceed 9.99% of the outstanding shares of the Common Stock
      following such exercise, except within sixty (60) days of the Expiration Date.
      For purposes of the foregoing proviso, the aggregate number of shares of Common
      Stock beneficially owned by the holder and its affiliates shall include the
      number of shares of Common Stock issuable upon exercise of this Warrant with
      respect to which the determination of such proviso is being made, but shall
      exclude shares of Common Stock which would be issuable upon (i) exercise of
      the remaining, unexercised Warrants beneficially owned by the holder and its
      affiliates and (ii) exercise or conversion of the unexercised or
      unconverted portion of any other securities of the Company beneficially owned
      by
      the holder and its affiliates (including, without limitation, any convertible
      notes or preferred stock) subject to a limitation on conversion or exercise
      analogous to the limitation contained herein. Except as set forth in the
      preceding sentence, for purposes of this paragraph, beneficial ownership shall
      be calculated in accordance with Section 13(d) of the Securities Exchange Act
      of
      1934, as amended. For purposes of this Warrant, in determining the number of
      outstanding shares of Common Stock a holder may rely on the number of
      outstanding shares of Common Stock as reflected in (1) the Company’s most recent
      quarterly report or annual report, as the case may be, (2) a more recent public
      announcement by the Company or (3) any other notice by the Company or its
      transfer agent setting forth the number of shares of Common Stock outstanding.
      Upon the written request of any holder, the Company shall promptly, but in
      no
      event later than one (1) Business Day following the receipt of such notice,
      confirm in writing to any such holder the number of shares of Common Stock
      then
      outstanding. In any case, the number of outstanding shares of Common Stock
      shall
      be determined after giving effect to the exercise of Warrants (as defined below)
      by such holder and its affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      1.

    

    (a) This
      Warrant is issued pursuant to the Securities Purchase Agreement (“Securities
      Purchase Agreement”)
      dated
      March 14, 2008 between the Company and the Buyers listed on Schedule I thereto
      or issued in exchange or substitution thereafter or replacement thereof. Each
      Capitalized term used, and not otherwise defined herein, shall have the meaning
      ascribed thereto in the Securities Purchase Agreement.

    

    (b) Definitions.
      The
      following words and terms as used in this Warrant shall have the following
      meanings:

    

    (i) “Approved
      Stock Plan”
means
      a
      stock option plan that has been approved by a majority of the independent
      directors of the Board of Directors of the Company, pursuant to which the
      Company’s securities may be issued only to any employee, officer or director for
      services provided to the Company.

    

    (ii) “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      the City of New York are authorized or required by law to remain
      closed.

    

    (iii) “Closing
      Bid Price”
means
      the closing bid price of Common Stock as quoted on the Principal Market (as
      reported by Bloomberg Financial Markets (“Bloomberg”)
      through its “Volume at Price” function).

    

    (iv) “Common
      Stock”
means
      (i) the Company’s common stock, par value $0.001 per share, and
      (ii) any capital stock into which such Common Stock shall have been changed
      or any capital stock resulting from a reclassification of such Common Stock.
      

    

    (v) “Excluded
      Securities”
means,
      (a) shares issued or deemed to have been issued by the Company pursuant to
      an
      Approved Stock Plan or, (b) shares issued in connection with any acquisition
      by
      the Company, whether through an acquisition of stock or a merger of any
      business, assets or technologies, leasing arrangement or any other transaction
      the primary purpose of which is not to raise equity capital, (c) shares of
      Common Stock issued or deemed to be issued by the Company upon conversion of
      Series I Preferred Shares or the warrants to purchase Common Stock issued to
      holder of the Series I Preferred Shares, or (d) shares of Common Stock
      issued or deemed to be issued by the Company upon the conversion, exchange
      or
      exercise of any right, option, obligation or security outstanding on the date
      prior to date of the Securities Purchase Agreement, provided that the terms
      of
      such right, option, obligation or security are not amended or otherwise modified
      on or after the date of the Securities Purchase Agreement, and provided that
      the
      conversion price, exchange price, exercise price or other purchase price is
      not
      reduced, adjusted or otherwise modified and the number of shares of Common
      Stock
      issued or issuable is not increased (whether by operation of, or in accordance
      with, the relevant governing documents or otherwise) on or after the date of
      the
      Securities Purchase Agreement. 

     

    
      
        
        

      

      
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    (vi) “Expiration
      Date”
means
      March 14, 2013.

    

    (vii) “Issuance
      Date”
means
      the date hereof.

    

    (viii) “Options”
means
      any rights, warrants or options to subscribe for or purchase Common Stock or
      Convertible Securities. 

    

    (ix) “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

    

    (x) “Primary
      Market”
means
      on any of (a) the American Stock Exchange, (b) New York Stock Exchange, (c)
      the
      Nasdaq Global Select Market, (d) the Nasdaq Global Market, (e) the Nasdaq
      Capital Market, or (e) the Over-the-Counter Bulletin Board (“OTCBB”).

    

    (xi) “Securities
      Act”
means
      the Securities Act of 1933, as amended. 

    

    (xii) “Warrant”
means
      this Warrant and all Warrants issued in exchange, transfer or replacement
      thereof. 

    

    (xiii) “Warrant
      Exercise Price”
shall
      be $0.03
      or as
      subsequently adjusted as provided in Section 8 hereof. 

    

    (c) Other
      Definitional Provisions. 

    

    (i) Except
      as
      otherwise specified herein, all references herein (A) to the Company shall
      be deemed to include the Company’s successors and (B) to any applicable law
      defined or referred to herein shall be deemed references to such applicable
      law
      as the same may have been or may be amended or supplemented from time to time.
      

    

    (ii) When
      used
      in this Warrant, the words “herein”,
      “hereof”,
      and
“hereunder”
      and
      words of similar import, shall refer to this Warrant as a whole and not to
      any
      provision of this Warrant, and the words “Section”,
      “Schedule”,
      and
“Exhibit”
shall
      refer to Sections of, and Schedules and Exhibits to, this Warrant unless
      otherwise specified. 

     

    
      
        
        

      

      
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    (iii) Whenever
      the context so requires, the neuter gender includes the masculine or feminine,
      and the singular number includes the plural, and vice versa. 

    

    Section
      2. Exercise
      of Warrant.
      

    

    (a) Subject
      to the terms and conditions hereof, this Warrant may be exercised by the holder
      hereof then registered on the books of the Company, pro rata as hereinafter
      provided, at any time on any Business Day on or after the opening of business
      on
      such Business Day, commencing with the first day after the date hereof, and
      prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by delivery of
      a written notice, in the form of the subscription notice attached as
Exhibit
      A
      hereto
      (the “Exercise
      Notice”),
      of
      such holder’s election to exercise this Warrant, which notice shall specify the
      number of Warrant Shares to be purchased, payment to the Company of an
      amount equal to the Warrant Exercise Price(s) applicable to the Warrant Shares
      being purchased, multiplied by the number of Warrant Shares (at the
      applicable Warrant Exercise Price) as to which this Warrant is being
      exercised (plus any applicable issue or transfer taxes) (the “Aggregate
      Exercise Price”)
      in
      cash or wire transfer of immediately available funds and the surrender of this
      Warrant (or an indemnification undertaking with respect to this Warrant in
      the
      case of its loss, theft or destruction) to a common carrier for overnight
      delivery to the Company as soon as practicable following such date
      (“Cash
      Basis”)
      or
      (ii) if at the time of exercise, the Warrant Shares are not subject to an
      effective registration statement, by delivering an Exercise Notice and in lieu
      of making payment of the Aggregate Exercise Price in cash or wire transfer,
      elect instead to receive upon such exercise the “Net Number” of shares of Common
      Stock determined according to the following formula (the “Cashless
      Exercise”):
      

    

      
        	
                Net
                  Number =

              	
                 A
                  x B) - (A x C)

              
	 	
                B

              

      

    

     

    For
      purposes of the foregoing formula: 

    

    A
      = the
      total number of Warrant Shares with respect to which this Warrant is then being
      exercised. 

    

    B
      = the
      Closing Bid Price of the Common Stock on the date of exercise of the
      Warrant.

    

    C
      = the
      Warrant Exercise Price then in effect for the applicable Warrant Shares at
      the
      time of such exercise. 

    

    In
      the
      event of any exercise of the rights represented by this Warrant in compliance
      with this Section 2, the Company shall on or before the fifth (5th)
      Business Day following the date of receipt of the Exercise Notice, the Aggregate
      Exercise Price and this Warrant (or an indemnification undertaking with respect
      to this Warrant in the case of its loss, theft or destruction) and the receipt
      of the representations of the holder specified in Section 6 hereof, if requested
      by the Company (the “Exercise
      Delivery Documents”),
      and
      if the Common Stock is DTC eligible, credit such aggregate number of shares
      of
      Common Stock to which the holder shall be entitled to the holder’s or its
      designee’s balance account with The Depository Trust Company; provided, however,
      if the holder who submitted the Exercise Notice requested physical delivery
      of
      any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible
      then the Company shall, on or before the fifth (5th)
      Business Day following receipt of the Exercise Delivery Documents, issue and
      surrender to a common carrier for overnight delivery to the address specified
      in
      the Exercise Notice, a certificate, registered in the name of the holder, for
      the number of shares of Common Stock to which the holder shall be entitled
      pursuant to such request. Upon delivery of the Exercise Notice and Aggregate
      Exercise Price referred to in clause (i) or (ii) above the holder of this
      Warrant shall be deemed for all corporate purposes to have become the holder
      of
      record of the Warrant Shares with respect to which this Warrant has been
      exercised. In the case of a dispute as to the determination of the Warrant
      Exercise Price, the Closing Bid Price or the arithmetic calculation of the
      Warrant Shares, the Company shall promptly issue to the holder the number of
      Warrant Shares that is not disputed and shall submit the disputed determinations
      or arithmetic calculations to the holder via facsimile within one (1) Business
      Day of receipt of the holder’s Exercise Notice. 

     

    
      
        
        

      

      
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    (b) If
      the
      holder and the Company are unable to agree upon the determination of the Warrant
      Exercise Price or arithmetic calculation of the Warrant Shares within one (1)
      day of such disputed determination or arithmetic calculation being submitted
      to
      the holder, then the Company shall immediately submit via facsimile (i) the
      disputed determination of the Warrant Exercise Price or the Closing Bid Price
      to
      an independent, reputable investment banking firm or (ii) the disputed
      arithmetic calculation of the Warrant Shares to its independent, outside
      accountant. The Company shall cause the investment banking firm or the
      accountant, as the case may be, to perform the determinations or calculations
      and notify the Company and the holder of the results no later than forty-eight
      (48) hours from the time it receives the disputed determinations or
      calculations. Such investment banking firm’s or accountant’s determination or
      calculation, as the case may be, shall be deemed conclusive absent manifest
      error.

    

    (c) Unless
      the rights represented by this Warrant shall have expired or shall have been
      fully exercised, the Company shall, as soon as practicable and in no event
      later
      than five (5) Business Days after any exercise and at its own expense, issue
      a
      new Warrant identical in all respects to this Warrant exercised except it shall
      represent rights to purchase the number of Warrant Shares purchasable
      immediately prior to such exercise under this Warrant exercised, less the number
      of Warrant Shares with respect to which such Warrant is exercised.

    

    (d) No
      fractional Warrant Shares are to be issued upon any pro rata exercise of this
      Warrant, but rather the number of Warrant Shares issued upon such exercise
      of
      this Warrant shall be rounded up or down to the nearest whole
      number.

    

    (e) If
      the
      Company or its transfer agent shall fail for any reason or for no reason to
      issue to the holder within ten (10) days of receipt of the Exercise
      Delivery Documents, a certificate for the number of Warrant Shares to which
      the
      holder is entitled or to credit the holder’s balance account with The Depository
      Trust Company for such number of Warrant Shares to which the holder is entitled
      upon the holder’s exercise of this Warrant, the Company shall, in addition to
      any other remedies under this Warrant or otherwise available to such holder,
      pay
      as additional damages in cash to such holder on each day the issuance of such
      certificate for Warrant Shares is not timely effected an amount equal to 0.025%
      of the product of (A) the sum of the number of Warrant Shares not issued to
      the
      holder on a timely basis and to which the holder is entitled, and (B) the
      Closing Bid Price of the Common Stock for the trading day immediately preceding
      the last possible date which the Company could have issued such Common Stock
      to
      the holder without violating this Section 2.

     

    
      
        
        

      

      
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    (f) If
      within
      ten (10) days after the Company’s receipt of the Exercise Delivery Documents,
      the Company fails to deliver a new Warrant to the holder for the number of
      Warrant Shares to which such holder is entitled pursuant to Section 2 hereof,
      then, in addition to any other available remedies under this Warrant, or
      otherwise available to such holder, the Company shall pay as additional damages
      in cash to such holder on each day after such tenth (10th)
      day
      that such delivery of such new Warrant is not timely effected in an amount
      equal
      to 0.25% of the product of (A) the number of Warrant Shares represented by
      the portion of this Warrant which is not being exercised and (B) the
      Closing Bid Price of the Common Stock for the trading day immediately preceding
      the last possible date which the Company could have issued such Warrant to
      the
      holder without violating this Section 2.

    

    Section
      3. Covenants
      as to Common Stock.
      The
      Company hereby covenants and agrees as follows:

    

    (a) This
      Warrant is, and any Warrants issued in substitution for or replacement of this
      Warrant will upon issuance be, duly authorized and validly issued.

    

    (b) All
      Warrant Shares which may be issued upon the exercise of the rights represented
      by this Warrant will, upon issuance, be validly issued, fully paid and
      nonassessable and free from all taxes, liens and charges with respect to the
      issue thereof.

    

    (c) During
      the period within which the rights represented by this Warrant may be exercised,
      the Company will at all times have authorized and reserved at least one hundred
      percent (100%) of the number of shares of Common Stock needed to provide for
      the
      exercise of the rights then represented by this Warrant and the par value of
      said shares will at all times be less than or equal to the applicable Warrant
      Exercise Price. If at any time the Company does not have a sufficient number
      of
      shares of Common Stock authorized and available, then the Company shall call
      and
      hold a special meeting of its stockholders within sixty (60) days of that
      time for the sole purpose of increasing the number of authorized shares of
      Common Stock.

    

    (d) If
      at any
      time after the date hereof the Company shall file a registration statement,
      the
      Company shall include the Warrant Shares issuable to the holder, pursuant to
      the
      terms of this Warrant and shall maintain, so long as any other shares of Common
      Stock shall be so listed, such listing of all Warrant Shares from time to time
      issuable upon the exercise of this Warrant; and the Company shall so list on
      each national securities exchange or automated quotation system, as the case
      may
      be, and shall maintain such listing of, any other shares of capital stock of
      the
      Company issuable upon the exercise of this Warrant if and so long as any shares
      of the same class shall be listed on such national securities exchange or
      automated quotation system.

    

    (e) The
      Company will not, by amendment of its Certificate of Incorporation or through
      any reorganization, transfer of assets, consolidation, merger, dissolution,
      issue or sale of securities, or any other voluntary action, avoid or seek to
      avoid the observance or performance of any of the terms to be observed or
      performed by it hereunder, but will at all times in good faith assist in the
      carrying out of all the provisions of this Warrant and in the taking of all
      such
      action as may reasonably be requested by the holder of this Warrant in order
      to
      protect the exercise privilege of the holder of this Warrant against dilution
      or
      other impairment, consistent with the tenor and purpose of this Warrant. The
      Company will not increase the par value of any shares of Common Stock receivable
      upon the exercise of this Warrant above the Warrant Exercise Price then in
      effect, and (ii) will take all such actions as may be necessary or
      appropriate in order that the Company may validly and legally issue fully paid
      and nonassessable shares of Common Stock upon the exercise of this
      Warrant.

     

    
      
        
        

      

      
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    (f) This
      Warrant will be binding upon any entity succeeding to the Company by merger,
      consolidation or acquisition of all or substantially all of the Company’s
      assets.

    

    Section
      4. Taxes.
      The
      Company shall pay any and all taxes, except any applicable withholding, which
      may be payable with respect to the issuance and delivery of Warrant Shares
      upon
      exercise of this Warrant.

    

    Section
      5. Warrant
      Holder Not Deemed a Stockholder.
      Except
      as otherwise specifically provided herein, no holder, as such, of this Warrant
      shall be entitled to vote or receive dividends or be deemed the holder of shares
      of capital stock of the Company for any purpose, nor shall anything contained
      in
      this Warrant be construed to confer upon the holder hereof, as such, any of
      the
      rights of a stockholder of the Company or any right to vote, give or withhold
      consent to any corporate action (whether any reorganization, issue of stock,
      reclassification of stock, consolidation, merger, conveyance or otherwise),
      receive notice of meetings, receive dividends or subscription rights, or
      otherwise, prior to the issuance to the holder of this Warrant of the Warrant
      Shares which he or she is then entitled to receive upon the due exercise of
      this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on such holder to purchase any securities (upon
      exercise of this Warrant or otherwise) or as a stockholder of the Company,
      whether such liabilities are asserted by the Company or by creditors of the
      Company. Notwithstanding this Section 5, the Company will provide the holder
      of
      this Warrant with copies of the same notices and other information given to
      the
      stockholders of the Company generally, contemporaneously with the giving thereof
      to the stockholders.

    

    Section
      6. Representations
      of Holder.
      The
      holder of this Warrant, by the acceptance hereof, represents that it is
      acquiring this Warrant and the Warrant Shares for its own account for investment
      only and not with a view towards, or for resale in connection with, the public
      sale or distribution of this Warrant or the Warrant Shares, except pursuant
      to
      sales registered or exempted under the Securities Act; provided, however, that
      by making the representations herein, the holder does not agree to hold this
      Warrant or any of the Warrant Shares for any minimum or other specific term
      and
      reserves the right to dispose of this Warrant and the Warrant Shares at any
      time
      in accordance with or pursuant to a registration statement or an exemption
      under
      the Securities Act. The holder of this Warrant further represents, by acceptance
      hereof, that, as of this date, such holder is an “accredited investor” as such
      term is defined in Rule 501(a)(1) of Regulation D promulgated by the
      Securities and Exchange Commission under the Securities Act (an “Accredited
      Investor”).
      Upon
      exercise of this Warrant the holder shall, if requested by the Company, confirm
      in writing, in a form satisfactory to the Company, that the Warrant Shares
      so
      purchased are being acquired solely for the holder’s own account and not as a
      nominee for any other party, for investment, and not with a view toward
      distribution or resale and that such holder is an Accredited Investor. If such
      holder cannot make such representations because they would be factually
      incorrect, it shall be a condition to such holder’s exercise of this Warrant
      that the Company receive such other representations as the Company considers
      reasonably necessary to assure the Company that the issuance of its securities
      upon exercise of this Warrant shall not violate any United States or state
      securities laws.

     

    
      
        
        

      

      
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    Section
      7. Ownership
      and Transfer.

    

    (a) The
      Company shall maintain at its principal executive offices (or such other office
      or agency of the Company as it may designate by notice to the holder hereof),
      a
      register for this Warrant, in which the Company shall record the name and
      address of the person in whose name this Warrant has been issued, as well as
      the
      name and address of each transferee. The Company may treat the person in whose
      name any Warrant is registered on the register as the owner and holder thereof
      for all purposes, notwithstanding any notice to the contrary, but in all events
      recognizing any transfers made in accordance with the terms of this Warrant.
      Upon transfer, this Warrant together with a properly executed assignment in
      the
      form attached hereto, must be delivered to the Company. 

    

    Section
      8. Adjustment
      of Warrant Exercise Price and Number of Shares.
      The
      Warrant Exercise Price and the number of shares of Common Stock issuable upon
      exercise of this Warrant shall be adjusted from time to time as
      follows:

    

    (a) Adjustment
      of Warrant Exercise Price and Number of Shares upon Issuance of Common
      Stock.
      If and
      whenever on or after the Issuance Date of this Warrant, the Company issues
      or
      sells, or is deemed to have issued or sold, any shares of Common
      Stock (other than Excluded Securities) for a consideration per share less
      than a price (the “Applicable
      Price”)
      equal
      to the Warrant Exercise Price in effect immediately prior to such issuance
      or
      sale, then immediately after such issue or sale the Warrant Exercise Price
      then
      in effect shall be reduced to an amount equal to such consideration per share.
      Upon each such adjustment of the Warrant Exercise Price hereunder, the number
      of
      Warrant Shares issuable upon exercise of this Warrant shall be adjusted to
      the
      number of shares determined by multiplying the Warrant Exercise Price in effect
      immediately prior to such adjustment by the number of Warrant Shares issuable
      upon exercise of this Warrant immediately prior to such adjustment and dividing
      the product thereof by the Warrant Exercise Price resulting from such
      adjustment.

    

    (b) Effect
      on Warrant Exercise Price of Certain Events.
      For
      purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
      above, the following shall be applicable:

    

    (i) Issuance
      of Options.
      If
      after the date hereof, the Company in any manner grants any Options and the
      lowest price per share for which one share of Common Stock is issuable upon
      the
      exercise of any such Option or upon conversion or exchange of any convertible
      securities issuable upon exercise of any such Option is less than the Applicable
      Price, then such share of Common Stock shall be deemed to be outstanding and
      to
      have been issued and sold by the Company at the time of the granting or sale
      of
      such Option for such price per share. For purposes of this Section 8(b)(i),
      the
      lowest price per share for which one share of Common Stock is issuable upon
      exercise of such Options or upon conversion or exchange of such Convertible
      Securities shall be equal to the sum of the lowest amounts of consideration
      (if
      any) received or receivable by the Company with respect to any one share of
      Common Stock upon the granting or sale of the Option, upon exercise of the
      Option or upon conversion or exchange of any convertible security issuable
      upon
      exercise of such Option. No further adjustment of the Warrant Exercise Price
      shall be made upon the actual issuance of such Common Stock or of such
      convertible securities upon the exercise of such Options or upon the actual
      issuance of such Common Stock upon conversion or exchange of such convertible
      securities.

     

    
      
        
        

      

      
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    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any convertible securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion or exchange thereof is less than the Applicable Price, then such
      share of Common Stock shall be deemed to be outstanding and to have been issued
      and sold by the Company at the time of the issuance or sale of such convertible
      securities for such price per share. For the purposes of this
      Section 8(b)(ii), the lowest price per share for which one share of Common
      Stock is issuable upon such conversion or exchange shall be equal to the sum
      of
      the lowest amounts of consideration (if any) received or receivable by the
      Company with respect to one share of Common Stock upon the issuance or sale
      of
      the convertible security and upon conversion or exchange of such convertible
      security. No further adjustment of the Warrant Exercise Price shall be made
      upon
      the actual issuance of such Common Stock upon conversion or exchange of such
      convertible securities, and if any such issue or sale of such convertible
      securities is made upon exercise of any Options for which adjustment of the
      Warrant Exercise Price had been or are to be made pursuant to other provisions
      of this Section 8(b), no further adjustment of the Warrant Exercise Price shall
      be made by reason of such issue or sale. 

    

    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase price provided for in any Options, the additional consideration, if
      any, payable upon the issue, conversion or exchange of any convertible
      securities, or the rate at which any convertible securities are convertible
      into
      or exchangeable for Common Stock changes at any time, the Warrant Exercise
      Price
      in effect at the time of such change shall be adjusted to the Warrant Exercise
      Price which would have been in effect at such time had such Options or
      convertible securities provided for such changed purchase price, additional
      consideration or changed conversion rate, as the case may be, at the time
      initially granted, issued or sold and the number of Warrant Shares issuable
      upon
      exercise of this Warrant shall be correspondingly readjusted. For purposes
      of
      this Section 8(b)(iii), if the terms of any Option or convertible security
      that
      was outstanding as of the Issuance Date of this Warrant are changed in the
      manner described in the immediately preceding sentence, then such Option or
      convertible security and the Common Stock deemed issuable upon exercise,
      conversion or exchange thereof shall be deemed to have been issued as of the
      date of such change. No adjustment pursuant to this Section 8(b) shall be
      made if such adjustment would result in an increase of the Warrant Exercise
      Price then in effect.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (iv) Calculation
      of Consideration Received.
      If any
      Common Stock, Options or convertible securities are issued or sold or deemed
      to
      have been issued or sold for cash, the consideration received therefore will
      be
      deemed to be the net amount received by the Company therefore. If any Common
      Stock, Options or convertible securities are issued or sold for a consideration
      other than cash, the amount of such consideration received by the Company will
      be the fair value of such consideration, except where such consideration
      consists of marketable securities, in which case the amount of consideration
      received by the Company will be the market price of such securities on the
      date
      of receipt of such securities. If any Common Stock, Options or convertible
      securities are issued to the owners of the non-surviving entity in connection
      with any merger in which the Company is the surviving entity, the amount of
      consideration therefore will be deemed to be the fair value of such portion
      of
      the net assets and business of the non-surviving entity as is attributable
      to
      such Common Stock, Options or convertible securities, as the case may be. The
      fair value of any consideration other than cash or securities will be determined
      jointly by the Company and the holders of Warrants representing at least
      two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
      then
      outstanding. If such parties are unable to reach agreement within ten (10)
      days after the occurrence of an event requiring valuation (the “Valuation
      Event”),
      the
      fair value of such consideration will be determined within five (5) Business
      Days after the tenth (10th)
      day
      following the Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the holders of Warrants representing at least
      two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants
      then
      outstanding. The determination of such appraiser shall be final and binding
      upon
      all parties and the fees and expenses of such appraiser shall be borne jointly
      by the Company and the holders of Warrants.

    

    (v) Integrated
      Transactions.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $.01.

    

    (vi) Treasury
      Shares.
      The
      number of shares of Common Stock outstanding at any given time does not include
      shares owned or held by or for the account of the Company, and the disposition
      of any shares so owned or held will be considered an issue or sale of Common
      Stock.

    

    (vii) Record
      Date.
      If the
      Company takes a record of the holders of Common Stock for the purpose of
      entitling them (1) to receive a dividend or other distribution payable in
      Common Stock, Options or in convertible securities or (2) to subscribe for
      or purchase Common Stock, Options or convertible securities, then such record
      date will be deemed to be the date of the issue or sale of the shares of Common
      Stock deemed to have been issued or sold upon the declaration of such dividend
      or the making of such other distribution or the date of the granting of such
      right of subscription or purchase, as the case may be.

    

    (c) Adjustment
      of Warrant Exercise Price upon Subdivision or Combination of Common
      Stock.
      If the
      Company at any time after the date of issuance of this Warrant subdivides (by
      any stock split, stock dividend, recapitalization or otherwise) one or more
      classes of its outstanding shares of Common Stock into a greater number of
      shares, any Warrant Exercise Price in effect immediately prior to such
      subdivision will be proportionately reduced and the number of shares of Common
      Stock obtainable upon exercise of this Warrant will be proportionately
      increased. If the Company at any time after the date of issuance of this Warrant
      combines (by combination, reverse stock split or otherwise) one or more classes
      of its outstanding shares of Common Stock into a smaller number of shares,
      any
      Warrant Exercise Price in effect immediately prior to such combination will
      be
      proportionately increased and the number of Warrant Shares issuable upon
      exercise of this Warrant will be proportionately decreased. Any adjustment
      under
      this Section 8(c) shall become effective at the close of business on the
      date the subdivision or combination becomes effective.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (d) Distribution
      of Assets.
      If the
      Company shall declare or make any dividend or other distribution of its assets
      (or rights to acquire its assets) to holders of Common Stock, by way of return
      of capital or otherwise (including, without limitation, any distribution of
      cash, stock or other securities, property or options by way of a dividend,
      spin
      off, reclassification, corporate rearrangement or other similar transaction)
      (a
“Distribution”),
      at
      any time after the issuance of this Warrant, then, in each such
      case:

    

    (i) any
      Warrant Exercise Price in effect immediately prior to the close of business
      on
      the record date fixed for the determination of holders of Common Stock
      entitled to
      receive the Distribution shall be reduced, effective as of the close of business
      on such record date, to a price determined by multiplying such Warrant Exercise
      Price by a fraction of which (A) the numerator shall be the Closing Sale Price
      of the Common Stock on the trading day immediately preceding such record date
      minus the value of the Distribution (as determined in good faith by the
      Company’s Board of Directors) applicable to one share of Common Stock, and (B)
      the denominator shall be the Closing Sale Price of the Common Stock on the
      trading day immediately preceding such record date; and

    

    (ii) either
      (A) the number of Warrant Shares obtainable upon exercise of this Warrant shall
      be increased to a number of shares equal to the number of shares of Common
      Stock
      obtainable immediately prior to the close of business on the record date fixed
      for the determination of holders of Common Stock entitled to receive the
      Distribution multiplied by the reciprocal of the fraction set forth in the
      immediately preceding clause (i), or (B) in the event that the Distribution
      is
      of common stock of a company whose common stock is traded on a national
      securities exchange or a national automated quotation system, then the holder
      of
      this Warrant shall receive an additional warrant to purchase Common Stock,
      the
      terms of which shall be identical to those of this Warrant, except that such
      warrant shall be exercisable into the amount of the assets that would have
      been
      payable to the holder of this Warrant pursuant to the Distribution had the
      holder exercised this Warrant immediately prior to such record date and with
      an
      exercise price equal to the amount by which the exercise price of this Warrant
      was decreased with respect to the Distribution pursuant to the terms of the
      immediately preceding clause (i).

    

    (e) Certain
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 8
      but not expressly provided for by such provisions (including, without
      limitation, the granting of stock appreciation rights, phantom stock rights
      or
      other rights with equity features), then the Company’s Board of Directors will
      make an appropriate adjustment in the Warrant Exercise Price and the number
      of
      shares of Common Stock obtainable upon exercise of this Warrant so as to protect
      the rights of the holders of the Warrants; provided, except as set forth in
      section 8(c),that no such adjustment pursuant to this Section 8(e) will increase
      the Warrant Exercise Price or decrease the number of shares of Common Stock
      obtainable as otherwise determined pursuant to this Section 8.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (f) Voluntary
      Adjustments By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

    

    (g) Notices.

    

    (i) Immediately
      upon any adjustment of the Warrant Exercise Price, the Company will give written
      notice thereof to the holder of this Warrant, setting forth in reasonable
      detail, and certifying, the calculation of such adjustment.

    

    (ii) The
      Company will give written notice to the holder of this Warrant at least ten
      (10)
      days prior to the date on which the Company closes its books or takes a record
      (A) with respect to any dividend or distribution upon the Common Stock,
      (B) with respect to any pro rata subscription offer to holders of Common
      Stock or (C) for determining rights to vote with respect to any Organic
      Change (as defined below), dissolution or liquidation, provided that such
      information shall be made known to the public prior to or in conjunction with
      such notice being provided to such holder.

    

    (iii) The
      Company will also give written notice to the holder of this Warrant at least
      ten
      (10) days prior to the date on which any Organic Change, dissolution or
      liquidation will take place, provided that such information shall be made known
      to the public prior to or in conjunction with such notice being provided to
      such
      holder.

    

    Section
      9. Purchase
      Rights; Reorganization, Reclassification, Consolidation, Merger or
      Sale.

    

    (a) In
      addition to any adjustments pursuant to Section 8 above, if at any time the
      Company grants, issues or sells any Options, Convertible Securities or rights
      to
      purchase stock, warrants, securities or other property pro rata to the record
      holders of any class of Common Stock (the “Purchase
      Rights”),
      then
      the holder of this Warrant will be entitled to acquire, upon the terms
      applicable to such Purchase Rights, the aggregate Purchase Rights which such
      holder could have acquired if such holder had held the number of shares of
      Common Stock acquirable upon complete exercise of this Warrant immediately
      before the date on which a record is taken for the grant, issuance or sale
      of
      such Purchase Rights, or, if no such record is taken, the date as of which
      the
      record holders of Common Stock are to be determined for the grant, issue or
      sale
      of such Purchase Rights.

    

    (b) Any
      recapitalization, reorganization, reclassification, consolidation, merger,
      sale
      of all or substantially all of the Company’s assets to another Person or other
      transaction in each case which is effected in such a way that holders of Common
      Stock are entitled to receive (either directly or upon subsequent liquidation)
      stock, securities or assets with respect to or in exchange for Common Stock
      is
      referred to herein as an “Organic
      Change.”
Prior
      to the consummation of any (i) sale of all or substantially all of the Company’s
      assets to an acquiring Person or (ii) other Organic Change following which
      the
      Company is not a surviving entity, the Company will secure from the Person
      purchasing such assets or the successor resulting from such Organic Change
      (in
      each case, the “Acquiring
      Entity”)
      a
      written agreement (in form and substance satisfactory to the holders of Warrants
      representing at least two-thirds (iii) of the Warrant Shares issuable upon
      exercise of the Warrants then outstanding) to deliver to each holder of Warrants
      in exchange for such Warrants, a security of the Acquiring Entity evidenced
      by a
      written instrument substantially similar in form and substance to this Warrant
      and satisfactory to the holders of the Warrants (including an adjusted warrant
      exercise price equal to the value for the Common Stock reflected by the terms
      of
      such consolidation, merger or sale, and exercisable for a corresponding number
      of shares of Common Stock acquirable and receivable upon exercise of the
      Warrants without regard to any limitations on exercise, if the value so
      reflected is less than any Applicable Warrant Exercise Price immediately prior
      to such consolidation, merger or sale). Prior to the consummation of any other
      Organic Change, the Company shall make appropriate provision (in form and
      substance satisfactory to the holders of Warrants representing a
      majority of
      the
      Warrant Shares issuable upon exercise of the Warrants then outstanding) to
      insure that each of the holders of the Warrants will thereafter have the right
      to acquire and receive in lieu of or in addition to (as the case may be) the
      Warrant Shares immediately theretofore issuable and receivable upon the exercise
      of such holder’s Warrants (without regard to any limitations on exercise),
      such shares of stock, securities or assets that would have been issued or
      payable in such Organic Change with respect to or in exchange for the number
      of
      Warrant Shares which would have been issuable and receivable upon the exercise
      of such holder’s Warrant as of the date of such Organic Change (without taking
      into account any limitations or restrictions on the exercisability of this
      Warrant).

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
      10. Lost,
      Stolen, Mutilated or Destroyed Warrant.
      If this
      Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly,
      on
      receipt of an indemnification undertaking (or, in the case of a mutilated
      Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
      this Warrant so lost, stolen, mutilated or destroyed.

    

    Section
      11. Notice.
      Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Warrant 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 receipt
      is received by the sending party transmission is mechanically or electronically
      generated and kept on file by the sending party); or (iii) one 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 Holder:

            	
              YA
                Global Investments, L.P.

            
	 	
              101
                Hudson Street - Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Attention: Mark
                A. Angelo

            
	 	
              Telephone: (201)
                985-8300

            
	 	
              Facsimile: (201)
                985-8266

            
	 	 
	
              With
                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, 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
                a 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 a
      holder of this Warrant, to it at the address and facsimile number set forth
      in
      this Section 11, or at such other address and facsimile as shall be delivered
      to
      the Company upon the issuance or transfer of this Warrant. Each party shall
      provide five days’ prior written notice to the other party of any change in
      address or facsimile number. Written confirmation of receipt (A) given by
      the recipient of such notice, consent, facsimile, waiver or other communication,
      (or (B) provided by a nationally recognized overnight delivery 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.

    

    Section
      12. Date.
      The
      date of this Warrant is set forth on page 1 hereof. This Warrant, in all
      events, shall be wholly void and of no effect after the close of business on
      the
      Expiration Date, except that notwithstanding any other provisions hereof, the
      provisions of Section 8(b) shall continue in full force and effect after
      such date as to any Warrant Shares or other securities issued upon the exercise
      of this Warrant.

    

    Section
      13. Amendment
      and Waiver.
      Except
      as otherwise provided herein, the provisions of the Warrants may be amended
      and
      the Company may take any action herein prohibited, or omit to perform any act
      herein required to be performed by it, only if the Company has obtained the
      written consent of the holders of Warrants representing at least two-thirds
      of
      the Warrant Shares issuable upon exercise of the Warrants then outstanding;
      provided that, except for Section 8(d), no such action may increase the Warrant
      Exercise Price or decrease the number of shares or class of stock obtainable
      upon exercise of any Warrant without the written consent of the holder of such
      Warrant.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Section
      14. Descriptive
      Headings; Governing Law.
      The
      descriptive headings of the several sections and paragraphs of this Warrant
      are
      inserted for convenience only and do not constitute a part of this Warrant.
      All
      other questions concerning the construction, validity, enforcement and
      interpretation of this Agreement shall be governed by the internal laws of
      the
      State of Delaware, 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
      jurisdictions) that would cause the application of the laws of any jurisdictions
      other than the State of New Jersey. Each party hereby irrevocably submits to
      the
      exclusive jurisdiction of the state and federal courts sitting in Hudson County
      and the United States District Court for the District of New Jersey, for the
      adjudication of any dispute hereunder or in connection herewith or therewith,
      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. 

     

    Section
      15. Waiver
      of Jury Trial.
      AS
      A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE
      PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
      RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS
      ASSOCIATED WITH THIS TRANSACTION.

    

    REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to be signed as of the date first set forth
      above.

     

    
      
        	 	 	 
	 	
                HOMELAND
                  SECURITY CAPITAL CORPORATION

              
	 
 	 
 	 
 
	 	By:  	  
	 	
                Name:

              
	 	
                Title:

              
	 	
              

      

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A TO WARRANT

    

    EXERCISE
      NOTICE

    

    TO
      BE EXECUTED 

    BY
      THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

    

    HOMELAND
      SECURITY CAPITAL CORPORATION

    

    The
      undersigned holder hereby exercises the right to purchase ______________ of
      the
      shares of Common Stock (“Warrant
      Shares”)
      of
      Homeland Security Capital Corporation (the “Company”),
      evidenced by the attached Warrant (the “Warrant”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

    

    Specify
      Method of exercise by check mark:

    

    1.
      ___ Cash
      Exercise

    

    (a)
      Payment
      of Warrant Exercise Price.
      The
      holder shall pay the Aggregate Exercise Price of $______________ to the Company
      in accordance with the terms of the Warrant. 

    

    (b)
      Delivery
      of Warrant Shares.
      The
      Company shall deliver to the holder _________
      Warrant
      Shares in accordance with the terms of the Warrant. 

    

    

    2.
      ___ Cashless
      Exercise

    

    (a)
      Payment
      of Warrant Exercise Price.
      In lieu
      of making payment of the Aggregate Exercise Price, the holder elects to receive
      upon such exercise the Net Number of shares of Common Stock determined in
      accordance with the terms of the Warrant. 

    

    (b)
      Delivery
      of Warrant Shares.
      The
      Company shall deliver to the holder _________
      Warrant
      Shares in accordance with the terms of the Warrant. 

    

    Date:
      _______________ __, ______

    

    Name
      of
      Registered Holder

    

      
        	
                By:

              	  
	 
	
                Name:

              	 
	 
	
                Title:

              	 
	 

      

    

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B TO WARRANT

    

    FORM
      OF WARRANT POWER

    

    FOR
      VALUE RECEIVED,
      the
      undersigned does hereby assign and transfer to ________________, Federal
      Identification No. __________, a warrant to purchase ____________ shares of
      the capital stock of Homeland Security Capital Corporation represented by
      warrant certificate no. _____, standing in the name of the undersigned on
      the books of said corporation. The undersigned does hereby irrevocably
      constitute and appoint ______________, attorney to transfer the warrants of
      said
      corporation, with full power of substitution in the premises.

    

      
        	
                Dated:

              	     	 	   
	 
	 	 	 	 	 	 	 	 
	 	 	 	
                By:

              	  
	 
	 	 	 	
                Name:

              	  
	 
	 	 	 	
                Title:

              	  
	 

      

    

     

    
      
        
        

      

      
        B-1Unassociated Document

    

      SECURITIES
        PURCHASE AGREEMENT

      

      THIS SECURITIES
        PURCHASE AGREEMENT
        (this
“Agreement”),
        dated
        as of March 13, 2008, by and among HOMELAND
        SECURITY CAPITAL CORPORATION,
        a
        Delaware corporation (the “Company”),
        and
        YA GLOBAL INVESTMENTS, L.P. (the “Buyer”).

      

      WITNESSETH

      

      WHEREAS,
        the
        Company and the Buyer are executing and delivering this Agreement in reliance
        upon an exemption from securities registration pursuant to Section 4(2) and/or
        Rule 506 of Regulation D (“Regulation
        D”)
        as
        promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
        under
        the Securities Act of 1933, as amended (the “Securities
        Act”).

      

      WHEREAS,
        the
        Company has authorized the designation of that certain Series H Convertible
        Preferred Stock, par value $.01 per share (the "Series
        H Preferred Shares")
        consisting of 10,000 Series H Preferred Shares, which are be convertible
        into
        shares of the Company’s Common Stock, par value $.001 per share (the
        "Common
        Stock"),
        in
        accordance with the terms of the Certificate of Designations of the Series
        H
        Convertible Preferred Stock of the Company attached hereto as Exhibit
        A (the
        "Certificate
        of Designations").

      

      WHEREAS,
        the
        parties desire that, upon the terms and subject to the conditions contained
        herein, the Company shall issue and sell to the Buyer, as provided herein,
        and
        the Buyer shall purchase (i) up to $6,310,000 of secured notes in the form
        attached hereto as “Exhibit
        B-1”
(the
        “New
        Notes”)
        for a
        purchase price of $6,310,000, (ii) 6,190 Series H Preferred Shares (the
“New
        Preferred Shares”)
        for a
        purchase price of $6,190,000, and (iii) a warrant (the “Warrant”)
        substantially in the form attached as Exhibit
        C
        to this
        Agreement with the to be initially exercisable to acquire 83,333,333 shares
        of
        Common Stock (the “Warrant
        Shares”);
        in
        each case as set forth on Schedule I attached hereto.

      

      WHEREAS,
        the
        Company and the Buyer are parties to that certain Securities Purchase Agreement,
        dated as of February 6, 2006 the (“February
        2006 Purchase Agreement”),
        pursuant to which, among other things, the Buyer purchased from the Company
        an
        aggregate original principal amount of $4,000,000 of senior secured convertible
        debentures (the “February
        2006 Debentures”),
        which
        are convertible into shares of the Company's common stock, par value $0.001
        per
        share (the “Common
        Stock”),
        in
        accordance with the terms thereof, and which as of the date hereof has an
        outstanding principal balance of $3,810,000, plus accrued and unpaid interest
        thereon.

       

      WHEREAS,
        the
        Company and the Buyer are parties to that certain Securities Purchase Agreement,
        dated as of August 21, 2006 the (“August
        2006 Purchase Agreement”),
        pursuant to which, among other things, the Buyer purchased from the Company
        an
        aggregate original principal amount of $4,000,000 of senior secured convertible
        debentures (the “August
        2007 Debentures”),
        which
        are convertible into Common Stock in accordance with the terms thereof, and
        which as of the date hereof has an outstanding principal balance of $4,000,000,
        plus accrued and unpaid interest thereon.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS,
        the
        Company and the Buyer are parties to that certain Securities Purchase Agreement,
        dated as of June 1, 2007 the (“2007
        Purchase Agreement”),
        pursuant to which, among other things, the Buyer purchased from the Company
        an
        aggregate original principal amount of $2,750,000 of senior secured convertible
        debentures (the “2007
        Debentures”),
        which
        are convertible into shares of Common Stock in accordance with the terms
        thereof, and which as of the date hereof has an outstanding principal balance
        of
        $2,750,000, plus accrued and unpaid interest thereon.

      

      WHEREAS,
        pursuant
        to the terms hereof, the Buyer desires to exchange February 2006 Debentures
        (but
        not accrued and unpaid interest thereon) for 3,810
        Series H Preferred Shares (the “Exchanged
        Preferred Shares”
and
        collectively along with the New Preferred Share, the “Preferred
        Shares”),
        which
        Exchanged Preferred Shares are being acquired for consideration consisting
        solely of the February
        2006 Debentures surrendered
        for conversion.

      

      WHEREAS,
        pursuant
        to the terms hereof, the Buyer desires to exchange the August 2006 Debentures
        and the 2007 Debentures (but not accrued and unpaid interest thereon) for
        an
        aggregate original principal amount of $6,750,000 of senior secured notes
        in the
        form attached as Exhibit B-2 to this Agreement (the “Exchanged
        Notes”
and
        collectively along with the New Notes, the “Notes”),
        which
        Exchanged Notes are being acquired for consideration consisting solely of
        the
August
        2006 Debentures and the 2007 Debentures surrendered
        for conversion.

      

      WHEREAS,
        contemporaneously with the execution and delivery of this Agreement, the
        parties
        hereto are executing and delivering a Registration Rights Agreement (the
        “Registration
        Rights Agreement”)
        pursuant to which the Company has agreed to provide certain demand registration
        rights under the Securities Act and the rules and regulations promulgated
        there
        under, and applicable state securities laws.

      

      WHEREAS,
        contemporaneously with the execution and delivery of this Agreement, (i)
        the
        Buyer, the Company, and the following subsidiaries of the Company: Homeland
        Security Advisory Services, Inc. (“Homeland
        Advisory”)
        and
        Celerity Systems, Inc. (“Celerity”)
        are
        executing and delivering a Security Agreement (the “Security
        Agreement”)
        pursuant to which the Company, Homeland Advisory and Celerity shall provide
        the
        Buyer a security interest in Pledged Property (as this term is defined in
        the
        Security Agreement) to secure the Company’s obligations under this Agreement,
        the Transaction Documents, or any other obligations of the Company to the
        Buyer,
        and (ii) Nexus Technologies Group, Inc. (“Nexus”),
        Homeland Advisory and Celerity (collectively, the “Guarantors”)
        are
        executing and delivering a Guaranty dated the date hereof (the “Guaranty”
and
        collectively with the Security Agreement, the “Security
        Documents”)
        in
        favor of the Buyer, with respect to the Company’s obligations under the
        Securities Purchase Agreement and the Transaction Documents;

      

      WHEREAS,
        contemporaneously with the execution and delivery of this Agreement, the
        parties
        hereto are executing and delivering Irrevocable Transfer Agent Instructions
        (the
“Irrevocable
        Transfer Agent Instructions”);
        and

      

      WHEREAS,
        the
        Notes, the Series H Preferred Shares, the Conversion Shares, the Warrants,
        and
        the Warrants Shares collectively are referred to herein as the “Securities”).
        

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      NOW,
        THEREFORE,
        in
        consideration of the mutual covenants and other agreements contained in this
        Agreement the Company and the Buyer(s) hereby agree as follows:

      

      1. PURCHASE
        AND SALE OF NOTES AND PREFERRED SHARES.

      

      (a) Purchase
        of New Notes, New Preferred Shares, and Warrants.
        Subject
        to the satisfaction (or waiver) of the terms and conditions of this Agreement,
        the Buyer agrees to purchase at the Closing (as defined below) and the Company
        agrees to sell and issue to the Buyer at the Closing, (i) the New Notes in
        the
        amount set forth opposite the Buyer’s name on Schedule I, (ii) the New Preferred
        Shares in the amount set forth opposite the Buyer’s name on Schedule I, and
        (iii) the Warrants to acquire up that number of Warrant Shares as set forth
        opposite the Buyer’s name on Schedule I. At the Closing, (i) the Buyer shall
        deliver to the Company such aggregate proceeds for the New Notes, the New
        Preferred Shares, the Warrants to be issued and sold to the Buyer at the
        Closing
        and (ii) the Company shall deliver to the Buyer, the New Notes, the New
        Preferred Shares and Warrants which the Buyer is purchasing at the Closing
        in
        amounts indicated opposite such Buyer’s name on Schedule I, duly executed on
        behalf of the Company.

      

      (b) Exchange
        of Existing Debentures for Series H Preferred Shares.
        Pursuant to the terms and conditions of this Agreement, at the Closing, the
        Buyer shall surrender the February
        2006 Debentures (but not accrued and unpaid interest thereon) with
        an
        aggregate principal amount equal to $3,810,000 as set forth on Schedule II
        to
        the Company for conversion into 3,810 Series H Preferred Shares as set forth
        opposite the Buyer’s name on Schedule II attached hereto. At the Closing, (i)
        the Buyer shall deliver to the Company the February
        2006 Debentures and
        (ii) the Company shall deliver to the Buyer, the 3,810 Series H Preferred
        Shares which the Buyer is acquiring in exchange for the surrender of the
        February
        2006 Debentures as
        indicated opposite such Buyer’s name on Schedule II. 

      

      (c) Exchange
        of Existing Debentures for Exchanged Notes.
        Subject
        to the satisfaction (or waiver) of the terms and conditions of this Agreement,
        at the Closing, the Buyer agrees to surrender the
        August 2006 Debentures and the 2007 Debentures (but not accrued and unpaid
        interest thereon) in
        principal amount of the $6,750,000 as set forth on Schedule II to the Company
        for conversion into Exchanged Notes in the aggregate principal amount equal
        to
        $6,750,000 as set forth opposite the Buyer’s name on Schedule II attached
        hereto. At the Closing, (i) the Buyer shall deliver to the Company the
August
        2006 Debentures and the 2007 Debentures (but not accrued and unpaid interest
        thereon) and
        (ii) the Company shall deliver to the Buyer, the Exchanged Notes which the
        Buyer is acquiring at the Closing in amounts indicated opposite such Buyer’s
        name on Schedule II, duly executed on behalf of the Company. 

      

      (d) Closing
        Dates.
        The
        Closing of the transactions contemplated herein shall take place at 10:00
        a.m.
        Eastern Standard Time within 3 business days following the date hereof, subject
        to notification of satisfaction of the conditions to the Closing set forth
        herein and in Sections 6 and 7 below (or such other date as is mutually agreed
        to by the Company and the Buyer(s)) (the “Closing
        Date”).
        The
        Closings shall occur on the respective Closing Dates at the offices of Yorkville
        Advisors, LLC, 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302
        (or
        such other place as is mutually agreed to by the Company and the Buyer).
        

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (e) Holding
        Period for Series H Preferred Stock Issued in Exchange for
        Debentures.
        The
        Company represents, warrants and agrees that for the purposes of Rule 144,
        the
        holding period of the Exchanged Preferred Share issued hereunder in exchange
        for
        the February 2006 Debentures (including the corresponding Conversion Shares)
        will include the holding period of such surrendered February 2006 Debentures,
        and the Company agrees not to take a position contrary to this Section 2(e).
        If
        (A) there has been no change in facts and circumstances, (B) no contrary
        law,
        rule, regulation or instruction has been proposed, issued or adopted by the
        Commission, and (C) the Buyer is not an “affiliate” of the Company as the term
        is defined in Securities Act Rule 144(a)(1), then upon receipt of
        representations made by Buyer, in a form reasonably acceptable to the Company
        and its counsel, that it is not an affiliate of the Company and has not been
        an
        affiliate of the Company during the preceding 3 months, as well as other
        representations customarily given in connection with the removal of restrictive
        legends under Rule 144, the Company will, in connection with an applicable
        transfer request by Buyer, take the position that the holding period for
        the
        Exchanged Preferred Shares issued to the Buyer in exchange for the Buyer’s
        surrendered February 2006 Debentures include the holding period for such
        surrendered February 2006 Debentures.

      

      2. BUYER’S
        REPRESENTATIONS AND WARRANTIES.

      

      The
        Buyer
        represents and warrants that:

      

      (a) Investment
        Purpose.
        The
        Buyer is acquiring the Securities for its own account for investment only
        and
        not with a view towards, or for resale in connection with, the public sale
        or
        distribution thereof, except pursuant to sales registered or exempted under
        the
        Securities Act; provided, however, that by making the representations herein,
        the Buyer reserves the right to dispose of the Securities at any time in
        accordance with or pursuant to an effective registration statement covering
        such
        Securities or an available exemption under the Securities Act. The Buyer
        does
        not presently have any agreement or understanding, directly or indirectly,
        with
        any Person to distribute any of the Securities. 

      

      (b) Accredited
        Investor Status.
        The
        Buyer is an “Accredited
        Investor”
as
        that
        term is defined in Rule 501(a)(3) of Regulation D.

      

      (c) Reliance
        on Exemptions.
        The
        Buyer understands that the Securities are being offered and sold to it in
        reliance on specific exemptions from the registration requirements of United
        States federal and state securities laws and that the Company is relying
        in part
        upon the truth and accuracy of, and the Buyer’s compliance with, the
        representations, warranties, agreements, acknowledgments and understandings
        of
        the Buyer set forth herein in order to determine the availability of such
        exemptions and the eligibility of the Buyer to acquire the
        Securities.

      

      (d) Information.
        The
        Buyer and its advisors (and its counsel), if any, have been furnished with
        all
        materials relating to the business, finances and operations of the Company
        and
        information he deemed material to making an informed investment decision
        regarding his purchase of the Securities, which have been requested by the
        Buyer. The Buyer and its advisors, if any, have been afforded the opportunity
        to
        ask questions of the Company and its management. Neither such inquiries nor
        any
        other due diligence investigations conducted by the Buyer or its advisors,
        if
        any, or its representatives shall modify, amend or affect the Buyer’s right to
        rely on the Company’s representations and warranties contained in Section 3
        below. The Buyer understands that its investment in the Securities involves
        a
        high degree of risk. The Buyer is in a position regarding the Company, which,
        based upon employment, family relationship or economic bargaining power,
        enabled
        and enables the Buyer to obtain information from the Company in order to
        evaluate the merits and risks of this investment. The Buyer has sought such
        accounting, legal and tax advice, as it has considered necessary to make
        an
        informed investment decision with respect to its acquisition of the
        Securities.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      (e) No
        Governmental Review.
        The
        Buyer understands that no United States federal or state agency or any other
        government or governmental agency has passed on or made any recommendation
        or
        endorsement of the Securities, or the fairness or suitability of the investment
        in the Securities, nor have such authorities passed upon or endorsed the
        merits
        of the offering of the Securities.

      

      (f) Transfer
        or Resale.
        The
        Buyer understands that except as provided in the Registration Rights Agreement:
        (i) the Securities have not been and are not being registered under the
        Securities Act or any state securities laws, and may not be offered for sale,
        sold, assigned or transferred unless (A) subsequently registered thereunder,
        (B)
        the Buyer shall have delivered to the Company an opinion of counsel, in a
        generally acceptable form, to the effect that such Securities to be sold,
        assigned or transferred may be sold, assigned or transferred pursuant to
        an
        exemption from such registration requirements, or (C) the Buyer provides
        the
        Company with reasonable assurances (in the form of seller and broker
        representation letters) that such Securities can be sold, assigned or
        transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities
        Act, as amended (or a successor rule thereto) (collectively, “Rule
        144”),
        in
        each case following the applicable holding period set forth therein; (ii)
        any
        sale of the Securities made in reliance on Rule 144 may be made only in
        accordance with the terms of Rule 144 and further, if Rule 144 is not
        applicable, any resale of the Securities under circumstances in which the
        seller (or the person through whom the sale is made) may be deemed to be an
        underwriter (as that term is defined in the Securities Act) may require
        compliance with some other exemption under the Securities Act or the rules
        and
        regulations of the SEC thereunder; and (iii) neither the Company nor any
        other
        person is under any obligation to register the Securities under the Securities
        Act or any state securities laws or to comply with the terms and conditions
        of
        any exemption thereunder. 

      

      (g) Legends.
        The
        Buyer agrees to the imprinting, so long as is required by this Section 2(g),
        of
        a restrictive legend in substantially the following form:

      

      THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
        THE
        SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH
        A VIEW
        TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
        IN
        THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
        THE
        SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
        OR AN
        OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
        NOT
        REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. 

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Certificates
        evidencing the Conversion Shares or Warrant Shares shall not contain any
        legend
        (including the legend set forth above), (i) while a registration statement
        (including the Registration Statement) covering the resale of such security
        is
        effective under the Securities Act, (ii) following any sale of such Conversion
        Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares
        or Warrant Shares are eligible for sale under Rule 144, or (iv) if such legend
        is not required under applicable requirements of the Securities Act (including
        judicial interpretations and pronouncements issued by the staff of the SEC).
        The
        Company shall cause its counsel to issue a legal opinion to the Company’s
        transfer agent promptly after the effective date (the “Effective
        Date”)
        of a
        Registration Statement if required by the Company’s transfer agent to effect the
        removal of the legend hereunder. If all or any portion of the Convertible
        Debentures or Warrants are exercised by a Buyer that is not an Affiliate
        of the
        Company (a “Non-Affiliated
        Buyer”)
        at a
        time when there is an effective registration statement to cover the resale
        of
        the Conversion Shares or the Warrant Shares, such Conversion Shares or Warrant
        Shares shall be issued free of all legends. The Company agrees that following
        the Effective Date or at such time as such legend is no longer required under
        this Section 2(g), it will, no later than three (3) Trading Days following
        the
        delivery by a Non-Affiliated Buyer to the Company or the Company’s transfer
        agent of a certificate representing Conversion Shares or Warrant Shares,
        as the
        case may be, issued with a restrictive legend (such third Trading Day, the
        “Legend
        Removal Date”),
        deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
        representing such shares that is free from all restrictive and other legends.
        The Company may not make any notation on its records or give instructions
        to any
        transfer agent of the Company that enlarge the restrictions on transfer set
        forth in this Section. The Buyer acknowledges that the Company’s agreement
        hereunder to remove all legends from Conversion Shares or Warrant Shares
        is not
        an affirmative statement or representation that such Conversion Shares or
        Warrant Shares are freely tradable. Each Buyer, severally and not jointly
        with
        the other Buyer, agrees that the removal of the restrictive legend from
        certificates representing Securities as set forth in this Section 3(g) is
        predicated upon the Company’s reliance that the buyer will sell any Securities
        pursuant to either the registration requirements of the Securities Act,
        including any applicable prospectus delivery requirements, or an exemption
        therefrom, and that if Securities are sold pursuant to a Registration Statement,
        they will be sold in compliance with the plan of distribution set forth
        therein.

      

      (h) Authorization,
        Enforcement.
        This
        Agreement has been duly and validly authorized, executed and delivered on
        behalf
        of the Buyer and is a valid and binding agreement of the Buyer enforceable
        in
        accordance with its terms, except as such enforceability may be limited by
        general principles of equity or applicable bankruptcy, insolvency,
        reorganization, moratorium, liquidation and other similar laws relating to,
        or
        affecting generally, the enforcement of applicable creditors’ rights and
        remedies.

      

      (i) Receipt
        of Documents.
        The
        Buyer and its counsel has received and read in their entirety: (i) this
        Agreement and each representation, warranty and covenant set forth herein
        and
        the Transaction Documents (as defined herein); (ii) all due diligence and
        other
        information necessary to verify the accuracy and completeness of such
        representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
        the fiscal year ended December 31, 2006; (iv) the Company’s Form 10-QSB for the
        fiscal quarter ended September 30, 2007 and (v) answers to all questions
        the
        Buyer submitted to the Company regarding an investment in the Company; and
        the
        Buyer has relied on the information contained therein and has not been furnished
        any other documents, literature, memorandum or prospectus.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (j) Due
        Formation of Corporate and Other Buyer.
        If the
        Buyer(s) is a corporation, trust, partnership or other entity that is not
        an
        individual person, it has been formed and validly exists and has not been
        organized for the specific purpose of purchasing the Securities and is not
        prohibited from doing so.

      

      (k) No
        Legal Advice From the Company.
        The
        Buyer acknowledges, that it had the opportunity to review this Agreement
        and the
        transactions contemplated by this Agreement with his or its own legal counsel
        and investment and tax advisors. Each Buyer is relying solely on such counsel
        and advisors and not on any statements or representations of the Company
        or any
        of its representatives or agents for legal, tax or investment advice with
        respect to this investment, the transactions contemplated by this Agreement
        or
        the securities laws of any jurisdiction. 

      

      3. REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY.

      

      Except
        as
        set forth under the corresponding section of the Disclosure Schedules which
        Disclosure Schedules shall be deemed a part hereof and to qualify any
        representation or warranty otherwise made herein to the extent of such
        disclosure, the Company hereby makes the representations and warranties set
        forth below to the Buyer: 

      

      (a) Subsidiaries.
        All of
        the direct and indirect subsidiaries of the Company are set forth on
Schedule
        3(a).
        Except
        as set forth on Schedule 3(a), the Company owns, directly or indirectly,
        all of
        the capital stock or other equity interests of each subsidiary free and clear
        of
        any liens, and all the issued and outstanding shares of capital stock of
        each
        subsidiary are validly issued and are fully paid, non-assessable and free
        of
        preemptive and similar rights to subscribe for or purchase
        securities.

      

      (b) Organization
        and Qualification.
        The
        Company and its subsidiaries are corporations duly organized and validly
        existing in good standing under the laws of the jurisdiction in which they
        are
        incorporated, and have the requisite corporate power to own their properties
        and
        to carry on their business as now being conducted. Each of the Company and
        its
        subsidiaries is duly qualified as a foreign corporation to do business and
        is in
        good standing in every jurisdiction in which the nature of the business
        conducted by it makes such qualification necessary, except to the extent
        that
        the failure to be so qualified or be in good standing would not have or
        reasonably be expected to result in (i) a material adverse effect on the
        legality, validity or enforceability of any Transaction Document, (ii) a
        material adverse effect on the results of operations, assets, business or
        condition (financial or otherwise) of the Company and the subsidiaries, taken
        as
        a whole, or (iii) a material adverse effect on the Company’s ability to perform
        in any material respect on a timely basis its obligations under any Transaction
        Document (any of (i), (ii) or (iii), a “Material
        Adverse Effect”)
        and no
        proceeding has been instituted in any such jurisdiction revoking, limiting
        or
        curtailing or seeking to revoke, limit or curtail such power and authority
        or
        qualification..

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (c) Authorization,
        Enforcement, Compliance with Other Instruments.
        (i) The Company has the requisite corporate power and authority to enter
        into and perform its obligations under this Agreement, the Notes, the
        Certificate of Designations, the Warrants, the Security Documents, the
        Registration Rights Agreement, the Irrevocable Transfer Agent Instructions,
        and
        each of the other agreements entered into by the parties hereto in connection
        with the transactions contemplated by this Agreement (collectively the
“Transaction
        Documents”)
        and to
        issue the Securities in accordance with the terms hereof and thereof, (ii)
        the
        execution and delivery of the Transaction Documents by the Company and the
        consummation by it of the transactions contemplated hereby and thereby,
        including, without limitation, the issuance of the Securities, the reservation
        for issuance and the issuance of the Conversion Shares, and the reservation
        for
        issuance and the issuance of the Warrant Shares, have been duly authorized
        by
        the Company’s Board of Directors and no further consent or authorization is
        required by the Company, its Board of Directors or its stockholders, (iii)
        the
        Transaction Documents have been duly executed and delivered by the Company,
        (iv)
        the Transaction Documents constitute the valid and binding obligations of
        the
        Company enforceable against the Company in accordance with their terms, except
        as such enforceability may be limited by general principles of equity or
        applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
        or
        similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies. The authorized officer of the Company executing the
        Transaction Documents knows of no reason why the Company cannot file the
        Registration Statement as required under the Registration Rights Agreement
        or
        perform any of the Company’s other obligations under the Transaction Documents.

      

      (d) Capitalization.
        The
        authorized capital stock of the Company consists of 200,000,000 shares of
        Common
        Stock and 3,000,000 shares of Preferred Stock, par value $0.01 (“Preferred
        Stock”)
        of
        which 49,246,244 shares of Common Stock and 1,358,080 shares of Preferred
        Stock
        are issued and outstanding of which 1,000,000 shares are Series F Preferred
        Stock and 358,080 shares are Series G Preferred Stock. All of the
        outstanding shares of capital stock of the Company are validly issued, fully
        paid and nonassessable, have been issued in compliance with all federal and
        state securities laws, and none of such outstanding shares was issued in
        violation of any preemptive rights or similar rights to subscribe for or
        purchase securities. Except as disclosed in Schedule
        3(d):
        (i)
        none of the Company's capital stock is subject to preemptive rights or any
        other
        similar rights or any liens or encumbrances suffered or permitted by the
        Company; (ii) there are no outstanding options, warrants, scrip, rights to
        subscribe to, calls or commitments of any character whatsoever relating to,
        or
        securities or rights convertible into, or exercisable or exchangeable for,
        any
        capital stock of the Company or any of its subsidiaries, or contracts,
        commitments, understandings or arrangements by which the Company or any of
        its
        subsidiaries is or may become bound to issue additional capital stock of
        the
        Company or any of its subsidiaries or options, warrants, scrip, rights to
        subscribe to, calls or commitments of any character whatsoever relating to,
        or
        securities or rights convertible into, or exercisable or exchangeable for,
        any
        capital stock of the Company or any of its subsidiaries; (iii) there are
        no
        outstanding debt securities, notes, credit agreements, credit facilities
        or
        other agreements, documents or instruments evidencing indebtedness of the
        Company or any of its subsidiaries or by which the Company or any of its
        subsidiaries is or may become bound; (iv) there are no financing statements
        securing obligations in any material amounts, either singly or in the aggregate,
        filed in connection with the Company or any of its subsidiaries; (v) there
        are
        no outstanding securities or instruments of the Company or any of its
        subsidiaries which contain any redemption or similar provisions, and there
        are
        no contracts, commitments, understandings or arrangements by which the Company
        or any of its subsidiaries is or may become bound to redeem a security of
        the
        Company or any of its subsidiaries; (vi) there are no securities or instruments
        containing anti-dilution or similar provisions that will be triggered by
        the
        issuance of the Securities; (vii) the Company does not have any stock
        appreciation rights or "phantom stock" plans or agreements or any similar
        plan
        or agreement; and (viii) the Company and its subsidiaries have no liabilities
        or
        obligations required to be disclosed in the SEC Documents but not so disclosed
        in the SEC Documents, other than those incurred in the ordinary course of
        the
        Company's or its subsidiaries' respective businesses and which, individually
        or
        in the aggregate, do not or would not have a Material Adverse Effect. The
        Company has furnished to the Buyer true, correct and complete copies of the
        Company's Certificate of Incorporation, as amended and as in effect on the
        date
        hereof (the “Certificate
        of Incorporation”),
        and
        the Company's Bylaws, as amended and as in effect on the date hereof (the
        “Bylaws”),
        and
        the terms of all securities convertible into, or exercisable or exchangeable
        for, shares of Common Stock and the material rights of the holders thereof
        in
        respect thereto. No further approval or authorization of any stockholder,
        the
        Board of Directors of the Company or others is required for the issuance
        and
        sale of the Securities. There are no stockholders agreements, voting agreements
        or other similar agreements with respect to the Company’s capital stock to which
        the Company is a party or, to the knowledge of the Company, between or among
        any
        of the Company’s stockholders. 

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (e) Issuance
        of Securities.
        The
        issuance of the Notes, Series H Preferred Share, and the Warrants are duly
        authorized and free from all taxes, liens and charges with respect to the
        issue
        thereof. Upon exercise in accordance with the terms of the Series H Preferred
        Shares or the Warrants, as the case may be, the Conversion Shares and Warrant
        Shares, respectively, when issued will be validly issued, fully paid and
        nonassessable, free from all taxes, liens and charges with respect to the
        issue
        thereof. 

      

      (f) No
        Conflicts.
        The
        execution, delivery and performance of the Transaction Documents by the Company
        and the consummation by the Company of the transactions contemplated hereby
        and
        thereby (including, without limitation, the issuance of the Notes, Series
        H
        Preferred Share, and the Warrants, and reservation for issuance and issuance
        of
        the Conversion Shares and the Warrant Shares) will not (i) result in a violation
        of any certificate of incorporation, certificate of formation, any certificate
        of designations or other constituent documents of the Company or any of its
        subsidiaries, any capital stock of the Company or any of its subsidiaries
        or
        bylaws of the Company or any of its subsidiaries or (ii) conflict with, or
        constitute a default (or an event which with notice or lapse of time or both
        would become a default) in any respect under, or give to others any rights
        of
        termination, amendment, acceleration or cancellation of, any agreement,
        indenture or instrument to which the Company or any of its subsidiaries is
        a
        party, or (iii) result in a violation of any law, rule, regulation, order,
        judgment or decree (including foreign, federal and state securities laws
        and
        regulations and the rules and regulations of the National Association of
        Securities Dealers Inc.’s OTC Bulletin Board) applicable to the Company or any
        of its subsidiaries or by which any property or asset of the Company or any
        of
        its subsidiaries is bound or affected; except in the case of each of clauses
        (ii) and (iii), such as could not, individually or in the aggregate, have
        or
        reasonably be expected to result in a Material Adverse Effect. The business
        of
        the Company and its subsidiaries is not being conducted, and shall not be
        conducted in violation of any material law, ordinance, or regulation of any
        governmental entity. Except as specifically contemplated by this Agreement
        and
        as required under the Securities Act and any applicable state securities
        laws,
        the Company is not required to obtain any consent, authorization or order
        of, or
        make any filing or registration with, any court or governmental agency in
        order
        for it to execute, deliver or perform any of its obligations under or
        contemplated by this Agreement or the Registration Rights Agreement in
        accordance with the terms hereof or thereof. All consents, authorizations,
        orders, filings and registrations which the Company is required to obtain
        pursuant to the preceding sentence have been obtained or effected on or prior
        to
        the date hereof. The Company and its subsidiaries are unaware of any facts
        or
        circumstance, which might give rise to any of the foregoing.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (g) SEC
        Documents; Financial Statements.
        The
        Company has filed all reports, schedules, forms, statements and other documents
        required to be filed by it with the SEC under the Securities Exchange Act
        of
        1934, as amended (the “Exchange
        Act”),
        for
        the two years preceding the date hereof (or such shorter period as the Company
        was required by law or regulation to file such material) (all of the foregoing
        filed prior to the date hereof or amended after the date hereof and all exhibits
        included therein and financial statements and schedules thereto and documents
        incorporated by reference therein, being hereinafter referred to as the
“SEC
        Documents”)
        on
        timely basis or has received a valid extension of such time of filing and
        has
        filed any such SEC Document prior to the expiration of any such extension.
        The
        Company has delivered to the Buyer or their representatives, or made available
        through the SEC’s website at http://www.sec.gov., true and complete copies of
        the SEC Documents. As of their respective dates, the SEC Documents complied
        in
        all material respects with the requirements of the Exchange Act and the rules
        and regulations of the SEC promulgated thereunder applicable to the SEC
        Documents, and none of the SEC Documents, at the time they were filed with
        the
        SEC, contained any untrue statement of a material fact or omitted to state
        a
        material fact required to be stated therein or necessary in order to make
        the
        statements therein, in the light of the circumstances under which they were
        made, not misleading. As of their respective dates, the financial statements
        of
        the Company included in the SEC Documents complied as to form in all material
        respects with applicable accounting requirements and the published rules
        and
        regulations of the SEC with respect thereto. Such financial statements have
        been
        prepared in accordance with generally accepted accounting principles,
        consistently applied, during the periods involved (except (i) as may be
        otherwise indicated in such financial statements or the notes thereto, or
        (ii)
        in the case of unaudited interim statements, to the extent they may exclude
        footnotes or may be condensed or summary statements) and fairly present in
        all
        material respects the financial position of the Company as of the dates thereof
        and the results of its operations and cash flows for the periods then ended
        (subject, in the case of unaudited statements, to normal year-end audit
        adjustments). No other information provided by or on behalf of the Company
        to
        the Buyer which is not included in the SEC Documents, including, without
        limitation, information referred to in Section 2(i) of this Agreement, contains
        any untrue statement of a material fact or omits to state any material fact
        necessary in order to make the statements therein, in the light of the
        circumstance under which they are or were made and not misleading. 

      

      (h) 10(b)-5.
        The SEC
        Documents do not include any untrue statements of material fact, nor do they
        omit to state any material fact required to be stated therein necessary to
        make
        the statements made, in light of the circumstances under which they were
        made,
        not misleading.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (i) Absence
        of Litigation.
        There
        is no action, suit, proceeding, inquiry or investigation before or by any
        court,
        public board, government agency, self-regulatory organization or body pending
        against or affecting the Company, the Common Stock or any of the Company’s
        subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
        have
        a Material Adverse Effect.

      

      (j) Acknowledgment
        Regarding Buyer’s Purchase of the Securities.
        The
        Company acknowledges and agrees that the Buyer is acting solely in the capacity
        of an arm’s length purchaser with respect to this Agreement and the transactions
        contemplated hereby. The Company further acknowledges that each Buyer is
        not
        acting as a financial advisor or fiduciary of the Company (or in any similar
        capacity) with respect to this Agreement and the transactions contemplated
        hereby and any advice given by each Buyer or any of their respective
        representatives or agents in connection with this Agreement and the transactions
        contemplated hereby is merely incidental to the Buyer’s purchase of the
        Securities. The Company further represents to each Buyer that the Company’s
        decision to enter into this Agreement has been based solely on the independent
        evaluation by the Company and its representatives.

      

      (k) No
        General Solicitation.
        Neither
        the Company, nor any of its affiliates, nor any person acting on its or their
        behalf, has engaged in any form of general solicitation or general advertising
        (within the meaning of Regulation D under the Securities Act) in connection
        with
        the offer or sale of the Securities.

      

      (l) No
        Integrated Offering.
        Neither
        the Company, nor any of its affiliates, nor any person acting on its or their
        behalf has, directly or indirectly, made any offers or sales of any security
        or
        solicited any offers to buy any security, under circumstances that would
        require
        registration of the Securities under the Securities Act or cause this offering
        of the Securities to be integrated with prior offerings by the Company for
        purposes of the Securities Act.

      

      (m) Employee
        Relations.
        Neither
        the Company, the Guarantors, or each their subsidiaries are involved in any
        labor dispute or, to the knowledge of the Company or any of its subsidiaries,
        is
        any such dispute threatened. None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe
        that their relations with their employees are good.

      

      (n) Intellectual
        Property Rights.
        The
        Company, the Guarantors, and each of their subsidiaries own or possess adequate
        rights or licenses to use all trademarks, trade names, service marks, service
        mark registrations, service names, patents, patent rights, copyrights,
        inventions, licenses, approvals, governmental authorizations, trade secrets
        and
        rights necessary to conduct their respective businesses as now conducted.
        The
        Company and its subsidiaries do not have any knowledge of any infringement
        by
        the Company or its subsidiaries of trademark, trade name rights, patents,
        patent
        rights, copyrights, inventions, licenses, service names, service marks, service
        mark registrations, trade secret or other similar rights of others, and,
        to the
        knowledge of the Company there is no claim, action or proceeding being made
        or
        brought against, or to the Company’s knowledge, being threatened against, the
        Company or its subsidiaries regarding trademark, trade name, patents, patent
        rights, invention, copyright, license, service names, service marks, service
        mark registrations, trade secret or other infringement; and the Company and
        its
        subsidiaries are unaware of any facts or circumstances which might give rise
        to
        any of the foregoing.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (o) Environmental
        Laws.
        The
        Company, the Guarantors, and each of their subsidiaries are (i) in compliance
        with any and all applicable foreign, federal, state and local laws and
        regulations relating to the protection of human health and safety, the
        environment or hazardous or toxic substances or wastes, pollutants or
        contaminants (“Environmental
        Laws”),
        (ii)
        have received all permits, licenses or other approvals required of them under
        applicable Environmental Laws to conduct their respective businesses and
        (iii)
        are in compliance with all terms and conditions of any such permit, license
        or
        approval.

      

      (p) Title.
        All
        real property and facilities held under lease by the Company and its
        subsidiaries are held by them under valid, subsisting and enforceable leases
        with such exceptions as are not material and do not interfere with the use
        made
        and proposed to be made of such property and buildings by the Company and
        its
        subsidiaries.

      

      (q) Insurance.
        The
        Company, the Guarantors, and each of their subsidiaries are insured by insurers
        of recognized financial responsibility against such losses and risks and
        in such
        amounts as management of the Company believes to be prudent and customary
        in the
        businesses in which the Company and its subsidiaries are engaged. Neither
        the
        Company nor any such subsidiary has been refused any insurance coverage sought
        or applied for and neither the Company nor any such subsidiary has any reason
        to
        believe that it will not be able to renew its existing insurance coverage
        as and
        when such coverage expires or to obtain similar coverage from similar insurers
        as may be necessary to continue its business at a cost that would not materially
        and adversely affect the condition, financial or otherwise, or the earnings,
        business or operations of the Company and its subsidiaries, taken as a
        whole.

      

      (r) Regulatory
        Permits.
        The
        Company, the Guarantors, and each of their subsidiaries possess all material
        certificates, authorizations and permits issued by the appropriate federal,
        state or foreign regulatory authorities necessary to conduct their respective
        businesses, and neither the Company nor any such subsidiary has received
        any
        notice of proceedings relating to the revocation or modification of any such
        certificate, authorization or permit.

      

      (s) Internal
        Accounting Controls.
        The
        Company, the Guarantors, and each of their subsidiaries maintains a system
        of
        internal accounting controls sufficient to provide reasonable assurance that
        (i)
        transactions are executed in accordance with management’s general or specific
        authorizations, (ii) transactions are recorded as necessary to permit
        preparation of financial statements in conformity with generally accepted
        accounting principles and to maintain asset accountability, and (iii) the
        recorded amounts for assets are compared with the existing assets at reasonable
        intervals and appropriate action is taken with respect to any
        differences.

      

      (t) No
        Material Adverse Breaches, etc.
        Neither
        the Company, the Guarantors, or each their subsidiaries are is subject to
        any
        charter, corporate or other legal restriction, or any judgment, decree, order,
        rule or regulation which in the judgment of the Company’s officers has or is
        expected in the future to have a Material Adverse Effect on the business,
        properties, operations, financial condition, results of operations or prospects
        of the Company or its subsidiaries. Neither the Company, the Guarantors,
        or any
        of their subsidiaries are in breach of any contract or agreement which breach,
        in the judgment of the Company’s officers, has or is expected to have a Material
        Adverse Effect on the business, properties, operations, financial condition,
        results of operations or prospects of the Company, the Guarantors, and any
        of
        their subsidiaries.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (u) Tax
        Status.
        The
        Company, the Guarantors, and each of their subsidiaries have made and filed
        all
        federal and state income and all other tax returns, reports and declarations
        required by any jurisdiction to which it is subject and (unless and only
        to the
        extent that the Company, the Guarantors, and each of their subsidiaries are
        has
        set aside on its books provisions reasonably adequate for the payment of
        all
        unpaid and unreported taxes) has paid all taxes and other governmental
        assessments and charges that are material in amount, shown or determined
        to be
        due on such returns, reports and declarations, except those being contested
        in
        good faith and has set aside on its books provision reasonably adequate for
        the
        payment of all taxes for periods subsequent to the periods to which such
        returns, reports or declarations apply. There are no unpaid taxes in any
        material amount claimed to be due by the taxing authority of any jurisdiction,
        and the officers of the Company know of no basis for any such
        claim.

      

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

      

      (w) Fees
        and Rights of First Refusal.
        The
        Company is not obligated to offer the securities offered hereunder on a right
        of
        first refusal basis or otherwise to any third parties including, but not
        limited
        to, current or former shareholders of the Company, underwriters, brokers,
        agents
        or other third parties.

      

      (x) Investment
        Company.
        The
        Company is not, and is not an affiliate of, and immediately after receipt
        of
        payment for the Securities, will not be or be an affiliate of, an “investment
        company” within the meaning of the Investment Company Act of 1940, as amended.
        The Company shall conduct its business in a manner so that it will not become
        subject to the Investment Company Act.

      

      (y) Registration
        Rights.
        Other
        than the Buyer and as set forth on Schedule 3(y),
        no
        Person has any right to cause the Company to effect the registration under
        the
        Securities Act of any securities of the Company. There are no outstanding
        registration statements not yet declared effective and there are no outstanding
        comment letters from the SEC or any other regulatory agency.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (z) Private
        Placement.
        Assuming the accuracy of the Buyer’s representations and warranties set forth in
        Section 2, no registration under the Securities Act is required for the offer
        and sale of the Securities by the Company to the Buyer as contemplated hereby.
        The issuance and sale of the Securities hereunder does not contravene the
        rules
        and regulations of the Primary Market.

      

      (aa) Listing
        and Maintenance Requirements.
        The
        Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
        Exchange Act, and the Company has taken no action designed to terminate,
        or
        which to its knowledge is likely to have the effect of, terminating the
        registration of the Common Stock under the Exchange Act nor has the Company
        received any notification that the SEC is contemplating terminating such
        registration. The Company has not, in the twelve (12) months preceding the
        date
        hereof, received notice from any Primary Market on which the Common Stock
        is or
        has been listed or quoted to the effect that the Company is not in compliance
        with the listing or maintenance requirements of such Primary Market. The
        Company
        is, and has no reason to believe that it will not in the foreseeable future
        continue to be, in compliance with all such listing and maintenance
        requirements.

      

      (bb) Reporting
        Status. 
        With a view to making available to the Buyer the benefits of Rule 144 or
        any
        similar rule or regulation of the SEC that may at any time permit the Buyer
        to
        sell securities of the Company to the public without registration, and as
        a
        material inducement to the Buyer’s purchase of the Securities, the Company
        represents and warrants to the following: (i) the Company is, and has been
        for a
        period of at least 90 days immediately preceding the date hereof, 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, as applicable,
        during the 12 months preceding the date hereof (or for such shorter period
        that
        the Company was required to file such reports), and (ii) the Company is not
        and
        for at least the last 12 months prior to the date hereof has not been a “shell
        company,” as defined in paragraph (i)(1)(i) of Rule 144;

      

      (cc) Manipulation
        of Price. 
        The Company has not, and to its knowledge no one acting on its behalf has,
        (i)
        taken, directly or indirectly, any action designed to cause or to result
        in the
        stabilization or manipulation of the price of any security of the Company
        to
        facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
        purchased, or, paid any compensation for soliciting purchases of, any of
        the
        Securities, or (iii) paid or agreed to pay to any Person any compensation
        for
        soliciting another to purchase any other securities of the Company, other
        than,
        in the case of clauses (ii) and (iii), compensation paid to the Company’s
        placement agent in connection with the placement of the Securities.

      

      (dd) Dilutive
        Effect.
        The
        Company understands and acknowledges that the number of Conversion Shares
        issuable upon conversion of the Series H Preferred Shares and the Warrant
        Shares
        issuable upon exercise of the Warrants will increase in certain circumstances.
        The Company further acknowledges that its obligation to issue Conversion
        Shares
        upon conversion of the Series H Preferred Shares in accordance with this
        Agreement and the Series H Preferred Shares and its obligation to issue the
        Warrant Shares upon exercise of the Warrants in accordance with this Agreement
        and the Warrants, in each case, is absolute and unconditional regardless
        of the
        dilutive effect that such issuance may have on the ownership interests of
        other
        stockholders of the Company.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      4. COVENANTS.

      

      (a) Best
        Efforts.
        Each
        party shall use its best efforts to timely satisfy each of the conditions
        to be
        satisfied by it as provided in Sections 6 and 7 of this Agreement.

      

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

      

      (c) Reporting
        Status.
        With a
        view to making available to the Buyer the benefits of Rule 144 or any similar
        rule or regulation of the SEC that may at any time permit the Buyer to sell
        securities of the Company to the public without registration, and as a material
        inducement to the Buyer’s purchase of the Securities, the Company represents,
        warrants, and covenants to the following: 

      

      (i) 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; 

      

      (ii) from
        the
        date hereof until all the Securities either have been sold by the Buyer,
        or may
        permanently be sold by the Buyer without any restrictions pursuant to Rule
        144,
        (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 and such reports shall conform to
        the
        requirement of the Exchange Act and the SEC for filing thereunder; 

      

      (iii) The
        Company shall furnish to the Buyer so long as the Buyer owns 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 Buyer to sell such securities pursuant
        to
        Rule 144 without registration; and 

      

      (iv) During
        the Registration Period the Company shall not terminate its status as an
        issuer
        required to file reports under the Exchange Act even if the Exchange Act
        or the
        rules and regulations thereunder would otherwise permit such
        termination.

      

      (d) Use
        of
        Proceeds.
        The
        Company will use the proceeds from the sale of the New Notes, Series H
        Preferred Shares, and Warrants for general corporate and working capital
        purposes and as the merger consideration in the acquisition of Safety &
Ecology Holdings Corporation (“Safety
        & Ecology”)
        through the Company’s wholly owned subsidiary, HSCC Acquisition
        Corp.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (e) Reservation
        of Shares.
        On the
        date hereof, the Company shall reserve for issuance to the Buyer 145,000,000
        shares for issuance upon conversions of the Series H Preferred Shares and
        exercise of the Warrants (collectively, the “Share
        Reserve”).
        The
        Company represents that it has sufficient authorized and unissued shares
        of
        Common Stock available to create the Share Reserve after considering all
        other
        commitments that may require the issuance of Common Stock. The Company shall
        take all action reasonably necessary to at all times have authorized, and
        reserved for the purpose of issuance, such number of shares of Common Stock
        as
        shall be necessary to effect the full conversion of the Series H Preferred
        Shares and the full exercise of the Warrants. If at any time the Share Reserve
        is insufficient to effect the full conversion of the Series H Preferred Shares
        or the full exercise of the Warrants, the Company shall increase the Share
        Reserve accordingly. If the Company does not have sufficient authorized and
        unissued shares of Common Stock available to increase the Share Reserve,
        the
        Company shall call and hold a special meeting of the shareholders within
        thirty
        (30) days of such occurrence, for the sole purpose of increasing the number
        of
        shares authorized. The Company’s management shall recommend to the shareholders
        to vote in favor of increasing the number of shares of Common Stock authorized.
        Management shall also vote all of its shares in favor of increasing the number
        of authorized shares of Common Stock. Without limiting the forgoing, the
        Company
        agrees that, upon the obtaining the Share Increase (as defined below) the
        Company shall increase the Share Reserve to 1,300,000,000 shares of Common
        Stock.

      

      (f) Listings
        or Quotation.
        The
        Common Stock shall be listed or quoted for trading on any of (a) the American
        Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global Select
        Market, (d) the Nasdaq Global Market (e) the Nasdaq Capital Market, or (f)
        the
        Nasdaq OTC Bulletin Board (which does not include the Pink Sheets LLC)
        (“OTCBB”)
        (each,
        a “Primary
        Market”).
        The
        Company shall promptly secure the listing of all of the Registrable Securities
        (as defined in the Registration Rights Agreement) upon each national securities
        exchange and automated quotation system, if any, upon which the Common Stock
        is
        then listed (subject to official notice of issuance) and shall maintain such
        listing of all Registrable Securities from time to time issuable under the
        terms
        of the Transaction Documents. 

      

      (g) Fees
        and Expenses.
        

      

      (i) The
        Company shall pay all of its costs and expenses incurred by it connection
        with
        the negotiation, investigation, preparation, execution and delivery of the
        Transaction Documents. 

      

      (ii) The
        Company shall place into escrow $800,000 upon the Closing directly from the
        proceeds of the Closing (collectively, the “Monitoring
        Fees,”
and
        as
        deposited into escrow, the “Escrow
        Funds”)
        which
        shall be used to compensate Yorkville Advisors LLC (“Investment
        Manager”)
        for
        monitoring and managing the purchase and investment made by YA Global
        Investments, L.P. (“YA
        Global”)
        described herein, pursuant to the Investment Manager’s existing advisory
        obligations to YA Global. The Company, Investment Manager, and YA Global
        shall
        enter into an Escrow Agreement of even date herewith in the form attached
        hereto
        as Exhibit
        D
        (the
“Escrow
        Agreement”)
        appointing an escrow agent (the “Escrow
        Agent”)
        to
        hold the Escrow Funds and to periodically disburse portions of such Escrow
        Funds
        to the Investment Manager from escrow in accordance with the terms of the
        Escrow
        Agreement. The Investment Manager shall periodically receive portions of
        the
        Escrow Funds in accordance with the Escrow Agreement until either: (1) the
        Escrow Funds shall have been fully disbursed pursuant the Escrow Agreement
        or
        (2) the Securities shall have been Fully Retired. “Fully
        Retired”
shall
        mean that the Buyer shall have fully disposed of all the Securities issued
        or
        issuable hereunder, shall no longer have any investment in, or ownership
        of, any
        of the Securities, all amounts owed to YA Global under the Transaction Documents
        shall have been paid, and the Transaction Documents shall have been terminated.
        When the Securities are Fully Retired, the remaining Escrow Funds shall be
        returned to the Company or otherwise disbursed in accordance with the Escrow
        Agreement.

       

      
        
          
          

        

        
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      (iii) The
        Company shall pay a structuring and due diligence fee to Yorkville of $50,000
        which shall be paid directly from the proceeds of the Closing. The structuring
        and due diligence fee shall be nonrefundable and payable whether or not any
        Closing occurs.

      

      (h) Transfer
        Agent.
        The
        Company covenants and agrees that, in the event that the Company’s agency
        relationship with the transfer agent should be terminated for any reason
        while
        any Notes or any Series H Preferred Shares remain outstanding, the Company
        shall
        immediately appoint a new transfer agent and shall require that the new transfer
        agent execute and agree to be bound by the terms of the Irrevocable Transfer
        Agent Instructions (as defined herein).

      

      (i) Short
        Sales.
        Neither
        the Buyer(s) nor any of its affiliates have an open short position in the
        Common
        Stock of the Company, and the Buyer(s) agrees that it shall not, and that
        it
        will cause its affiliates not to, engage in any short sales of or hedging
        transactions with respect to the Common Stock as long as any Convertible
        Debentures shall remain outstanding. 

      

      (j) Lockup
        Agreements.
        Within
        ten (10) calendar days following the date hereof, the Company shall obtain
        from
        each officer and director a lockup agreement in the form attached hereto
        as
Exhibit
        E
        and upon
        receipt of all such executed lockup agreements, all other lockup agreements
        of
        C. Thomas McMillen entered into in connection with prior transactions with
        the Buyer with regard to Company securities shall be cancelled. 

      

      (k) Review
        of Public Disclosures.
        All SEC
        filings (including, without limitation, all filings required under the Exchange
        Act, which include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8-K, etc) and
        other
        public disclosures made by the Company, including, without limitation, all
        press
        releases, investor relations materials, and scripts of analysts meetings
        and
        calls, shall be reviewed and approved for release by the Company’s attorneys
        and, if containing financial information, the Company’s independent certified
        public accountants.

      

      (l) Disclosure
        of Transaction.
        Within
        four Business Day following the date of this Agreement, the Company shall
        file a
        Current Report on Form 8-K describing the terms of the transactions contemplated
        by the Transaction Documents in the form required by the Exchange Act and
        attaching the material Transaction Documents (including, without limitation,
        this Agreement, the form of the Convertible Debenture, the form of Warrant
        and
        the form of the Registration Rights Agreement) as exhibits to such
        filing.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (m) Subsidiaries.
        In the
        event that any entity becomes a subsidiary of the Company or any Guarantor,
        the
        Company or such Guarantor shall concurrently with such entity becoming a
        subsidiary cause such subsidiary to become a guarantor under the Guaranty
        Agreement and a Grantor under the Security Agreement (other than a subsidiary
        of
        Nexus), with respect to each such subsidiary, the Company or Guarantor shall
        promptly send to the Buyer written notice setting forth with respect to such
        entity the date on which such entity became a subsidiary of the
        Company.

      

      (n) Further
        Assurances.
        At any
        time or from time to time upon the request of the Buyer, the Company or any
        Guarantor will, at its expense, promptly execute, acknowledge and deliver
        such
        further documents and do such other acts and things as Buyer may reasonably
        request in order to effect fully the purposes of the Transaction Documents,
        including providing Buyer with any information reasonably requested pursuant
        of
        it. In furtherance and not in limitation of the foregoing, each of the Company
        or any Guarantor shall take such actions as Buyer may reasonably request
        from
        time to time to ensure that the obligations are guaranteed by the Guarantors
        and
        are secured by substantially all of the assets of Company, and its subsidiaries
        and all of the outstanding capital stock of Company and its subsidiaries
        (subject to limitations contained in the Transaction Documents).

      

      (o) Amendment
        to Certificate of Incorporation.
        On or
        before May 15, 2008, the Company shall call and hold a special meeting of
        its
        stockholders for the sole purpose of increasing the number of authorized
        shares
        of Common Stock from 200,000,000 to at least 2,000,000,000 (the “Share
        Increase”)
        or
        obtain the necessary written consent from its stockholders for such actions.
        The
        Company’s management shall recommend to the stockholders to vote in favor of
        increasing the number of shares of Common Stock authorized. Management shall
        also vote all of its shares in favor of increasing the number of authorized
        shares of Common Stock. 

      

      (p) Acknowledgment.
        The
        Company hereby acknowledges, confirms and agrees that as of the date hereof,
        the
        Company is indebted to YA Global under the February 2006 Debentures, August
        2006
        Debentures, and the 2007 Debentures and in the outstanding principal amount
        set
        forth above plus accrued and unpaid interest thereon and such amounts are
        unconditionally owing by the Company to YA Global, without offset, defense
        or
        counterclaim of any kind, nature or description whatsoever. The Company further
        acknowledges, confirms and agrees that: (a) each of the February 2006
        Debentures, the August 2006 Debentures, the 2007 Debentures, the February
        2006
        Purchase Agreement, the August 2006 Purchase Agreement, the 2007 Purchase
        Agreement, and all the related documents to which it is a party have been
        duly
        executed and delivered to YA Global by the Company, and each is in full force
        and effect as of the date hereof, (b) the agreements and obligations of the
        Company contained in such documents constitute the legal, valid and binding
        obligations of the Company, enforceable against each in accordance with their
        respective terms, and the Company has no valid defense to the enforcement
        of
        such obligations. 

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      5. NEGATIVE
        COVENANTS. Each of the Company and the Guarantors, Safety & Ecology
        (provided, however, that the obligations of Safety & Ecology shall not arise
        until after the SEC Closing (as defined in Section 8(a)(xiii)) and
        Polimatrix, Inc. (collectively, the “HSCC
        Subsidiaries”)
        covenant and agree that, so long as either any portion of the Notes remain
        outstanding or any Series H Preferred Shares remain outstanding, such party
        shall perform, and shall cause each of its subsidiaries to perform, all
        covenants in this Section 5.

      

      (a) Corporate
        Existence.
        Neither
        the Company or any HSCC Subsidiary shall directly or indirectly consummate
        any
        merger, reorganization, restructuring, reverse stock split consolidation,
        sale
        of all or substantially all of the Company’s assets or any similar transaction
        or related transactions (each such transaction, an “Organizational
        Change”)
        unless, prior to the consummation an Organizational Change, the Company obtains
        the written consent of the Buyer. 

      

      (b) Transactions
        With Affiliates.
        The
        Company and each HSCC Subsidiary shall not, and shall cause each of its
        subsidiaries not to, enter into, amend, modify or supplement, or permit any
        subsidiary to enter into, amend, modify or supplement any agreement,
        transaction, commitment, or arrangement with any of its or any subsidiary’s
        officers, directors, person who were officers or directors at any time during
        the previous two (2) years, stockholders who beneficially own five percent
        (5%)
        or more of the Common Stock, or Affiliates (as defined below) or with any
        individual related by blood, marriage, or adoption to any such individual
        or
        with any entity in which any such entity or individual owns a five percent
        (5%)
        or more beneficial interest (each a “Related
        Party”),
        except for (a) customary employment arrangements and benefit programs on
        reasonable terms, (b) any investment in Homeland Advisory or Celerity or
        any
        other subsidiary that has granted the Buyer a lien in all its assets pursuant
        to
        the Security Agreement, (c) any agreement, transaction, commitment, or
        arrangement on an arms-length basis on terms no less favorable than terms
        which
        would have been obtainable from a person other than such Related Party, (d)
        any
        agreement, transaction, commitment, or arrangement which is approved by a
        majority of the disinterested directors of the Company; for purposes hereof,
        any
        director who is also an officer of the Company or any subsidiary of the Company
        shall not be a disinterested director with respect to any such agreement,
        transaction, commitment, or arrangement. “Affiliate”
for
        purposes hereof means, with respect to any person or entity, another person
        or
        entity that, directly or indirectly, (i) has a ten percent (10%) or more
        equity
        interest in that person or entity, (ii) has ten percent (10%) or more common
        ownership with that person or entity, (iii) controls that person or entity,
        or
        (iv) shares common control with that person or entity. “Control”
or
        “controls”
for
        purposes hereof means that a person or entity has the power, direct or indirect,
        to conduct or govern the policies of another person or entity.

      

      (c) Subsequent
        Offerings.
        

      

      (i) Without
        the written consent of the Buyer, the Company shall not (a) grant, issue
        or sell
        any Common Stock or other equity securities, any securities convertible into
        or
        exchangeable for any Common Stock or other equity securities or take any
        other
        action that may result in the issuance of any of the foregoing, or (b) file
        any
        registration statements on Form S-8 or issue any Common Stock that is registered
        on Form S-8.
        

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (ii) Without
        the written consent of the Buyer, the Company shall not consummate any merger,
        reorganization, restructuring, reverse stock split consolidation, sale of
        all or
        substantially all of the Company’s assets or any similar transaction or related
        transactions, or take any other action that may result in any of the foregoing,
        except that any wholly-owned subsidiary of the Company may merge with the
        Company, provided that, the Company shall be the continuing or surviving
        entity.

      

      (d) Notwithstanding
        the restrictions set forth in Section 5(c) above, the Company may issue (i)
        shares of Common Stock or options to employees, consultants, officers or
        directors of the Company pursuant to any stock or option plan duly adopted
        by a
        majority of the independent directors of the Board of Directors of the Company
        or a majority of the members of a committee of independent directors established
        for such purpose; provided
        that the
        number of shares directly or upon exercise of such options shall not exceed
        75,000,000 in the aggregate; (c) securities upon the exercise or exchange
        of or
        conversion of any Securities issued hereunder and/or securities exercisable
        or
        exchangeable for or convertible into shares of Common Stock issued and
        outstanding on the Closing Date provided the terms of such securities have
        not
        been changed; (d) securities issued pursuant to acquisitions of other companies;
        provided, that any such issuance (1) shall only be to a person or entity
        that
        is, itself or through its subsidiaries, an operating company in a business
        synergistic with the business of the Company and in which the Company receives
        substantial benefits in addition to the investment of funds, but shall not
        include a transaction in which the Company is issuing securities primarily
        for
        the purpose of raising capital or to an entity whose primary business is
        investing in securities, (2) shall only be to a person or entity that is
        not an
        Affiliate of the Company, the HSCC Subsidiaries, or any of their subsidiaries
        and (3) has been approved by a majority of the independent directors of the
        Company; (e) securities issued in connection with strategic license agreements
        or other partnering arrangements so long as such issuances are not for the
        purpose of raising capital.

      

      (e) Indebtedness.
        The
        Company and the HSCC Subsidiaries shall not, nor shall they permit any of
        their
        subsidiaries to, directly or indirectly, create, incur, assume or guaranty,
        or
        otherwise become or remain directly or indirectly liable with respect to
        any
        Indebtedness, except for Permitted Indebtedness. “Permitted
        Indebtedness”
means:
        (i) indebtedness evidenced by Notes; (ii) indebtedness described on the
        Disclosure Schedule; (iii) indebtedness incurred solely for the purpose of
        financing the acquisition or lease of any equipment by a Credit Party, including
        capital lease obligations with no recourse other than to such equipment;
        (iv)
        renewals, extensions and refinancing of any indebtedness described in clauses
        (i) or (iii) of this subsection, or (iv) indebtedness of up to $8,000,000
        incurred by Safety & Ecology pursuant to that Loan and Security Agreement
        dated March 14, 2008, by and among Safety & Ecology, its subsidiaries
        and Suntrust Bank, provided that the Buyer (within thirty (30) days following
        the Closing Date and at all times thereafter) has the right to purchase the
        Safety & Ecology Debt from the creditor at par (the “Safety
        & Ecology Debt”).
        

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (f) Liens.
        The
        Company and the HSCC Subsidiaries shall not, nor shall they permit any of
        their
        subsidiaries to directly or indirectly, create, incur, assume or permit to
        exist
        any lien, security interest, option or other charge or encumbrance (each,
        a
“Lien”)
        on or
        with respect to any property or asset of any kind (including any document
        or
        instrument in respect of goods or accounts receivable) of Company, the HSCC
        Subsidiaries, or any of their subsidiaries, whether now owned or hereafter
        acquired, or any income or profits therefrom, or file or permit the filing
        of,
        or permit to remain in effect, any financing statement or other similar notice
        of any Lien with respect to any such property, asset, income or profits under
        the UCC of any State or under any similar recording or notice statute, except
        for Permitted Liens. “Permitted
        Liens”
means:
        (1) the security interests created by the Security Documents, (2) any prior
        security interest granted to the Buyer, (3) existing Liens which have been
        disclosed by the Company on Schedule 5(f) 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 person or entity not materially interfering with
        the
        conduct of the business of the Company or its subsidiaries; (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 or its subsidiaries 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; (13) escrows in
        connection with acquisitions and dispositions and (14) a Lien granted by
        Safety
& Ecology in connection with the Safety & Ecology Debt. 

      

      (g) Fundamental
        Changes; Disposition of Assets; Acquisitions.
        The
        Company and the HSCC Subsidiaries shall not enter into any transaction of
        merger
        or consolidation, or liquidate, wind-up or dissolve itself (or suffer any
        liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor
        or
        sublessor), exchange, transfer or otherwise dispose of, in one transaction
        or a
        series of transactions, all or any part of its business, assets or property
        of
        any kind whatsoever, whether real, personal or mixed and whether tangible
        or
        intangible, whether now owned or hereafter acquired, or acquire by purchase
        or
        otherwise (other than purchases or other acquisitions of inventory, materials
        and equipment and capital expenditures in the ordinary course of business)
        the
        business, property or fixed assets of, or stock or other evidence of beneficial
        ownership of, any entity or any division or line of business or other business
        unit of any entity, except: (a) asset sales, the proceeds of which (i) are
        less
        than $50,000 with respect to any single asset sale or series of related asset
        sales, and (ii) when aggregated with the proceeds of all other asset sales
        made
        within the same fiscal year, are less than $100,000; provided
        (1) the
        consideration received for such assets shall be in an amount at least equal
        to
        the fair market value thereof (determined in good faith by the board of
        directors of the Company (or similar governing body)), (2) no less than 75%
        thereof shall be paid in Cash, (b) disposals of obsolete or worn out property
        or
        (c) the sale by SEC of its assets in the ordinary course of business following
        the completion of a project. 

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (h) Disposal
        of Subsidiary Interests.
        The
        Company and the HSCC Subsidiaries shall not (a) directly or indirectly sell,
        assign, pledge or otherwise encumber or dispose of any capital stock of any
        of
        its subsidiaries, except to qualify directors if required by applicable law;
        or
        (b) permit any of its subsidiaries directly or indirectly to sell, assign,
        pledge or otherwise encumber or dispose of any capital stock of any of its
        subsidiaries, except to the Company or any subsidiaries (subject to the
        restrictions on such disposition otherwise imposed hereunder), or to qualify
        directors if required by applicable law.

      

      (i) The
        Company shall not (a) create a new series of preferred stock, or amend any
        terms, preferences or rights of any series of preferred stock now existing
        or
        hereinafter created, (b) authorize or issue shares of any class of stock
        having
        preferences or priority as to dividends or assets superior to or on a parity
        with any such preference or priority of the Series H Preferred Shares, (c)
        make
        any amendment to its Certificate of Incorporation or Bylaws adversely affecting
        (directly or indirectly) the rights of the holders of the Series H Preferred
        Shares, or (d) reclassify any shares of any class of stock into shares having
        preference or priority as to dividends or assets superior to or on a parity
        with
        any such preference or priority of the Series H Preferred Shares.
        Notwithstanding the forgoing, the Company shall be permitted to create a
        class
        of Series I Convertible Preferred Stock (the “Series I Stock) with the terms,
        conditions, and preferences specifically set forth on Exhibit E attached
        hereto
        and the Company may issue up to 550,000 shares of Series I Stock to the former
        shareholders of Safety & Ecology upon the SEC Closing.

      

      6. TRANSFER
        AGENT INSTRUCTIONS.

      

      (a) The
        Company shall issue the Irrevocable Transfer Agent Instructions to its transfer
        agent, and any subsequent transfer agent, irrevocably appointing David Gonzalez,
        Esq. as the Company’s agent for purpose instructing its transfer agent to issue
        certificates or credit shares to the applicable balance accounts at The
        Depository Trust Company (“DTC”),
        registered in the name of each Buyer or its respective nominee(s), for the
        Conversion Shares and the Warrant Shares issued upon conversion of the Series
        H
        Preferred Shares or exercise of the Warrants as specified from time to time
        by
        each Buyer to the Company upon conversion of the Series H Preferred Shares
        or
        exercise of the Warrants. The Company shall not change its transfer agent
        without the express written consent of the Buyer, which may be withheld by
        the
        Buyer in their sole discretion. The Company warrants that no instruction
        other
        than the Irrevocable Transfer Agent Instructions referred to in this Section
        5,
        and stop transfer instructions to give effect to Section 2(g) hereof (in
        the
        case of the Conversion Shares or Warrant Shares prior to registration of
        such
        shares under the Securities Act) will be given by the Company to its transfer
        agent, and that the Securities shall otherwise be freely transferable on
        the
        books and records of the Company as and to the extent provided in this Agreement
        and the other Transaction Documents. If a Buyer effects a sale, assignment
        or
        transfer of the Securities in accordance with Section 2(f), the Company shall
        promptly instruct its transfer agent to issue one or more certificates or
        credit
        shares to the applicable balance accounts at DTC in such name and in such
        denominations as specified by the Buyer to effect such sale, transfer or
        assignment and, with respect to any transfer, shall permit the transfer.
        In the
        event that such sale, assignment or transfer involves Conversion Shares or
        Warrant Shares sold, assigned or transferred pursuant to an effective
        registration statement or pursuant to Rule 144, the transfer agent shall
        issue
        such Securities to the Buyer, assignee or transferee, as the case may be,
        without any restrictive legend. Nothing in this Section 5 shall affect in
        any
        way the Buyer’s obligations and agreement to comply with all applicable
        securities laws upon resale of Conversion Shares. The Company acknowledges
        that
        a breach by it of its obligations hereunder will cause irreparable harm to
        the
        Buyer by vitiating the intent and purpose of the transaction contemplated
        hereby. Accordingly, the Company acknowledges that the remedy at law for
        a
        breach of its obligations under this Section 5 will be inadequate and agrees,
        in
        the event of a breach or threatened breach by the Company of the provisions
        of
        this Section 5, that the Buyer(s) shall be entitled, in addition to all
        other available remedies, to an injunction restraining any breach and requiring
        immediate issuance and transfer, without the necessity of showing economic
        loss
        and without any bond or other security being required.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      7. CONDITIONS
        TO THE COMPANY’S OBLIGATION TO SELL.

      

      The
        obligation of the Company hereunder to issue and sell the Series H Preferred
        Shares, the Notes, and the Warrants to the Buyer at the Closing is subject
        to
        the satisfaction, at or before the Closing Dates, of each of the following
        conditions, provided that these conditions are for the Company’s sole benefit
        and may be waived by the Company at any time in its sole
        discretion:

      

      (a) The
        Buyer
        shall have executed the Transaction Documents and delivered them to the
        Company.

      

      (b) The
        Buyer
        shall have delivered to the Company the Purchase Price for the Series H
        Preferred Shares, the Notes, and the Warrants in the respective amounts as
        set
        forth next to the Buyer as set forth on Schedule I attached hereto, minus
        any
        fees to be paid directly from the proceeds the Closing as set forth herein,
        by
        wire transfer of immediately available U.S. funds pursuant to the wire
        instructions provided by the Company.

      

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

      

      8. CONDITIONS
        TO THE BUYER’S OBLIGATION TO PURCHASE.

      

      (a) The
        obligation of the Buyer hereunder to purchase the Series H Preferred Shares,
        the
        Notes, and the Warrants at the Closing is subject to the satisfaction, at
        or
        before the Closing Date, of each of the following conditions, provided that
        these conditions are for the Buyer’s sole benefit and may be waived by the Buyer
        at any time in its sole discretion:

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (i) The
        Company shall have executed the Transaction Documents and delivered the same
        to
        the Buyer; provided, however, that the Deposit Control Agreement may be
        delivered within five (5) business days following the Closing Date.

      

      (ii) The
        Common Stock shall be authorized for quotation or trading on the Primary
        Market,
        trading in the Common Stock shall not have been suspended for any reason,
        and
        all the Conversion Shares issuable upon the conversion of the Convertible
        Debentures shall be approved for listing or trading on the Primary Market.
        

      

      (iii) The
        representations and warranties of the Company shall be true and correct in
        all
        material respects (except to the extent that any of such representations
        and
        warranties is already qualified as to materiality in Section 3 above, in
        which
        case, such representations and warranties shall be true and correct without
        further qualification) as of the date when made and as of the Closing Date
        as
        though made at that time (except for representations and warranties that
        speak
        as of a specific date) and the Company shall have performed, satisfied and
        complied in all material respects with the covenants, agreements and conditions
        required by this Agreement to be performed, satisfied or complied with by
        the
        Company at or prior to the Closing Date

      

      (iv) The
        Company shall have delivered to the Buyer(s) the Series H Preferred Shares,
        the
        Notes, and the Warrants in the respective amounts set forth opposite the
        Buyer’s
        name on Schedule I and II attached hereto.

      

      (v) The
        Buyer
        shall have received an opinion of counsel from counsel to the Company in
        a form
        satisfactory to the Buyer.

      

      (vi) The
        Company shall have provided to the Buyer a true copy of a certificate of good
        standing evidencing the formation and good standing of the Company from the
        secretary of state (or comparable office) from the jurisdiction in which
        the
        Company is incorporated, as of a date within 10 days of the Closing
        Date.

      

      (vii) The
        Company shall have delivered to the Buyer a certificate, executed by the
        Secretary of the Company and dated as of the Closing Date, as to (i) the
        resolutions consistent with Section 3(c) as adopted by the Company's Board
        of
        Directors in a form reasonably acceptable to the Buyer, (ii) the Certificate
        of
        Incorporation and (iii) the Bylaws, each as in effect at the
        Closing.

      

      (viii) The
        Company or the Buyer shall have filed a form UCC-1 or such other forms as
        may be
        required to perfect the Buyer’s interest in the Pledged Property as detailed in
        the Security Agreement dated the date hereof and provided proof of such filing
        to the Buyer(s).

      

      (ix) All
        subsidiary stock held by the Company as well as executed and medallion
        guaranteed stock powers as required pursuant to the Security Documents shall
        have been delivered to the Buyer. 

      

      (x) The
        Company shall have provided to the Buyer an acknowledgement, to the satisfaction
        of the Buyer, from the Company’s independent certified public accountants as to
        its ability to provide all consents required in order to file a registration
        statement in connection with this transaction.

       

      
        
          
          

        

        
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      (xi) The
        Company shall have created the Share Reserve. 

      

      (xii) The
        Irrevocable Transfer Agent Instructions, in form and substance satisfactory
        to
        the Buyer, shall have been delivered to and acknowledged in writing by the
        Company’s transfer agent.

      

      (xiii) All
        conditions to the consummation of the transactions contemplated by the Agreement
        and Plan of Merger and Stock Purchase Agreement entered into as of March
        13,
        2008 among the Company, Safety & Ecology, HSCC Acquisition Corp. and the
        shareholders of Safety & Ecology named therein shall have been satisfied or
        waived (except for delivery by the Company of the cash portion of the merger
        consideration, which shall be satisfied simultaneously with the Closing)
        and
        such transactions shall close simultaneously with the Closing hereunder (the
        “SEC
        Closing”).
        

      

      9. INDEMNIFICATION.

      

      (a) In
        consideration of the Buyer’s execution and delivery of this Agreement and
        acquiring the Convertible Debentures and the Conversion Shares hereunder,
        and in
        addition to all of the Company’s other obligations under this Agreement, the
        Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
        each
        other holder of the Convertible Debentures and the Conversion Shares, and
        all of
        their officers, directors, employees and agents (including, without
        limitation, those retained in connection with the transactions contemplated
        by
        this Agreement) (collectively, the “Buyer
        Indemnitees”)
        from
        and against any and all actions, causes of action, suits, claims, losses,
        costs,
        penalties, fees, liabilities and damages, and expenses in connection therewith
        (irrespective of whether any such Buyer Indemnitee is a party to the action
        for
        which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
        Liabilities”),
        incurred by the Buyer Indemnitees or any of them as a result of, or arising
        out
        of, or relating to (a) any misrepresentation or breach of any representation
        or
        warranty made by the Company in this Agreement, the Convertible Debentures
        or
        the other Transaction Documents or any other certificate, instrument or document
        contemplated hereby or thereby, (b) any breach of any covenant, agreement
        or
        obligation of the Company contained in this Agreement, or the other Transaction
        Documents or any other certificate, instrument or document contemplated hereby
        or thereby, or (c) any cause of action, suit or claim brought or made against
        such Buyer Indemnitee and arising out of or resulting from the execution,
        delivery, performance or enforcement of this Agreement or any other instrument,
        document or agreement executed pursuant hereto by any of the parties hereto,
        any
        transaction financed or to be financed in whole or in part, directly or
        indirectly, with the proceeds of the issuance of the Convertible Debentures
        or
        the status of the Buyer or holder of the Convertible Debentures the Conversion
        Shares, as a Buyer of Convertible Debentures in the Company. To the extent
        that
        the foregoing undertaking by the Company may be unenforceable for any reason,
        the Company shall make the maximum contribution to the payment and satisfaction
        of each of the Indemnified Liabilities, which is permissible under applicable
        law.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      (b) In
        consideration of the Company’s execution and delivery of this Agreement, and in
        addition to all of the Buyer’s other obligations under this Agreement, the Buyer
        shall defend, protect, indemnify and hold harmless the Company and all of
        its
        officers, directors, employees and agents (including, without limitation,
        those
        retained in connection with the transactions contemplated by this Agreement)
        (collectively, the “Company
        Indemnitees”)
        from
        and against any and all Indemnified Liabilities incurred by the Indemnitees
        or
        any of them as a result of, or arising out of, or relating to (a) any
        misrepresentation or breach of any representation or warranty made by the
        Buyer(s) in this Agreement, instrument or document contemplated hereby or
        thereby executed by the Buyer, (b) any breach of any covenant, agreement
        or
        obligation of the Buyer(s) contained in this Agreement, the Transaction
        Documents or any other certificate, instrument or document contemplated hereby
        or thereby executed by the Buyer, or (c) any cause of action, suit or claim
        brought or made against such Company Indemnitee based on material
        misrepresentations or due to a material breach and arising out of or resulting
        from the execution, delivery, performance or enforcement of this Agreement,
        the
        Transaction Documents or any other instrument, document or agreement executed
        pursuant hereto by any of the parties hereto. To the extent that the foregoing
        undertaking by each Buyer may be unenforceable for any reason, each Buyer
        shall
        make the maximum contribution to the payment and satisfaction of each of
        the
        Indemnified Liabilities, which is permissible under applicable law.

      

      10. GOVERNING
        LAW: MISCELLANEOUS.

      

      (a) Governing
        Law.
        This
        Agreement shall be governed by and interpreted in accordance with the laws
        of
        the State of New Jersey 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.

      

      (b) Counterparts.
        This
        Agreement may be executed in two or more identical counterparts, all of which
        shall be considered one and the same agreement and shall become effective
        when
        counterparts have been signed by each party and delivered to the other party.
        In
        the event any signature page is delivered by facsimile transmission, the
        party
        using such means of delivery shall cause four (4) additional original executed
        signature pages to be physically delivered to the other party within five
        (5)
        days of the execution and delivery hereof.

      

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

      

      (d) Severability.
        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.

      

      (e) Entire
        Agreement, Amendments.
        This
        Agreement supersedes all other prior oral or written agreements between the
        Buyer(s), the Company, their affiliates and persons acting on their behalf
        with
        respect to the matters discussed herein, and this Agreement and the instruments
        referenced herein contain the entire understanding of the parties with respect
        to the matters covered herein and therein and, except as specifically set
        forth
        herein or therein, neither the Company nor any Buyer makes any representation,
        warranty, covenant or undertaking with respect to such matters. No provision
        of
        this Agreement may be waived or amended other than by an instrument in writing
        signed by the party to be charged with enforcement.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      (f) Notices.
        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
        confirmation of receipt, when sent by facsimile; (iii) three (3) days after
        being sent by U.S. certified mail, return receipt requested, or (iv) one
        (1) 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
                  a 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 the
        Buyer(s), to its address and facsimile number on Schedule I, with copies
        to the
        Buyer’s counsel as set forth on Schedule I. Each party shall provide five (5)
        days’ prior written notice to the other party of any change in address or
        facsimile number.

      

      (g) Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the parties and
        their respective successors and assigns. Neither the Company nor any Buyer
        shall
        assign this Agreement or any rights or obligations hereunder without the
        prior
        written consent of the other party hereto.

      

      (h) No
        Third Party Beneficiaries.
        This
        Agreement is intended for the benefit of the parties hereto and their respective
        permitted successors and assigns, and is not for the benefit of, nor may
        any
        provision hereof be enforced by, any other person.

      

      (i) Survival.
        Unless
        this Agreement is terminated under Section 9(l), all agreements, representations
        and warranties contained in this Agreement or made in writing by or on behalf
        of
        any party in connection with the transactions contemplated by this Agreement
        shall survive the execution and delivery of this Agreement and the Closing.
        

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      (j) Publicity.
        The
        Company and the Buyer(s) shall have the right to approve, before issuance
        any
        press release or any other public statement with respect to the transactions
        contemplated hereby made by any party; provided, however, that the Company
        shall
        be entitled, without the prior approval of the Buyer(s), to issue any press
        release or other public disclosure with respect to such transactions required
        under applicable securities or other laws or regulations (the Company shall
        use
        its best efforts to consult the Buyer(s) in connection with any such press
        release or other public disclosure prior to its release and Buyer(s) shall
        be
        provided with a copy thereof upon release thereof).

      

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

      

      (l) Termination.
        In the
        event that the Closing shall not have occurred with respect to the Buyer
        on or
        before five (5) business days from the date hereof due to the Company’s or the
        Buyer’s failure to satisfy the conditions set forth in Sections 7 and 8 above
        (and the non-breaching party’s failure to waive such unsatisfied condition(s)),
        the non-breaching party shall have the option to terminate this Agreement
        with
        respect to such breaching party at the close of business on such date without
        liability of any party to any other party; provided, however, that if this
        Agreement is terminated by the Company pursuant to this Section 10(l), the
        Company shall remain obligated to reimburse the Buyer(s) for the fees and
        expenses of Yorkville Advisors LLC described in Section 4(g) above (other
        than
        the amounts set forth in Section 4(g)(ii)).

      

      (m) Brokerage.
        The
        Company represents that no broker, agent, finder or other party has been
        retained by it in connection with the transactions contemplated hereby and
        that
        no other fee or commission has been agreed by the Company to be paid for
        or on
        account of the transactions contemplated hereby. 

      

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

      

      

      [REMAINDER
        PAGE INTENTIONALLY LEFT BLANK]

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

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

       

      

        
          	 	
                  COMPANY:

                	 
	 	HOMELAND
                  SECURITY CAPITAL CORPORATION 
	 	 
	 	
                  By:

                	  
	 
	 	
                  Name:

                	 	 
	 	
                  Title:

                	 	 

        

      

       

      
        

          
            	 	
                    SUBSIDIARIES
                      (solely with respect to Section 5):

                  
	 	 	 
	 	
                    
                      POLIMATRIX,
                        INC.

                    

                  	 
	 	 
	 	
                    By:

                  	  
	 
	 	
                    Name:

                  	 	 
	 	
                    Title:

                  	 	 

          

        

         

      

      
        

          
            	 	
                    HOMELAND
                      SECURITY ADVISORY SERVICES, INC.,

                  
	 	 
	 	
                    By:

                  	  
	 
	 	
                    Name:

                  	 	 
	 	
                    Title:

                  	 	 

          

        

        
           

           

        

      

      
        
          
            	 	
                    CELERITY
                      SYSTEMS, INC.

                  	 
	 	 
	 	
                    By:

                  	  
	 
	 	
                    Name:

                  	 	 
	 	
                    Title:

                  	 	 

          

        

        

          

            
              	 	
                      SAFETY
                        & ECOLOGY HOLDINGS CORPORATION 

                    
	 	 
	 	
                      By:

                    	  
	 
	 	
                      Name:

                    	 	 
	 	
                      Title:

                    	 	 

            

          

          

            

              
                	 	
                        NEXUS
                          TECHNOLOGIES GROUP, INC 

                      	 
	 	 
	 	
                        By:

                      	  
	 
	 	
                        Name:

                      	 	 
	 	
                        Title:

                      	 	 

              

            

            

            
              
                
                

              

              
                29

                
                  

                

              

              
                
                

              

            

          

        

      

       

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

       

      

        
          	 	
                  BUYER:

                
	 	
                  YA
                    GLOBAL INVESTMENTS, L.P. 

                
	 	 	 	 
	 	
                  By:
                    

                	
                  Yorkville
                    Advisors, LLC 

                	 
	 	
                  Its:

                	
                  Investment
                    Manager

                	 
	 	 	 	 
	 	 	 	 
	 	
                  By:

                	
                   
                    

                	 
	 	
                  Name:

                	
                  Mark
                    Angelo

                	 
	 	
                  Its:

                	
                  Portfolio
                    Manager

                	 

        

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      

      SCHEDULE
        I

      

      SCHEDULE
        OF BUYER

       

      

        
          	
                  (1)

                	
                  (2)

                	
                  (3)

                	
                  (4)

                	
                  (5)

                	
                  (6)

                
	
                  Buyer
                    

                	
                  Principal
                    Amount of New Notes to be Purchased at the
                    Closing

                	
                  Number
                    of New Preferred Shares to be Purchased at the
                    Closing

                	
                  Warrant
                    to Acquire Such Number of Warrant Shares to be Purchased at the
                    Closing

                	
                  Purchase
                    Price to be Paid by Buyer

                	
                  Legal
                    Representative’s Address and Facsimile Number

                
	 	 	 	 	 	 
	
                  YA
                    Global Investments, L.P.

                   

                  101
                    Hudson Street, Suite 3700

                  Jersey
                    City, NJ 07302

                  Attention:
                    Mark Angelo

                  Telephone:
                    (201) 985-8300

                  Facsimile:
                    (201) 985-8266

                  Residence:
                    Cayman Islands

                	
                  $6,310,000

                	
                  6,190
                    Shares

                	
                  83,333,333

                	
                  $12,500,000

                	
                  David
                    Gonzalez, Esq.

                  101
                    Hudson Street, Suite 3700

                  Jersey
                    City, New Jersey 07302 

                  Telephone:
                    (201) 985-8300 

                  Facsimile:
                    (201) 985-8266

                

        

      

      
         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      SCHEDULE
        II

      

      

      

      
        	
                (1)

              	
                (2)

              	
                (3)

              	
                (4)

              	
                (5)

              	
                (6)

              	
                (7)

              
	
                Buyer
                  

              	
                Principal
                  Amount of February 2006 Debenture Surrendered at
                  Closing

              	
                Number
                  of Series H Preferred Shares to be Issued in Exchange for February
                  2006
                  Debenture at Closing

              	
                Principal
                  Amount of August 2006 Debenture Surrendered at
                  Closing

              	
                Principal
                  Amount of 2007 Debenture Surrendered at Closing

              	
                Principal
                  Amount Exchanged Notes to be Issued in Exchange for the August
                  2006
                  Debenture and the 2007 Debenture at Closing

              	
                Legal
                  Representative’s Address and Facsimile Number

              
	 	 	 	 	 	 	 
	
                YA
                  Global Investments, L.P.

                 

                101
                  Hudson Street 

                Suite
                  3700

                Jersey
                  City, NJ 07302

                Attention:
                  Mark Angelo

                Telephone:
                  (201) 985-8300

                Facsimile:
                  (201) 985-8266

                Residence:
                  Cayman Islands

              	
                $3,810,000

              	
                3,810
                  Shares

              	
                $4,000,000

              	
                $2,750,000

              	
                $6,750,000

              	
                David
                  Gonzalez, Esq.

                101
                  Hudson Street, 

                Suite
                  3700

                Jersey
                  City, New Jersey 07302 

                T:
                  (201) 985-8300 

                F:
                  (201) 985-8266

              

      

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      LIST
        OF EXHIBITS:

      

      Disclosure
        Schedule

      

      Exhibit
        A
– Form
        of
        Certificate of Designations of Series H Preferred Shares

      

      Exhibit
        B
– Form of Note

      

      Exhibit
        C
– Form of Warrant 

      

      Exhibit
        D
– Form of Escrow Agreement

      

      Exhibit
        E
– Form of Series I Preferred Stock

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