Document:

Unassociated Document

    NEITHER
      THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
      REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN
      EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES
      ACT”),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS.

    

     

    HOMELAND
      SECURITY CAPITAL CORPORATION

    

     

    Senior
      Secured Note

     

     

    
      	
              Issuance
                Date: March 14, 2008

            	
              Original
                Principal Amount: $________

            
	
              No.
                HOMS-5-__

            	 

    

    

    

    FOR
      VALUE RECEIVED,
      HOMELAND
      SECURITY CAPITAL CORPORATION, a Delaware corporation (the "Company"),
      hereby promises to pay to the order of YA GLOBAL INVESTMENTS, L.P. or registered
      assigns (the "Holder")
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption or otherwise, the "Principal")
      when
      due, whether upon the Maturity Date (as defined below), acceleration, redemption
      or otherwise (in each case in accordance with the terms hereof) and to pay
      interest ("Interest")
      on any
      outstanding Principal at the applicable Interest Rate from the date set out
      above as the Issuance Date (the "Issuance
      Date")
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), or the Maturity Date or acceleration, redemption or otherwise (in each
      case in accordance with the terms hereof). This Senior Secured Note (including
      all Senior Secured Notes issued in exchange, transfer or replacement hereof,
      this "Note")
      is one
      of an issue of Senior Secured Notes issued pursuant to the Securities Purchase
      Agreement (collectively, the "Notes"
      and
      such other Senior Secured Notes, the "Other
      Notes").
      Certain capitalized terms used herein are defined in Section 17.

    

    (1) GENERAL
      TERMS

    

    (a) Payment
      of Principal.
      On
      the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all outstanding Principal, accrued and unpaid Interest.
The
      "Maturity
      Date"
      shall
      be March 14, 2010. Other than as specifically permitted by this Note, the
      Company may not prepay or redeem any portion of the outstanding Principal
      without the prior written consent of the Holder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to 13% (“Interest
      Rate”).
      Interest shall be calculated on the basis of a 365-day year and the actual
      number of days elapsed, to the extent permitted by applicable law. Interest
      hereunder shall be paid on the Maturity Date (or sooner as provided herein)
      to
      the Holder or its assignee in whose name this Note is registered on the records
      of the Company regarding registration and transfers of Notes in
      cash.

    

    (c) Security.
      The
      Note
(i)
      is
      secured by a pledge of assets by the Company,
      and the following subsidiaries of the Company: Homeland Security Advisory
      Services, Inc. (“Homeland
      Advisory”)
      and
      Celerity Systems, Inc. (“Celerity”)
      pursuant to the Security Agreement of even date herewith (the “Security
      Agreement”),
      and
      (ii) guaranteed by Nexus Technology Group, Inc. (“Nexus”),
      Homeland Advisory, and Celerity (collectively, the “Guarantors”)
      pursuant to the Guaranty of even date herewith (the “Guaranty”
and
      collectively with the Security Agreement, the “Security
      Documents”).
      

    

    (2) EVENTS
      OF DEFAULT. 

    

    (a) An
      “Event
      of Default”,
      wherever used herein, means any one of the following events (whatever the reason
      and whether it shall be voluntary or involuntary or effected by operation of
      law
      or pursuant to any judgment, decree or order of any court, or any order, rule
      or
      regulation of any administrative or governmental body):

    

    (i) The
      Company's failure to pay to the Holder any amount of Principal, Interest, or
      other amounts when and as due under this Note (including, without limitation,
      the Company's failure to pay any redemption payments or amounts hereunder)
      or
      any other Transaction Document;

    

    (ii) The
      Company or any subsidiary of the Company shall commence, or there shall be
      commenced against the Company or any subsidiary of the Company under any
      applicable bankruptcy or insolvency laws as now or hereafter in effect or any
      successor thereto, or the Company or any subsidiary of the Company commences
      any
      other proceeding under any reorganization, arrangement, adjustment of debt,
      relief of debtors, dissolution, insolvency or liquidation or similar law of
      any
      jurisdiction whether now or hereafter in effect relating to the Company or
      any
      subsidiary of the Company or there is commenced against the Company or any
      subsidiary of the Company any such bankruptcy, insolvency or other proceeding
      which remains undismissed for a period of 61 days; or the Company or any
      subsidiary of the Company is adjudicated insolvent or bankrupt; or any order
      of
      relief or other order approving any such case or proceeding is entered; or
      the
      Company or any subsidiary of the Company suffers any appointment of any
      custodian, private or court appointed receiver or the like for it or any
      substantial part of its property which continues undischarged or unstayed for
      a
      period of sixty one (61) days; or the Company or any subsidiary of the Company
      makes a general assignment for the benefit of creditors; or the Company or
      any
      subsidiary of the Company shall fail to pay, or shall state that it is unable
      to
      pay, or shall be unable to pay, its debts generally as they become due; or
      the
      Company or any subsidiary of the Company shall call a meeting of its creditors
      with a view to arranging a composition, adjustment or restructuring of its
      debts; or the Company or any subsidiary of the Company shall by any act or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or any corporate or other action is taken by the Company
      or any subsidiary of the Company for the purpose of effecting any of the
      foregoing;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (iii) The
      Company or any subsidiary of the Company shall default in any of its obligations
      under any other Note or any mortgage, credit agreement or other facility,
      indenture agreement, factoring agreement or other instrument under which there
      may be issued, or by which there may be secured or evidenced any indebtedness
      for borrowed money or money due under any long term leasing or factoring
      arrangement of the Company or any subsidiary of the Company in an amount
      exceeding $100,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable;

    

    (iv) The
      Company or any subsidiary of the Company shall be a party to any Change of
      Control Transaction (as defined in Section 6) unless in connection with such
      Change of Control Transaction this Note is retired;

    

    (v) The
      Company shall fail for any reason to deliver the payment in cash pursuant to
      a
      Buy-In (as defined herein) within three (3) Business Days after such payment
      is
      due;

    

    (vi) The
      Company shall fail to observe or perform any other covenant, agreement or
      warranty contained in, or otherwise commit any breach or default of any
      provision of this Note (except as may be covered by Section 2(a)(i) through
      2(a)(vii) hereof) or any Transaction Document (as defined in Section 17) which
      is not cured within the time prescribed.

    

    (vii) any
      Event
      of Default (as defined in the Other Notes) occurs with respect to any Other
      Notes.

    

    (b) During
      the time that any portion of this Note is outstanding, if any Event of Default
      has occurred, the full unpaid Principal amount of this Note, together with
      interest and other amounts owing in respect thereof, to the date of acceleration
      shall become at the Holder's election, immediately due and payable in cash;
      provided however, the Holder may request (but shall have no obligation to
      request) payment of such amounts in Common Stock of the Company. If an Event
      of
      Default occurs and for so long as such Event of Default remains uncured, the
      Interest Rate on this Note shall immediately become 18% per annum and shall
      remain at such increased interest rate until the applicable Event of Default
      is
      cured. The Holder need not provide and the Company hereby waives any
      presentment, demand, protest or other notice of any kind, and the Holder may
      immediately and without expiration of any grace period enforce any and all
      of
      its rights and remedies hereunder and all other remedies available to it under
      applicable law. Such declaration may be rescinded and annulled by Holder at
      any
      time prior to payment hereunder. No such rescission or annulment shall affect
      any subsequent Event of Default or impair any right consequent thereon.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (3) COMPANY
      REDEMPTION.
      The
      Company at its option shall have the right to redeem (“Optional
      Redemption”)
      a
      portion of the outstanding amounts under the Notes prior to the Maturity Date
      provided that as of the date of the Holder’s receipt of a Redemption Notice (as
      defined herein) no Event of Default has occurred, and provided further that
      the
      outstanding Principal balance on this Note combined with the Other Notes after
      such Optional Redemption shall not be less than $3,000,000.
      In
      order to make an Option Redemption, the Company shall first provide written
      notice to the Holder of its intention to make a redemption (the “Redemption
      Notice”)
      setting forth the amount of Principal it desires to redeem. On the fourth (4th)
      Business Day after the Redemption Notice, the Company shall deliver to the
      Holder the Principal amount of such Optional Redemption, plus all accrued and
      unpaid interest thereon. In the event the Company makes any Optional Redemption
      of the Notes in full in violation of the provisions herein, the Note shall
      remain outstanding (and all covenants and negative covenants set forth in the
      Securities Purchase Agreement shall remain in full force and effect) unless
      the
      Holder expressly agrees in writing to accept such full redemption. 

    

    (4) RESERVED. 

    

    (5) REISSUANCE
      OF THIS NOTE.

    

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will, subject to the satisfaction of the transfer
      provisions of the Securities Purchase Agreement, forthwith issue and deliver
      upon the order of the Holder a new Note (in accordance with Section 6(d)),
      registered in the name of the registered transferee or assignee, representing
      the outstanding Principal being transferred by the Holder and, if less then
      the
      entire outstanding Principal is being transferred, a new Note (in accordance
      with Section 6(d)) to the Holder representing the outstanding Principal not
      being transferred.

    

    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the Holder to the
      Company in customary form and, in the case of mutilation, upon surrender and
      cancellation of this Note, the Company shall execute and deliver to the Holder
      a
      new Note (in accordance with Section 6(d)) representing the outstanding
      Principal.

    

    (c) Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      6(d))
      representing in the aggregate the outstanding Principal of this Note, and each
      such new Note will represent such portion of such outstanding Principal as
      is
      designated by the Holder at the time of such surrender.

    

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      6(a)
      or Section 6(c), the Principal designated by the Holder which, when added to
      the
      principal represented by the other new Notes issued in connection with such
      issuance, does not exceed the Principal remaining outstanding under this Note
      immediately prior to such issuance of new Notes), (iii) shall have an issuance
      date, as indicated on the face of such new Note, which is the same as the
      Issuance Date of this Note, (iv) shall have the same rights and conditions
      as
      this Note, and (v) shall represent accrued and unpaid Interest from the Issuance
      Date.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (6) NOTICES. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms hereof must be in writing and will be deemed to have
      been
      delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
      when
      sent by facsimile (provided confirmation of transmission is mechanically or
      electronically generated and kept on file by the sending party); or (iii) one
      (1) Trading 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

            
	 	
              Facsimile:
                (703) 528-0956

            
	 	
              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 Holder:

              	
                YA
                  Global Investments, LP

              
	 	
                101
                  Hudson Street, Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Attention: 

              	
                Mark
                  Angelo

              
	 	
                Telephone: 

              	
                (201)
                  985-8300

              
	 	 	 
	
                With
                  a copy to:

              	
                David
                  Gonzalez, Esq. 

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone: 

              	
                (201)
                  985-8300

              
	 	
                Facsimile: 

              	
                (201)
                  985-8266

              

      

    

     

     

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) Business Days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (7) Except
      as
      expressly provided herein, no provision of this Note shall alter or impair
      the
      obligations of the Company, which are absolute and unconditional, to pay the
      principal of, interest and other charges (if any) on, this Note at the time,
      place, and rate, and in the coin or currency, herein prescribed. This Note
      is a
      direct obligation of the Company. As long as this Note is outstanding, the
      Company shall not and shall cause their subsidiaries not to, without the consent
      of the Holder, amend its certificate of incorporation, bylaws or other charter
      documents so as to adversely affect any rights of the Holder. 

    

    (8) No
      indebtedness of the Company is senior to this Note in right of payment, whether
      with respect to interest, damages or upon liquidation or dissolution or
      otherwise. Except as set forth in the Securities Purchase Agreement, \without
      the Holder’s consent, the Company will not and will not permit any of their
      subsidiaries to, directly or indirectly, enter into, create, incur, assume
      or
      suffer to exist any indebtedness of any kind, on or with respect to any of
      its
      property or assets now owned or hereafter acquired or any interest therein
      or
      any income or profits there from that is senior in any respect to the
      obligations of the Company under this Note.

    

    (9) This
      Note
      shall be governed by and construed in accordance with the laws of the State
      of
      Delaware, without giving effect to conflicts of laws thereof. Each of the
      parties consents to the jurisdiction of the Superior Courts of the State of
      New
      Jersey sitting in Hudson County, New Jersey and the U.S. District Court for
      the District of New Jersey sitting in Newark, New Jersey in connection with
      any
      dispute arising under this Note and hereby waives, to the maximum extent
      permitted by law, any objection, including any objection based on forum non
      conveniens to the bringing of any such proceeding in such jurisdictions.

    

    (10) If
      the
      Company fails to strictly comply with the terms of this Note, then the Company
      shall reimburse the Holder promptly for all fees, costs and expenses, including,
      without limitation, attorneys’ fees and expenses incurred by the Holder in any
      action in connection with this Note, including, without limitation, those
      incurred: (i) during any workout, attempted workout, and/or in connection with
      the rendering of legal advice as to the Holder’s rights, remedies and
      obligations, (ii) collecting any sums which become due to the Holder, (iii)
      defending or prosecuting any proceeding or any counterclaim to any proceeding
      or
      appeal; or (iv) the protection, preservation or enforcement of any rights or
      remedies of the Holder.

    

    (11) Any
      waiver by the Holder of a breach of any provision of this Note shall not operate
      as or be construed to be a waiver of any other breach of such provision or
      of
      any breach of any other provision of this Note. The failure of the Holder to
      insist upon strict adherence to any term of this Note on one or more occasions
      shall not be considered a waiver or deprive that party of the right thereafter
      to insist upon strict adherence to that term or any other term of this Note.
      Any
      waiver must be in writing.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (12) If
      any
      provision of this Note is invalid, illegal or unenforceable, the balance of
      this
      Note shall remain in effect, and if any provision is inapplicable to any person
      or circumstance, it shall nevertheless remain applicable to all other persons
      and circumstances. If it shall be found that any interest or other amount deemed
      interest due hereunder shall violate applicable laws governing usury, the
      applicable rate of interest due hereunder shall automatically be lowered to
      equal the maximum permitted rate of interest. The Company covenants (to the
      extent that it may lawfully do so) that it shall not at any time insist upon,
      plead, or in any manner whatsoever claim or take the benefit or advantage of,
      any stay, extension or usury law or other law which would prohibit or forgive
      the Company from paying all or any portion of the principal of or interest
      on
      this Note as contemplated herein, wherever enacted, now or at any time hereafter
      in force, or which may affect the covenants or the performance of this
      indenture, and the Company (to the extent it may lawfully do so) hereby
      expressly waives all benefits or advantage of any such law, and covenants that
      it will not, by resort to any such law, hinder, delay or impeded the execution
      of any power herein granted to the Holder, but will suffer and permit the
      execution of every such as though no such law has been enacted.

    

    (13) Whenever
      any payment or other obligation hereunder shall be due on a day other than
      a
      Business Day, such payment shall be made on the next succeeding Business
      Day.

    

    (14) THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

    

    (15) CERTAIN
      DEFINITIONS  For
      purposes of this Note, the following terms shall have the following
      meanings:

    

    (a) “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States or a day on which banking institutions are
      authorized or required by law or other government action to close.

    

    (b) “Change
      of Control Transaction”
means
      the occurrence of (a) an acquisition after the date hereof by an individual
      or
      legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
      Exchange Act) of effective control (whether through legal or beneficial
      ownership of capital stock of the Company, by contract or otherwise) of in
      excess of fifty percent (50%) of the voting securities of the Company (except
      that the acquisition of voting securities by the Holder or any other current
      holder of convertible securities of the Company shall not constitute a Change
      of
      Control Transaction for purposes hereof), (b) a replacement at one time or
      over
      time of more than one-half of the members of the board of directors of the
      Company which is not approved by a majority of those individuals who are members
      of the board of directors on the date hereof (or by those individuals who are
      serving as members of the board of directors on any date whose nomination to
      the
      board of directors was approved by a majority of the members of the board of
      directors who are members on the date hereof), (c) the merger, consolidation
      or
      sale of fifty percent (50%) or more of the assets of the Company or any
      subsidiary of the Company in one or a series of related transactions with or
      into another entity, or (d) the execution by the Company of an agreement to
      which the Company is a party or by which it is bound, providing for any of
      the
      events set forth above in (a), (b) or (c).

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (c) “Commission”
means
      the Securities and Exchange Commission.

    

    (d) “Common
      Stock”
means
      the common stock, par value $.001, of the Company and stock of any other class
      into which such shares may hereafter be changed or reclassified.

    

    (e) “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

    

    (f) “Original
      Issue Date”
means
      the date of the first issuance of this Note regardless of the number of
      transfers and regardless of the number of instruments, which may be issued
      to
      evidence such Note.

    

    (g) “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

    

    (h) “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

    

    (i) “Securities
      Purchase Agreement”
means
      the Securities Purchase Agreement dated March 13, 2008 by and among the Company
      and the Buyers listed on Schedule I attached thereto. 

    

    (j) “Transaction
      Documents”
shall
      have the meaning ascribed to it in the Securities Purchase
      Agreement.

    

    [Signature
      Page Follows]

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Senior Secured Note to be duly executed by a duly
      authorized officer as of the date set forth above.

    

    

    
      	 	
              COMPANY:

            
	 	
              HOMELAND
                SECURITY CAPITAL CORPORATION

            
	 	 	 	 	 	 
	 	
              By:

            	  
	 
	 	
              Name:

            	 	 
	 	
              Title:GUARANTY

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

    

    SECTION
      3. Guaranty
      Absolute; Continuing Guaranty; Assignments.

    

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

    

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

    

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

    

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

    

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

    

    (v) any
      other
      circumstance (including any statute of limitations) or any existence of or
      reliance on any representation by the Secured Party that might otherwise
      constitute a defense available to, or a discharge of, any Transaction Party
      or
      any other guarantor or surety.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    This
      Guaranty shall continue to be effective or be reinstated, as the case may be,
      if
      at any time any payment of any of the Guaranteed Obligations is rescinded or
      must otherwise be returned by the Secured
      Party or
      any
      other Person upon the insolvency, bankruptcy or reorganization of any
      Transaction Party or otherwise, all as though such payment had not been
      made.

    

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

    

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

    

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

    

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

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    SECTION
      6. Representations,
      Warranties and Covenants.
      

    

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

    

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

    

    (ii) The
      execution, delivery and performance by the
      Guarantor
      of this
      Guaranty and each other Transaction Document to which the
      Guarantor
      is a
      party (A) have been duly authorized by all necessary corporate, limited
      liability company or limited partnership action, (B) do not and will not
      contravene its charter or by-laws, its limited liability company or operating
      agreement or its certificate of partnership or partnership agreement, as
      applicable, or any applicable law or any contractual restriction binding on
      the
      Guarantor
      or its
      properties (except where the contravention of such contractual restriction
      would
      not result in a Material Adverse Effect), (C) do not and will not result in
      or
      require the creation of any lien (other than pursuant to any Transaction
      Document) upon or with respect to any of its properties, and (D) do not and
      will
      not result in any default, noncompliance, suspension, revocation, impairment,
      forfeiture or nonrenewal of any material permit, license, authorization or
      approval applicable to it or its operations or any of its
      properties.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (iii) No
      authorization or approval or other action by, and no notice to or filing with,
      any governmental authority is required in connection with the due execution,
      delivery and performance by the
      Guarantor
      of this
      Guaranty or any of the other Transaction Documents to which the
      Guarantor
      is a
      party (other than expressly provided for in any of the Transaction
      Documents).

    

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

    

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

    

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

    

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

    

    SECTION
      8. Notices,
      Etc.
      All
      notices and other communications provided for hereunder shall be in writing
      and
      shall be mailed, telecopied or delivered, if to any Guarantor, to it at its
      address set forth on the signature page hereto, or if to the Secured Party,
      to
      it at its respective address set forth in the Securities Purchase Agreement;
      or
      as to either such Person at such other address as shall be designated by such
      Person in a written notice to such other Person complying as to delivery with
      the terms of this Section 8. All such notices and other communications shall
      be
      effective (i) if mailed (by certified mail, postage prepaid and return receipt
      requested), when received or three Business Days after deposited in the mails,
      whichever occurs first; (ii) if telecopied, when transmitted and confirmation
      is
      received, provided same is on a Business Day and, if not, on the next Business
      Day; or (iii) if delivered by hand, upon delivery, provided same is on a
      Business Day and, if not, on the next Business Day.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    SECTION
      9. Governing
      Law.
      This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of Delaware without regard to the principles of conflict of laws.
      The
      parties further agree that any action between them shall be heard in Hudson
      County, New Jersey, and expressly consent to the jurisdiction and venue of
      the
      Superior Court of New Jersey, sitting in Hudson County and the United States
      District Court for the District of New Jersey sitting in Newark, New Jersey
      for
      the adjudication of any civil action asserted pursuant to this
      Paragraph.

    

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

    

    SECTION
      11. Miscellaneous.
      

    

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

    

    (b)
       No
      amendment or waiver of any provision of this Guaranty and no consent to any
      departure by any Guarantor therefrom shall in any event be effective unless
      the
      same shall be in writing and signed by each Guarantor and the Secured Party,
      and
      then such waiver or consent shall be effective only in the specific instance
      and
      for the specific purpose for which given.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (c)
       No
      failure on the part of the Secured Party to exercise, and no delay in
      exercising, any right hereunder or under any other Transaction Document shall
      operate as a waiver thereof, nor shall any single or partial exercise of any
      right hereunder or under any Transaction Document preclude any other or further
      exercise thereof or the exercise of any other right. The rights and remedies
      of
      the Secured Party provided herein and in the other Transaction Documents are
      cumulative and are in addition to, and not exclusive of, any rights or remedies
      provided by law. The rights of the Secured Party under any Transaction Document
      against any party thereto are not conditional or contingent on any attempt
      by
      the Secured Party to exercise any of their respective rights under any other
      Transaction Document against such party or against any other
      Person.

    

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

    

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

    

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

    

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

    

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

    

    

    [REMAINDER
      OF THIS PAGE INTENTIONALLY LEFT BLANK]

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

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

    

    

    
      	 	
              COMPANY:

            
	 	 
	 	
              HOMELAND
                SECURITY CAPITAL CORPORATION

            
	 	 	 	 	 	 
	 	
              By: 

            	   
	 
	 	
              Name: 

            	 	 
	 	
              Title: 

            	 	 

    

     

    
      

      
        	 	
                
                  GUARANTOR:

                

              
	 	 
	 	
                
                  HOMELAND
                    SECURITY ADVISORY SERVICES,
                    INC.

                

              
	 	 	 	 	 	 
	 	
                By: 

              	   
	 
	 	
                Name: 

              	 	 
	 	
                Title: 

              	 	 

      

      
         

         

        
          	 	
                  
                    GUARANTOR:

                  

                
	 	 
	 	
                  
                    
                      CELERITY
                        SYSTEMS,
                        INC.

                    

                  

                
	 	 	 	 	 	 
	 	
                  By: 

                	   
	 
	 	
                  Name: 

                	 	 
	 	
                  Title: 

                	 	 

        

        
          
 

          
            	 	
                    
                      GUARANTOR:

                    

                  
	 	 
	 	
                    
                      
                        
                          NEXUS
                            TECHNOLOGIES GROUP,
                            INC.

                        

                      

                    

                  
	 	 	 	 	 	 
	 	
                    By: 

                  	   
	 
	 	
                    Name: 

                  	 	 
	 	
                    Title: 

                  	 	 

          

           

          
            
               

            

            
              8

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