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").
(a)
The
Guarantors, jointly and severally, guaranty that the Guaranteed Obligations
will
be paid strictly in accordance with the terms of the Transaction Documents,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Secured Party
with
respect thereto. The obligations of each Guarantor under this Guaranty are
independent of the Guaranteed Obligations, and a separate action or actions
may
be brought and prosecuted against any Guarantor to enforce such obligations,
irrespective of whether any action is brought against any Transaction Party
or
whether any Transaction Party is joined in any such action or actions. The
liability of any Guarantor under this Guaranty shall be irrevocable, absolute
and unconditional irrespective of, and each Guarantor hereby irrevocably waives,
to the extent permitted by law, any defenses it may now or hereafter have in
any
way relating to, any or all of the following:
(i) any
lack
of validity or enforceability of any Transaction Document or any agreement
or
instrument relating thereto;
(ii) any
change in the time, manner or place of payment of, or in any other term of,
all
or any of the Guaranteed Obligations, or any other amendment or waiver of or
any
consent to departure from any Transaction Document, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to any Transaction
Party
or
otherwise;
(iii) any
taking, exchange, release or non-perfection of any Pledged Property (as defined
in the Security Documents), or any taking, release or amendment or waiver of
or
consent to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(iv) any
change, restructuring or termination of the corporate, limited liability company
or partnership structure or existence of any Transaction
Party;
or
(v) any
other
circumstance (including any statute of limitations) or any existence of or
reliance on any representation by the Secured Party that might otherwise
constitute a defense available to, or a discharge of, any Transaction Party
or
any other guarantor or surety.
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This
Guaranty shall continue to be effective or be reinstated, as the case may be,
if
at any time any payment of any of the Guaranteed Obligations is rescinded or
must otherwise be returned by the Secured
Party or
any
other Person upon the insolvency, bankruptcy or reorganization of any
Transaction Party or otherwise, all as though such payment had not been
made.
(b)
This
Guaranty is a continuing guaranty and shall (i) remain in full force and effect
until the indefeasible cash payment in full of the Guaranteed Obligations (other
than inchoate indemnity obligations) and (ii) be binding upon each Guarantor
and
its respective successors and assigns. This Guaranty shall inure to the benefit
of and be enforceable by the Secured
Party and
its
successors, and permitted pledgees, transferees and assigns. Without limiting
the generality of the foregoing sentence, the Secured Party may pledge, assign
or otherwise transfer all or any portion of its rights and obligations under
and
subject to the terms of any Transaction Document to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Secured Party herein or otherwise, in each case as
provided in the Securities Purchase Agreement or such Transaction
Document.
(c)
Pursuant
to Section 6.12 of the Security Agreement, each subsidiary of the Guarantors
that is formed or acquired after the execution of this Guaranty is required
to
execute the Guaranty. Such subsidiary shall become a Guarantor hereunder with
the same force and effect as if originally named as a Guarantor herein. The
execution and delivery of any instrument adding an additional Guarantor as
a
party to this Guaranty shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor
as a
party to this Guaranty
SECTION
4. Waivers.
To the
extent permitted by applicable law, each Guarantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Secured Party exhaust any right or take any action against
any Transaction Party or any other Person or any Pledged Property. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in
this
Section 4 is knowingly made in contemplation of such benefits. The Guarantors
hereby waive any right to revoke this Guaranty, and acknowledges that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
SECTION
5. Subrogation.
No
Guarantor may exercise any rights that it may now or hereafter acquire against
any Transaction Party or any other guarantor that arise from the existence,
payment, performance or enforcement of any Guarantor's obligations under this
Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Secured Party against any Transaction
Party or any other guarantor or any Pledged Property, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Transaction
Party or any other guarantor, directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security solely on account
of
such claim, remedy or right, unless and until all of the Guaranteed Obligations
(other than inchoate indemnity obligations) and all other amounts payable under
this Guaranty (other than inchoate indemnity obligations) shall have
indefeasibly
been
paid
in full in cash. If any amount shall be paid to the Guarantor in violation
of
the immediately preceding sentence at any time prior to the later of the payment
in full in cash of the Guaranteed Obligations and all other amounts payable
under this Guaranty, such amount shall be held in trust for the benefit of
the
Secured Party and shall forthwith be paid to the Secured Party to be credited
and applied to the Guaranteed Obligations and all other amounts payable under
this Guaranty, whether matured or unmatured, in accordance with the terms of
the
Transaction Document, or to be held as Pledged Property for any Guaranteed
Obligations or other amounts payable under this Guaranty thereafter arising.
If
(a) any Guarantor shall make payment to the Secured Party of all or any
part of the Guaranteed Obligations, and (b) all of the Guaranteed
Obligations (other than inchoate indemnity obligations) and all other amounts
payable under this Guaranty (other than inchoate indemnity obligations) shall
indefeasibly
be
paid
in full in cash, the Secured Party will, at such Guarantor's request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.
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SECTION
6. Representations,
Warranties and Covenants.
(a) Each
Guarantor hereby represents and warrants as of the date first written above
as
follows:
(i) The
Guarantor (A) is a corporation, limited liability company or limited partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (B) has all corporate, limited liability
company or limited partnership power and authority to conduct its business
as
now conducted and as presently contemplated and to execute and deliver this
Guaranty and each other Transaction Document to which the
Guarantor
is a
party, and to consummate the transactions contemplated hereby and thereby and
(C) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it
or
in which the transaction of its business makes such qualification necessary
except where the failure to be so qualified would not result in a Material
Adverse Effect.
(ii) The
execution, delivery and performance by the
Guarantor
of this
Guaranty and each other Transaction Document to which the
Guarantor
is a
party (A) have been duly authorized by all necessary corporate, limited
liability company or limited partnership action, (B) do not and will not
contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding on
the
Guarantor
or its
properties (except where the contravention of such contractual restriction
would
not result in a Material Adverse Effect), (C) do not and will not result in
or
require the creation of any lien (other than pursuant to any Transaction
Document) upon or with respect to any of its properties, and (D) do not and
will
not result in any default, noncompliance, suspension, revocation, impairment,
forfeiture or nonrenewal of any material permit, license, authorization or
approval applicable to it or its operations or any of its
properties.
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 Xxxxxx
County, New Jersey, and expressly consent to the jurisdiction and venue of
the
Superior Court of New Jersey, sitting in Xxxxxx 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.
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IN
WITNESS WHEREOF,
each
Guarantor has caused this Guaranty to be executed by its respective duly
authorized officer, as of the date first above written.
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COMPANY:
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By:
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Name:
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Title:
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GUARANTOR:
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HOMELAND
SECURITY ADVISORY SERVICES,
INC.
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By:
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Name:
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Title:
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GUARANTOR:
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CELERITY
SYSTEMS,
INC.
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By:
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Name:
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Title:
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GUARANTOR:
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NEXUS
TECHNOLOGIES GROUP,
INC.
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By:
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Name:
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Title:
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