Letter Agreement June 1, 2006
EXHIBIT
10.7
June
1,
2006
Cornell
Capital Partners, LP
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, Xxx Xxxxxx 00000
Dear
Ladies and Gentlemen:
We
are
providing you with this Letter Agreement in connection with the Purchase
Agreement, dated as of February 6, 2006 (the “February
Purchase Agreeement”),
between Homeland Security Capital Corporation (the “Company”)
and
Cornell Capital Partners, LP (the “Investor”)
and
the Securities Purchase Agreement, dated as of August 22, 2006, between the
Company and the Investor (the “August
Purchase Agreement”;
and
together with the February Purchase Agreement, the “Purchase
Agreements”),
pursuant to which the Company issued secured convertible debentures to the
Investor pursuant to the Secured Convertible Debenture, dated as of February
6,
2006, issued by the Company to the Investor (the “February
Debenture”)
and
the Secured Convertible Debenture, dated as of August 22, 2006, issued by the
Company to the Investor (the “August
Debenture”;
and
together with the February Debenture, the “Debentures”).
In
connection with the issuance of the Debentures, the Company provided certain
registration rights pursuant to the Investor Registration Rights Agreement,
dated as of February 6, 2006, between the Company and the Investor (the
“February
Registration Rights Agreement”)
and
the Investor Registration Rights Agreement, dated as of August 22, 2006, between
the Company and the Investor (the “August
Registration Rights Agreement”;
and
together with the February Registration Rights Agreement, the “Registration
Rights Agreements”).
Capitalized terms not otherwise defined in this Letter Agreement shall have
the
meanings specified in the Purchase Agreements.
1. The
Company and the Investor agree that the Interest
paragraph of each of the February Debenture and the August Debenture is amended
and restated to read in its entirety as follows:
“Interest.
Interest shall accrue on the outstanding principal balance hereof at an annual
rate equal to ten percent (10%). Interest shall be calculated on the basis
of a
365-day year and the actual number of days elapsed, to the extent permitted
by
applicable law. Interest hereunder will be paid to the Holder or its assignee
(as defined in Section 5) in whose name this Debenture is registered on the
records of the Obligor regarding registration and transfers of Debentures (the
“Debenture
Register”).”
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2. The
Investor hereby waives any breach prior to the date hereof by the Company of
Sections 2(a) and 2(b) of the February Registration Rights Agreement and
forgives any liquidated damages owed by the Company, prior to the date hereof,
to the Investor as a result of any such breach pursuant to Sections 2(c) and
2(d) of the February Registration Rights Agreement. The Investor hereby waives
any breach by the Company prior to the date hereof of Sections 2(a) and 2(b)
of
the August Registration Rights Agreement and forgives any liquidated damages
owed by the Company to the Investor as a result of any such breach pursuant
to
Sections 2(c) and 2(d) of the August Registration Rights Agreement.
3. The
Company and the Investor agree that Sections 2(a) and 2(b) of the February
Registration Rights Agreement are amended and restated to read in their entirety
as follows:
“(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare and
file, no later than ninety (90) days from the date upon which the Company
receives written demand of registration from any Investor (the “Scheduled
Filing Deadline”),
with
the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
then
eligible, on Form S-3) under the Securities Act (the “Initial
Registration Statement”)
for
the resale by the Investors of the Registrable Securities, which includes at
least 717,389,652 shares of Common Stock to be issued upon conversion of the
Convertible Debentures and the Series G Preferred Shares (inclusive of any
Buyer’s Shares). The Company shall cause the Registration Statement to remain
effective until all of the Registrable Securities have been sold. Prior to
the
filing of the Registration Statement with the SEC, the Company shall furnish
a
copy of the Initial Registration Statement to the Investors for their review
and
comment. The Investors shall furnish comments on the Initial Registration
Statement to the Company within twenty-four (24) hours of the receipt thereof
from the Company.
(b) Effectiveness
of the Initial Registration Statement.
The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than one hundred eighty (180)
days after the date upon which the Company receives written demand of
registration from any Investor (the “Scheduled
Effective Deadline”)
and
(ii) to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this Agreement. It shall
be an event of default hereunder if the Initial Registration Statement is not
declared effective by the SEC within one hundred eighty (180) days after the
date upon which the Company receives written demand of registration from any
Investor.”
4. The
Company and the Investor agree that Sections 2(a) and 2(b) of the August
Registration Rights Agreement are amended and restated to read in their entirety
as follows:
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“(a) Subject
to the terms and conditions of this Agreement, the Company shall prepare and
file, no later than ninety (90) days from the date upon which the Company
receives written demand of registration from any Investor (the “Scheduled
Filing Deadline”),
with
the SEC a registration statement on Form S-1 or SB-2 (or, if the Company is
then
eligible, on Form S-3) under the Securities Act (the “Initial
Registration Statement”)
for
the resale by the Investors of the Registrable Securities, which includes at
least 717,389,652 shares of Common Stock to be issued upon conversion of the
Convertible Debentures as well as one hundred million (100,000,000) Warrant
Shares. The Company shall cause the Registration Statement to remain effective
until all of the Registrable Securities have been sold. Prior to the filing
of
the Registration Statement with the SEC, the Company shall furnish a copy of
the
Initial Registration Statement to the Investors for their review and comment.
The Investors shall furnish comments on the Initial Registration Statement
to
the Company within twenty-four (24) hours of the receipt thereof from the
Company.
(b) Effectiveness
of the Initial Registration Statement.
The
Company shall use its best efforts (i) to have the Initial Registration
Statement declared effective by the SEC no later than one hundred eighty (180)
days from the date upon which the Company receives written demand of
registration from any Investor (the “Scheduled
Effective Deadline”)
and
(ii) to insure that the Initial Registration Statement and any subsequent
Registration Statement remains in effect until all of the Registrable Securities
have been sold, subject to the terms and conditions of this
Agreement.”
5. The
Company and the Investor agree that except for the changes and amendments to
the
Debentures and the Registration Rights Agreements noted herein, the Debentures
and the Registration Rights Agreements shall remain unchanged and in full force
and effect.
This
Letter Agreement may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each complete set of which, when so
executed and delivered by all parties, shall be an original, but all such
counterparts shall together constitute but one and the same instrument. This
Letter Agreement may be executed by telefacsimile transmission, and such
telefacsimile signatures shall be binding, of full force and effect, and treated
as original signatures. This Letter Agreement shall be governed by the
substantive laws (other than conflict laws) of the State of Delaware. Any
provision of this Letter Agreement held by a court of competent jurisdiction
to
be invalid or unenforceable shall not impair or invalidate the remainder of
this
Letter Agreement, and the effect thereof shall be confined to the provision
so
held to be invalid or unenforceable.
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Please
confirm your agreement with the foregoing by signing and returning the enclosed
copy of this Letter Agreement to the undersigned, whereupon this Letter
Agreement shall become a binding agreement among the Company and the
Investor.
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By:
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/s/
C. Xxxxxx XxXxxxxx
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Name:
C. Xxxxxx XxXxxxxx
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Title:
Chief Executive Officer
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Accepted
and Agreed to as of the 1st
day
of
June, 2007.
Cornell
Capital Partners, LP
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By:
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Yorkville
Advisors, LLC
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Its:
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Investment
Manager
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By:
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/s/
Xxxx
Xxxxxx
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Name:
Xxxx Xxxxxx
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Title:
Portfolio Manager
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