Exhibit 10.16



 


HOME SOLUTIONS OF AMERICA, INC.

1998 STOCK OPTION PLAN

STOCK OPTION AGREEMENT




Unless otherwise defined herein, the terms defined in
the Plan (defined below) shall have the same defined meanings in this Stock
Option Agreement (this "Stock Option Agreement"), which is
executed this 2nd day of December 2003.




I.          NOTICE
OF STOCK OPTION GRANT


            The
undersigned Optionee has been granted an Option to purchase Common Stock of
Home Solutions of America, Inc., a Delaware
corporation (the "Company"), subject to the terms and conditions of the Company's 1998 Stock Option
Plan (the "Plan") and this Stock Option Agreement, as follows:




Optionee                                              RICK
J. O'BRIEN                 


Date of Grant                                       December 2, 2003




Vesting Commencement Date   December 2, 2003




Exercise Price per Share                       $2.00




Total Number of Shares Granted          250,000




Total Exercise Price                              $500,000




Type of Option:                                    
X        Incentive Stock Option


            Non-Qualified Stock Option




Term/Expiration Date:                          Tenth
Anniversary of Date of Grant




            Vesting
Schedule:         The Option shall
become exercisable as to 1/36th of the Shares subject to the Option
on the last day of each month following the Date of the Grant, subject to
Optionee's continued status as a Service Provider on each such date.  The
Shares shall vest immediately (i) if a Change of Control of the Company shall
occur, or (ii) if the Optionee's employment under his Executive Employment
Agreement dated July 10, 2003, is terminated without "Cause" or with "Good Reason",
as such terms are defined under the Executive Employment Agreement.




Termination Period:  The vested portion of this Option shall be exercisable for 90 days
after Optionee ceases to be a Service Provider.  Upon Optionee's death or
disability, the vested portion of this Option shall be exercisable for the duration of the time period provided for in
the Plan.  In no event may Optionee exercise this Option after the
Term/Expiration Date as provided above.


 






 


 


II.               

AGREEMENT


            1.         Grant
of Option.




                        (a)        The
Administrator hereby grants to the Optionee an option (the "Option")
to purchase the number of Shares set forth herein, at the per Share exercise
price set forth herein (the "Exercise Price"), and subject to the
terms and conditions of the Plan, which is incorporated herein by reference. 
In the event of a conflict between the terms and conditions of the Plan and
this Stock Option Agreement, the terms and conditions of the Plan shall
prevail. 




                        (b)        If
designated as an Incentive Stock Option ("ISO"), the Option is
intended to qualify as an Incentive Stock Option as defined in Section 422
of the Code.  Nevertheless, to the extent that it exceeds the $100,000 rule of
Code Section 422(d), the Option shall be treated as a Non-Qualified Stock
Option ("NSO").




            2.         Exercise
of Option.




                        (a)        Right
to Exercise.  The Option shall be exercisable for the duration of its term and
in accordance with the Vesting Schedule set forth herein, subject to any applicable
provisions of the Plan and any other applicable provisions of this Stock Option
Agreement.




                        (b)        Method
of Exercise.  The Option shall be exercisable by delivery of an exercise
notice in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the Optionee's election to exercise the Option, the number of
Shares with respect to which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be
required by the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares.  The Option shall be
deemed exercised upon receipt by the Company of such fully executed Exercise
Notice accompanied by the aggregate Exercise Price.




            3.         Optionee's
Representations.  In the event the Shares have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), at
the time this Option is exercised, the Optionee shall, if required by the
Company, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or her Investment Representation Statement in the
form attached hereto as Exhibit B.




            4.         Lock-Up Period.  Optionee hereby
agrees that, if so requested by the Company or any representative of the
underwriters (the "Managing Underwriter") in connection with any
registration of the offering of any securities of the Company under the
Securities Act, Optionee shall not sell or otherwise transfer any Shares
or other securities of the Company during the 180-day period (or such other
shorter or longer period as may be requested in writing by the Managing
Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration
statement of the Company filed under the Securities Act (excluding a
registration of securities on Form S-8 or a successor form).  The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.




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            5.         Method
of Payment.  Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee




                        (a)        cash
or check;




                        (b)        Shares
surrendered to the Company in a Cashless Exercise; or




                                (c)           surrender
of other Shares that, (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six months on the date of
surrender, and (ii) have an
aggregate Fair Market Value as of
the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.




            6.         Restrictions
on Exercise.  The Option may not be exercised unless the issuance of such
Shares upon such exercise or the method of payment of consideration for such
shares would constitute a violation of any Applicable Law.




            7.         Non-Transferability
of Option.  The Option may not be transferred in any manner other than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by Optionee.  The terms of the Plan and this Stock
Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.




            8.         Term
of Option.  The Option may be exercised only within the term set forth
herein, and may be exercised during such term only in accordance with the Plan
and the terms of this Stock Option Agreement.




            9.         Entire
Agreement; Governing Law.  The Plan is incorporated herein by reference.
The Plan and this Stock Option Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof, and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by a writing signed by the Company and Optionee. 
This Stock Option Agreement is governed by the internal substantive laws but
not the choice of law rules of the State of Delaware.  Venue for all disputes arising hereunder shall be
proper exclusively in Harris County, Texas.




            10.       No
Guarantee of Continued Service.  OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER IN ACCORDANCE WITH THE OPTIONEE'S EMPLOYMENT
AGREEMENT, IF ANY, OR OTHERWISE (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).  OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN
EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR
THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY
WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME IN ACCORDANCE WITH THE
OPTIONEE'S EMPLOYMENT AGREEMENT, IF ANY, OR OTHERWISE, AT ANY TIME, WITH OR
WITHOUT CAUSE.




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            11.       Optionee
acknowledges receipt of a copy of the Plan and represents that he or she is
familiar with the terms and provisions thereof, and hereby accepts the Option and
agrees to all of the terms and provisions hereof related thereto.  Optionee has
reviewed the Plan and this Stock Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Stock Option
Agreement and fully understands all provisions of this Stock Option Agreement. 
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan or this Stock Option Agreement.  Optionee further agrees to notify the
Company upon any change in the residence address indicated below.




            12.       The
Company hereby agrees that, on or before March 31, 2004, the Company will either (i) register
all shares available for issuance under the Plan, or (ii) enter into a
registration rights agreement with Optionee under the same terms as that
Registration Rights Agreement between the Company and Merritt Computer
Products, L.P. dated July
 31, 2003.  




"COMPANY"                                                            "OPTIONEE"




HOME
SOLUTIONS OF AMERICA, INC.






By:                                                                                                                                                      


Name:
                                                                         Rick
J. O'Brien

Title:
                                                                




 Address:




5565 Red Bird Center Drive

Suite 150

Dallas,
 TX
 75237




 




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EXHIBIT A


1998
STOCK OPTION PLAN

EXERCISE NOTICE


 


Home
Solutions of America, Inc.

11850
  Jones Road

Houston, Texas 77070

ATTN:  Secretary




1.   Exercise of Option.  Effective as of
today, _______________, 20___, the undersigned ("Optionee")
hereby elects to exercise Optionee's option to purchase ________________ shares
(the "Shares") of the Common Stock of Home Solutions of America, Inc. (the "Company")
under and pursuant to the 1998 Stock
Option Plan (the "Plan") and the Stock Option Agreement dated December 2, 2003 (the
"Stock Option Agreement")
with the execution of this Exercise Notice (this "Exercise Notice").




2.   Delivery of Payment.  Optionee herewith
delivers to the Company the full purchase price of the Shares, as set forth in
the Stock Option Agreement.




3.   Representations of Optionee.  Optionee
acknowledges that Optionee has received, read and understood the Plan and the
Stock Option Agreement and agrees to abide by and be bound by their terms and
conditions.




4.   Rights as Stockholder.  Until the issuance
of the Shares (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option.  The Shares shall be
issued to the Optionee as soon as practicable after the Option is exercised. 
No adjustment shall be made for a dividend or other right for which the record
date is prior to the date of issuance except as provided in Section 13 of the
Plan.




5.   Tax Consultation.  Optionee understands
that Optionee may suffer adverse tax consequences as a result of Optionee's
purchase or disposition of the Shares.  Optionee represents that Optionee has
consulted with any tax consultants Optionee deems advisable in connection with
the purchase or disposition of the Shares and that Optionee is not relying on
the Company for any tax advice.




6.   Restrictive Legends and Stop-Transfer Orders.




(a)  Legends.  Optionee understands and agrees
that the Company shall cause the legends set forth below or legends
substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Shares together with any other legends that may be
required by the Company or by state or federal securities laws:






 






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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COMPANY COUNSEL SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.




(b)  Stop-Transfer Notices.  Optionee agrees
that, in order to ensure compliance with the restrictions referred to herein,
the Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, and that, if the Company transfers
its own securities, it may make appropriate notations to the same effect
in its own records.




7.   Successors and Assigns.  This Exercise
Notice shall be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.




8.   Interpretation.  Any dispute regarding the
interpretation of this Agreement shall be submitted by Optionee or by the
Company forthwith to the Administrator, which shall review such dispute at its
next regular meeting.  The resolution of such a dispute by the Administrator
shall be final and binding on all parties.




      


Submitted
by:                                                               Accepted
by:




OPTIONEE:                                                               HOME
SOLUTIONS OF AMERICA, INC. 




_____________________________                          By:                                                      


Rick
J. O'Brien                                                            Name:                                                 


                                                                                    Title:                                                     


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EXHIBIT B




INVESTMENT REPRESENTATION
STATEMENT


 


OPTIONEE:      Rick J. O'Brien 

COMPANY:     Home
Solutions of America, Inc.

SECURITY:      Common
Stock

AMOUNT:        $_________________________ 

DATE:               __________________________



            In
connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:




1.   Optionee is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Securities.  Optionee is acquiring these Securities for investment for
Optionee's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").




2.   Optionee acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein.  In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.  Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.  Optionee further
acknowledges and understands that the Company is under no obligation to
register the Securities.  Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend that prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company and any other legend
required under applicable state securities laws.




3.   Optionee is familiar with the provisions of
Rule 144, promulgated under the Securities Act, which, in substance,
permits limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions.  The Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which
requires the resale to occur not less than one year after the later of the
date the Securities were sold by the Company or the date the Securities were
sold by an affiliate of the Company, within the meaning of Rule 144, and
the resale must take place in a manner described in (1) below; and, in the case
of acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
following conditions: (1) the resale is made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as
said term is defined under the Securities Exchange Act of 1934), (2) the
availability of certain public information about the Company, (3) the amount of
Securities being sold during any three-month period not exceeding the limitations
specified in Rule 144(e), and (4) the timely filing of a Form 144.




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4.   Optionee further understands that in the event
all of the applicable requirements of Rule 144 are not satisfied,
registration under the Securities Act or some other registration exemption will
be required; and that the Staff of the Securities and Exchange Commission has
expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that
such persons and their respective brokers who participate in such transactions
do so at their own risk.  Optionee understands that no assurances can be given
that any such other registration exemption will be available in such event.




"Optionee"






___________________________________

Rick J. O'Brien




Date:______________________________




 




 




 




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