exv4w2






Exhibit 4.2




AMENDMENT NO. 2 TO FORBEARANCE AGREEMENT




          AMENDMENT NO. 2 TO FORBEARANCE AGREEMENT, dated as of June 27, 2008 (this
“Amendment”), among (a) Home Solutions of America, Inc., a Delaware corporation (the
“Borrower”), (b) each of the lenders party hereto (individually, together with its
successors and assigns, a “Lender” and collectively, the “Lenders”), (c) each of
the Debtors set forth in the Pledge and Security Agreement dated as of November 1, 2006
(collectively, the “Debtors” or each, a “Debtor”), (d) the Guarantors (as such term
is defined in the Credit Agreement) (collectively, with the Debtors and the Borrower, the
“Credit Parties” and each, individually, a “Credit Party”) and (e) Texas
Capital Bank, National Association, as Lender, Administrative Agent, Arranger and Sole Bookrunner
(the “Agent”).



WITNESSETH:




          WHEREAS, on or about November 1, 2006, the Borrower, the Agent, and the Lenders party thereto
entered into the Credit Agreement dated as of November 1, 2006 (as it may be amended from time to
time, the “Credit Agreement”).1



          WHEREAS, on or about February 6, 2008, the Borrower, the Agent, the Lenders, the Debtors, and
the Credit Parties entered into a Forbearance Agreement (as subsequently amended, the
“Forbearance Agreement”) pursuant to which the Lenders agreed to forbear, during the
Forbearance Period (as such term is defined in the Forbearance Agreement), from exercising their
rights and remedies under the Loan Documents with respect to certain then-existing Events of
Default (the “Existing Events of Default”).



          WHEREAS, on or about June 3, 2008, the Borrower, the Agent, the Lenders, the Debtors, and the
Credit Parties entered into that certain Amendment No. 1 to Forbearance Agreement (“Amendment
No. 1”) pursuant to which the parties amended the terms of the Forbearance Agreement.



          WHEREAS, certain defaults exist and are continuing under the Forbearance Agreement
(collectively, the “Existing Forbearance Events of Default”).



          WHEREAS, notwithstanding the existence of the Existing Forbearance Events of Default, the
Borrower has requested, and the Lenders have agreed, to amend the Forbearance Agreement as set
forth below.



          NOW, THEREFORE, in consideration of the premises and the agreements hereinafter contained, and
for other good and valuable consideration, notwithstanding any provisions of the Credit Agreement
or the Forbearance Agreement to the contrary, the parties hereto hereby agree as follows:



          1. Modification of Minimum Interim Reductions. Subparagraph 3(a) of Amendment No. 1 is hereby
deleted and replaced in its entirety by the following:





 




			
	1	 	Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Credit Agreement.




 









 











          (a) Notwithstanding anything to the contrary in Paragraphs 10, 11 and 12 of the Forbearance
Agreement, during the period commencing on May 19, 2008 and ending on July 15, 2008 (the
“Pay-Off Period”), the Borrower shall have made to the Agent for the benefit of the
Lenders payments, whether from the collection of accounts receivable or otherwise and after
taking into account the order of application set forth in Paragraph 2 above,2 that
result in the reduction of the principal amount of the Borrower’s Obligations under the Credit
Agreement in the aggregate amount of $10,500,000 (the “Pay-Off Amount”), including
minimum interim aggregate reductions of principal of $5,450,000 by July 1, 2008; and $10,500,000
by July 15, 2008 (each, a “Minimum Interim Reduction”). If any such payments are funded
with the proceeds of a disposition of an asset other than accounts receivable, and the Lenders
have granted prior written consent of such disposition, the Agent shall release its lien on such
asset, contemporaneously with its receipt of 100% of the proceeds of such disposition in readily
available funds.



          2. Consent to Sale of PWS. Execution of this Amendment No. 2 by a Super Majority of Lenders
shall constitute consent of the Lenders to the sale of substantially all the assets of P.W.
Stephens, Inc. (“PWS”) for an amount not less than $5,000,000; provided that prior to such
sale (i) the Borrower shall have delivered to the Agent a copy of the fully executed agreement for
the sale of the PWS assets and such agreement is in form and substance satisfactory to the Agent;
(ii) the Credit Parties shall have remitted to the Agent 100% of all accounts receivable collected
by PWS from June 15, 2008 through the date immediately preceding the date of closing of such sale;
(iii) the Borrower shall have delivered to the Agent a form of warrant agreement in form and
substance satisfactory to the Agent as contemplated by Paragraph 7 of Amendment No. 1; and (iv) the
Borrower shall have satisfied the Additional Funding Commitment provided for in Paragraph 3 below.



          3. Additional Funding Commitment. On or before July 1, 2008, the Borrower shall provide the
Agent with a copy of (i) one or more fully executed bridge funding commitments or other
arrangements in form, substance and amount satisfactory to the Lenders and in any event in an
aggregate amount of no less than $5,500,000 (the “Additional Funding Commitment”), which
Additional Funding Commitment shall designate the Lenders as third party beneficiaries of same, to
provide liquidity from the Closing Date until August 1, 2008 to the Borrower in amounts sufficient
to maintain the financial viability of the Borrower and to fulfill the obligations of the Borrower
under the Forbearance Agreement including this Amendment, and (ii) a personal commitment from
Michael J. McGrath individually to fund Evenflo Funding, LLC or such other entity as shall provide
the Additional Funding Commitment in an amount no less than $2,000,000 in the event Borrower does
not satisfy all Payoff Conditions on or before August 1, 2008.



          4. Conditions to Effectiveness. This Amendment shall become effective as of the date the
following conditions precedent (collectively, the “Conditions Precedent”) have been
satisfied, in no event later than July 2, 2008 (the “Closing Date”):





 




			
	2	 	Reference is to Paragraph 2 of Amendment No. 1.




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          (a) The Agent shall have received from each Credit Party a duly executed counterpart of this
Amendment;




          (b) The Agent shall have received from a Super Majority of Lenders a duly executed
counterpart of this Amendment; and




          (c) The Agent shall have duly executed a counterpart of this Amendment.



          5. Ratification. Except as expressly amended hereby, the Forbearance Agreement, the Credit
Agreement and each other Loan Document remain in full force and effect, and each Credit Party
hereby ratifies and confirms each such Loan Document.



          6. Releases. Each Credit Party hereby acknowledges its status as a Credit Party and affirms
its obligations under the Credit Agreement and Loan Documents and represents and warrants that
there are no liabilities, claims, suits, debts, liens, losses, causes of action, demands, rights,
damages or costs, or expenses of any kind, character or nature whatsoever, known or unknown, fixed
or contingent (collectively, the “Claims”) that any Credit Party may have or claim to have
against the Agent, any Lender or any Participant, or any of their respective affiliates, agents,
employees, officers, directors, representatives, attorneys, successors and assigns (collectively,
the “Lender Released Parties”), which might arise out of or be connected with any act of
commission or omission of the Lender Released Parties existing or occurring on or prior to the date
of this Amendment, including, without limitation, any Claims arising with respect to the
Obligations or any Loan Documents. In furtherance of the foregoing, each Credit Party hereby
releases, acquits and forever discharges the Lender Released Parties from any and all Claims that
any Credit Party may have or claim to have, relating to or arising out of or in connection with the
Obligations or any Loan Documents or any other agreement or transaction contemplated thereby or any
action taken in connection therewith from the beginning of time up to and including the date of the
execution and delivery of this Amendment. Each Credit Party further agrees forever to refrain from
commencing, instituting or prosecuting any lawsuit, action or other proceeding against any Lender
Released Parties with respect to any and all Claims which might arise out of or be connected with
any act of commission or omission of the Lender Released Parties existing or occurring on or prior
to the date of this Amendment, including, without limitation, any Claims arising with respect to
the Obligations or any Loan Documents and any Claims, demands or causes of action brought pursuant
to chapter 5 of the Bankruptcy Code.



          7. Reference to and Effect on the Loan Documents.




          (a) All of the terms of any Loan Document shall remain unchanged and in full force and
effect except as specifically modified hereby.




          (b) This Amendment is, and shall be, a Loan Document.




          (c) The execution, delivery and effectiveness of this Amendment shall not operate as a
waiver or cure of any Default or Event of Default, right, power or remedy under any Loan
Document, nor constitute a waiver of any other provision of any Loan Document, including, but not
limited to, with respect to the Existing Events of Default or



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Existing Forbearance Events of Default, other than with respect to the Lenders’ agreement to
forbear as set forth in Paragraph 1 of the Forbearance Agreement. The Credit Parties acknowledge
that, notwithstanding the execution, delivery and effectiveness of this Amendment, the Existing
Events of Default and the Existing Forbearance Events of Default exist and are continuing until
payment in full of the Obligations under the Loan Documents or full and complete satisfaction of
the Payoff Conditions.




          (d) Except as expressly provided herein, the Lenders reserve all rights, claims and remedies
that they have or may have against the Borrower, the Debtors, and any other Credit Parties.



          8. Execution in Counterparts. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which, when so executed and
delivered, shall be deemed to be an original and all of which taken together shall constitute but
one and the same agreement.



          9. Headings. Section headings in this Amendment are included herein for convenience of
reference only and shall not constitute a part of this Amendment for any other purpose.



          10. Section Numbers. Unless otherwise indicated, all references to section numbers are
references to sections of this Amendment.



[Remainder of Page Intentionally Left Blank]




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          In Witness Whereof, the parties hereto have caused this Amendment to be executed by
their respective officers and members thereunto duly authorized, as of the date first above
written.



	 	 	 	 	 
	 	BORROWER:




HOME SOLUTIONS OF AMERICA, INC.

as Borrower

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	DEBTORS AND GUARANTORS:




CORNERSTONE MARBLE & GRANITE, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	FIBER-SEAL SYSTEMS, L.P.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	FIRELINE RESTORATION, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	HOME SOLUTIONS RESTORATION OF
 LOUISIANA, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	P.W. STEPHENS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SOUTHERN EXPOSURE UNLIMITED OF
 FLORIDA, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	S.E. TOPS OF FLORIDA, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	FSS HOLDING CORP.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	SOUTHERN EXPOSURE HOLDINGS, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	LENDERS:




TEXAS CAPITAL BANK, NATIONAL
 ASSOCIATION, as Administrative Agent

 	 
	 	By:  	



 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	TEXAS CAPITAL BANK, NATIONAL
 ASSOCIATION, as Lender

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	AMEGY BANK, N.A., as Lender

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	BANK OF OKLAHOMA, N.A., as Lender

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	COMPASS BANK, as Lender

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	AMARILLO NATIONAL BANK, as Lender

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title: