Filed by Bowne Pure Compliance





Exhibit 10.1




HOME SOLUTIONS AMERICA, INC.




May 28, 2008




Frank J. Fradella

1500 Dragon Street

Suite B

Dallas, Texas 75207




Dear Frank:



We are pleased to confirm the terms and conditions of your continued employment with Home Solutions
America, Inc. (the “Company”) as set forth herein:




	1.	 	Employment. You will be employed by the Company as its Chief Executive Officer. You
will report to its Board of Directors (the “Board”) or such persons as designated by them, and
shall perform such duties as may be assigned to you. For as long as you serve as Chief
Executive Officer, the Company will use its best efforts to nominate you to serve as a member
of the Board, and, if appointed, you agree to serve as such. You may also be appointed to
serve, and agree to serve, as an officer and/or director of one or more subsidiaries and/or
affiliates of the Company. You agree to use your best efforts to perform your duties
faithfully, to devote all of your working time, attention and energies to the businesses of
the Company and its subsidiaries, and while you remain employed, not to engage in any other
business activity that is in conflict with your duties and obligations to the Company.







	2.	 	Term. Subject to the provisions of Section 6 of this Agreement, this Agreement and
your employment hereunder shall be effective as of the date hereof (the “Effective Date”) and
shall continue until the third anniversary of the Effective Date (the “Term”). The period
during which you are employed by the Company hereunder is hereinafter referred to as the
“Employment Term”.







	3.	 	Base Salary. You will be paid a base salary (“Base Salary”) at an annual rate of
$350,000. Your Base Salary will be reviewed at least annually, and may be subject to upward
adjustment at the discretion of the Board.







	4.	 	Annual Bonus. In addition to a Base Salary, you shall receive an annual cash bonus
for each fiscal year that ends during the Employment Term (the “Annual Bonus”); provided that
you remain employed by the Company on the date on which the Annual Bonus is paid. The Annual
Bonus shall be an amount equal to three percent (3%) of EBITDA (as defined below) for each
such year. The Annual Bonus shall be paid to you during the fiscal year following the fiscal
year to which is relates, as soon as practicable after the release of audited financial
statements for such year. EBITDA means the Company’s consolidated earnings before interest,
income taxes, depreciation, and amortization, as shall be determined by the Board based on the
Company’s financial statements for such year,
subject to such adjustments to reflect unusual, nonrecurring or extraordinary items or
events as the Board shall deem equitable and appropriate in its discretion.





 


 









 











	5.	 	Stock Option. Upon or as soon as practicable after the Effective Date, the Company
will grant you options to purchase shares of common stock of the Company on terms and
conditions set forth in a separate option agreement (the “Option Agreement”).







	6.	 	Termination.







(a) Generally. You will be free to resign from the Company at any time, and the
Company will be free to terminate your employment at any time. Upon any such termination or
resignation, except as provided in paragraph 6(b) below or as set forth in the Option
Agreement, you will be entitled only to (i) any portion of your Base Salary earned but not
yet paid, and (ii) any amounts payable pursuant to the terms of any Company benefit plan.




(b) Severance. In addition to the amounts payable pursuant to paragraph 6(a), if
the Company terminates your employment other than for Cause (as defined below) prior to the
end of the Term, then in lieu of any other severance benefits otherwise payable under any
Company policy, or any other damages payable in connection with such termination, you will
be entitled to receive continued payment of your Base Salary for twelve (12) months
following termination of your employment and reimbursement of premiums you pay for continued
health coverage under “COBRA” during the twelve (12) month period following termination of
your employment. Your right to such payments and benefits shall be conditional upon your
execution of a customary release of claims in favor of the Company and its affiliates, in a
form prescribed by the Company, and your compliance with the provisions of Sections 7 and 8
herein. If at the time of your termination of employment with the Company, the Company has
securities which are publicly traded on an established securities market and you are a
“specified employee” within the meaning of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and the deferral of the commencement of any payments or
benefits otherwise payable as a result of such termination of employment is necessary in
order to prevent any accelerated or additional tax under Section 409A of the Code, then, to
the extent permitted by Section 409A of the Code, the Company will defer the commencement of
the payment of any such payments or benefits hereunder (without any reduction in such
payments or benefits ultimately paid or provided to you) until the date that is six (6)
months following your termination of employment with the Company (or the earliest date as is
permitted under Section 409A of the Code). If any payments or benefits are deferred due to
such requirements, such amounts will be paid in a lump sum to you at the end of such six (6)
month period. Notwithstanding the foregoing, the Company will have no liability to you for
any tax imposed upon you pursuant to Section 409A of the Code.


 


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“Cause” means the occurrence of any of the following: (i) commission by you of any act of
gross negligence or fraud; (ii) your failure, refusal or neglect to substantially perform
your duties (other than by reason of a bona fide physical or mental impairment) or to
implement the directives of the Company that continued for thirty (30) days after you had
been provided adequate and specific written notice thereof, (iii) the appropriation (or
willful attempted appropriation) by you of a material business opportunity of the Company
that is not waived in writing or renounced in writing by the Company, including, but not
limited to, attempting to secure any personal profit in connection with any transaction
entered into on behalf of the Company; (iv) theft or embezzlement by you of any material
real or personal property, tangible or intangible, of the Company or any of its affiliates;
(v) willful engaging in conduct that is materially injurious to the Company, monetarily or
otherwise; (vi) your indictment of (or plea of guilty or no contest to) a felony (or the
equivalent thereof), or any other crime with respect to which imprisonment is a possible
punishment or any crime involving moral turpitude; (vii) your having been enjoined or banned
by any state or federal governmental agency from serving as a board member or officer of a
public company; (viii) any determination or finding by a federal or state governmental
agency or any stock exchange or quotation system that you have committed any acts of
wrongdoing which the Board, in its sole discretion, determines has had or could have an
adverse effect on the Company or its affiliates; or (ix) any material breach by you of this
Letter Agreement or any material inaccuracy of any representation or warranty contained
herein.




	7.	 	Assignment of Inventions/Confidentiality.







(a) Confidential Information Defined. For the purposes of this Letter Agreement,
the phrase “Confidential Information” means any and all of the following information or
items that the Company treats as confidential: trade secrets concerning the business and
affairs of the Company or its affiliates, product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings, samples,
inventions and ideas, past, current, and planned research and development, current and
planned distribution methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software and programs
(including object code, machine code, and source code), computer software and database
technologies, systems, structures, and architecture (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas,
designs, and methods); information concerning the business and affairs of the Company or its
affiliates (which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training techniques and materials, however
documented); notes, analysis, compilations, studies, summaries, and other material prepared
by or for the Company or its affiliates containing or based, in whole or in part, on any
information included in the foregoing; and any other information, observations, and data
obtained by you while employed by the Company or any of its affiliates concerning the
business affairs of the Company or any of its affiliates which is non-public and
confidential in nature. Notwithstanding the foregoing, Confidential Information shall not
include any information that was or became or is or becomes available to the public or to
the Company’s industry other than as a result of a disclosure of such information by you or
any other person under a duty to keep such information confidential.


 


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(b) Access to the Confidential Information. Throughout your employment with the
Company, the Company has and will continue to provide you with access to Confidential
Information. You acknowledge: (a) that the Company has devoted substantial time, effort,
and resources to develop and compile the Confidential Information; (b) unauthorized or
improper public disclosure of such Confidential Information by you would have an adverse
effect on the Company and its business; (c) the Company would not disclose such information
to you, nor employ or continue to employ you without the agreements and covenants set forth
in this Section 7; and (d) the provisions of this Section 7 are reasonable and necessary to
prevent the improper use or disclosure of Confidential Information.




(c) Nondisclosure Duties Regarding the Confidential Information.




(i) You will hold in strictest confidence the Confidential Information and will not
disclose it to any Person (as defined in Section 8 of this Agreement) or use it for
your own account except with the specific prior written consent of the Company or as
may be required by court order, law, government agencies with which the Company deals
in the ordinary course of its business, or except to the extent such disclosure is
necessary or appropriate for you to perform your duties under this Letter Agreement.
Any trade secrets of the Company will be entitled to all of the protections and
benefits afforded under applicable laws. If any Confidential Information that the
Company deems to be a trade secret is ruled by a court of competent jurisdiction not
to be a trade secret, such information will, nevertheless, be considered Confidential
Information for purposes of this Letter Agreement. You hereby waive any requirement
that the Company submit proof of the economic value of any trade secret or post a
bond or other security. You will not remove from the Company’s premises or record
(regardless of the media) any Confidential Information of the Company or its
affiliates, except to the extent such removal or recording is necessary or
appropriate for you to perform your duties or as may be required by court order, law,
or governmental agencies with which the Company deals in the ordinary course of its
business. You acknowledge and agree that all Confidential Information, and physical
embodiments thereof, whether or not developed by you, are the exclusive property of
the Company or its affiliates, as the case may be.




(ii) You recognize that the Company and its affiliates have received and in the
future will receive from third parties their confidential or proprietary information
subject to a duty on the part of the Company and its affiliates to maintain the
confidentiality of such information and to use it only for certain limited purposes.
You agree that you owe the Company, its affiliates, and such third parties, during
the term of your employment with the Company and thereafter, a duty to hold all such
confidential or proprietary information in the strictest confidence and not to
disclose it to any Person (except as necessary or appropriate in carrying out your
duties for the Company consistent with the Company’s agreement with such third party
or as may required by court order, law, or government agencies with which the Company
deals in the ordinary course of its business), or to use it for the
benefit of anyone other than for the Company or such third party (consistent with the
Company’s agreement with such third party) without the express written authorization
of the Company or its affiliate, as the case may be.


 


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(iii) You agree that, at the time of the termination of the Employment Term or at any
other time that the Company may request, you will deliver to the Company (and will
not keep in your possession or deliver to any other Person) any and all devices,
records, data, notes, plans, reports, memoranda, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other documents
or property, or reproductions of any of the aforementioned items or any property
belonging to the Company or any of its affiliates, and their respective successors or
assigns, regardless of whether such items are represented in tangible, electronic,
digital, magnetic or any other media, to the extent that any of the foregoing are in
the your possession or within your control. In the event of the termination of the
Employment Term, you agree to promptly sign and deliver to the Company the
“Termination Certification” attached hereto as Exhibit A.




(d) Disputes or Controversies. You recognize that should a dispute or controversy
arising from or relating to this Letter Agreement be submitted for adjudication to any court
or other third party, the preservation of the secrecy of Confidential Information may be
jeopardized. All pleadings, documents, testimony, and records in your possession or under
your control relating to any such adjudication will be maintained in secrecy and will be
available for inspection by the Company, you, and each party’s attorneys and experts, who
will agree, in advance and in writing, to receive, use, and maintain all such Confidential
Information in secrecy, except as may be agreed by them in writing.




(e) Inventions and Patents. You agree that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports, and all similar
or related information which relates to the Company’s or any of its affiliates’ actual or
anticipated business, research and development or existing or future products or services
and which are conceived, developed or made by you during your employment with the Company
(“Work Product”) belong to the Company. You will promptly disclose such Work Product to the
Company and perform all actions reasonably requested by the Company (whether during or after
the Employment Term) to establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).



 


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	8.	 	Non-Interference. You agree that the Company’s commitment described in Section 7(b)
above to provide its Confidential Information to you gives rise to the Company’s interest in
restraining you from competing against it and that the restrictions in this Section are
designed to enforce your promise in Section 7(c) not to use or disclose Confidential
Information belonging to the Company, except as otherwise permitted in Section 7. You agree
that the restrictions in this Section 8 are reasonable and do not impose a greater
restraint than is necessary to protect the goodwill or other business interests of the
Company. For these reasons, you agree to the following:







(a) Solicitation of Customers. During the Restricted Period you will not, directly
or indirectly, on behalf of yourself or any other person or entity, solicit a Current
Customer (as defined below) of the Company or its affiliates with whom you had contact
during your employment by the Company, for purposes of selling products or services to such
Current Customer that are in competition with the products and services offered or sold by
the Company or its affiliates as part of the Business of the Company.




(b) Solicitation of Employees. During the Restricted Period you will not, directly
or indirectly, on behalf of yourself or any other person or entity, employ any current
employee of the Company or its affiliates or any individual who was an employee of the
Company or its affiliates at any time during your employment by the Company, and will not
solicit any employee of the Company or its affiliates for the purpose of encouraging such
employee to leave or terminate his or her employment with the Company or its affiliates.




(c) Computer Systems. Following the termination of your employment with the
Company, you will not, either directly or indirectly, access the Company’s computer systems,
download files or any other information from the Company’s computer systems or in any way
interfere, disrupt, modify or change any computer system used by the Company or any data
stored on the Company’s computer systems.




(d) Scope. You acknowledge and agree that the length and scope of the restrictions
contained in Sections 7 and 8 hereof are reasonable and necessary to protect the legitimate
business interests of the Company. The duration of the agreements contained in this Section
8 shall be extended for the amount of any time of any violation thereof and the time, if
greater, necessary to enforce such provisions or obtain any relief or damages for such
violation through the court system. The Company may, at any time on written notice approved
by the Board reduce the length or scope of any restrictions contained in Sections 7 and 8
and, thereafter, you shall comply with the restriction as so reduced, subject to subsequent
reductions. If any covenant in Sections 7 or 8 of this Agreement is held to be
unreasonable, arbitrary, or against public policy, such covenant will be considered to be
divisible with respect to scope and time, and such lesser scope and time, as an arbitrator
or a court of competent jurisdiction may determine to be reasonable, not arbitrary, and not
against public policy, will be effective, binding, and enforceable against you. In the
event of termination of your employment with the Company for any reason, you shall inform
any subsequent employer within the Restricted Period (if applicable) of the continuing
restrictions and obligations imposed on you under this Letter Agreement.



 


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(e) Required Notice. You agree that during the Restricted Period following the
termination of your employment with the Company, you will provide the Company with written
notice of any new employment within thirty (30) days after you commence such employment.
The notice will identify your new employer and include your
representation that you have informed your new employer of the applicable confidentiality
and other obligations under this Letter Agreement.




(f) Injunctive Relief and Additional Remedy. You acknowledge that the injury that
would be suffered by the Company as a result of a breach of the provisions of Sections 7 and
8 hereof might be irreparable and that an award of monetary damages to the Company for such
a breach would be an inadequate remedy. Consequently, the Company will have the right, in
addition to any other rights it may have, to obtain injunctive relief to restrain any breach
or overtly threatened breach or otherwise to specifically enforce the provisions of Sections
7 and 8 hereof.




(g) Covenants of Sections 7 and 8 are Essential Covenants. The covenants by you in
Sections 7 and 8 are essential elements of this Agreement, and without your agreement to
comply with such covenants, the Company would not have entered into this Agreement or
employed or continued your employment. You and the Company have independently consulted
counsel and have been advised in all respects concerning the reasonableness and propriety of
such covenants, with specific regard to the nature of the business conducted by the Company.




(h) Definitions. For purposes of this Letter Agreement:




Current Customer means any person or entity who is currently utilizing any product or
service sold or provided by the Company through the facility managed by you; any
person or entity who utilized any such product or service within the previous twelve
(12) months; and any person or entity with whom the Company or any of its affiliates
is currently conducting negotiations concerning the utilization of such products or
services.




Person has the meaning given in Section 3(a)(9) of the Securities Exchange Act of
1934, as amended, as modified and used in Sections 13(d)(3) and 14(d)(2) of such act.




Restricted Period means the period commencing on the Effective Date and terminating on
the second anniversary of your termination of employment.




Business of the Company means the provision of recovery, restoration,
rebuilding/remodeling, and other specialty interior services to residential and
commercial properties.




	9.	 	Withholding. The Company shall have the right to withhold from any amount payable to
you hereunder an amount necessary in order for the Company to satisfy any withholding tax
obligation it may have under applicable law.






 


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	10.	 	Governing Law. The terms of this Letter Agreement, and any action arising
thereunder, shall be governed by and construed in accordance with the domestic laws of the
State of Texas, without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of Texas or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Texas.







	11.	 	Modification; Waiver; Severability. This Letter Agreement may not be released,
changed or modified in any manner, except by an instrument in writing signed by you and the
Company. The failure of either party to enforce any of the provisions of this Letter Agreement
shall in no way be construed to be a waiver of any such provision. No waiver of any breach of
this Letter Agreement shall be held to be a waiver of any other or subsequent breach. If any
portion or application of this Letter Agreement should for any reason be declared invalid,
illegal or unenforceable, in whole or in part, by a court of competent jurisdiction, such
invalid, illegal or unenforceable provision or application or part thereof shall be severable
from this Letter Agreement and shall not in any way affect the validity or enforceability of
any of the remaining provisions or applications.







	12.	 	Assignment. This Letter Agreement is personal to you. You shall not assign this
Letter Agreement or any of your rights and/or obligations under this Letter Agreement to any
other person. The Company may, without your consent, assign this Letter Agreement to any
affiliate or successor to its business.







	13.	 	[Dispute Resolution. To benefit mutually from the time and cost savings of
arbitration over the delay and expense of the use of the federal and state court systems, all
disputes involving this Letter Agreement, including claims of violations of federal or state
discrimination statutes or public policy, shall be resolved pursuant to binding arbitration in
Texas. The award of the arbitrators shall be final and binding and judgment upon the award
may be entered in any court having jurisdiction thereof. This procedure shall be the
exclusive means of settling any disputes that may arise under this Letter Agreement.
All fees and expenses of the arbitrators and all other expenses of the arbitration, except for
attorneys’ fees and witness expenses, shall be shared equally by you and the Company. Each
party shall bear its own witness expenses and attorneys’ fees. Nothing in this Section 13
shall be construed as to deny the Company the right and power to seek and obtain injunctive
relief in a court of competent jurisdiction for any breach or threatened breach by you of the
covenants in this Letter Agreement.]







	14.	 	Representations. You represent and warrant to the Company that your continued
employment and the performance of your duties for the Company will not conflict with or result
in a violation or breach of, or constitute a default under any contract, agreement or
understanding to which you are or were a party or of which you are aware and that there are no
restrictions, covenants, agreements or limitations on your right or ability to enter into and
perform the terms of this Letter Agreement. You further represent and warrant to the Company
that as of the date hereof you are not aware of any material violation of any federal or state
law or regulation or requirements of any stock exchange or quotation system which is
applicable to you in your capacity as a member of the Board and Chief Executive Officer of the
Company, and in the event that you become aware of any such violation, you will immediately
disclose it to the Board.





 


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	15.	 	Entire Agreement. This Letter Agreement supersedes all previous and contemporaneous
communications, agreements and understandings, whether oral or written, between you, on the
one hand, and the Company or any of its affiliates, on the other hand, including the
employment agreement between you and the Company entered into as of September 8, 2006, and
constitutes the sole and entire agreement between you and the Company pertaining to the
subject matter hereof.







	16.	 	Counterparts. This Letter Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become a binding agreement
when one or more counterparts have been signed by each party and delivered to the other party.







	17.	 	Survival. The obligations you and the Company under this Letter Agreement which by
their nature may require either partial or total performance after the expiration of the
Employment Term shall survive such expiration.






*      *     *     *




 


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If the foregoing is acceptable to you, kindly sign and return to us one copy of this letter.



	 	 	 	 	 
	 	Sincerely yours,



Home Solutions of American, Inc.

 	 
	 	By:  	/s/ Michael J. McGrath
 	 
	 	 	Name:  	Michael J. McGrath 	 
	 	 	Title:  	Chairman of the Board of Directors 	 




	 	 	 	 	 
	AGREED TO AND ACCEPTED BY:	 	 
	 
	 	 	 	 
	By:

	 	/s/ Frank J. Fradella	 	 
	 

	 	 

Frank Fradella
	 	 






 


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EXHIBIT A




TERMINATION CERTIFICATION




I hereby certify that my employment with Home Solutions of America, Inc. (the “Company”)
has terminated effective as of                                         , and that as of
                                        , I have fully complied with all of my obligations in Section
5.3(c)(iii) of the Letter Agreement I entered into with the Company as of May      , 2008.



	 	 	 
	 

	 	 
	 

	 	Frank J. Fradella
	 
	 	 
	 

	 	 
	 

	 	Date signed









 


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