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**PARTNERSHIP INTEREST PURCHASE AGREEMENT**** **

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**BY AND AMONG**

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**HOME SOLUTIONS OF AMERICA, INC.**

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**FSS HOLDING CORP.**

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**GRASSMERE COMPUTER PRODUCTS, INC.**

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**AND**

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**MERRITT COMPUTER PRODUCTS, L.P.****(D/B/A AMHERST MERRITT INTERNATIONAL) **

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**FOR THE ACQUISITION OF 100% OF THE OUTSTANDING PARTNERSHIP INTERESTSINFIBER-SEAL SYSTEMS, L.P. **

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**July 31, 2003**

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**PARTNERSHIPINTEREST PURCHASE AGREEMENT**

This Partnership Interest Purchase Agreement (this "**Agreement**") isentered into as of July 31, 2003 (the "**Closing Date**"), by and among HomeSolutions of America, Inc., a Delaware corporation ("**HSOA**"), FSS HoldingCorp., a Texas corporation and wholly-owned subsidiary of HSOA ("**SUBSIDIARY**"),Grassmere Computer Products, Inc., a Texas corporation ("**GRASSMERE**"),and Merritt Computer Products, L.P. d/b/a Amherst Merritt International, aTexas limited partnership ("**AMHERST**").  HSOA, SUBSIDIARY, GRASSMERE, andAMHERST are referred to herein individually as a "**Party**" andcollectively as the "**Parties**."

**WITNESSETH:**             

            WHEREAS, Fiber-SealSystems, L.P., a Texas limited partnership ("**FIBER-SEAL**") is currentlyengaged in the business of selling and franchising the Fiber-Seal® furniture care system;

WHEREAS,GRASSMERE and AMHERST (together, the "**PARTNERS**") own an aggregate of100% of the outstanding partnership interests in FIBER-SEAL; and 

            WHEREAS,the PARTNERS desire for FIBER-SEAL to become a wholly-owned subsidiary of HSOA,through the sale by the PARTNERS to HSOA and SUBSIDIARY of 100% of theoutstanding partnership interests in FIBER-SEAL, and HSOA desires to so acquireFIBER-SEAL as a wholly-owned subsidiary, in exchange for shares of common stockof HSOA and other consideration to be paid to the PARTNERS.

NOW, THEREFORE, in consideration of the foregoing premises and the mutualundertakings and covenants herein, and for such other good and valuableconsideration the receipt and sufficiency of which are hereby acknowledged, theparties to this Agreement hereby agree as follows:

**ARTICLE ITHE PARTNERSHIP INTEREST PURCHASE**

1.1             The Partnership Interest Purchase.  Upon the execution of this Agreement, subjectto the terms and conditions hereof and in reliance on the representations andwarranties made pursuant hereto, (a) GRASSMERE hereby sells to SUBSIDIARY, andSUBSIDIARY hereby purchases from GRASSMERE, GRASSMERE's 0.1% partnershipinterest in FIBER-SEAL (the "**GRASSMERE Interest**"), and (b) AMHERSThereby sells to HSOA, and HSOA hereby purchases from AMHERST, AMHERST's 99.9%partnership interest in FIBER-SEAL (the "**AMHERST Interest**") (together,the GRASSMERE Interest and the AMHERST Interest are referred to herein as the "**Fiber-SealInterests**"), for the consideration set forth in Section 1.2 hereof.

1.2             Consideration.  In consideration for HSOA's purchase of theAMHERST Interest and SUBSIDIARY's purchase of the GRASSMERE Interest, HSOAshall issue the PARTNERS the following consideration:

 

(a)        an aggregate of300,000 shares (the "**HSOA Shares**") of common stock, $.001 par value pershare, of HSOA ("**HSOA Common Stock**") (299,700 shares shall be issued toAMHERST (the "**AMHERST Shares**") and 300 shares shall be issued toGRASSMERE (the "**GRASSMERE Shares**"); provided, however, that 30,000 ofthe AMHERST Shares (the "**Escrow Shares**") shall be delivered to theEscrow Agent and held in escrow subject to the Escrow Agreement (definedbelow);

(b)        a subordinatedpromissory note issued to AMHERST in the original principal amount of $520,000,in the form attached hereto as Exhibit A (the "**Note**"), secured byHSOA's and SUBSIDIARY's pledge to AMHERST of the Fiber-Seal Interests pursuantto a Partnership Interest Pledge Agreement in the form attached hereto as ExhibitB (the "**Pledge Agreement**");

(c)        a warrant issued to AMHERSTto purchase 250,000 shares of HSOA Common Stock, at an exercise price of $2.00per share, subject to certain vesting requirements, in the form attached heretoas Exhibit C (the "**Warrant**").

1.3             Escrow.  On the Closing Date,HSOA, AMHERST, and the Escrow Agent (as defined in the Escrow Agreement) shallenter into an Escrow Agreement substantially in the form attached hereto as Exhibit D(the "**Escrow Agreement**").  On the Closing Date, (i) HSOA shalldeliver to the Escrow Agent a stock certificate issued in AMHERST's namerepresenting the Escrow Shares, as described in Section 1.2(a), for thepurpose of securing the indemnification obligations of AMHERST and GRASSMEREset forth in this Agreement, and (ii) AMHERST shall deliver to the EscrowAgent a stock power in blank, duly executed by AMHERST.  The Escrow Sharesshall be held by the Escrow Agent under the Escrow Agreement pursuant to theterms thereof.  The Escrow Shares shall be held as a trust fund and shall notbe subject to any lien, attachment, trustee process or any other judicialprocess of any creditor of any party, and shall be held and disbursed solelyfor the purposes and in accordance with the terms of the Escrow Agreement.

1.4             The Closing.  The closing of the transactions contemplated bythis Agreement (the "**Closing**") shall take place at the offices of HSOAin Houston, Texas. 

1.5              Actions at the Closing.  At the Closing, (a) each PARTNER shall deliveran executed assignment that assigns its respective Fiber-Seal Interest to HSOAor SUBSIDIARY, as the case may be, along with the minute book and allorganizational documents of FIBER-SEAL, and (b) HSOA shall deliver theWarrant,  Note, and Pledge Agreement to AMHERST, and (c) additionally, eachParty shall execute and deliver to the other Party such additional agreementsas required by the conditions set forth in Article IV.  Within three businessdays following the Closing, HSOA shall deliver (i) stock certificatesrepresenting the GRASSMERE Shares to GRASSMERE, (ii) stock certificates representingthe Escrow Shares to the Escrow Agent, (iii) stock certificates representingall of the AMHERST Shares other than the Escrow Shares to AMHERST.

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**ARTICLE II****REPRESENTATIONS ANDWARRANTIES OFTHE PARTNERS**

Except as set forth in the FIBER-SEAL Disclosure Schedule attached hereto(which schedule shall be arranged in paragraphs corresponding to the numberedand lettered paragraphs contained in this Article II, and the disclosuresin any paragraph of the FIBER-SEAL Disclosure Schedule shall qualify only thecorresponding paragraph in this Article II, the "**FIBER-SEAL DisclosureSchedule**"), the PARTNERS each jointly and severally represent and warrantto HSOA, as of the Closing Date (which representations and warranties shallsurvive the Closing to the extent provided in Section 5.3 hereof), as follows;provided, however, that, notwithstanding any language in this Agreement to thecontrary, such representations and warranties shall be limited to events thathave occurred during the time that the PARTNERS have owned FIBER-SEAL, or July1, 2002:

2.1             Organization, Qualification and Corporate Power.  FIBER-SEAL is a limited partnership dulyorganized, validly existing and in good standing under the laws of the State of  Texas.  FIBER-SEAL is duly qualified to conduct business and is in goodstanding under the laws of each jurisdiction in which the nature of itsbusiness or the ownership or leasing of its properties requires suchqualification, except where the failure to be so qualified would not have aMaterial Adverse Effect (as defined in Article VII) on the business, businessprospects, assets, results of operations or financial condition of FIBER-SEAL. FIBER-SEAL has all requisite power and authority to carry on the business inwhich it is engaged and to own and use the properties owned and used by it. FIBER-SEAL has furnished to HSOA true and complete copies of its organizationaldocuments, each as amended and as in effect on the date hereof.  On the ClosingDate, FIBER-SEAL is not in default under or in violation of any provision ofits organizational documents.

2.2             Capitalization.

(a)        On the Closing Date,the capitalization of FIBER-SEAL consists of a 0.1% general partners' interest,which is the GRASSMERE Interest, and a 99.9% limited partners' interest, whichis the AMHERST Interest.  The Fiber-Seal Interests are duly authorized, validlyissued, fully paid, nonassessable and free of preemptive rights.  There are nooutstanding or authorized options, warrants, rights, agreements or commitmentsto which FIBER-SEAL is a party or which are binding upon FIBER-SEAL providingfor the issuance, disposition or acquisition of any partnership interest. There are no agreements, voting trusts, proxies, or understandings with respectto the voting, or registration under the Securities Act of 1933, as amended(the "**Securities Act**"), of any Fiber-Seal Interest.  All of the issuedand outstanding Fiber-Seal Interests was issued in compliance with applicablefederal and state securities laws.

(b)        There are no equitysecurities of any class of FIBER-SEAL or any security exchangeable into orexercisable for such equity securities, issued, reserved for issuance oroutstanding.  There are no options, warrants, equity securities, calls, rights,commitments or agreements of any character to which FIBER-SEAL or eitherPARTNER is a party or by which it is bound obligating FIBER-SEAL or eitherPARTNER to issue, deliver or sell, or cause to be issued, delivered or sold,existing or additional securities of FIBER-SEAL or obligating FIBER-SEAL togrant, extend, accelerate the vesting of or enter into any such option,warrant, equity security, call, right, commitment or agreement, including as a resultof the transaction contemplated by this Agreement.

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2.3             Good Title to Fiber-Seal Interests.  GRASSMERE owns beneficially and of record, andhas good and indefeasible title to, the GRASSMERE Interest, free of allSecurity Interests (defined in Article VII), pledges, charges, liens, orencumbrances of any kind.  AMHERST owns beneficially and of record, and hasgood and indefeasible title to, the AMHERST Interest, free of all SecurityInterests, pledges, charges, liens, or encumbrances of any kind.  NeitherPARTNER acquired any of the Fiber-Seal Interests in violation of any preemptiveright of any Person (as defined in Article VII).

2.4             Authorization of  AMHERST.  AMHERST has all requisite power and authorityto execute and deliver this Agreement and to perform its respective obligationshereunder.  The performance by AMHERST under this Agreement and theconsummation by AMHERST of the transactions contemplated hereby have been dulyand validly authorized by all necessary corporate action on the part ofAMHERST.  This Agreement has been duly and validly executed and delivered byAMHERST and constitutes a valid and binding obligation of AMHERST, enforceableagainst it in accordance with its terms, except as enforceability may belimited by bankruptcy, insolvency, reorganization, moratorium and other lawsaffecting creditor's rights generally, or by general equitable principles, andto the extent any indemnification or contribution provisions thereof may belimited by applicable federal or state securities laws.

2.5             Authorization of GRASSMERE.  GRASSMERE has all requisite power and authority to execute and deliver this Agreement and to perform itsrespective obligations hereunder.  The performance by GRASSMERE under thisAgreement and the consummation by GRASSMERE of the transactions contemplatedhereby have been duly and validly authorized by all necessary corporate actionon the part of GRASSMERE.  This Agreement has been duly and validly executedand delivered by GRASSMERE and constitutes a valid and binding obligation ofGRASSMERE, enforceable against it in accordance with its terms, except asenforceability may be limited by bankruptcy, insolvency, reorganization,moratorium and other laws affecting creditor's rights generally, or by generalequitable principles, and to the extent any indemnification or contributionprovisions thereof may be limited by applicable federal or state securitieslaws.

2.6             Noncontravention.  Except as disclosed on Section 2.6 of theFIBER-SEAL Disclosure Schedule, neither the execution and delivery of thisAgreement by the PARTNERS, nor the consummation of the transactionscontemplated hereby, will (a) conflict with or violate any provision ofthe organizational documents of FIBER-SEAL, (b) require on the part ofFIBER-SEAL any filing with, or any permit, authorization, consent or approval of,any court, arbitrational tribunal, administrative agency or commission orGovernmental Authority (as defined in Article VII), (c)  conflict with,result in a breach of, constitute (with or without due notice or lapse of timeor both) a default under, result in the acceleration of, create in any partythe right to accelerate, terminate, modify or cancel, or require any notice,consent or waiver under, any contract, lease, sublease, license, sublicense,franchise, permit, indenture, agreement or mortgage for borrowed money,instrument of indebtedness, Security Interest or other arrangement to whichFIBER-SEAL is a party or by which FIBER-SEAL is bound or to which any of itsassets is subject, (d) result in the imposition of any Security Interestupon any assets of FIBER-SEAL or (e) violate any order, writ, injunction,decree, statute, rule or regulation applicable to FIBER-SEAL or any of itsproperties or assets.  By executing this Agreement, each PARTNER hereby giveswritten consent to the other PARTNER's sale of its Fiber-Seal Interest, asrequired under Section 6.1 of the FIBER-SEAL Limited Partnership Agreementdated June 21, 2002.

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2.7               No Subsidiaries.  There is no corporation, partnership, or otherbusiness enterprise in which FIBER-SEAL has any direct or indirect equityinterest.

2.8             Financial Statements.  FIBER-SEAL hasprovided to HSOA the unaudited balance sheets and statements of income, changesin partnership capital and cash flows of FIBER-SEAL as of and for the yearended December 31, 2002, and as of and for the three-month period ended March31, 2003 (the balance sheet included therein and dated as of March 31, 2003,being referred to herein as (the "**Most Recent Balance Sheet**").  Suchfinancial statements (collectively, the "**Financial Statements**") havebeen prepared in accordance with GAAP applied on a consistent basis throughoutthe periods covered thereby, fairly present the financial condition, results ofoperations and cash flows of FIBER-SEAL as of the respective dates thereof andfor the periods referred to therein and are consistent with the books andrecords of FIBER-SEAL.  FIBER-SEAL has never retained an independent accountingfirm to conduct an audit of its financial statements. 

2.9             Internal Accounting Controls.  FIBER-SEAL (a) keeps books, records, andaccounts that accurately, fairly, and in reasonable detail reflect its assetsand transactions, and (b) maintains a system of internal accounting controlssufficient to provide reasonable assurance that (i) transactions are accuratelyand promptly recorded to permit the preparation of its financial statements,(ii) transactions are executed in accordance with management's specific orgeneral authorizations, and (iii) access to its assets is permitted only inaccordance with management's general or specific authorization.

2.10         Undisclosed Liabilities.  FIBER-SEAL has no liability (whether known orunknown, whether absolute or contingent, whether liquidated or unliquidated andwhether due or to become due, including without limitation any liability fortaxes and interest, penalties, and other charges payable with respect to any suchliability or obligation), except for (a) liabilities shown on the MostRecent Balance Sheet, (b) liabilities which have arisen since the MostRecent Balance Sheet in the Ordinary Course of Business (as defined in ArticleVII) and not in excess of $25,000 in the aggregate or $2,500 individually and(c) contractual liabilities incurred in the Ordinary Course of Businessthat are not required by GAAP to be reflected on a balance sheet and aredisclosed on Section 2.10 of the FIBER-SEAL Disclosure Schedule.

2.11         Absence of Certain Changes.  Except as providedfor or contemplated in this Agreement, or disclosed on Section 2.11 of theFIBER-SEAL Disclosure Schedule, since January 1, 2003, with respect toFIBER-SEAL, there has not been:

(a)        anytransaction not in the Ordinary Course of Business that has had or could have aMaterial Adverse Effect;

(b)       any change in the business, property, assets, liabilities (whether absolute,accrued, contingent, or otherwise), operations, liquidity, income, condition(financial or otherwise), prospects, or net worth of FIBER-SEAL that has had orcould have a Material Adverse Effect;

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(c)        distributionsof any assets of any kind to the PARTNERS, or a redemption, or agreement orauthorization to redeem any Fiber-Seal Interest;            

(d)        anydamage, destruction, or loss, extraordinary or otherwise and whether or notcovered by insurance, that has had or could have a Material Adverse Effect;

(e)        any materialamendment permitted or made with regard to any material contract, license, oragreement to which FIBER-SEAL is a party;

(f)         anyacquisition or disposition by FIBER-SEAL of any property or asset, whether realor personal, having a fair market value in an amount greater than $5,000;

(g)        anymortgage, pledge, or subjection to lien, charge, or encumbrance of any kind oron any of the respective properties or assets of FIBER-SEAL;

(h)        anyincrease in, or commitment to increase, the compensation payable or to becomepayable to any officer, director, employee, or agent of FIBER-SEAL, or anybonus payment or similar arrangement made to or with any of such officers,directors, employees, or agents;

(i)         anyincurrence of, guarantee of, assumption of, or taking any property subject to,any liability;

(j)         anyadoption of a plan or agreement or amendment to any plan or agreement providingany new or additional benefits for officers, directors, or employees;

(k)        anymaterial alteration in the manner of keeping the books, accounts, or records ofFIBER-SEAL, or in the accounting practices therein reflected; 

(l)         anyrelease or discharge of any obligation or liability of any Person to FIBER-SEALof any nature whatsoever;

(m)       anydelay by FIBER-SEAL in paying any debt, charge, or amount owed by it in excessof 30 days past the date such amount was due;

(n)        anyincrease or decrease of (i) any amounts charged for services rendered orproducts sold by FIBER-SEAL; or (ii) inventory ordered;

(o)        anyfacts or circumstances that may reasonably result in the loss of customers,suppliers, or vendors, including without limitation, any notices, statements,or circumstances indicating that any customer, supplier, or vendor has or willterminate or alter its business relationship with FIBER-SEAL;  

(p)        anyloan to any officer, partner, or any Affiliate (as defined in Article VII)thereof;

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(q)        anyother event or condition of any character which has had or could have aMaterial Adverse Effect; or

(r)        anyagreement or authorization to do any of the above.

2.12         Tax Matters.

(a)               FIBER-SEAL has filed all Tax Returns (as defined below) that it wasrequired to file prior to the date of this Agreement and all such Tax Returnswere correct and complete in all material respects.  FIBER-SEAL has paid allTaxes (as defined below) that are shown to be due on any such Tax Returns.  Theunpaid Taxes of FIBER-SEAL for tax periods through the date of the Most RecentBalance Sheet do not exceed the accruals and reserves for Taxes set forth onthe Most Recent Balance Sheet.  FIBER-SEAL has no actual or potential liabilityfor any Tax obligation of any taxpayer (including without limitation anyaffiliated group of corporations or other entities that included FIBER-SEALduring a prior period) other than FIBER-SEAL.  All Taxes that either FIBER-SEALis or was required by law to withhold or collect have been duly withheld orcollected and, to the extent required, have been paid to the properGovernmental Authority.  For purposes of this Agreement, "**Taxes**" meansall taxes, charges, fees, levies or other similar assessments or liabilities,including without limitation income, gross receipts, ad valorem, premium,value-added, excise, real property, personal property, sales, use, transfer,withholding, employment, payroll and franchise taxes imposed by the UnitedStates of America or any state, local or foreign government, or any agencythereof, or other political subdivision of the United States or any suchgovernment, and any interest, fines, penalties, assessments or additions to taxresulting from, attributable to or incurred in connection with any tax or anycontest or dispute thereof.  For purposes of this Agreement, "**Tax Returns**"means all reports, returns, declarations, statements or other information requiredto be supplied to a taxing authority in connection with Taxes.

(b)              FIBER-SEAL has delivered to HSOA correct and complete copies of allfederal income Tax Returns, examination reports and statements of deficienciesassessed against or agreed to by FIBER-SEAL since January 1, 2000 that it has in its possession.  To the Knowledge of the PARTNERS (as defined in Article VII) thefederal income Tax Returns of FIBER-SEAL have never been audited by theInternal Revenue Service.  No examination or audit of any Tax Returns ofFIBER-SEAL by any Governmental Authority is currently in progress or, to theKnowledge of either PARTNER, threatened or contemplated.  FIBER-SEAL has notwaived any statute of limitations with respect to Taxes or agreed to anextension of time with respect to a tax assessment or deficiency.

2.13         Assets. FIBER-SEAL owns or leases all tangible assets necessary and sufficient for theconduct of its businesses as presently conducted and as presently proposed tobe conducted.  Each such tangible asset is free from material defects, has beenmaintained in accordance with normal industry practice, is in good operatingcondition and repair (subject to normal wear and tear) and is suitable for thepurposes for which it presently is used.  No asset of FIBER-SEAL  (tangible orintangible) is subject to any Security Interest, except as disclosed on Section2.13 of the FIBER-SEAL Disclosure Schedule.

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2.14         Real Property.  FIBER-SEAL does notown any real property.

2.15         Intellectual Property.

(a)               FIBER-SEAL owns or has the right to use all Intellectual Property (asdefined below) necessary for, or used in, the operation of its business aspresently conducted (the "**FIBER-SEAL Intellectual Property**"). Each itemof FIBER-SEAL Intellectual Property will continue to be owned or available foruse by FIBER-SEAL on and after the Closing Date. FIBER-SEAL has taken allreasonable measures to protect the proprietary nature of each item ofFIBER-SEAL Intellectual Property, and to maintain in confidence all tradesecrets and confidential information that it owns or uses, including, withoutlimitation, maintaining all registrations and paying all fees associatedtherewith. To the Knowledge of either PARTNER, (a) no other Person has anyrights to any FIBER-SEAL Intellectual Property owned by FIBER-SEAL, and (b) noother Person is infringing, violating or misappropriating any FIBER-SEALIntellectual Property. FIBER-SEAL has made available to HSOA complete andaccurate copies of all written documentation in FIBER-SEAL's possessionrelating to claims or disputes known to any of them concerning any item ofFIBER-SEAL Intellectual Property. For purposes of this Agreement, "**IntellectualProperty**" means all (i) patents and patent applications, (ii) copyrightsand registrations thereof, (iii) mask works and registrations and applicationsfor registration thereof, (iv) computer software, data and documentation, (v)trade secrets and confidential business information, whether patentable orunpatentable and whether or not reduced to practice, know‐how,manufacturing and production processes and techniques, research and developmentinformation, copyrightable works, financial, marketing and business data,pricing and cost information, business and marketing plans and customer andsupplier lists and information, (vi) trademarks, service marks, trade names andapplications and registrations therefor and (vii) other proprietary rightsrelating to any of the foregoing. Section 2.15(a) of the FIBER-SEAL DisclosureSchedule lists each patent, patent application, copyright registration orapplication therefor, and trademark or service mark registration or applicationtherefor of FIBER-SEAL .

(b)              None of the activities or business presently conducted by FIBER-SEALinfringes or violates, or constitutes a misappropriation of, any IntellectualProperty rights of any Person.  FIBER-SEAL has not received any complaint,claim or notice alleging any such infringement, violation or misappropriation,and no such claim has been threatened by any third party.

(c)               Section 2.15(c) of the FIBER-SEAL Disclosure Schedule identifies eachlicense or other agreement (or type of license or other agreement) pursuant towhich FIBER-SEAL has licensed, distributed or otherwise granted any rights toany third party with respect to, any of the FIBER-SEAL Intellectual Property.

(d)              Section 2.15(d) of the FIBER-SEAL Disclosure Schedule identifies eachitem of FIBER-SEAL Intellectual Property that is owned by a party other thanFIBER-SEAL, and the license or agreement pursuant to which FIBER-SEAL uses it(excluding off‐the‐shelf software programs licensed by FIBER-SEALpursuant to "shrink wrap" licenses).

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2.16         Inventory.  All inventory ofFIBER-SEAL, whether or not reflected on the Most Recent Balance Sheet, consistsof a quality and quantity that are useable and saleable in the Ordinary Courseof Business, except for obsolete items and items of below-standard quality, allof which have been written-off, written-down to net realizable value orotherwise provided for on the Most Recent Balance Sheet.  The quantities ofeach type of inventory, whether raw materials, work-in-process or finishedgoods, are not excessive in the present circumstances of FIBER-SEAL.  Section2.16 of the FIBER-SEAL Disclosure Schedule lists all of FIBER-SEAL's work inprocess (identified by project), the percentage of completion of each suchproject, costs incurred to date, estimated gross profit, and total contractprice with respect to each such project.

2.17         Real Property Leases.  Section 2.17of the FIBER-SEAL Disclosure Schedule lists and describes briefly all realproperty leased or subleased to FIBER-SEAL and lists the term of any suchlease, any extension and expansion options, and the rent payable thereunder. FIBER-SEAL has delivered to HSOA correct and complete copies of the leases andsubleases (as amended to date) listed in Section 2.17 of the FIBER-SEALDisclosure Schedule.  With respect to each lease and sublease listed inSection 2.17 of the FIBER-SEAL Disclosure Schedule:

(a)               the lease or sublease is legal, valid, binding, enforceable and in fullforce and effect;

(b)              the lease or sublease will continue to be legal, valid, binding,enforceable and in full force and effect on and immediately following theClosing Date in accordance with the terms thereof as in effect prior to theClosing Date;

(c)               no party to the lease or sublease is in breach or default, and no eventhas occurred which, with notice or lapse of time, would constitute a breach ordefault or permit termination, modification, or acceleration thereunder;

(d)              there are no disputes, oral agreements or forbearance programs in effectas to the lease or sublease;

(e)               FIBER-SEAL has not assigned, transferred, conveyed, mortgaged, deeded intrust or encumbered any interest in the leasehold or subleasehold; 

(f)                all facilities leased or subleased thereunder are supplied withutilities and other services necessary for the operation of said facilities;and

(g)               to the Knowledge of either PARTNER, the owner of the facility leased orsubleased has good and clear record and marketable title to the parcel of realproperty, free and clear of any Security Interest, easement, covenant or otherrestriction, except for recorded easements, covenants, and other restrictionsthat do not impair the intended uses, occupancy or value of the propertysubject thereto.

2.18         Contracts.  Section 2.18of the FIBER-SEAL Disclosure Schedule lists the following written arrangements(including without limitation written agreements) to which FIBER-SEAL is aparty:

(a)               any written arrangement (or group of related written arrangements) forthe lease of personal property from or to third parties providing for leasepayments in excess of $5,000 per annum;

(b)              any written arrangement (or group of related written arrangements) forthe purchase or sale of raw materials, commodities, supplies, products or otherpersonal property or for the furnishing or receipt of services (i) whichcalls for performance over a period of more than one year, (ii) whichinvolves more than the sum of $5,000, or (iii) in which FIBER-SEAL (A) hasgranted manufacturing rights, (B) has granted "most favored nation" pricingprovisions or exclusive marketing or distribution rights relating to anyproducts or territory, (C) has agreed to purchase a minimum quantity of goodsor services, or (D) has agreed to purchase goods or services exclusively from acertain party;

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(c)               any written arrangement establishing a partnership or joint venture;

(d)              any written arrangement (or group of related written arrangements) underwhich it has created, incurred, assumed, or guaranteed (or may create, incur,assume, or guarantee) indebtedness (including capitalized lease obligations)involving more than $15,000 or under which it has imposed (or may impose) aSecurity Interest on any of its assets, tangible or intangible;

(e)               any written arrangement concerning confidentiality or noncompetition;

(f)                any written arrangement involving either PARTNER or any of theirAffiliates;

(g)               any written arrangement under which the consequences of a default ortermination could have a Material Adverse Effect on the assets, business,financial condition, results of operations or future prospects of FIBER-SEAL,taken as a whole; and

(h)               any other written arrangement (or group of related written arrangements)currently in existence or which any provisions thereof are currently binding onFIBER-SEAL either (x) involving more than $15,000 or (y) not entered into inthe Ordinary Course of Business.

            FIBER-SEAL has delivered to HSOA a correct and complete copyof each written arrangement (as amended to date) listed in Section 2.18 ofthe FIBER-SEAL Disclosure Schedule. With respect to each written arrangement solisted:  (i) the written arrangement is legal, valid, binding andenforceable and in full force and effect; (ii) the written arrangementwill continue to be legal, valid, binding and enforceable and in full force andeffect on and immediately following the Closing Date in accordance with theterms thereof as in effect prior to the Closing Date, subject to obtaining anyconsents required by such arrangement that are listed on Section 2.6 ofthe FIBER-SEAL Disclosure Schedule; and (iii) no party is in breach ordefault, and no event has occurred which with notice or lapse of time wouldconstitute a breach or default or permit termination, modification, oracceleration, under the written arrangement.  FIBER-SEAL is not party to anyoral contract, agreement or other arrangement that, if reduced to written form,would be required to be listed in Section 2.18 of the FIBER-SEALDisclosure Schedule under the terms of this Section 2.18.  

2.19         Accounts Receivable.  All accountsreceivable of FIBER-SEAL reflected on the Most Recent Balance Sheet are validreceivables subject to no setoffs or counterclaims and are current andcollectible (within 60 days after the date on which it first became due andpayable), net of the applicable reserve for bad debts on the Most RecentBalance Sheet.  All accounts receivable reflected in the financial oraccounting records of FIBER-SEAL that have arisen since the Most Recent BalanceSheet are valid receivables subject to no setoffs or counterclaims and arecollectible, net of a reserve for bad debts in an amount proportionate to thereserve shown on the Most Recent Balance Sheet.  Section 2.19 of the FIBER-SEALDisclosure Schedule lists an aging schedule of all accounts receivable.

2.20         Powers of Attorney.  There are nooutstanding powers of attorney executed on behalf of FIBER-SEAL .

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2.21         Insurance.  Section 2.21 of the FIBER-SEAL DisclosureSchedule sets forth the name of the insurer, the name of the policyholder, thename of each covered insured, and the policy number, period of coverage, amountof insurance, and annual premium in respect of each such policy (includingfire, theft, casualty, general liability, workers compensation, businessinterruption, environmental, product liability and automobile insurancepolicies and bond and surety arrangements) to which FIBER-SEAL has been aparty, a named insured, or otherwise the beneficiary of coverage at any timewithin the past five years.  (i) Each such insurance policy is enforceableand in full force and effect; (ii) such policy will continue to beenforceable and in full force and effect on and immediately following theClosing Date in accordance with the terms thereof as in effect prior to theClosing Date, subject to obtaining any consents required pursuant to suchpolicy that are listed on Section 2.6 of the FIBER-SEAL DisclosureSchedule; (iii) FIBER-SEAL is not in breach or default (including withrespect to the payment of premiums or the giving of notices) under such policy,and no event has occurred which, with notice or the lapse of time, wouldconstitute such a breach or default or permit termination, modification oracceleration, under such policy; and (iv) FIBER-SEAL has not received anynotice from the insurer disclaiming coverage or reserving rights with respectto a particular claim or such policy in general.  FIBER-SEAL has not incurredany loss, damage, expense or liability covered by any such insurance policy forwhich it has not properly asserted a claim under such policy.  FIBER-SEAL iscovered by insurance in scope and amount customary and reasonable for thebusiness in which it is engaged.

2.22         No Litigation.  There are no investigations, actions, suits, orclaims pending or threatened against FIBER-SEAL or either PARTNER involving anyof their respective properties or assets, whether at law or in equity, beforeor by any foreign, federal, state, municipal, or other governmental court,department, commission, board, bureau, agency, instrumentality, or other Person(a "**Proceeding**"), which may have a Material Adverse Effect uponFIBER-SEAL or the Fiber-Seal Interest.

2.23         No Warranties.  No product sold or service provided byFIBER-SEAL is subject to any guaranty, warranty, or other indemnity that, ifenforced, either individually or in the aggregate, would have a MaterialAdverse Effect on FIBER-SEAL.  

2.24         Employees; Labor Matters.  Section 2.24 of the FIBER-SEAL DisclosureSchedule contains a list of all employees of FIBER-SEAL, along with theposition and the annual rate of compensation of each such person and the amountand date of each such employee's last raise.  To the Knowledge of eitherPARTNER, no key employee or group of employees of FIBER-SEAL has any plans toterminate employment with FIBER-SEAL.  There are no disputes, employeegrievances or disciplinary actions pending, or to the Knowledge of eitherPARTNER, threatened, involving FIBER-SEAL and any of its present or formeremployees.  FIBER-SEAL has complied with all provisions of law relating toemployment and employment practices, terms and conditions of employment, wagesand hours, the failure to comply with which would have a Material AdverseEffect upon FIBER-SEAL, taken as a whole.  FIBER-SEAL is not engaged in anyunfair labor practice and it does not have any liability for any arrears ofwages or Taxes or penalties for failure to comply with any such provisions oflaw.  FIBER-SEAL is not a party to or bound by any collective bargainingagreement, and it has not experienced any strikes, grievances, claims of unfairlabor practices or other collective bargaining disputes.  Neither PARTNER hasany Knowledge of any organizational effort made or threatened, either currentlyor within the past two years, by or on behalf of any labor union with respectto employees of FIBER-SEAL.

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2.25         Employee Benefits.

(a)                 Neither FIBER-SEAL nor any ERISA Affiliate (as defined below) hasmaintained, or contributed to, any Employee Benefit Plan (as defined below). For purposes of this Agreement, "**Employee Benefit Plan**" means any"employee pension benefit plan" (as defined in Section 3(2) of theEmployee Retirement Income Security Act of 1974, as amended ("**ERISA**")),any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA),and any other written or oral plan, agreement or arrangement involving director indirect compensation, including without limitation insurance coverage,severance benefits, disability benefits, deferred compensation, bonuses, stockoptions, stock purchase, phantom stock, stock appreciation or other forms ofincentive compensation or post-retirement compensation.  For purposes of thisAgreement, "**ERISA Affiliate**" means any entity which is a member of(i) a controlled group of corporations (as defined in Section 414(b)of the Code), (ii) a group of trades or businesses under common control(as defined in Section 414(c) of the Code), or (iii) an affiliatedservice group (as defined under Section 414(m) of the Code or theregulations under Section 414(o) of the Code), any of which includesFIBER-SEAL.

(b)              Section 2.25(b) of the FIBER-SEAL Disclosure Schedule discloseseach: (i) agreement with any director, executive officer or other keyemployee of FIBER-SEAL  (A) the benefits of which are contingent, or theterms of which are materially altered, upon the occurrence of a transactioninvolving FIBER-SEAL of the nature of any of the transactions contemplated bythis Agreement, (B) providing any term of employment or compensationguarantee or (C) providing severance benefits or other benefits after thetermination of employment of such director, executive officer or key employee;(ii) agreement, plan or arrangement under which any Person may receivepayments from FIBER-SEAL  that may be subject to the tax imposed bySection 4999 of the Code or included in the determination of such person's"parachute payment" under Section 280G of the Code; and(iii) agreement or plan binding FIBER-SEAL , including without limitationany stock option plan, stock appreciation right plan, restricted stock plan,stock purchase plan, severance benefit plan, or any Employee Benefit Plan, anyof the benefits of which will be increased, or the vesting of the benefits ofwhich will be accelerated, by the occurrence of any of the transactionscontemplated by this Agreement or the value of any of the benefits of whichwill be calculated on the basis of any of the transactions contemplated by thisAgreement. 

2.26         Environmental Matters.

(a)               FIBER-SEAL has complied with all applicable Environmental Laws (as definedin Article VII), except for violations of Environmental Laws that do not andwill not, individually or in the aggregate, have a Material Adverse Effect onthe assets, business, financial condition, results of operations or futureprospects of FIBER-SEAL, taken as a whole.  There is no pending or, to theKnowledge of either PARTNER, threatened civil or criminal litigation, writtennotice of violation, formal administrative proceeding, or investigation,inquiry or information request by any Governmental Authority, relating to anyEnvironmental Law involving FIBER-SEAL, except for litigation, notices ofviolations, formal administrative proceedings or investigations, inquiries orinformation requests that will not, individually or in the aggregate, have a MaterialAdverse Effect on the assets, business, financial condition, results ofoperations or future prospects of FIBER-SEAL, taken as a whole. 

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(b)              There have been no releases of any Materials of Environmental Concern(as defined below) into the environment at any parcel of real property or anyfacility formerly or currently owned, operated or controlled by FIBER-SEAL.With respect to any such releases of Materials of Environmental Concern,FIBER-SEAL has given all required notices to Governmental Authorities (copiesof which have been provided to HSOA).  FIBER-SEAL is not aware of any releasesof Materials of Environmental Concern at parcels of real property or facilitiesowned, operated or controlled by persons other than FIBER-SEAL that couldreasonably be expected to have an impact on the real property or facilitiesowned, operated or controlled by FIBER-SEAL.  For purposes of this Agreement, "**Materialsof Environmental Concern**" means any chemicals, pollutants or contaminants,hazardous substances (as such term is defined under CERCLA), solid wastes andhazardous wastes (as such terms are defined under the Federal ResourcesConservation and Recovery Act), toxic materials, oil or petroleum and petroleumproducts, or any other material subject to regulation under any EnvironmentalLaw.

(c)               Set forth in Section 2.26(c) of the FIBER-SEAL Disclosure Scheduleis a list of all environmental reports, investigations and audits relating topremises currently or previously owned or operated by FIBER-SEAL  (whetherconducted by or on behalf of FIBER-SEAL or a third party, and whether done atthe initiative of FIBER-SEAL or directed by a Governmental Authority or otherthird party) which were issued or conducted during the past five years andwhich FIBER-SEAL  has possession of or access to.  Complete and accurate copiesof each such report, or the results of each such investigation or audit, havebeen provided to HSOA.  

(d)              Set forth in Section 2.26(d) of the FIBER-SEAL Disclosure Scheduleis a list of all of the solid and hazardous waste transporters and treatment,storage and disposal facilities that have been utilized by FIBER-SEAL since November 19, 1980.  FIBER-SEAL is not aware of any material environmental liabilityof any such transporter or facility.

2.27         Legal Compliance.  FIBER-SEAL and the conduct and operations ofits business are in compliance with each law (including rules and regulationsthereunder) of any federal, state, local or foreign government, or anyGovernmental Authority, which (a) affects or relates to this Agreement orthe transactions contemplated hereby or (b) is applicable to FIBER-SEAL orits business.

2.28         Permits.  Section 2.28 of the FIBER-SEAL DisclosureSchedule sets forth a list of all permits, licenses, registrations,certificates, orders or approvals from any Governmental Authority (includingwithout limitation those issued or required under Environmental Laws and thoserelating to the occupancy or use of owned or leased real property) ("**Permits**")issued to or held by FIBER-SEAL.  Such listed Permits are the only Permits thatare required for FIBER-SEAL to conduct its business as presently conducted oras proposed to be conducted, except for those the absence of which would not,individually or in the aggregate, have a Material Adverse Effect on FIBER-SEAL,taken as a whole.  Each such Permit is in full force and effect and, to theKnowledge of either PARTNER, no suspension or cancellation of such Permit isthreatened and there is no basis for believing that such Permit will not berenewable upon expiration.  Each such Permit will continue in full force andeffect on and following the Closing Date.

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2.29         Certain Business Relationships With Affiliates.  Except for those transactions described inSection 2.29 of the FIBER-SEAL Disclosure Schedule, no Affiliate ofFIBER-SEAL (a) owns any property or right, tangible or intangible, whichis used in the business of FIBER-SEAL, (b) has any claim or cause ofaction against FIBER-SEAL, or (c) owes any money to, or is owed money by,FIBER-SEAL.

2.30         [NOT USED]

2.31         Books and Records.  FIBER-SEAL has furnished or made available toHSOA or its representatives for their examination true and complete copies ofFIBER-SEAL's books and records and its partnership interest transfer books.

2.32         Customers and Suppliers.  No unfilled customer order or commitment obligatingFIBER-SEAL to deliver products or perform services will result in a loss toFIBER-SEAL upon completion of performance.  No purchase order or commitment ofFIBER-SEAL is in excess of normal requirements, nor are prices provided thereinin excess of current market prices for the products or services to be providedthereunder.  No Material supplier of FIBER-SEAL has indicated within the pastyear that it will stop, or materially decrease the rate of, supplyingmaterials, products or services to FIBER-SEAL and no Material customer ofFIBER-SEAL has indicated within the past year that it will stop, or materiallydecrease the rate of, buying, leasing or licensing materials, products orservices from it. Section 2.32 of the FIBER-SEAL Disclosure Schedule setsforth a list of (a) each customer that accounted for more than 5% of therevenues of FIBER-SEAL during the last full fiscal year or the interim periodthrough the Most Recent Balance Sheet and the approximate amount of revenuesaccounted for by such customer during each such period and (b) eachsupplier that is the sole supplier of any significant product or component toFIBER-SEAL.

2.33         [NOT USED]

2.34         Government Contracts.  FIBER-SEAL has never been, nor as a result ofthe consummation of the transactions contemplated by this Agreement is itreasonable to expect that it will be, suspended or debarred from bidding oncontracts or subcontracts for any agency of the United States government, norhas such suspension or debarment been threatened or action for such suspensionor debarment been commenced. FIBER-SEAL has never been nor is it now beingaudited or investigated by the United States Government Accounting Office, theUnited States Department of Justice, the United States Department of Defense orany of its agencies, the Defense Contract Audit Agency or the inspector generalof any agency of the United States government, nor has such audit orinvestigation been threatened. There is no valid basis for FIBER-SEAL's suspensionor debarment from bidding on contracts or subcontracts for any agency of theUnited States government and there is no valid basis for a claim pursuant to anaudit or investigation by the United States Government Accounting Office, theUnited States Department of Justice, the United States Department of Defense orany of its agencies, the Defense Contract Audit Agency or the inspector generalof any agency of the United States government, or any prime contractor.

2.35         Absence of Questionable Payments.  To the Knowledge of the PARTNERS, neitherFIBER-SEAL nor any owner, officer, agent, employee or other Person acting onbehalf of FIBER-SEAL has (a) used any of FIBER-SEAL's funds for improper or unlawfulcontributions, payments, gifts or entertainment, or made any improper orunlawful expenditures relating to political activity to government officials orothers; (b) accepted or received any improper or unlawful contributions,payments, gifts or expenditures; (c) directly or indirectly given or agreed togive any gift or similar benefit to any customer, contractor, government,employee, or other Person who was or is in a possible position to help orhinder FIBER-SEAL, which gift or benefit (i) might subject FIBER-SEAL to anydamages or penalties in any civil or criminal proceeding, (ii) might have had aMaterial Adverse Effect, or (iii) might have a Material Adverse Effect if notcontinued.

 

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2.36         Bank Accounts.  Section 2.36 of the FIBER-SEAL DisclosureSchedule sets forth the names and locations of all banks, trust companies,savings and loan associations and other financial institutions at whichFIBER-SEAL maintains safe deposit boxes or accounts of any nature and the namesof all persons authorized to draw thereon, make withdrawals therefrom or haveaccess thereto.

2.37         Health of O'Brien.  To either PARTNER's Knowledge, Rick J. O'Brienis free from any terminal or disabling disease, affliction, or condition, orany disease, affliction, or condition that with the passage of time will becomea terminal or disabling disease, affliction, or condition, and Rick J. O'Brienhas no materially adverse medical history, nor, does he have in his past, anyfacts, circumstances, or symptoms that would reasonably indicate, to eitherPARTNER's Knowledge, that he may have a terminal or disabling disease,affliction, or condition.

2.38         Purchase Entirely for Own Account.  As more fully represented by the PARTNERS intheir respective Investor's Representation Statement executed as of the ClosingDate, each PARTNER represents to HSOA that the HSOA Shares to be issued to thePARTNERS hereunder are being acquired for investment for such PARTNER's ownaccount, not as a nominee or agent, and not with a view to the resale ordistribution of any part thereof, other than to the partners of AMHERST (andtheir partners as well), and that neither PARTNER has any present intention ofselling, granting any participation in, or otherwise distributing the same(except as noted above).  By executing this Agreement, each PARTNER furtherrepresents that it or he does not have any contract, undertaking, agreement orarrangement with any person to sell, transfer or grant participations to suchperson or to any third person with respect to any of the HSOA Shares.

**ARTICLE III****REPRESENTATIONS AND WARRANTIES OF HSOA**

HSOA represents and warrants to the PARTNERS, asof the Closing Date (which representations and warranties shall survive theClosing to the extent provided in Section 5.3 hereof), as follows:

3.1             Organization.  HSOA is a corporation duly organized, validlyexisting and in good standing under the laws of the State of Delaware. SUBSIDIARY is a corporation duly organized, validly existing and in goodstanding under the laws of the State of Texas.  HSOA is duly qualified toconduct business and is in corporate and tax good standing under the laws ofeach jurisdiction in which the nature of its business or the ownership orleasing of its properties requires such qualification, except where the failureto be so qualified would not have a Material Adverse Effect on HSOA or itssubsidiaries, taken as a whole.  HSOA has all requisite corporate power andauthority to carry on the business in which it is engaged and to own and usethe properties owned and used by it.  HSOA is not in default under or inviolation of any provision of its Certificate of Incorporation or Bylaws as ofthe Closing Date.

3.2             Capitalization.  The authorized capital stock of HSOA consistsof 50,000,000 shares of HSOA Common Stock, of which approximately 12,850,000shares are issued and outstanding on the date hereof (excluding the HSOA Sharesand any shares issued in connection with HSOA's acquisition of Horizon Cleaning& Restoration, Inc.), and 1,000,000 shares of preferred stock, $.001 parvalue per share, of which no shares are issued and outstanding on the datehereof.  All of the issued and outstanding shares of HSOA Common Stock are dulyauthorized, validly issued, fully paid, nonassessable and free of allpreemptive rights.  All of the HSOA Shares will be, when issued in accordancewith this Agreement, duly authorized, validly issued, fully paid, nonassessableand free and clear of all liens, claims, pledges, options, adverse claims orcharges of any nature whatsoever, other than the provisions of the EscrowAgreement with regard to the AMHERST Shares.  As of the date hereof, HSOA hasoutstanding under its stock option plans option grants to purchaseapproximately 2,000,000 shares of HSOA Common Stock, excluding any optionscontemplated by this Agreement and the transactions contemplated hereby.  HSOAalso has outstanding warrants (excluding the Warrant and shares that could bepurchased thereby) to purchase approximately 1,900,000 shares of HSOA CommonStock.

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3.3             Authorization of Transaction.  HSOA and SUBSIDIARY each have all requisitepower and authority to execute and deliver this Agreement and to perform theirobligations hereunder.  The execution, delivery, and performance of thisAgreement, and the consummation of the transactions contemplated hereby by HSOAhave been duly and validly authorized by all necessary corporate action on thepart of HSOA.  This Agreement has been duly and validly executed and deliveredby HSOA and constitutes a valid and binding obligation of HSOA, enforceableagainst it in accordance with its terms, except as enforceability may belimited by bankruptcy, insolvency, reorganization, moratorium and other lawsaffecting creditor's rights generally, or by general equitable principles, andto the extent any indemnification or contribution provisions thereof may belimited by applicable federal or state securities laws.

3.4             Noncontravention.  Neither the execution and delivery of thisAgreement nor the consummation by HSOA of the transactions contemplated herebywill (a) conflict with or violate any provision of the certificate ofincorporation or Bylaws of HSOA, (b) require on the part of HSOA anyfiling with, or permit, authorization, consent or approval of, any GovernmentalAuthority, other than any filing, permit, authorization, consent or approvalwhich if not obtained or made would not have a Material Adverse Effect on theassets, business, financial condition, results of operations or futureprospects of HSOA or on the ability of the Parties to consummate thetransactions contemplated by this Agreement, (c) conflict with, result inbreach of, constitute (with or without due notice or lapse of time or both) adefault under, result in the acceleration of, create in any party any right toaccelerate, terminate, modify or cancel, or require any notice, consent orwaiver under, any Material contract, lease, sublease, license, sublicense,franchise, permit, indenture, agreement or mortgage for borrowed money,instrument of indebtedness, Security Interest or other arrangement to whichHSOA is a party or by which either is bound or to which any of their assets aresubject, other than any conflict, breach, default, acceleration, termination,modification or cancellation which individually or in the aggregate would nothave a Material Adverse Effect on the assets, business, financial condition,results of operations or future prospects of HSOA or on the ability of theParties to consummate the transactions contemplated by this Agreement, or(d) violate any order, writ, injunction, decree, statute, rule orregulation applicable to HSOA or any of their properties or assets.

3.5             Reports and Financial Statements.  The PARTNERS have had access to, via the EDGARsystem of the U.S. Securities and Exchange Commission (the "**SEC**"), eachreport, schedule and proxy statement filed by HSOA with the SEC dating back toJanuary 1, 2000 (collectively, the "**HSOA Reports**") or before.  As oftheir respective dates, the HSOA Reports did not contain any untrue statementof a material fact or omit to state a material fact required to be statedtherein or necessary to make the statements therein, in light of thecircumstances under which they were made, not misleading.  To the Knowledge ofsenior management of HSOA, no Material adverse development has occurred withrespect to HSOA's business since its most recently filed Form 10-KSB or Form10-QSB, except as disclosed in any HSOA Report (including, without limitation,any Form 8-K) filed or amended after the date of such Form 10-KSB or Form10-QSB and except for any changes in the economy in general (or in the overallindustry in which HSOA operates) or in any stock market or trading system(including, without limitation, any change in the value of any trading indiceswith respect thereto).

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**ARTICLE IV****CONDITIONS TOEFFECTIVENESS OF AGREEMENT**

4.1             Conditions to Each Party's Obligations.  The effectivenessof this Agreement on the Closing Date is subject to the satisfaction of thefollowing conditions:

(a)               no action, suit or proceeding shall be pending or threatened by orbefore any Governmental Authority wherein an unfavorable judgment, order,decree, stipulation or injunction would (i) prevent consummation of any ofthe transactions contemplated by this Agreement, (ii) cause any of thetransactions contemplated by this Agreement to be rescinded followingconsummation or (iii) affect adversely the right of HSOA to own, operateor control any of the assets and operations of FIBER-SEAL following theClosing, and no such judgment, order, decree, stipulation or injunction shallbe in effect;

(b)               the Parties shall have duly executed and delivered this Agreement;

(c)               the delivery by HSOA of the HSOA Shares as set forth in Section 1.2(a)hereof;

(d)              the execution and delivery by HSOA to AMHERST of the Note, the PledgeAgreement (herein so called), and the Warrant;

(e)               the execution and delivery by HSOA, AMHERST and Escrow Agent of theEscrow Agreement, and the execution and delivery of a blank stock power for theEscrow Shares;

(f)                the execution and delivery by HSOA/FIBER-SEAL and Rick J. O'Brien of anemployment agreement in the form attached hereto as Exhibit E;

(g)               the execution and delivery by HSOA and Rick J. O'Brien of a stock optionagreement in the form attached hereto as Exhibit F;

(h)               the execution and delivery by HSOA, AMHERST and GRASSMERE of aRepurchase Option Agreement in the form attached hereto as Exhibit G;

(i)                 the execution and delivery by HSOA and AMHERST of a Registration RightsAgreement in the form attached hereto as Exhibit H;

(j)                FIBER-SEAL shall have obtained any waiver, permit, consent, approval, orother authorization, and effected any registration, filing or notice, referredto in Section 2.6;

(k)              Each of the Parties to this Agreement shall have performed or compliedwith the agreements and covenants required to be performed or complied withunder this Agreement as of or prior to the Closing Date;

(l)                 HSOA shall have received an Investor's Representation Statement preparedjointly by the PARTNERS in the form attached hereto as Exhibit I.

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**ARTICLE V****INDEMNIFICATION**

5.1             Indemnification.

(a)               Each PARTNER shall jointly and severally indemnify HSOA, SUBSIDIARY,their successors and assigns, and the officers, directors, Affiliates,employees, shareholders, controlling persons and agents of HSOA and SUBSIDIARY(an "**HSOA Indemnified Person**"), and hold each of them harmless againstand in respect of any and all debts, obligations and other liabilities (whetherabsolute, accrued, contingent, fixed or otherwise, or whether known or unknown,or due or to become due or otherwise), monetary damages, fines, fees,penalties, interest obligations, deficiencies, losses and expenses (includingwithout limitation amounts paid in settlement, interest, court costs, costs ofinvestigators, fees and expenses of attorneys, accountants, financial advisorsand other experts, and other expenses of litigation) (collectively, "**Damages**")incurred or suffered by any of them by reason of (i) a breach of any of therepresentations or warranties made by either PARTNER in this Agreement, (ii)the failure of either PARTNER to have good, valid and marketable title to theissued and outstanding Fiber-Seal Interests, free and clear of all liens,claims, pledges, options, adverse claims or charges of any nature whatsoever,or (iii) any claim by a partner, former partner, or alleged partner ofFIBER-SEAL, or any other person (other than PARTNERS and their Affiliates),firm, corporation or entity, seeking to assert, or based upon:(A) ownership or rights to ownership of any equity interest in FIBER-SEAL;(B) any rights of a partner, including any option, preemptive rights orrights to notice or to vote; or (C) any claim that his, her or its equityinterest was wrongfully repurchased by FIBER-SEAL.

(b)              HSOA agrees to indemnify and to hold harmless each PARTNER and theirsuccessors and assigns, and the officers, directors, Affiliates, employees,partners, shareholders, controlling persons and agents of each PARTHER (a "**PARTNERIndemnified Person**") against and in respect of any and all Damages incurredor suffered by any of them by reason of (i) a breach of any of therepresentations or warranties made by HSOA or SUBSIDIARY in this Agreement, or(ii) the failure of the HSOA Shares to be duly authorized, validly issued,fully paid and nonassessable.

 

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5.2             Method of Asserting Claims.  

(a)               If any person entitled to indemnification pursuant to Section 5.1hereof (an "**Indemnitee**") is threatened in writing with any claim, or anyclaim is presented in writing to, or any action or proceeding is formallycommenced against, any of the Indemnitees which may give rise to the right ofindemnification hereunder, the Indemnitee will promptly give written noticethereof to each indemnifying party; provided, however, that any delay by anIndemnitee in so notifying the indemnifying party shall not relieve theindemnifying party of any liability to any of the Indemnitees hereunder exceptto the extent that the indemnifying party shall have been actually prejudicedas a result of such failure.

(b)              The indemnifying party or parties, by delivery of written notice to anIndemnitee within 30 days of notice of claim to indemnity from an Indemnitee,may elect to assume the defense of such claim, action or proceeding at theexpense of the indemnifying party; provided, however, that (i) unless suchwritten notice shall be accompanied by a written agreement of each indemnifyingparty acknowledging the liability of the indemnifying parties to theIndemnitees as a result of this Agreement for any indemnified damage which anyIndemnitee might incur or suffer as a result of such claim, action orproceeding or the contesting thereof, each indemnifying party shall be jointlyand severally liable for the attorneys' fees and expenses of the Indemnitee, ifany, incurred in connection with defending such claim; (ii) counsel undertakingsuch defense shall be reasonably acceptable to the Indemnitee; (iii) theindemnifying parties shall mutually elect to contest such claim, action orproceeding and shall conduct and settle such contest in a joint manner, and ifthe indemnifying parties shall fail at any time to agree, the Indemnitee shallhave no obligation to contest such claim, action or proceeding; and (iv) if theIndemnitee requests in writing that such claim, action or proceeding not to becontested, then it shall not be contested but shall not be covered by theindemnities provided herein. The indemnifying parties may settle anindemnifiable matter after delivering a written description of the proposedsettlement to and receiving consent from the Indemnitee. In the event theIndemnitee unreasonably declines to consent to such settlement, then theIndemnitee shall have no right to indemnification beyond the amount of theproposed settlement. In the event the indemnifying parties jointly elect tocontest an indemnifiable matter, HSOA and the PARTNERS shall permit the otherparty reasonable access to their respective books and records and shallotherwise cooperate in connection with such claim. If the indemnifying partiesdo not jointly elect to contest an indemnifiable matter, they shall cooperatewith the Indemnitee to the extent any of them has knowledge of facts orcircumstances relating to such matter, and the Indemnitee shall have theexclusive right to prosecute, defend, compromise, settle or pay any claim, butthe Indemnitee shall not be obligated to do so; provided, however, that, shouldthe Indemnitee elect not to exercise its right exclusively to prosecute,defend, compromise, settle or pay such claim, any indemnifying party may electto do so at its sole expense.

 

5.3             Survival.  The representations and warranties of theParties set forth in this Agreement shall survive the Closing and theconsummation of the transactions contemplated hereby and continue until 12months after the Closing Date and shall not be affected by any examination madefor or on behalf of any Party or the Knowledge of any of their respectiveofficers, directors, Partners, employees or agents. 

 

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5.4             Limitations on Indemnification. 

 

                        (a)        Notwithstandingany provision of this Agreement to the contrary, no HSOA Indemnified Persons orPARTNER Indemnified Persons shall be entitled to indemnification or tootherwise recover any amount unless and until one or more claims (of whateverindividual value) identifying Damages in excess of $25,000 in the aggregate(the "**Basket Amount**") has or have been delivered to the indemnifyingparty, in which case such HSOA Indemnified Persons or PARTNER IndemnifiedPersons shall be entitled to recover all Damages so identified.  Furthermore,in no event shall the liability of any indemnifying party exceed an aggregateof $1,120,000.  Notwithstanding the foregoing, no limitation on indemnificationcontained in this Section 5.4 shall apply to any Damages arising out of orrelating to intentional misrepresentations or actions constituting fraud byHSOA, SUBSIDIARY, or either PARTNER in connection with representations andactions pursuant to this Agreement.

 

                        (b)        Notwithstandingany provision of this Agreement to the contrary, no HSOA Indemnified Personshall be entitled to recover any amount pursuant to this Article V unless anduntil (i) the Note has been paid in full, or (ii) the HSOA Indemnified Personcan reasonably show that the Damages will remain following the exercise of the rightsto repurchase FIBER-SEAL Interests pursuant to the Repurchase Option Agreement. Thus, for example, if there is a breach of a representation regardinglitigation, FIBER-SEAL pays the expenses associated with such breachedrepresentation, and the FIBER-SEAL Interests are repurchased pursuant to theRepurchase Option Agreement, then no HSOA Indemnified Person is entitled to beindemnified for Damages attributable to such breached representations exceptfor those directly suffered by such Person.  

                        (c)        Anyamounts payable by a PARTNER to an HSOA Indemnified Person may be paid, at theelection of the PARTNER in either cash or HSOA Shares.  If the Damages are paidin HSOA Shares, the value of such shares shall be $2.00 per share (irrespectiveof the price at which they trade in the marketplace).

 

 

**ARTICLE VI****POST-CLOSING COVENANTS AND AGREEMENTS**

 

6.1             Non-Competition.  In order to ensure that HSOA will realize thebenefits of the transactions contemplated hereby, GRASSMERE and AMHERST, andeach of their respective Affiliates, hereby covenant and agree that they willnot, during the Restricted Period (defined below):

(a)        directlyor indirectly, in any capacity whatsoever, individually or on behalf of anyother person or entity, engage or invest in, own, manage, operate, finance,control, or participate in the ownership, management, operation, financing, orcontrol of, be employed by, associated with, or in any manner connected with,lend their name or any similar name to, lend their credit to or render servicesor advice to, any business engaged or about to become engaged in the Businessof HSOA, or any of its Affiliates, in the Market Area (defined below).  Forpurposes of this Agreement, the Business of HSOA and its Affiliates includes,but is not limited to, (i) all those products and services that are presently orhereafter marketed by HSOA or any of its Affiliates (including FIBER-SEAL), orthat are in the development stage on the last day of the Restricted Period;(ii) the business of selling and franchising the Fiber-Seal®furniture care system.

20

 

 

 

(b)        directlyor through an Affiliate, solicit any Person that is a Current Customer (asdefined in Article VII) of HSOA or its Affiliates for purposes of sellingproducts or services to such Person that are in competition with the productsand services offered or sold by HSOA or its Affiliates. 

(c)        employ,either directly or through an Affiliate, any employee of HSOA or its Affiliatesor any individual who was an employee of HSOA or its Affiliates during the 18months immediately preceding the Restricted Period, and agrees not to solicit,or contact in any manner that could reasonably be construed as a solicitation,either directly or through an Affiliate, any employee of HSOA or its Affiliatesfor the purpose of encouraging such employee to leave or terminate his or heremployment with HSOA or its Affiliates.

(d)        solicit,either directly or through an Affiliate, a vendor or supplier of HSOA or itsAffiliates for purposes of encouraging such vendor or supplier to cease ordiminish providing products or services to HSOA or its Affiliates, or to changeadversely the terms under which such vendor or supplier provides such productsor services to HSOA or its Affiliates.

(e)        interferewith HSOA's relationship with any Person who at the relevant time is anemployee, contractor, supplier, or customer of HSOA or its Affiliates.

(f)         Restricted Period. For purposes of this Section 6.1, the term "**Restricted Period**" means theperiod commencing with the Closing Date and terminating upon the earlier of:(i) July 31, 2006; (ii) the date on which the FIBER-SEAL is reacquired eitherpursuant to the Pledge Agreement or the Repurchase Option (which are beingexecuted simultaneously with this Agreement); or (iii) the date on which RickJ. O'Brien's employment agreement with HSOA (which is being executedsimultaneously with this Agreement) is terminated without "Cause" or with"Good Reason" as such terms are defined in such employment agreement.

(g)        Market Area.  For purposes of thisSection 6.1, the term "**Market Area**" means the State of Texas, and anyother state or province in which FIBER-SEAL has provided goods or serviceswithin the twelve months prior to the last day of the Restricted Period.

(h)        Reformation.  If any covenant in this Section 6.1 is held to beunreasonable, arbitrary, or against public policy, such covenant will beconsidered to be divisible with respect to scope, time, and geographic area,and such lesser scope, time, or geographic area, or all of them, as anarbitrator or a court of competent jurisdiction may determine to be reasonable,not arbitrary, and not against public policy, will be effective, binding, andenforceable against GRASSMERE.

            6.2       StockOption Grants.  Upon the Closing Date, HSOA shall seek the approval of itsBoard of Directors  to establish a pool of 60,000 stock options to grant toemployees of FIBER-SEAL, with individual grants made upon the recommendation ofRick J. O'Brien.

21

 

 

            6.3       Appointmentof O'Brien to HSOA's Board.  If AMHERST and GRASSMERE have not exercisedtheir repurchase option at the time such Repurchase Option expires, HSOA shallseek the approval of its Board of Directors to appoint Rick J. O'Brien toHSOA's Board of Directors immediately upon the expiration of the Repurchase Option.

**ARTICLE VII****DEFINITIONS**

            The following termsas used in this Agreement shall have the meanings set forth below:

            "**Affiliate**"shall mean, as to any Person, any Person controlled by, controlling, or undercommon control with such Person, and, in the case of a Person who is an individual,a member of the family of such individual consisting of a spouse, sibling,in-law, lineal descendant, or ancestor (including by adoption), and the spousesof any such individuals.  For purposes of this definition, "control" (includingthe terms "controlling", "controlled by" and "under common control with") of aPerson means the possession, directly or indirectly, alone or in concert withothers, of the power to direct or cause the direction of the management andpolicies of such Person, whether through the ownership of securities, bycontract or otherwise, and no Person shall be deemed in control of anothersolely by virtue of being a director, officer or holder of voting securities ofany entity.  A Person shall be presumed to control any partnership of whichsuch Person is a general partner.

            "**Code**" shallmean the Internal Revenue Code of 1986, as amended.  All references herein tosections of the Code shall include any corresponding provision or provisions ofsucceeding law.

            "**Current Customer**"shall mean any Person who is currently utilizing any product or service sold orprovided by HSOA or any of its Affiliates; any Person who utilized any suchproduct or service within the previous 12 months; and any Person with whom HSOAor any of its Affiliates is currently conducting negotiations concerning theutilization of such products or services.

            "**EnvironmentalLaws**" shall mean laws, including, without limitation, federal, state, orlocal laws, ordinances, rules, regulations, interpretations, and orders ofcourts or administrative agencies or authorities relating to pollution,environmental protection, health and safety, or similar laws (including,without limitation, ambient air, surface water, ground water, land surface, andsubsurface strata), including, without limitation, the ComprehensiveEnvironmental Response Compensation and Liability Act of 1980, as amended("CERCLA"), the Federal Clean Water Act ("CWA"), the Safe Drinking Water Act("SDWA"), the Resource Conservation and Recovery Act of 1976, as amended("RCRA"), the Clean Air Act ("CAA"), the Emergency Planning and Community Rightto Know Act ("EPCRA"), the Occupational Safety and Health Act ("OSHA"), andother laws relating to pollution or protection of the environment, or to themanufacturing, processing, distribution, use, treatment, handling, storage,disposal, or transportation of Polluting Substances (defined below).

22

 

 

            "**GovernmentalAuthority**" means any nation or government, any state, regional, local, orother political subdivision thereof, and any entity or official exercisingexecutive, legislative, judicial, regulatory or administrative functions of orpertaining to government.

            "**Knowledge**" -An individual shall be deemed to have "knowledge" of a particular fact or othermatter if (i) such individual is actually aware of such fact or other matter,or (ii) a prudent person serving in the same capacity as such individual wouldbe expected to discover or otherwise become aware of such fact or other matterin the course of performing the official duties of such individual.  Acorporation shall be deemed to have "knowledge" of a particular fact or othermatter if any individual serving as a director or officer (or in any similarcapacity) of the corporation has Knowledge (as set forth above) of such fact orother matter.  A PARTNER will be deemed to have Knowledge if, but only if, RickJ. O'Brien has such Knowledge.

            "**Material**"when capitalized and used in reference to the business, products or financialsituation of the party to which the reference relates shall be construed,except as specifically provided, to qualify the matter referred to herein tomatters with an effect on the financial condition of that party in excess of $25,000. When the word "material" is not capitalized it shall mean material with respectto the matter referenced.  For example, a reference to a material breach of aparticular agreement would mean a breach that is material with respect to theparticular contract (and not necessarily with respect to the overall businessof the party). 

            "**Material AdverseEffect**" means any development, change, or effect that is adverse to thebusiness, properties, tangible or intangible assets, net worth, condition(financial or other), results of operations, or business prospects of the partyto which the reference relates that is Material.

            "**Person**" shallhave the meaning given in Section 3(a)(9) of the Securities Exchange Act of1934, as amended, as modified and used in Sections 13(d)(3) and 14(d)(2) ofsuch act.  

            "**Polluting Substances**"shall be construed broadly to include (a) asbestos, (b) petroleum products orwastes, (c) biomedical or biological wastes, and (d) all pollutants,contaminants, chemicals, or industrial, toxic, or hazardous substances orwastes and shall include, without limitation, any flammable explosives,radioactive materials, oil, hazardous materials, hazardous or solid wastes,hazardous or toxic substances or regulated materials defined in CERCLA, CWA,SDWA, RCRA, EPCRA, and CAA and/or any other Environmental Laws, as amended, andin the regulations adopted and publications promulgated thereto; provided, tothe extent that the laws of the State of Massachusetts establish a meaning for"hazardous substance," "hazardous waste," "hazardous materials," "solid waste,"or "toxic substance," which is broader than that specified in any of  CERCLA,CWA, SDWA, RCRA, EPCRA, and CAA or other Environmental Laws such broadermeaning shall apply.

            "**Security Interest**"means any mortgage, pledge, security interest, encumbrance, charge, or otherlien (whether arising by contract or by operation of law), other than(i) mechanic's, materialmen's, and similar liens, (ii) liens arisingunder worker's compensation, unemployment insurance, social security,retirement, and similar legislation, and (iii) liens on goods in transitincurred pursuant to documentary letters of credit, in each case arising in theordinary course of business consistent with past custom and practice and inamount (including with respect to frequency and amount) ("**Ordinary Course ofBusiness**") that would not have a Material Adverse Effect, taken as a whole.

 

23

 

**ARTICLE VIII****MISCELLANEOUS**

8.1             Press Releases and Announcements.  No Party shall issue any press release orpublic disclosure relating to the subject matter of this Agreement without theprior written approval of the other Parties; provided, however,that any Party may make any public disclosure it believes in good faith isrequired by law or regulation (in which case the disclosing Party shall advisethe other Parties and provide them with a copy of the proposed disclosure priorto making the disclosure).

8.2             No Third Party Beneficiaries.  This Agreement shall not confer any rights orremedies upon any person other than the Parties and their respective successorsand permitted assigns.

8.3             Entire Agreement.  This Agreement (including the documentsreferred to herein) constitutes the entire agreement among the Parties andsupersedes any prior understandings, agreements, or representations by or amongthe Parties, written or oral, with respect to the subject matter hereof,including the letter of intent dated March 13, 2003, and any nondisclosureagreement entered into prior to the date hereof.

8.4             Succession and Assignment.  This Agreement shall be binding upon and inureto the benefit of the Parties named herein and their respective successors andpermitted assigns.  No Party may assign either this Agreement or any of itsrights, interests, or obligations hereunder without the prior written approvalof the other Parties.  By executing this Agreement, GRASSMERE and AMHERSThereby assign to HSOA any and all rights of indemnification from the party fromwhom they acquired FIBER-SEAL and/or FIBER-SEAL's existing operations, andGRASSMERE and AMHERST agree to cooperate fully with HSOA in obtaining suchindemnification on behalf of HSOA if such circumstances arise.  

8.5             Counterparts.  This Agreement may be executed in two or morecounterparts, each of which shall be deemed an original but all of whichtogether shall constitute one and the same instrument.  Facsimile signaturesdelivered shall be deemed to constitute originals.

8.6             Headings.  The section headings contained in thisAgreement are inserted for convenience only and shall not affect in any way themeaning or interpretation of this Agreement. 

8.7             Notices.  All notices,requests, demands, claims, and other communications hereunder shall be inwriting.  Any notice, request, demand, claim, or other communication hereundershall be deemed duly delivered two business days after it is sent by registeredor certified mail, return receipt requested, postage prepaid; one business dayafter it is sent via a reputable nationwide overnight courier service; or uponreceipt if delivered personally, in each case to the intended recipient as setforth below:

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If to either PARTNER:

Copy to:

Rick J. O'Brien  5565 Red Bird Center Drive  Suite 150  Dallas, TX 75237

Scot O'Brien, Esq.  Hallett & Perrin, P.C.    2001 Bryan Street, Suite 3900  Dallas, TX 75201
      
If to HSOA or SUBSIDIARY:

Copy to:

R. Andrew White  President and CEO  Home Solutions of America, Inc.  11850 Jones Road  Houston, Texas 77070

J. Paul Caver, Esq.  3102 Maple Avenue   Suite 220     Dallas, Texas 75201

Any Party may give any notice, request, demand, claim, or othercommunication hereunder using any other means, but no such notice, request,demand, claim, or other communication shall be deemed to have been duly givenunless and until it actually is received by the party for whom it is intended. Any Party may change the address to which notices, requests, demands, claims,and other communications hereunder are to be delivered by giving the otherParties notice in the manner herein set forth.

8.8             Governing Law.  This Agreement shall be governed by andconstrued in accordance with the internal laws (and not the law of conflicts)of the State of Delaware.

8.9             Amendments and Waivers.  No amendment of any provision of this Agreementshall be valid unless the same shall be in writing and signed by all of theParties.  No waiver by any Party of any default, misrepresentation, or breachof warranty or covenant hereunder, whether intentional or not, shall be deemedto extend to any prior or subsequent default, misrepresentation, or breach ofwarranty or covenant hereunder or affect in any way any rights arising byvirtue of any prior or subsequent such occurrence.

8.10         Severability.  Any term or provision of this Agreement that isinvalid or unenforceable in any situation in any jurisdiction shall not affectthe validity or enforceability of the remaining terms and provisions hereof orthe validity or enforceability of the offending term or provision in any other situationor in any other jurisdiction.  If the final judgment of a court of competentjurisdiction declares that any term or provision hereof is invalid orunenforceable, the Parties agree that the court making the determination ofinvalidity or unenforceability shall have the power to reduce the scope,duration, or area of the term or provision, to delete specific words orphrases, or to replace any invalid or unenforceable term or provision with aterm or provision that is valid and enforceable and that comes closest toexpressing the intention of the invalid or unenforceable term or provision, andthis Agreement shall be enforceable as so modified after the expiration of thetime within which the judgment may be appealed.

8.11         Expenses.  Each of the Parties shall bear its own costsand expenses (including legal fees and expenses) incurred in connection withthis Agreement and the transactions contemplated hereby, and FIBER-SEAL shallhave no liability for legal fees pertaining to this Agreement on the ClosingDate.

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8.12         Specific Performance.  Each of the Parties acknowledges and agreesthat one or more of the other Parties would be damaged irreparably in the eventany of the provisions of this Agreement are not performed in accordance withtheir specific terms or otherwise are breached.  Accordingly, each of theParties agrees that the other Parties shall be entitled to an injunction orinjunctions to prevent breaches of the provisions of this Agreement and toenforce specifically this Agreement and the terms and provisions hereof in anyaction instituted in any court of the United States or any state thereof havingjurisdiction over the Parties and the matter (subject to the provisions ofSection 8.13), in addition to any other remedy to which it may beentitled, at law or in equity.

8.13         Submission to Jurisdiction.  HSOA and SUBSIDIARY each hereby(a) submits to the jurisdiction of any state or federal court sitting inDallas County, Texas in any action or proceeding arising out of or relating tothis Agreement that is brought by GRASSMERE or AMHERST, and (b) agreesthat all claims in respect of such action or proceeding may be heard and determinedin any such court.  GRASSMERE and AMHERST each agrees not to bring any actionor proceeding arising out of or relating to this Agreement in any court otherthan one sitting in Dallas County, Texas.  GRASSMERE or AMHERST each hereby(a) submits to the jurisdiction of any state or federal court sitting inHarris County, Texas in any action or proceeding arising out of or relating tothis Agreement that is brought by HSOA or SUBSIDIARY, and (b) agrees thatall claims in respect of such action or proceeding may be heard and determinedin any such court.  HSOA and SUBSIDIARY each agrees not to bring any action orproceeding arising out of or relating to this Agreement in any other courtother than one sitting in Harris County, Texas.  Each of the Parties waives anydefense of inconvenient forum to the maintenance of any action or proceeding sobrought and waives any bond, surety or other security that might be required ofany other Party with respect thereto.  Any Party may make service on anotherParty by sending or delivering a copy of the process to the Party to be servedat the address and in the manner provided for the giving of notices inSection 8.7.  Nothing in this Section 8.13, however, shall affect theright of any Party to serve legal process in any other manner permitted by law.

8.14         Construction.  The language used in this Agreement shall bedeemed to be the language chosen by the Parties hereto to express their mutualintent, and no rule of strict construction shall be applied against any Party. Any reference to any federal, state, local, or foreign statute or law shall bedeemed also to refer to all rules and regulations promulgated thereunder,unless the context requires otherwise.  

8.15         Incorporation of Schedules.  The Schedules identified in this Agreement areincorporated herein by reference and made a part hereof.

[Remainderof page intentionally left blank.]

 

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IN WITNESS WHEREOF, the Partieshereto have executed this Agreement as of the date first above written.
 
**HOMESOLUTIONS OF AMERICA, INC.**
     
By:________________________________
 
      R.Andrew White
 
      Presidentand Chief Executive Officer
 **  ** 
**FSSHOLDING CORP.**
 
By:________________________________
 
      R.Andrew White
 
      President
 **  ** **  ** 
**PARTNERS:**
 **  ** 
**GRASSMERE COMPUTER PRODUCTS,INC.**
 
** **
 
** **
 
By:                                                                   
 
Name: Rick J. O'Brien
 
Title:     President
 
 
 
** **
 
**MERRITT COMPUTER PRODUCTS, L.P.**
 
**(d/b/a  AmherstMerritt International)**
    
By:       Grassmere ComputerProducts, Inc.
 
Its:        General Partner
   
By:                                                                   
 
Name: Rick J. O'Brien
 
Title:     President

 

 

27

**TABLE OF CONTENTS**

 
**Page**
**ARTICLE I THE PARTNERSHIP INTERESTPURCHASE**
 
1.1 The Partnership Interest Purchase
1
1.2 Consideration
1
1.3 Escrow
2
1.4 The Closing
2
1.5 Actions at the Closing
2
**ARTICLE II REPRESENTATIONS ANDWARRANTIES OF THE PARTNERS**
3
2.1 Organization, Qualification and Corporate Power
3
2.2 Capitalization
3
2.3 Good Title to Fiber-Seal Interests
4
2.4 Authorization of AMHERST
4
2.5 Authorization of GRASSMERE
4
2.6 Noncontravention
4
2.7 No Subsidiaries
5
2.8 Financial Statements
5
2.9 Internal Accounting Controls
5
2.10 Undisclosed Liabilities
5
2.11 Absence of Certain Changes
5
2.12 Tax Matters
7
2.13 Assets
7
2.14 Real Property
7
2.15 Intellectual Property
8
2.16 Inventory
8
2.17 Real Property Leases
9
2.18 Contracts
9
2.19 Accounts Receivable
10
2.20 Powers of Attorney
10
2.21 Insurance
11
2.22 No Litigation
11
2.23 No Warranties
11
2.24 Employees; Labor Matters
11
 

i

 

2.25 Employee Benefits   

12

2.26 Environmental Matters   

12

2.27 Legal Compliance   

13

2.28 Permits   

13

2.29 Certain Business Relationships With Affiliates   

13

2.30 [NOT USED   

14

2.31 Books and Records   

14

2.32 Customers and Suppliers   

14

2.33 [NOT USED   

13

2.34 Government Contracts   

14

2.35 Absence of Questionable Payments   

14

2.36 Bank Accounts   

15

2.37 Health of O'Brien   

15

2.38 Purchase Entirely for Own Account   

15

**ARTICLE III REPRESENTATIONS ANDWARRANTIES OF HSOA  **

15

3.1 Organization   

15

3.2 Capitalization   

15

3.3 Authorization of Transaction   

16

3.4 Noncontravention   

16

3.5 Reports and Financial Statements   

16

**ARTICLE IV CONDITIONS TO EFFECTIVENESSOF AGREEMENT  **

17

4.1 Conditions to Each Party's Obligations   

17

**ARTICLE V INDEMNIFICATION  **

18

5.1 Indemnification   

18

5.2 Method of Asserting Claims   

19

5.3 Survival   

19

5.4 Limitations on Indemnification   

20

**ARTICLE VI POST-CLOSING COVENANTS ANDAGREEMENTS  **

20

6.1 Non-Competition   

20

6.2 Stock Option Grants   

21

6.3 Appointment of O'Brien to HSOA's Board   

22

**ARTICLE VII DEFINITIONS  **

22

** **

ii

 

**ARTICLE VIII MISCELLANEOUS  **

24

8.1 Press Releases and Announcements   

24

8.2 No Third Party Beneficiaries   

24

8.3 Entire Agreement   

24

8.4 Succession and Assignment   

24

8.5 Counterparts   

24

8.6 Headings   

24

8.7 Notices   

24

8.8 Governing Law   

25

8.9 Amendments and Waivers   

25

8.10 Severability   

25

8.11 Expenses   

25

8.12 Specific Performance   

26

8.13 Submission to Jurisdiction   

26

8.14 Construction   

26

8.15 Incorporation of Schedules   

26

Exhibit A - Form of Promissory NoteExhibit B - Form of Partnership Interest Pledge AgreementExhibit C - Form of WarrantExhibit D - Form of Escrow AgreementExhibit E - Form of Employment AgreementExhibit F - Form of Stock Option AgreementExhibit G - Form of Repurchase Option AgreementExhibit H - Form of Registration Rights AgreementExhibit I   - Form of Investor's Representation Statement

FIBER-SEALDISCLOSURE SCHEDULES

iii

**EXHIBIT A**

**FORM OFPROMISSORY NOTE**

 

**EXHIBIT B**

**FORM OFPARTNERSHIP INTEREST PLEDGE AGREEMENT**

 

**EXHIBIT C**

**FORM OF WARRANT**

 

**EXHIBIT D**

**FORM OF ESCROWAGREEMENT**

 

**EXHIBIT E**

**FORM OFEMPLOYMENT AGREEMENT**

 

**EXHIBIT G**

**FORM OFREPURCHASE OPTION AGREEMENT**

 

**EXHIBIT H**

**FORM OFREGISTRATION RIGHTS AGREEMENT**

 

**EXHIBIT I**

**FORM OFINVESTOR'S REPRESENTATION STATEMENT**

** **

** **

**FIBER-SEAL DISCLOSURE SCHEDULES**