**THIS NOTE AND THE COMMON SHARESISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  THIS NOTEAND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVEREGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATESSECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO HOMESOLUTIONS OF AMERICA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.**

**SECURED REVOLVING NOTE**

FOR VALUE RECEIVED, HOME SOLUTIONS OF AMERICA, INC. a Delawarecorporation (the "**Borrower**") promises to pay to LAURUS MASTER FUND,LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., QueensgateHouse, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877(the "**Holder**") or its registered assigns, on order, the sum of TWOMILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) without duplication of anyamounts owing by Borrower to Holder under the Minimum Borrowing Notes (asdefined in the Security Agreement referred to below), or, if different, theaggregate principal amount of all "Loans" (as such term is defined in theSecurity Agreement referred to below), together with any accrued and unpaidinterest hereon, on January 22, 2006 (the "**Maturity Date**").

Capitalized terms used herein without definition shall have themeanings ascribed to such terms in the Security Agreement between Borrower andthe Holder dated as of January 22, 2004 (as amended, modified and supplementedfrom time to time, the "**Security Agreement**").

The following terms shall apply to thisNote:

**ARTICLE IINTEREST & PREPAYMENT**S

1.1.           Interest Rate and Payments.  Subject to Sections 5.3 and 6.7hereof, interest payable on this Note shall accrue at a rate per annum equal tothe "prime rate" published in The Wall Street Journal from time to time,plus two and one half percent (2.5%) (the "**Contract Rate**").  TheContract  Rate shall be increased or decreased as the case may be for eachincrease or decrease in the Prime Rate in an amount equal to such increase ordecrease in the Prime Rate; each change to be effective as of the day of thechange in such rate in accordance with the terms of the Security Agreement.Subject to the immediately following sentence, the Contract Rate hall not beless than six and one half percent (6.5%).  The Contract Rate shall be adjustedas follows: if (i) the Company shall have registered the shares of theCompany's common stock underlying the conversion of all currently issued andoutstanding Minimum Borrowing Notes and that certain warrant issued to Holderof even date herewith on a registration statement declared effective by theSecurities Exchange Commission, and (ii) the volume weighted average price ofthe Common Stock as reported by Bloomberg, L.P. on the principal market for anyof the ten (10) trading days immediately preceding a Interest Payment Date(defined below) exceeds the then applicable Fixed Conversion Price by twentyfive percent (25%), the Contract Rate for the succeeding calendar month shallautomatically be reduced by twenty five basis points (25 b.p.) for such period.Interest shall be payable monthly in arrears commencing on March 1, 2004 and onthe first day of each consecutive calendar month thereafter, (each, an "**InterestPayment Date**").

 

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1.2.           Optional Prepayment in Cash.  The Borrower will have the optionof prepaying this Note in full (but not in part) in cash, ("**OptionalRedemption**") by paying to the Holder a sum of money equal to one hundredten  (110%) of the principal amount of this Note together with accrued butunpaid interest thereon and any and all other sums due, accrued or payable tothe Holder arising under this Note, the Security Agreement, or any AncillaryAgreement  (as defined in the Security Agreement) (the "**Redemption Amount**")outstanding on the day written notice of redemption (the "**Notice ofRedemption**") is given to the Holder. The Notice of Redemption shall specifythe date for such Optional Redemption (the "**Redemption Payment Date**")which date shall  be seven (7) days after the date of the Notice of Redemption(the "**Redemption Period**") . A Notice of Redemption shall not beeffective with respect to any portion of this Note for which the Holder has apending election to convert pursuant to Section 3.1, or for conversions electedto be made by the Holder pursuant to Section 3.1 during the Redemption Period. The Redemption Amount shall be determined as if such Holder's conversionelections had been completed immediately prior to the date of the Notice ofRedemption. On the Redemption Payment Date, the Redemption Amount must be paidin good funds to the Holder.  In the event the Borrower fails to pay theRedemption Amount on the Redemption Payment Date, then such Redemption Noticewill be null and void.

1.3       Allocation of Principal to Minimum Borrowing Note.  Inthe event that the amount due and payable hereunder should equal or exceed$1,500,000, to the extent that the outstanding balance on Minimum BorrowingNote shall be less than $1,500,000 (the difference of $1,500,000 less theactual balance of the Minimum Borrowing Note, the "Available MinimumBorrowing"), such portion of the balance hereof as shall equal the AvailableMinimum Borrowing shall be deemed to be simultaneously extinguished on theRevolving Note and transferred to, and evidenced by, a Minimum Borrowing Note(e.g., the Available Minimum Borrowing shall be $0).

**ARTICLE IIHOLDER'S CONVERSION RIGHTS**

2.1.Optional Conversion. Subject to theterms of this Article II, the Holder shall have the right, but not theobligation, at any time until the Maturity Date, or thereafter during an Eventof Default (as defined in Article IV), and, subject to the limitations setforth in Section 2.2 hereof, to convert all or any portion of the outstandingprincipal amount and/or accrued interest and fees due and payable into fullypaid and nonassessable shares of the Common Stock at the Fixed ConversionPrice. For purposes hereof, subject to Section 3.5 hereof, the "**FixedConversion Price**" means $1.88 (105 % of the average of the closing price ofthe Common Stock for the ten (10) trading days immediately prior to the datehereof.)  The shares of Common Stock to be issued upon such conversion areherein referred to as the "**Conversion Shares**."  Notwithstanding theforegoing, the Holder's right to convert all or any portion of the outstandingprincipal amount and/or accrued interest and fees due and payable into fullypaid and nonassessable shares of the Common Stock at the Fixed Conversion Priceshall be subject to the limitation that the number of shares of Common Stockissued in connection with any such conversion shall not exceed 25% of theaggregate dollar trading volume of the Common Stock for the ten (10) tradingdays immediately preceding the date upon which such conversion is made byHolder (as such volume is reported by Bloomberg, L.P.

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2.2.           Conversion Limitation. Notwithstanding anything contained hereinto the contrary, the Holder shall not be entitled to convert pursuant to theterms of this Note an amount that would be convertible into that number ofConversion Shares which would exceed the difference between the number ofshares of Common Stock beneficially owned by such Holder or issuable uponexercise of warrants held by such Holder (and its affiliates) and 4.99% of theoutstanding shares of Common Stock of the Borrower.  For the purposes of theimmediately preceding sentence, beneficial ownership shall be determined inaccordance with Section 13(d) of the Exchange Act and Regulation 13d-3thereunder.  The Conversion Shares limitation described in this Section 2.2shall automatically become null and void without any notice to Borrower uponthe occurrence and during the continuance beyond any applicable grace period ofan Event of Default. 

2.3.           Mechanics of Holder's Conversion. In the event that the Holderelects to convert this Note into Common Stock, the Holder shall give notice ofsuch election by delivering an executed and completed notice of conversion ("**Noticeof Conversion**") to the Borrower and such Notice of Conversion shall providea breakdown in reasonable detail of the principal amount, accrued interest andfees that are being converted.  On each Conversion Date (as hereinafterdefined) and in accordance with its Notice of Conversion, the Holder shall makethe appropriate reduction to the principal amount, accrued interest and fees asentered in its records and shall provide written notice thereof to the Borrowerwithin two (2) business days after the Conversion Date.  Each date on which aNotice of Conversion is delivered or telecopied to the Borrower in accordancewith the provisions hereof shall be deemed a Conversion Date (the "**ConversionDate**").  A form of Notice of Conversion to be employed by the Holder isannexed hereto as Exhibit A.  Pursuant to the terms of the Notice ofConversion, the Borrower will issue instructions to the transfer agentaccompanied by an opinion of counsel within one (1) business day of the date ofthe delivery to Borrower of the Notice of Conversion  and shall cause thetransfer agent to transmit the certificates representing the Conversion Sharesto the Holder by crediting the account of the Holder's designated broker withthe Depository Trust Corporation ("**DTC**") through its Deposit WithdrawalAgent Commission ("**DWAC**") system within three (3) business days afterreceipt by the Borrower of the Notice of Conversion (the "**Delivery Date**"). In the case of the exercise of the conversion rights set forth herein theconversion privilege shall be deemed to have been exercised and the ConversionShares issuable upon such conversion shall be deemed to have been issued uponthe date of receipt by the Borrower of the Notice of Conversion.  The Holdershall be treated for all purposes as the record holder of such Common Stock,unless the Holder provides the Borrower written instructions to the contrary.

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2.4.           Late Payments. The Borrower understands that a delay in thedelivery of the shares of Common Stock in the form required pursuant to thisArticle beyond the Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss, the Borrower agrees to pay latepayments to the Holder for late issuance of such shares in the form requiredpursuant to this Article III upon conversion of the Note, in the amount equalto $400  per business day after the Delivery Date.  The Borrower shall pay anypayments incurred under this Section in immediately available funds upondemand.  

2.5.           Adjustment Provisions. The Fixed Conversion Price and number andkind of shares or other securities to be issued upon conversion determinedpursuant to Section 2.1 shall be subject to adjustment from time to time uponthe happening of certain events while this conversion right remainsoutstanding, as follows:

A.                Reclassification, etc.  If the Borrower at any time shall, byreclassification or otherwise, change the Common Stock into the same or adifferent number of securities of any class or classes, this Note, as to theunpaid principal amount and accrued interest thereon, shall thereafter bedeemed to evidence the right to purchase an adjusted number of such securitiesand kind of securities as would have been issuable as the result of such changewith respect to the Common Stock immediately prior to such reclassification orother change.

B.                Stock Splits, Combinations and Dividends.  If the shares ofCommon Stock are subdivided or combined into a greater or smaller number ofshares of Common Stock, or if a dividend is paid on the Common Stock in sharesof Common Stock, the Fixed Conversion Price shall be proportionately reduced incase of subdivision of shares or stock dividend or proportionately increased inthe case of combination of shares, in each such case by the ratio which thetotal number of shares of Common Stock outstanding immediately after such eventbears to the total number of shares of Common Stock outstanding immediatelyprior to such event.

C.                Share Issuances.  Subject to the provisions of thisSection 3.6, if the Borrower shall at any time prior to the conversion orrepayment in full of the principal amount issue any shares of Common Stock to aperson other than the Holder (except (i) pursuant to Subsections A or B above;(ii) pursuant to options, warrants, or other obligations to issue sharesoutstanding on the date hereof as disclosed to Holder in writing; or (iii)pursuant to options that may be issued under any employee incentive stockoption and/or any qualified stock option plan adopted by the Borrower) for aconsideration per share (the "**Offer Price**") less than the FixedConversion Price in effect at the time of such issuance, then the FixedConversion Price shall be immediately reset pursuantto the formula below.  For purposes hereof, the issuance of any security of theBorrower convertible into or exercisable or exchangeable for Common Stock shallresult in an adjustment to the Fixed Conversion Price at the time of issuanceof such securities.  If the Borrower issues anyadditional shares pursuant to this Subsection then, and thereafter successivelyupon each such issue, the Fixed Conversion Price shall be adjusted bymultiplying the then applicable Fixed Conversion Price by the followingfraction:

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| A + B                          |
|--------------------------------|
| (A + B) +  [((C - D) x B) / C] |

A = Actual shares outstanding priorto such offeringB =  Actual shares sold in theofferingC = Fixed Conversion PriceD = Offer Price

D.                such lower Offer Price. For purposes hereof, the issuance of anysecurity of the Borrower convertible into or exercisable or exchangeable forCommon Stock shall result in an adjustment to the Fixed Conversion Price onlyupon the conversion, exercise or exchange of such securities. 

E.                 Computation of Consideration. For purposes of any computationrespecting consideration received pursuant to Subsection C above, the followingshall apply:

(a)               in the case of the issuance of shares of Common Stock for cash, theconsideration shall be the amount of such cash, provided that in no case shallany deduction be made for any commissions, discounts or other expenses incurredby the Borrower for any underwriting of the issue or otherwise in connectiontherewith;

(b)              in the case of the issuance of shares of Common Stock for aconsideration in whole or in part other than cash, the consideration other thancash shall be deemed to be the fair market value thereof as determined in goodfaith by the Board of Directors of the Borrower (irrespective of the accountingtreatment thereof); and 

(c)               Upon any such exercise, the aggregate consideration received for suchsecurities shall be deemed to be the consideration received by the Borrower forthe issuance of such securities plus the additional minimum consideration, ifany, to be received by the Borrower upon the conversion or exchange thereof(the consideration in each case to be determined in the same manner as providedin clauses (a) and (b) of this Subsection (D)).

2.6.           Reservation of Shares. During the period the conversion rightexists, the Borrower will reserve from its authorized and unissued Common Stocka sufficient number of shares to provide for the issuance of Common Stock uponthe full conversion of this Note.  The Borrower represents that upon issuance,such shares will be duly and validly issued, fully paid and non-assessable. The Borrower agrees that its issuance of this Note shall constitute fullauthority to its officers, agents, and transfer agents who are charged with theduty of executing and issuing stock certificates to execute and issue thenecessary certificates for shares of Common Stock upon the conversion of thisNote.

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**ARTICLE IIIEVENTS OF DEFAULT**

The occurrence of any of the following events is an Event ofDefault ("**Event of Default**"):

3.1.           Failure to Pay Principal, Interest or other Fees.  The Borrowerfails to pay when due any installment of principal, interest or other feeshereon or on any other Note issued pursuant to the Security Agreement, when duein accordance with the terms of such Note.  

3.2.           Breach of Covenant.  The Borrower breaches any covenant or otherterm or condition of this Note in any material respect and such breach, ifsubject to cure, continues for a period of thirty (30) days after theoccurrence thereof.

3.3.           Breach of Representations and Warranties.  Any materialrepresentation or warranty of the Borrower made herein, or the SecurityAgreement, or in any Ancillary Agreement shall be materially false ormisleading.

3.4.           Stop Trade.  An SEC stop trade order or Principal Market tradingsuspension of the Common Stock shall be in effect for 5 consecutive days or 5days during a period of 10 consecutive days, excluding in all cases asuspension of all trading on a Principal Market, provided that the Borrowershall not have been able to cure such trading suspension within 30 days of thenotice thereof or list the Common Stock on another Principal Market within 60days of such notice.  The "Principal Market" for the Common Stock shall includethe NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National MarketSystem, American Stock Exchange, or New York Stock Exchange (whichever of theforegoing is at the time the principal trading exchange or market for theCommon Stock), or any securities exchange or other securities market on whichthe Common Stock is then being listed or traded.

3.5.           Default Under Related Agreement.  The occurrence of an Event ofDefault under and as defined in the Security Agreement.

4.6    Failure to Deliver Common Stock or Replacement Note. The Borrower's failure to timely deliver Common Stock to the Holder pursuant toand in the form required by this Note and Section 9 of the Security Agreementif such failure to timely deliver Common Stock shall not be cured within two(2) business days, or if required, the Borrower is required to issue to Holdera replacement Note, and the Borrower's failure to deliver a replacement Note isnot cured within seven (7) business days.

4.7       Payment Grace Period.  The Borrower shall havea three (3) business day grace period to pay any monetary amounts due underthis Note or the Security Agreement or any Related Document, after which graceperiod a default interest rate of five percent (5%) per annum above the thenapplicable interest rate hereunder shall apply to the monetary amounts due.

**ARTICLE IVDEFAULT PAYMENTS**

4.1.           Default Payment.  If an Event of Default occurs, the Holder, atits option, may elect, in addition to all rights and remedies of Holder underthe Security Agreement and all obligations of Borrower under the SecurityAgreement, to require the Borrower to make a Default Payment ("**DefaultPayment**").  The Default Payment shall be the outstanding principal amountof the Note, plus accrued but unpaid interest, all other fees then remainingunpaid, and all other amounts payable hereunder. 

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4.2.           Default Payment Date and Default Notice Period.  The DefaultPayment shall be due and payable on the fifth business day after an Event ofDefault as defined in Article III ("**Default Payment Date**") has occurredand is continuing beyond any applicable grace period.  The period between dateupon which of an Event of Default has occurred and is continuing beyond anyapplicable grace period and the Default Payment Date shall be the "**DefaultPeriod**."  If during the Default Period, the Borrower cures the Event ofDefault, the Event of Default will no longer exist and any additional rightsthe Holder had triggered by the occurrence and continuance of an Event ofDefault will no longer exist.  If the Event of Default is not cured during theDefault Notice Period, all amounts payable hereunder shall be due and payableon the Default Payment Date, all without further demand, presentment or notice,or grace period, all of which hereby are expressly waived.  

4.3.            Default Interest Rate.  Following the occurrence and during thecontinuance of an Event of Default, interest on this Note shall automaticallybe increased by five percent (5%) per annum, and all outstanding Obligations,including unpaid interest, shall continue to accrue interest from the date ofsuch Event of Default at such interest rate applicable to such Obligationsuntil such Event of Default is cured or waived.

4.4.           Cumulative Remedies.  The remedies under this Note shall becumulative.

**ARTICLE VMISCELLANEOUS**

5.1.           Failure or Indulgence Not Waiver.  No failure or delay on thepart of the Holder hereof in the exercise of any power, right or privilegehereunder shall operate as a waiver thereof, nor shall any single or partialexercise of any such power, right or privilege preclude other or furtherexercise thereof or of any other right, power or privilege.  All rights andremedies existing hereunder are cumulative to, and not exclusive of, any rightsor remedies otherwise available.

5.2.           Notices.  Any notice herein required or permitted to be givenshall be in writing and provided in accordance with the terms of the SecurityAgreement.

5.3.            Amendment Provision.  The term "Note" and all reference thereto,as used throughout this instrument, shall mean this instrument as originallyexecuted, or if later amended or supplemented, then as so amended orsupplemented, and any successor instrument as it may be amended orsupplemented.

5.4.           Assignability.  This Note shall be binding upon the Borrower andits successors and assigns, and shall inure to the benefit of the Holder andits successors and assigns, and may be assigned by the Holder in accordancewith the requirements of the Security Agreement.

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5.5.           Cost of Collection.  If default is made in the payment of thisNote, the Borrower shall pay the Holder hereof reasonable costs of collection,including reasonable attorneys' fees.

5.6.           Governing Law.  This Note shall be governed by and construed inaccordance with the laws of the State of New York, without regard to principlesof conflicts of laws.  Any action brought by either party against the otherconcerning the transactions contemplated by this Agreement shall be broughtonly in the state courts of New York or in the federal courts located in thestate of New York.  Both parties and the individual signing this Note on behalfof the Borrower agree to submit to the jurisdiction of such courts.  Theprevailing party shall be entitled to recover from the other party itsreasonable attorney's fees and costs.  In the event that any provision of thisNote is invalid or unenforceable under any applicable statute or rule of law,then such provision shall be deemed inoperative to the extent that it mayconflict therewith and shall be deemed modified to conform with such statute orrule of law.  Any such provision which may prove invalid or unenforceable underany law shall not affect the validity or unenforceability of any otherprovision of this Note.  Nothing contained herein shall be deemed or operate topreclude the Holder from bringing suit or taking other legal action against theBorrower in any other jurisdiction to collect on the Borrower's obligations toHolder, to realize on any collateral or any other security for suchobligations, or to enforce a judgment or other court order in favor of Holder.

5.7.           Maximum Payments.  Nothing contained herein shall be deemed toestablish or require the payment of a rate of interest or other charges inexcess of the maximum permitted by applicable law.  In the event that the rateof interest required to be paid or other charges hereunder exceed the maximumpermitted by such law, any payments in excess of such maximum shall be creditedagainst amounts owed by the Borrower to the Holder and thus refunded to theBorrower.

5.8.           Security Interest.  The Holder of this Note has been granted a securityinterest in certain assets of the Borrower more fully described in a SecurityAgreement dated as of  January 22, 2004.

5.9.           Construction.  Each party acknowledges that its legal counselparticipated in the preparation of this Note and, therefore, stipulates thatthe rule of construction that ambiguities are to be resolved against thedrafting party shall not be applied in the interpretation of this Note to favorany party against the other.

[Balance of pageintentionally left blank; signature page follows.]

 

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**IN WITNESS WHEREOF**, the Borrower has caused this SecuredConvertible Revolving Note to be signed in its name effective as of this 22ndday of  January, 2004.

**HOME SOLUTIONS OF AMERICA, INC.**

By:__________________________________

Name:Title:

WITNESS:

                                                            

 

 

 

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**NOTICE OF CONVERSION**

(To be executed by the Holderin order to convert the Note)

The undersigned hereby elects to convert $_________ of theprincipal and $_________ of the interest due on the Secured ConvertibleRevolving Note issued by Home Solutions of America, Inc. on January __, 2004into Shares of Common Stock of Home Solutions of America, Inc. (the "Borrower")according to the conditions set forth in such Note, as of the date writtenbelow.

| Date of Conversion:            |                                                                                                              |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Conversion Price:              |                                                                                                              |
| Shares To Be Delivered:        |                                                                                                              |
| Signature:                     |                                                                                                              |
| Print Name:                    |                                                                                                              |
| Address:                       |                                                                                                              |
|                                |                                                                                                              |
| Holder  DWAC instructions | _______________________________________________________                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
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