Exhibit 10.27



 


 


HOME SOLUTIONS OF AMERICA, INC.

1998 STOCK OPTION PLAN

STOCK OPTION AGREEMENT




Unless otherwise defined herein, the terms defined in
the Plan (defined below) shall have the same defined meanings in this Stock
Option Agreement (this "Stock Option Agreement"), which is
executed this 27th day of January 2004.




I.          NOTICE
OF STOCK OPTION GRANT


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




Optionee                                              FRANK
J. FRADELLA 


Date of Grant                                       January
27, 2004




Vesting Commencement Date   January 27, 2004




Exercise Price per Share                       $1.80




Total Number of Shares Granted          500,000




Total Exercise Price                              $900,000




Type of Option:                                     
X       Incentive Stock Option

                                                                                    Non-Qualified Stock Option




Term/Expiration Date:                          Fifth
Anniversary of Date of Grant




            Vesting
Schedule:         The Option shall become exercisable as to the earlier of
a) (i) 33% of the Shares subject to the Option upon the first anniversary of
the Date of the Grant, (ii) 33% of the Shares subject to the Option upon the
second anniversary of the Date of the Grant, and (iii) the remaining Shares
subject to the Option upon the third anniversary of the Date of the Grant,
subject to Optionee's continued status as a Service Provider on each such date
or b) once the market value of Home Solutions common stock equals or exceeds
$40 million for at least twenty consecutive trading days as determined by the
closing stock price for each day.  If a Change of Control of the Company shall
occur, the Shares shall vest in accordance with the Plan. 




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


 






 


II.               

AGREEMENT


            1.         Grant
of Option.




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




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




            2.         Exercise
of Option.




                        (a)        Right
to Exercise.  This Option shall be exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and with the applicable provisions of the Plan and this Stock Option
Agreement.




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




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




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




 




2








 




                        (a)        cash
or check;




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




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




            5.         Restrictions
on Exercise.  This Option may not be exercised until such time as the
stockholders of the Company have approved the Plan, or if the issuance of such
Shares upon such exercise or the method of payment of consideration for such
shares would constitute a violation of any Applicable Law.




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




            7.         Term
of Option.  This Option may be exercised only within the term set out in
the Notice of Stock Option Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Stock Option Agreement.




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




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




 




3








 




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




"COMPANY"                                                            "OPTIONEE"




HOME
SOLUTIONS OF AMERICA, INC


 






By:                                                                                                                                                      


Name:
Rick J. O'Brien                                                 Frank J.
Fradella

Title:
CFO                                                                     




                                                                                    Address:


                                                                                    


 


 


4







EXHIBIT A


1998 STOCK PLAN

EXERCISE NOTICE


 


Home
Solutions of America, Inc.

11850
Jones Road

Houston,
Texas 77070

ATTN:  Secretary




1.   Exercise of Option.  Effective as of
today, _______________, 200__, the undersigned ("Optionee")
hereby elects to exercise Optionee's option to purchase ________________ shares
(the "Shares") of the Common Stock of Home Solutions of America,
Inc. (the "Company") under and pursuant to the 1998 Stock Option
Plan (the "Plan") and the Stock Option Agreement dated January
27, 2004 (the "Stock Option Agreement").




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




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




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




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




6.   Restrictive Legends and Stop-Transfer Orders.




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






 






A-1










 




 






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




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




(c)  Refusal to Transfer.  The Company shall
not be required (i) to transfer on its books any Shares that have been
sold or otherwise transferred in violation of any of the provisions of this
Agreement or (ii) to treat as owner of such Shares or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such
Shares shall have been so transferred.




7.   Successors and Assigns.  The Company may
assign any of its rights under this Agreement to single or multiple assignees,
and this Agreement shall inure to the benefit of the successors and assigns of
the Company.  Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.




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




                  9.
Governing Law; Severability.  This Agreement is governed by the internal
substantive laws, but not the choice of law rules, of Delaware.




10. Entire Agreement.  The Plan and Stock
Option Agreement are incorporated herein by reference.  This Agreement, the
Plan, the Stock Option Agreement and the Investment Representation Statement
constitute the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee.






A-2










 




 






Submitted
by:                                                               Accepted
by:




                                                                        Home
Solutions of America, Inc.




_____________________________             


Frank
J. Fradella


By:___________________________

Name:_________________________

Title:
__________________________


  












EXHIBIT B




INVESTMENT REPRESENTATION
STATEMENT


 


OPTIONEE:      Frank J. Fradella                          


COMPANY:     Home
Solutions of America, Inc.

SECURITY:      Common
Stock

AMOUNT:        $__________________________    


DATE:               __________________________



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




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




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




 




B-1








 




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




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




"Optionee"






___________________________________

Frank J. Fradella






 








Date:______________________________








 








 








 








B-2