Document:

Exhibit 10.18

 

STOCK PLEDGE AGREEMENT

            This
Stock Pledge Agreement (this "Agreement") dated as of January 22,
2004 between Laurus Master Fund, Ltd. ("Pledgee"), and Home Solutions of
America, Inc. ("Pledgor").

BACKGROUND

             Pledgor has
entered into a Security Agreement dated as of the date hereof (as amended,
modified, restated or supplemented from time to time, the "Security Agreement")
pursuant to which Pledgee provides or will provide certain financial
accommodations to Pledgor.

            In order to
induce Pledgee to provide or continue to provide the financial accommodations
described in the Security Agreement and the Security Agreement, Pledgor has
agreed to pledge and grant a security interest in the collateral described
herein to Pledgee on the terms and conditions set forth herein.

            NOW,
THEREFORE, in consideration of the premises and for other good and valuable
consideration the receipt of which is hereby acknowledged, the parties hereto
agree as follows:

            1.         Defined
Terms.  All capitalized terms used herein which are not defined shall have
the meanings given to them in the Security Agreement.

            2.         Pledge
and Grant of Security Interest.  To secure the full and punctual payment
and performance of the (a) obligations under the Security Agreement and the
Ancillary Agreements (as defined therein) and (b) all other indebtedness,
obligations and liabilities of Pledgor to Pledgee whether now existing or
hereafter arising, direct or indirect, liquidated or unliquidated, absolute or
contingent, due or not due and whether under, pursuant to or evidenced by a
note, agreement, guaranty, instrument or otherwise ((a) and (b) collectively,
the "Indebtedness"), Pledgor hereby pledges, assigns, hypothecates, transfers
and grants a security interest to Pledgee in all of the following (the
"Collateral"):

                        (a)        the shares of stock set forth on Schedule A annexed hereto and
expressly made a part hereof (the "Pledged Stock"), the certificates
representing the Pledged Stock and all dividends, cash, instruments and other
property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Stock, ;

                        (b)        all
additional shares of stock of any issuer of the Pledged Stock (the "Issuer")
from time to time acquired by the Pledgor in any manner, including, without
limitation, stock dividends or a distribution in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spin-off or split-off (which shares
shall be deemed to be part of the Collateral), and the certificates
representing such additional shares, and all dividends, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such shares; and

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                        (c)        all
options and rights, whether as an addition to, in substitution of or in
exchange for any shares of the Pledged Stock and all dividends, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
such options and rights.

            3.         Delivery
of Collateral.  All certificates representing or evidencing the Pledged
Stock shall be delivered to
(except that the Pledged Shares of [Southern
Exposure] which shall be delivered to Pledgee on
or before March 1, 2004) and held by or on behalf of Pledgee
pursuant hereto and shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to Pledgee.  Pledgor hereby authorizes the Issuer upon demand by Pledgee to
deliver any certificates, instruments or other distributions issued in
connection with the Collateral directly to Pledgee, in each case to be held by
Pledgee, subject to the terms hereof.  Upon an Event of Default under the Note
that has occurred and is continuing beyond any applicable grace period, Pledgee
shall have the right, during such time in its discretion and without notice to
the Pledgor, to transfer to or to register in the name of Pledgee or any of its
nominees any or all of the Pledged Stock.  In addition, Pledgee shall have the
right at such time to exchange certificates or instruments representing or
evidencing Pledged Stock for certificates or instruments of smaller or larger
denominations.

            4.         Representations
and Warranties of Pledgor.  Pledgor represents and warrants to Pledgee
(which representations and warranties shall be deemed to continue to be made
until all of the Indebtedness has been paid in full and the Security Agreement
has been irrevocably terminated) that:

                        (a)        The execution, delivery and performance by Pledgor of this Agreement and the
pledge of the Collateral hereunder do not and will not result in any violation
of any agreement, indenture, instrument, license, judgment, decree, order, law,
statute, ordinance or other governmental rule or regulation applicable to
Pledgor.

                        (b)        This
Agreement constitutes the legal, valid, and binding obligation of Pledgor
enforceable against Pledgor in accordance with its terms.

                        (c)        Pledgor
is the direct and beneficial owner of each share of the Collateral, except with
respect to the shares of common stock of Southern Exposure Holdings, Inc.,
which such shares shall be purchased by the Pledgor and delivered to the
Pledgee as Collateral within thirty (30) days of the date hereof.

                        (d)        All
of the shares of the Pledged Stock have been duly authorized, validly issued
and are fully paid and nonassessable.

                        (e)        No
consent or approval of any person, corporation, governmental body, regulatory
authority or other entity, is or will be necessary for (i) the execution,
delivery and performance of this Agreement, (ii) the exercise by Pledgee of any
rights with respect to the Collateral or (iii) the pledge and assignment of,
and the grant of a security interest in, the Collateral hereunder.

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                        (f)         There
are no pending or, to the best of Pledgor's knowledge, threatened actions or
proceedings before any court, judicial body, administrative agency or
arbitrator which may materially adversely affect the Collateral.

                        (g)        Pledgor
has the requisite power and authority to enter into this Agreement and to
pledge and assign the Collateral to Pledgee in accordance with the terms of
this Agreement.

                        (h)        Pledgor
owns each item of the Collateral and, except for the pledge and security
interest granted to Pledgee hereunder, the Collateral shall be, immediately
following the closing of the transactions contemplated by the Security
Agreement, free and clear of any other security interest, pledge, claim, lien,
charge, hypothecation, assignment, offset or encumbrance whatsoever (collectively,
"Liens").

                        (i)         There
are no restrictions on transfer of the Pledged Stock contained in the
certificate of incorporation or by-laws of the Issuer or otherwise which have
not otherwise been enforceably and legally waived by the necessary parties.

                        (j)         None
of the Pledged Stock has been issued or transferred in violation of the
securities registration, securities disclosure or similar laws of any
jurisdiction to which such issuance or transfer may be subject.

                        (k)        The
pledge and assignment of the Collateral and the grant of a security interest
under this Agreement vest in Pledgee all rights of Pledgor in the Collateral as
contemplated by this Agreement.

                                    5.         Covenants. 
Pledgor covenants that, until the Indebtedness shall be satisfied in full and
the Security Agreement is irrevocably terminated:

                        (a)        Pledgor
will not sell, assign, transfer, convey, or otherwise dispose of its rights in
or to the Collateral or any interest therein; nor will Pledgor create, incur or
permit to exist any Lien whatsoever with respect to any of the Collateral or
the proceeds thereof other than that created hereby.  

                        (b)        Pledgor
will, at its expense, defend Pledgee's right, title and security interest in
and to the Collateral against the claims of any other party.

                        (c)        Pledgor
shall at any time, and from time to time, upon the written request of Pledgee,
execute and deliver such further documents and do such further acts and things
as Pledgee may reasonably request in order to effect the purposes of this
Agreement including, but without limitation, delivering to Pledgee upon the occurrence
of an Event of Default irrevocable proxies in respect of the Collateral in form
satisfactory to Pledgee.  Until receipt thereof, upon an Event of Default under
the Note that has occurred and is continuing beyond any applicable grace
period, this Agreement shall constitute Pledgor's proxy to Pledgee or its
nominee to vote all shares of Collateral then registered in Pledgor's name.

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                        (d)        Pledgor
will not consent to or approve the issuance of (i) any additional shares of any
class of capital stock of the Issuer; (ii) any securities convertible either
voluntarily by the holder thereof or automatically upon the occurrence or
nonoccurrence of any event or condition into, or any securities exchangeable
for, any such shares.

            6.         Voting
Rights and Dividends.  In addition to Pledgee's rights and remedies set
forth in Section 8 hereof, in case an Event of Default under the Note shall
have occurred and be continuing, beyond any applicable cure period Pledgee
shall (i) vote the Collateral (ii) be entitled to give consents, waivers and
ratifications in respect of the Collateral (Pledgor hereby irrevocably
constituting and appointing Pledgee, with full power of substitution, the proxy
and attorney-in-fact of Pledgor for such purposes) and (iii) be entitled to
collect and receive for its own use cash dividends paid on the Collateral. 
Pledgor shall not be permitted to exercise or refrain from exercising any
voting rights or other powers if, in the reasonable judgment of Pledgee, such
action would have a material adverse effect on the value of the Collateral or
any part thereof; and, provided, further, that Pledgor shall give
at least five (5) days' written notice of the manner in which Pledgor intends
to exercise, or the reasons for refraining from exercising, any voting rights
or other powers other than with respect to any election of directors and voting
with respect to any incidental matters.  Following the occurrence of an Event
of Default, all dividends and all other distributions in respect of any of the
Collateral, shall be delivered to Pledgee to hold as Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of Pledgee, be
segregated from the other property or funds of the Pledgor, and be forthwith
delivered to Pledgee as Collateral in the same form as so received (with any
necessary endorsement.

            7.         Event
of Default.  An Event of Default shall be deemed to have occurred and may
be declared by Pledgee upon the happening of any of the following events:

                        (a)        An
"Event of Default" under any Note shall have occurred and be continuing beyond
any applicable cure period;

                        (b)        Pledgor
shall default in the performance of any of its obligations under any agreement
between Pledgor and Pledgee, including, without limitation, this Agreement, and
such default shall not be cured for a period of twenty (20)  business days
after the occurrence thereof;

                        (c)        Any
material representation or warranty of the Pledgee made herein, in the Security
Agreement, or in any agreement, statement or certificate given in writing
pursuant hereto or in connection therewith shall be false or misleading and
shall not be cured for a period of twenty (20)  business days after the occurrence
thereof ; 

                        (d)        The
Collateral is subjected to levy of execution, attachment, distraint or other
judicial process; or the Collateral is the subject of a claim (other than by
Pledgee) of a Lien or other right or interest in or to the Collateral and such
levy or claim shall not be cured, disputed or stayed within a period of thirty
(30) days after the occurrence  thereof; or

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                        (e)        Pledgor
shall (i) apply for, consent to, or suffer to exist the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or other
fiduciary of itself or of all or a substantial part of its property, (ii) make
a general assignment for the benefit of creditors, (iii) commence a voluntary
case under any state or federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within ninety (90) ) days, any
petition filed against it in any involuntary case under such bankruptcy laws,
or (vii) take any action for the purpose of effecting any of the foregoing.

            8.         Remedies. 
In case an Event of Default shall have occurred and be declared by Pledgee,
Pledgee may:  

                        (a)        Transfer
any or all of the Collateral into its name, or into the name of its nominee or
nominees;

                        (b)        Exercise
all corporate rights with respect to the Collateral including, without
limitation, all rights of conversion, exchange, subscription or any other
rights, privileges or options pertaining to any shares of the Collateral as if
it were the absolute owner thereof, including, but without limitation, the
right to exchange, at its discretion, any or all of the Collateral upon the
merger, consolidation, reorganization, recapitalization or other readjustment
of the Issuer thereof, or upon the exercise by the Issuer  of any right,
privilege or option pertaining to any of the Collateral, and, in connection
therewith, to deposit and deliver any and all of the Collateral with any
committee, depository, transfer agent, registrar or other designated agent upon
such terms and conditions as it may determine, all without liability except to
account for property actually received by it; and

                        (c)        Subject
to any requirement of applicable law, sell, assign and deliver the whole or,
from time to time, any part of the Collateral at the time held by Pledgee, at
any private sale or at public auction, with or without demand, advertisement or
notice of the time or place of sale or adjournment thereof or otherwise (all of
which are hereby waived, except such notice as is required by applicable law
and cannot be waived), for cash or credit or for other property for immediate or
future delivery, and for such price or prices and on such terms as Pledgee in
its sole discretion may determine, or as may be required by applicable law.

                        Pledgor
hereby waives and releases any and all right or equity of redemption, whether
before or after sale hereunder.  At any such sale, unless prohibited by
applicable law, Pledgee may bid for and purchase the whole or any part of the
Collateral so sold free from any such right or equity of redemption.  All
moneys received by Pledgee hereunder whether upon sale of the Collateral or any
part thereof or otherwise shall be held by Pledgee and applied by it as
provided in Section 10 hereof.  No failure or delay on the part of Pledgee in
exercising any rights hereunder shall operate as a waiver of any such rights
nor shall any single or partial exercise of any such rights preclude any other
or future exercise thereof or the exercise of any other rights hereunder. 
Pledgee shall have no duty as to the collection or protection of the Collateral
or any income thereon nor any duty as to preservation of any rights pertaining
thereto, except to apply the funds in accordance with the requirements of
Section 10 hereof.  Pledgee may exercise its rights with respect to property
held hereunder without resort to other security for or sources of reimbursement
for the Indebtedness.  In addition to the foregoing, Pledgee shall have all of
the rights, remedies and privileges of a secured party under the Uniform
Commercial Code of New York regardless of the jurisdiction in which enforcement
hereof is sought.

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            9.         Private
Sale.  Pledgor recognizes that Pledgee may be unable to effect (or to do so
only after delay which would adversely affect the value that might be realized
from the Collateral) a public sale of all or part of the Collateral by reason
of certain prohibitions contained in the Securities Act, and may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such Collateral for
their own account, for investment and not with a view to the distribution or
resale thereof.  Pledgor agrees that any such private sale may be at prices and
on terms less favorable to the seller than if sold at public sales and that
such private sales shall be deemed to have been made in a commercially reasonable
manner.  Pledgor agrees that Pledgee has no obligation to delay sale of any
Collateral for the period of time necessary to permit the Issuer to register
the Collateral for public sale under the Securities Act.

            10.       Proceeds
of Sale.  The proceeds of any collection, recovery, receipt, appropriation,
realization or sale of the Collateral shall be applied by Pledgee as follows:

                        (a)        First,
to the payment of all costs, reasonable expenses and charges of Pledgee and to
the reimbursement of Pledgee for the prior payment of such costs, reasonable
expenses and charges incurred in connection with the care and safekeeping of
the Collateral (including, without limitation, the reasonable expenses of any
sale or any other disposition of any of the Collateral), the expenses of any
taking, attorneys' fees and reasonable expenses, court costs, any other fees or
expenses incurred or expenditures or advances made by Pledgee in the
protection, enforcement or exercise of its rights, powers or remedies
hereunder;

                        (b)        Second, to the payment of
the Indebtedness, in whole or in part, in such order as Pledgee may elect,
whether or not such Indebtedness is then due;

                        (c)        Third, to such persons,
firms, corporations or other entities as required by applicable law including,
without limitation, Section 9-504(1)(c) of the UCC; and

                        (d)        Fourth, to the extent of
any surplus to Pledgor or as a court of competent jurisdiction may direct.

                        In the event that the proceeds of
any collection, recovery, receipt, appropriation, realization or sale are
insufficient to satisfy the Indebtedness, Pledgor shall be liable for the
deficiency plus the costs and fees of any attorneys employed by Pledgee to
collect such deficiency.

            11.       Waiver
of Marshaling.  Pledgor hereby waives any right to compel any marshaling of
any of the Collateral.

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            12.       No
Waiver.  Any and all of Pledgee's rights with respect to the Liens granted
under this Agreement shall continue unimpaired, and Pledgor shall be and remain
obligated in accordance with the terms hereof, notwithstanding (a) the
bankruptcy, insolvency or reorganization of Pledgor, (b) the release or
substitution of any item of the Collateral at any time, or of any rights or
interests therein, or (c) any delay, extension of time, renewal, compromise or
other indulgence granted by Pledgee in reference to any of the Indebtedness. 
Pledgor hereby waives all notice of any such delay, extension, release,
substitution, renewal, compromise or other indulgence, and hereby consents to
be bound hereby as fully and effectively as if Pledgor had expressly agreed
thereto in advance.  No delay or extension of time by Pledgee in exercising any
power of sale, option or other right or remedy hereunder, and no failure by
Pledgee to give notice or make demand, shall constitute a waiver thereof, or
limit, impair or prejudice Pledgee's right to take any action against Pledgor
or to exercise any other power of sale, option or any other right or remedy.

            13.       Expenses. 
The Collateral shall secure, and Pledgor shall pay to Pledgee on demand, from
time to time, all reasonable costs and expenses, (including but not limited to,
reasonable attorneys' fees and costs, taxes, and all transfer, recording,
filing and other charges) of, or incidental to, the custody, care, transfer,
administration of the Collateral or any other collateral, or in any way
relating to the enforcement, protection or preservation of the rights or
remedies of Pledgee under this Agreement or with respect to any of the
Indebtedness.

            14.       Pledgee
Appointed Attorney-In-Fact and Performance by Pledgee.  Upon the occurrence
of an Event of Default, Pledgor hereby irrevocably constitutes and appoints
Pledgee as Pledgor's true and lawful attorney-in-fact, with full power of
substitution, to execute, acknowledge and deliver any instruments and to do in
Pledgor's name, place and stead, all such acts, things and deeds for and on
behalf of and in the name of Pledgor, which Pledgor could or might do or which
Pledgee may deem necessary, desirable or convenient to accomplish the purposes
of this Agreement, including, without limitation, to execute such instruments
of assignment or transfer or orders and to register, convey or otherwise
transfer title to the Collateral into Pledgee's name.  Pledgor hereby ratifies
and confirms all that said attorney-in-fact may so do and hereby declares this
power of attorney to be coupled with an interest and irrevocable.  If Pledgor
fails to perform any agreement herein contained, Pledgee may itself perform or
cause performance thereof, and any costs and expenses of Pledgee incurred in
connection therewith shall be paid by Pledgor as provided in Section 10 hereof.

            15.       Waivers.

                        (a)        EACH
PARTY HERETO HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR ANY OTHER AGREEMENT EXECUTED OR DELIVERED BY THEM IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HERETO HEREBY AGREES AND CONSENTS
THAT ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY. 

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            16.       Recapture. 
Notwithstanding anything to the contrary in this Agreement, if Pledgee receives
any payment or payments on account of the Indebtedness, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver, or any other party under the United States Bankruptcy Code,
as amended, or any other federal or state bankruptcy, reorganization,
moratorium or insolvency law relating to or affecting the enforcement of
creditors' rights generally, common law or equitable doctrine, then to the
extent of any sum not finally retained by Pledgee, Pledgor's obligations to
Pledgee shall be reinstated and this Agreement shall remain in full force and
effect (or be reinstated) until payment shall have been made to Pledgee, which
payment shall be due on demand.

            17.       Captions. 
All captions in this Agreement are included herein for convenience of reference
only and shall not constitute part of this Agreement for any other purpose.

            18.       Miscellaneous.

                        (a)        This
Agreement constitutes the entire and final agreement among the parties with
respect to the subject matter hereof and may not be changed, terminated or
otherwise varied except by a writing duly executed by the parties hereto.

                        (b)        No
waiver of any term or condition of this Agreement, whether by delay, omission
or otherwise, shall be effective unless in writing and signed by the party
sought to be charged, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.

                        (c)        In
the event that any provision of this Agreement or the application thereof to
Pledgor or any circumstance in any jurisdiction governing this Agreement shall,
to any extent, be invalid or unenforceable under any applicable statute,
regulation, or rule of law, such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
to such statute, regulation or rule of law, and the remainder of this Agreement
and the application of any such invalid or unenforceable provision to parties,
jurisdictions, or circumstances other than to whom or to which it is held
invalid or unenforceable shall not be affected thereby, nor shall same affect
the validity or enforceability of any other provision of this Agreement.

                        (d)        This
Agreement shall be binding upon Pledgor, and Pledgor's successors and assigns,
and shall inure to the benefit of Pledgee and its successors and assigns.

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                        (e)        Any
notice or other communication required or permitted pursuant to this Agreement
shall be given in accordance with the Security Agreement. 

                        (f)         This
Agreement shall be governed by and construed and enforced in all respects in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York.

                        (g)        PLEDGOR
EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF EACH COURT OF COMPETENT JURISDICTION
LOCATED IN THE STATE OF NEW YORK FOR ALL PURPOSES IN CONNECTION WITH THIS
AGREEMENT.  ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY ANY
MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS
AGREEMENT SHALL BE BROUGHT ONLY IN A STATE COURT LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK.  PLEDGOR FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA
OR OTHER PROCESS OR PAPERS (INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION
OR OTHER APPLICATION TO EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF)
OR ANY NOTICE IN CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED
INSIDE OR OUTSIDE OF THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK
BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL
SERVICE PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH
OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS.  PLEDGOR 
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON
AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR
BASED UPON FORUM NON CONVENIENS.

                        (h)        This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original and all of which when taken together shall constitute one
and the same agreement.  Any signature delivered by a party by facsimile
transmission shall be deemed an original signature hereto.

[Remainder of Page
Intentionally Left Blank]

 

 

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            IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
and year first written above.

HOME SOLUTIONS OF AMERICA, INC.

 

By:__________________________

      Name:

      Title:

 

LAURUS MASTER FUND, LTD.

By:__________________________

      Name:

      Title:

 

 

 

 

 

 

10

 SCHEDULE A to the
Stock Pledge Agreement

Pledged
Stock

	
  Issuer

  	
  Class of Stock

  	
  Stock
  Certificate Number

  	
  Par
  Value

  	
  Number
  of Shares

  
	
  PW
  Stephens, Inc.

  	
  Common

  	

  	

  	

  
	
  Central
  Texas Residential

 Services, Inc. 

  	
  Common

  	

  	

  	

  
	
  Southern 
  Exposure

  Holdings, Inc.

  	
  Common

  	

  	

  	

  

 

 

 

 

 

 

11Exhibit 10.20

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

SECURED REVOLVING NOTE

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

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

The following terms shall apply to this
Note:

ARTICLE I

INTEREST & PREPAYMENTS

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

 

 

 

 

1.2.           
Optional Prepayment in Cash.  The Borrower will have the option
of prepaying this Note in full (but not in part) in cash, ("Optional
Redemption") by paying to the Holder a sum of money equal to one hundred
ten  (110%) of the principal amount of this Note together with accrued but
unpaid interest thereon and any and all other sums due, accrued or payable to
the Holder arising under this Note, the Security Agreement, or any Ancillary
Agreement  (as defined in the Security Agreement) (the "Redemption Amount")
outstanding on the day written notice of redemption (the "Notice of
Redemption") is given to the Holder. The Notice of Redemption shall specify
the 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 be
effective with respect to any portion of this Note for which the Holder has a
pending election to convert pursuant to Section 3.1, or for conversions elected
to 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 conversion
elections had been completed immediately prior to the date of the Notice of
Redemption. On the Redemption Payment Date, the Redemption Amount must be paid
in good funds to the Holder.  In the event the Borrower fails to pay the
Redemption Amount on the Redemption Payment Date, then such Redemption Notice
will be null and void.

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

ARTICLE II

HOLDER'S CONVERSION RIGHTS

2.1.Optional Conversion. Subject to the
terms of this Article II, the Holder shall have the right, but not the
obligation, at any time until the Maturity Date, or thereafter during an Event
of Default (as defined in Article IV), and, subject to the limitations set
forth in Section 2.2 hereof, to convert all or any portion of the outstanding
principal amount and/or accrued interest and fees due and payable into fully
paid and nonassessable shares of the Common Stock at the Fixed Conversion
Price. For purposes hereof, subject to Section 3.5 hereof, the "Fixed
Conversion Price" means $1.88 (105 % of the average of the closing price of
the Common Stock for the ten (10) trading days immediately prior to the date
hereof.)  The shares of Common Stock to be issued upon such conversion are
herein referred to as the "Conversion Shares."  Notwithstanding the
foregoing, the Holder's right to convert all or any portion of the outstanding
principal amount and/or accrued interest and fees due and payable into fully
paid and nonassessable shares of the Common Stock at the Fixed Conversion Price
shall be subject to the limitation that the number of shares of Common Stock
issued in connection with any such conversion shall not exceed 25% of the
aggregate dollar trading volume of the Common Stock for the ten (10) trading
days immediately preceding the date upon which such conversion is made by
Holder (as such volume is reported by Bloomberg, L.P.

2

 

 

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

2.3.           
Mechanics of Holder's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion ("Notice
of Conversion") to the Borrower and such Notice of Conversion shall provide
a breakdown in reasonable detail of the principal amount, accrued interest and
fees that are being converted.  On each Conversion Date (as hereinafter
defined) and in accordance with its Notice of Conversion, the Holder shall make
the appropriate reduction to the principal amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Borrower
within two (2) business days after the Conversion Date.  Each date on which a
Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a Conversion Date (the "Conversion
Date").  A form of Notice of Conversion to be employed by the Holder is
annexed hereto as Exhibit A.  Pursuant to the terms of the Notice of
Conversion, the Borrower will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the date of
the delivery to Borrower of the Notice of Conversion  and shall cause the
transfer agent to transmit the certificates representing the Conversion Shares
to the Holder by crediting the account of the Holder's designated broker with
the Depository Trust Corporation ("DTC") through its Deposit Withdrawal
Agent Commission ("DWAC") system within three (3) business days after
receipt by the Borrower of the Notice of Conversion (the "Delivery Date"). 
In the case of the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been issued upon
the date of receipt by the Borrower of the Notice of Conversion.  The Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides the Borrower written instructions to the contrary.

3

 

 

2.4.           
Late Payments. The Borrower understands that a delay in the
delivery of the shares of Common Stock in the form required pursuant to this
Article 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 late
payments to the Holder for late issuance of such shares in the form required
pursuant to this Article III upon conversion of the Note, in the amount equal
to $400  per business day after the Delivery Date.  The Borrower shall pay any
payments incurred under this Section in immediately available funds upon
demand.  

2.5.           
Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to Section 2.1 shall be subject to adjustment from time to time upon
the happening of certain events while this conversion right remains
outstanding, as follows:

A.                
Reclassification, etc.  If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal amount and accrued interest thereon, shall thereafter be
deemed to evidence the right to purchase an adjusted number of such securities
and kind of securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such reclassification or
other change.

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

C.                
Share Issuances.  Subject to the provisions of this
Section 3.6, if the Borrower shall at any time prior to the conversion or
repayment in full of the principal amount issue any shares of Common Stock to a
person other than the Holder (except (i) pursuant to Subsections A or B above;
(ii) pursuant to options, warrants, or other obligations to issue shares
outstanding on the date hereof as disclosed to Holder in writing; or (iii)
pursuant to options that may be issued under any employee incentive stock
option and/or any qualified stock option plan adopted by the Borrower) for a
consideration per share (the "Offer Price") less than the Fixed
Conversion Price in effect at the time of such issuance, then the Fixed
Conversion Price shall be immediately reset pursuant
to the formula below.  For purposes hereof, the issuance of any security of the
Borrower convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price at the time of issuance
of such securities.  If the Borrower issues any
additional shares pursuant to this Subsection then, and thereafter successively
upon each such issue, the Fixed Conversion Price shall be adjusted by
multiplying the then applicable Fixed Conversion Price by the following
fraction:

4

 

 

	
  A + B

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

  

A = Actual shares outstanding prior
to such offering

B =  Actual shares sold in the
offering

C = Fixed Conversion Price

D = Offer Price

D.                
such lower Offer Price. For purposes hereof, the issuance of any
security of the Borrower convertible into or exercisable or exchangeable for
Common Stock shall result in an adjustment to the Fixed Conversion Price only
upon the conversion, exercise or exchange of such securities. 

E.                 
Computation of Consideration. For purposes of any computation
respecting consideration received pursuant to Subsection C above, the following
shall apply:

(a)               
in the case of the issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash, provided that in no case shall
any deduction be made for any commissions, discounts or other expenses incurred
by the Borrower for any underwriting of the issue or otherwise in connection
therewith;

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

(c)               
Upon any such exercise, the aggregate consideration received for such
securities shall be deemed to be the consideration received by the Borrower for
the issuance of such securities plus the additional minimum consideration, if
any, 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 provided
in clauses (a) and (b) of this Subsection (D)).

2.6.           
Reservation of Shares. During the period the conversion right
exists, the Borrower will reserve from its authorized and unissued Common Stock
a sufficient number of shares to provide for the issuance of Common Stock upon
the 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 full
authority to its officers, agents, and transfer agents who are charged with the
duty of executing and issuing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the conversion of this
Note.

5

 

 

ARTICLE III

EVENTS OF DEFAULT

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

3.1.           
Failure to Pay Principal, Interest or other Fees.  The Borrower
fails to pay when due any installment of principal, interest or other fees
hereon or on any other Note issued pursuant to the Security Agreement, when due
in accordance with the terms of such Note.  

3.2.           
Breach of Covenant.  The Borrower breaches any covenant or other
term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of thirty (30) days after the
occurrence thereof.

3.3.           
Breach of Representations and Warranties.  Any material
representation or warranty of the Borrower made herein, or the Security
Agreement, or in any Ancillary Agreement shall be materially false or
misleading.

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

3.5.           
Default Under Related Agreement.  The occurrence of an Event of
Default 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 to
and in the form required by this Note and Section 9 of the Security Agreement
if 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 Holder
a replacement Note, and the Borrower's failure to deliver a replacement Note is
not cured within seven (7) business days.

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

ARTICLE IV

DEFAULT PAYMENTS

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

6

 

 

4.2.           
Default Payment Date and Default Notice Period.  The Default
Payment shall be due and payable on the fifth business day after an Event of
Default as defined in Article III ("Default Payment Date") has occurred
and is continuing beyond any applicable grace period.  The period between date
upon which of an Event of Default has occurred and is continuing beyond any
applicable grace period and the Default Payment Date shall be the "Default
Period."  If during the Default Period, the Borrower cures the Event of
Default, the Event of Default will no longer exist and any additional rights
the Holder had triggered by the occurrence and continuance of an Event of
Default will no longer exist.  If the Event of Default is not cured during the
Default Notice Period, all amounts payable hereunder shall be due and payable
on 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 the
continuance of an Event of Default, interest on this Note shall automatically
be increased by five percent (5%) per annum, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest from the date of
such Event of Default at such interest rate applicable to such Obligations
until such Event of Default is cured or waived.

4.4.           
Cumulative Remedies.  The remedies under this Note shall be
cumulative.

ARTICLE V

MISCELLANEOUS

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

5.2.           
Notices.  Any notice herein required or permitted to be given
shall be in writing and provided in accordance with the terms of the Security
Agreement.

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

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

7

 

 

5.5.           
Cost of Collection.  If default is made in the payment of this
Note, 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 in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws.  Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought
only in the state courts of New York or in the federal courts located in the
state of New York.  Both parties and the individual signing this Note on behalf
of the Borrower agree to submit to the jurisdiction of such courts.  The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs.  In the event that any provision of this
Note is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law.  Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or unenforceability of any other
provision of this Note.  Nothing contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action against the
Borrower in any other jurisdiction to collect on the Borrower's obligations to
Holder, to realize on any collateral or any other security for such
obligations, or to enforce a judgment or other court order in favor of Holder.

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

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

5.9.           
Construction.  Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that
the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.

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

 

8

IN WITNESS WHEREOF, the Borrower has caused this Secured
Convertible Revolving Note to be signed in its name effective as of this 22nd
day of  January, 2004.

HOME SOLUTIONS OF AMERICA, INC.

By:__________________________________

Name:

Title:

WITNESS:

                                                            

 

 

 

9

 

NOTICE OF CONVERSION

(To be executed by the Holder
in order to convert the Note)

The undersigned hereby elects to convert $_________ of the
principal and $_________ of the interest due on the Secured Convertible
Revolving Note issued by Home Solutions of America, Inc. on January __, 2004
into 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 written
below.

	
  Date of Conversion:

  	
                                                                                                               

  
	
  Conversion Price:

  	
                                                                                                               

  
	
  Shares To Be Delivered:

  	
                                                                                                               

  
	
  Signature:

  	
                                                                                                               

  
	
  Print Name:

  	
                                                                                                               

  
	
  Address:

  	
                                                                                                               

  
	

  	
                                                                                                               

  
	
  Holder  DWAC instructions

  	
  _______________________________________________________

  
	

  	
   

  

 

 

 

 

 

10

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