Document:

Exhibit 10.4

THIS WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR HOME SOLUTIONS OF AMERICA, INC. SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO HOME SOLUTIONS OF AMERICA, INC. THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

SERIES C WARRANT TO
PURCHASE

SHARES OF COMMON
STOCK

OF

 HOME SOLUTIONS OF
AMERICA, INC.

	
		No.: W-C-01-02                 
		
	
		Number of Shares: 333,334

	
		Date of Issuance: July 19, 2004

			
		 

FOR VALUE
RECEIVED, subject to the provisions hereinafter set forth, the undersigned, Home
Solutions of America, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that ________________
or its registered assigns is entitled to subscribe for and purchase, during the
Term (as hereinafter defined), up to Three Hundred Thirty-Three Thousand Three
Hundred Thirty-Four (333,334) shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an exercise price per share equal to the Warrant
Price then in effect, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth.  Capitalized terms used in this Warrant
and not otherwise defined herein shall have the respective meanings specified
in Section 9 hereof.

1.        
Term. 
The term of this Warrant shall commence on July 19, 2004 (the "Effective Date") and shall expire at 5:00 p.m., eastern time, on the date that is ninety
(90) days following the Effective Date (such period being the "Term").

2.        
Method
of Exercise Payment; Issuance of New Warrant; Transfer and Exchange.

(a)       
Time
of Exercise.  The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term commencing on July 19, 2004 and expiring on the date that is ninety (90) days following the Effective Date.

(b)       
Method
of Exercise.  The Holder hereof may exercise this Warrant, in whole or in
part, by the surrender of this Warrant (with the exercise form attached hereto
duly executed) at the principal office of the Issuer, and by the payment to the
Issuer of an amount of consideration therefor equal to the Warrant Price in
effect on the date of such exercise multiplied by the number of shares of
Warrant Stock with respect to which this Warrant is then being exercised,
payable at such Holder's election by certified or official bank check or by wire transfer to an account designated by the Issuer. 

 

  

(c)       
Issuance
of Stock Certificates.  In the event of any exercise of the rights
represented by this Warrant in accordance with and subject to the terms and
conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such exercise or, at the request of the Holder (provided that a registration
statement under the Securities Act providing for the resale of the Warrant
Stock is then in effect), issued and delivered to the Depository Trust Company
("DTC") account on the Holder's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC") within a reasonable time, not exceeding three
(3) Trading Days after such exercise, and the Holder hereof shall be deemed for
all purposes to be the holder of the shares of Warrant Stock so purchased as of
the date of such exercise and (ii) unless this Warrant has expired, a new
Warrant representing the number of shares of Warrant Stock, if any, with
respect to which this Warrant shall not then have been exercised (less any
amount thereof which shall have been canceled in payment or partial payment of
the Warrant Price as hereinabove provided) shall also be issued to the Holder
hereof at the Issuer's expense within such time.

(d)       
Transferability
of Warrant.  Subject to Section 2(f), this Warrant may be transferred by a
Holder without the consent of the Issuer.  If transferred pursuant to this
paragraph and subject to the provisions of subsection (f) of this Section 2,
this Warrant may be transferred on the books of the Issuer by the Holder hereof
in person or by duly authorized attorney, upon surrender of this Warrant at the
principal office of the Issuer, properly endorsed (by the Holder executing an
assignment in the form attached hereto) and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer.  This
Warrant is exchangeable at the principal office of the Issuer for Warrants for
the purchase of the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.  All Warrants
issued on transfers or exchanges shall be dated the Original Issue Date and
shall be identical with this Warrant except as to the name of the Holder or the
number of shares of Warrant Stock, as applicable.

(e)       
Continuing
Rights of Holder.  The Issuer will, at the time of or at any time after
each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant, provided
that if any such Holder shall fail to make any such request, the failure shall
not affect the continuing obligation of the Issuer to afford such rights to
such Holder.

(f)        
Compliance
with Securities Laws.

(i)         The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not as
a nominee for any other party, and for investment, and that the Holder will not
offer, sell or otherwise dispose of this Warrant or any shares of Warrant Stock
to be issued upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act and any
applicable state securities laws.

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(ii)        Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR HOME SOLUTIONS OF
AMERICA, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO HOME SOLUTIONS OF AMERICA, INC. THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

(iii)       The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been resold
pursuant to an effective registration statement under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and substance
reasonably satisfactory to the Issuer, addressed to the Issuer to the effect
that such restrictions are no longer required to ensure compliance with the
Securities Act and state securities laws or (C) upon the Issuer's receipt of
other evidence reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are not
required.  Whenever such restrictions shall cease and terminate as to any such
securities, the Holder thereof shall be entitled to receive from the Issuer (or
its transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of Warrant
Stock, new stock certificates) of like tenor not bearing the applicable legend
required by paragraph (ii) above relating to the Securities Act and state
securities laws.

(g)        In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder is an "accredited investor" as defined in Regulation D under the
Securities Act.

 

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3.         Stock Fully Paid; Reservation and Listing of Shares;
Covenants.

(a)        Stock Fully Paid.  The Issuer represents, warrants,
covenants and agrees that all shares of Warrant Stock which may be issued upon
the exercise of this Warrant or otherwise hereunder will, when issued in
accordance with the terms of this Warrant, be duly authorized, validly issued,
fully paid and non-assessable and free from all taxes, liens and charges
created by or through Issuer.  The Issuer further covenants and agrees that
during the period within which this Warrant may be exercised, the Issuer will
at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

(b)       
Reservation. 
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant or as otherwise provided hereunder require
registration or qualification with any governmental authority under any federal
or state law before such shares may be so issued, the Issuer will in good faith
use its reasonable best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock
has been registered pursuant to a registration statement under the Securities
Act then in effect), and, to the extent permissible under the applicable
securities exchange rules, all unissued shares of Warrant Stock which are at
any time issuable hereunder, so long as any shares of Common Stock shall be so
listed.  The Issuer will also so list on each securities exchange or market,
and will maintain such listing of, any other securities which the Holder of
this Warrant shall be entitled to receive upon the exercise of this Warrant if
at the time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.

(c)       
Covenants. 
The Issuer shall not by any action including, without limitation, amending the Certificate
of Incorporation or the by-laws of the Issuer, or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Holder hereof against dilution (to the extent specifically provided herein) or
impairment.  Without limiting the generality of the foregoing, the Issuer will
(i) not permit the par value, if any, of its Common Stock to exceed the then
effective Warrant Price, (ii) not amend or modify any provision of the Certificate
of Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants in their capacity as Holders
of the Warrants, (iii) take all such action as may be reasonably necessary in
order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock, free and clear of any liens, claims,
encumbrances and restrictions (other than as provided herein) upon the exercise
of this Warrant, and (iv) use its reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be reasonably necessary to enable the Issuer to perform
its obligations under this Warrant.

(d)       
Loss,
Theft, Destruction of Warrants.  Upon receipt of evidence satisfactory to
the Issuer of the ownership of and the loss, theft, destruction or mutilation
of any Warrant and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security satisfactory to the Issuer or, in the case of
any such mutilation, upon surrender and cancellation of such Warrant, the
Issuer will make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to purchase the
same number of shares of Common Stock.

 

4

  

4.        
Adjustment
of Warrant Price and Warrant Share Number.  The number of shares of Common
Stock for which this Warrant is exercisable, and the price at which such shares
may be purchased upon exercise of this Warrant, shall be subject to adjustment
from time to time as set forth in this Section 4. The Issuer shall give the
Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with Section 5.  

(a)       
Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.

            (i) 
In case the Issuer after the Original Issue Date shall do any of the following
(each, a "Triggering Event"): (a) consolidate or merge with or
into another corporation where the holders of outstanding Voting Stock prior to
such merger or consolidation do not own over 50% of the outstanding Voting
Stock of the merged or consolidated entity immediately after such merger or
consolidation, or (b) sell all or substantially all of its properties or assets
to any other Person, or (c) change the Common Stock to the same or different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 4(b) or Section 4(c)), or (d) effect a capital reorganization (other
than by way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 4(b) or Section 4(c)), then, and in the
case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled upon the exercise hereof at any time
after the consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the Warrant Price
in effect at the time immediately prior to the consummation of such Triggering
Event in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the securities, cash and property to which such
Holder would have been entitled upon the consummation of such Triggering Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto, subject to adjustments (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for elsewhere in this
Section 4.

            (ii)        Notwithstanding
anything contained in this Warrant to the contrary, a Triggering Event shall
not be deemed to have occurred if, prior to the consummation thereof, each
Person (other than the Issuer) which may be required to deliver any securities,
cash or property upon the exercise of this Warrant as provided herein shall
assume, by written instrument delivered to, and reasonably satisfactory to, the
Holder of this Warrant, (A) the obligations of the Issuer under this Warrant
(and if the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the Issuer from,
any continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder a written acknowledgement executed by the
President or Chief Financial Officer of the Company, stating that this Warrant
shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the securities, cash or property which such Person may
be required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto. 

5

  

 

                        (b)       
Stock
Dividends, Subdivisions and Combinations.  If at any time the Issuer shall:

                        (i)         make
or issue or set a record date for the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock, 

                        (ii)
       effect a stock split of its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or

                        (iii)
      combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,

then (1) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant
Price then in effect shall be adjusted to equal (A) the Warrant Price then in
effect multiplied by the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such adjustment.

Notwithstanding the foregoing, if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Warrant Price shall be adjusted
pursuant to this paragraph as of the time of actual payment of such dividends
or distributions.

            (c)       
Certain
Other Distributions.  If at any time the Issuer shall make or issue or set
a record date for the determination of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution of:

(i)         cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer),

(ii)        any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock
Equivalents or Additional Shares of Common Stock), or

6

  

(iii)       any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents or
Additional Shares of Common Stock), 

then (1) the number of shares of
Common Stock for which this Warrant is exercisable shall be adjusted to equal
the product of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (A)
the numerator of which shall be the Per Share Market Value of Common Stock at
the date of taking such record and (B) the denominator of which shall be such
Per Share Market Value minus the amount allocable to one share of Common Stock
of any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of the Issuer and supported by an opinion from
an investment banking firm of recognized national standing acceptable to (but
not affiliated with) the Holder) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights so distributable, and (2) the Warrant Price then in effect
shall be adjusted to equal (A) the Warrant Price then in effect multiplied by
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment.  A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value)
into shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Issuer to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section 4(c)
and, if the outstanding shares of Common Stock shall be changed into a larger
or smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be,
of the outstanding shares of Common Stock within the meaning of Section 4(b).      

Notwithstanding the foregoing, if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Warrant Price shall be adjusted
pursuant to this Section 4(c) as of the time of actual payment of such
dividends or distributions.

            (d)       
Issuance
of Additional Shares of Common Stock.  

                        (i)         In
the event the Issuer shall at any time following the Original Issue Date issue
any Additional Shares of Common Stock (otherwise than as provided in the
foregoing subsections (a) through (c) of this Section 4), at a price per share
less than the Warrant Price then in effect or without consideration, then the
Warrant Price upon each such issuance shall be adjusted to that price
determined by multiplying the Warrant Price then in effect by a fraction:

(A)       the
numerator of which shall be equal to the sum of (x) the number of shares of
Outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock plus (y) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase
at a price per share equal to the Warrant Price then in effect, and

7

 (B)       the denominator of
which shall be equal to the number of shares of Outstanding Common Stock
immediately after the issuance of such Additional Shares of Common Stock.

                        (ii)        No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such Common Stock Equivalents
(or upon the issuance of any warrant or other rights therefor) pursuant to
Section 4(e).

(e)            
  Intentionally Omitted.

(f)                   
Issuance of Common Stock Equivalents.  If at any time the Issuer
shall issue or sell any Common Stock Equivalents, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the aggregate
price per share for which Common Stock is issuable upon such conversion or
exchange plus the consideration received by the Issuer for issuance of such
Common Stock Equivalent divided by the number of shares of Common Stock
issuable pursuant to such Common Stock Equivalent shall be less than the
Warrant Price in effect immediately prior to the time of such issue or sale,
then the number of shares of Common Stock for which this Warrant is exercisable
and the Warrant Price then in effect shall be adjusted as provided in Section
4(d) on the basis that the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Common Stock
Equivalents shall be deemed to have been issued and outstanding and the Issuer
shall have received all of the consideration payable therefor, if any, as of
the date of actual issuance of such Common Stock Equivalents.  No further
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Price then in effect shall be made under this
Section 4(e) upon the issuance of any Common Stock Equivalents which are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any such adjustment shall previously have been made upon
the issuance of such warrants or other rights pursuant to this Section 4(e). 
No further adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Warrant Price then in effect shall be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Common Stock Equivalents.

(g)                  
Superseding Adjustment.  If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Warrant Price then in effect shall have been made pursuant to Section 4(e)
as the result of any issuance of Common Stock Equivalents, and (i) such Common
Stock Equivalents, or the right of conversion or exchange in such Common Stock
Equivalents, shall expire, and all or a portion of such or the right of
conversion or exchange with respect to all or a portion of such Common Stock
Equivalents, as the case may be, shall not have been exercised, or (ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such Common Stock Equivalents shall be increased, then such previous
adjustment shall be rescinded and annulled and the Additional Shares of Common
Stock which were deemed to have been issued by virtue of the computation made
in connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation.  Upon the occurrence
of an event set forth in this Section 4(g) above, there shall be a
recomputation made of the effect of such Common Stock Equivalents on the basis
of: (i) treating the number of Additional Shares of Common Stock theretofore
actually issued or issuable pursuant to the previous exercise of Common Stock
Equivalents or any such right of conversion or exchange, as having been issued
on the date or dates of any such exercise and for the consideration actually
received and receivable therefor, and (ii) treating any such Common Stock
Equivalents which then remain outstanding as having been granted or issued immediately
after the time of such increase of the consideration per share for which
Additional Shares of Common Stock are issuable under such Common Stock
Equivalents; whereupon a new adjustment of the number of shares of Common
Stock for which this Warrant is exercisable and the Warrant Price then in
effect shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.

8

  

(h)       
Purchase
of Common Stock by the Issuer.  If the Issuer at any time while this
Warrant is outstanding shall, directly or indirectly through a Subsidiary or
otherwise, purchase, redeem or otherwise acquire any shares of Common Stock at
a price per share greater than the Per Share Market Value, then the Warrant
Price upon each such purchase, redemption or acquisition shall be adjusted to
that price determined by multiplying such Warrant Price by a fraction (i) the
numerator of which shall be the number of shares of Outstanding Common Stock
immediately prior to such purchase, redemption or acquisition minus the number
of shares of Common Stock which the aggregate consideration for the total
number of such shares of Common Stock so purchased, redeemed or acquired would
purchase at the Per Share Market Value; and (ii) the denominator of which shall
be the number of shares of Outstanding Common Stock immediately after such
purchase, redemption or acquisition.  For the purposes of this subsection (h),
the date as of which the Per Share Market Price shall be computed shall be the
earlier of (x) the date on which the Issuer shall enter into a firm contract
for the purchase, redemption or acquisition of such Common Stock, or (y) the
date of actual purchase, redemption or acquisition of such Common Stock.  For
the purposes of this subsection (h), a purchase, redemption or acquisition of a
Common Stock Equivalent shall be deemed to be a purchase of the underlying
Common Stock, and the computation herein required shall be made on the basis of
the full exercise, conversion or exchange of such Common Stock Equivalent on
the date as of which such computation is required hereby to be made, whether or
not such Common Stock Equivalent is actually exercisable, convertible or
exchangeable on such date.

            (i)        
Other
Provisions applicable to Adjustments under this Section.  The following
provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect provided for in this Section 4:

                        (i)        
Computation
of Consideration.  To the extent that any Additional Shares of Common Stock
or any Common Stock Equivalents (or any warrants or other rights therefor)
shall be issued for cash consideration, the consideration received by the
Issuer therefor shall be the amount of the cash received by the Issuer
therefor, or, if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Common Stock Equivalents are sold
to underwriters or dealers for public offering without a subscription offering,
the initial public offering price (in any such case subtracting any amounts
paid or receivable for accrued interest or accrued dividends and without taking
into account any compensation, discounts or expenses paid or incurred by the
Issuer for and in the underwriting of, or otherwise in connection with, the
issuance thereof).  In connection with any merger or consolidation in which the
Issuer is the surviving corporation (other than any consolidation or merger in
which the previously outstanding shares of Common Stock of the Issuer shall be
changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board, of such
portion of the assets and business of the nonsurviving corporation as the Board
may determine to be attributable to such shares of Common Stock or Common Stock
Equivalents, as the case may be.  The consideration for any Additional Shares
of Common Stock issuable pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received by the Issuer for
issuing such warrants or other rights plus the additional consideration
payable to the Issuer upon exercise of such warrants or other rights.  The
consideration for any Additional Shares of Common Stock issuable pursuant to
the terms of any Common Stock Equivalents shall be the consideration received
by the Issuer for issuing warrants or other rights to subscribe for or
purchase such Common Stock Equivalents, plus the consideration paid or payable
to the Issuer in respect of the subscription for or purchase of such Common
Stock Equivalents, plus the additional consideration, if any, payable to the
Issuer upon the exercise of the right of conversion or exchange in such Common
Stock Equivalents.  In the event of any consolidation or merger of the Issuer
in which the Issuer is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Issuer shall be changed into or
exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Issuer for
stock or other securities of any corporation, the Issuer shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such
stock or securities or other property of the other corporation.  In the event
any consideration received by the Issuer for any securities consists of
property other than cash, the fair market value thereof at the time of issuance
or as otherwise applicable shall be as determined in good faith by the Board. 
In the event Common Stock is issued with other shares or securities or other
assets of the Issuer for consideration which covers both, the consideration
computed as provided in this Section 4(i)(i) shall be allocated among such
securities and assets as determined in good faith by the Board.

9

  

 

                        (ii)       
When
Adjustments to Be Made.  The adjustments required by this Section 4 shall
be made whenever and as often as any specified event requiring an adjustment
shall occur, except that any adjustment of the number of shares of Common Stock
for which this Warrant is exercisable that would otherwise be required may be
postponed (except in the case of a subdivision or combination of shares of the
Common Stock, as provided for in Section 4(b)) up to, but not beyond the date
of exercise if such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than one percent (1%) of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment.  Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.

                        (iii)      
Fractional
Interests.  In computing adjustments under this Section 4, fractional interests
in Common Stock shall be taken into account to the nearest one one-hundredth
(1/100th) of a share.

 

 

10

  

 

            (iv)      
When
Adjustment Not Required.  If the Issuer shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its plan to
pay or deliver such dividend, distribution, subscription or purchase rights,
then thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.

(j)        
Form
of Warrant after Adjustments.  The form of this Warrant need not be changed
because of any adjustments in the Warrant Price or the number and kind of
Securities purchasable upon the exercise of this Warrant.

            (k)       
Escrow
of Warrant Stock.  If after any property becomes distributable pursuant to
this Section 4 by reason of the taking of any record of the holders of Common
Stock, but prior to the occurrence of the event for which such record is taken,
and the Holder exercises this Warrant, any shares of Common Stock issuable
upon exercise by reason of such adjustment shall be deemed the last shares of
Common Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property shall be
held in escrow for the Holder by the Issuer to be issued to the Holder upon and
to the extent that the event actually takes place, upon payment of the current
Warrant Price.  Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is rescinded, then
such escrowed shares shall be cancelled by the Issuer and escrowed property
returned.

5.        
Notice
of Adjustments.  Whenever the Warrant Price or Warrant Share Number shall
be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each
an "adjustment"), the Issuer shall cause its Chief Financial Officer
to prepare and execute a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated (including a description of the basis on
which the Board made any determination hereunder), and the Warrant Price and
Warrant Share Number after giving effect to such adjustment, and shall cause
copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment.  Any dispute between the Issuer and the Holder
of this Warrant with respect to the matters set forth in such certificate may
at the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big four" selected by the
Holder, provided that the Issuer shall have ten (10) days after receipt
of notice from such Holder of its selection of such firm to object thereto, in
which case such Holder shall select another such firm and the Issuer shall have
no such right of objection.  The firm selected by the Holder of this Warrant as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty (30)
days after submission to it of such dispute.  Such opinion shall be final and
binding on the parties hereto.  

6.        
Fractional
Shares.  No fractional shares of Warrant Stock will be issued in connection
with any exercise hereof, but in lieu of such fractional shares, the Issuer
shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Per Share Market Value then in effect.

 

 

11

  

            7.        
Ownership Cap and Certain
Exercise Restrictions.  (a)  Notwithstanding anything to the contrary
set forth in this Warrant, at no time may a Holder of this Warrant exercise
this Warrant if the number of shares of Common Stock to be issued pursuant to
such exercise would exceed, when aggregated with all other shares of Common
Stock owned by such Holder at such time, the number of shares of Common Stock
which would result in such Holder owning more than 4.999% of all of the Common
Stock outstanding at such time; provided, however, that upon a holder of this
Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 13 hereof) (the "Waiver Notice") that such Holder would like
to waive this Section 7(a) with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 7(a) will be of no force
or effect with regard to all or a portion of the Warrant referenced in the
Waiver Notice; provided, further, that this provision shall be of no further
force or effect (i) during the sixty-one (61) days immediately preceding the
expiration of the term of this Warrant or (ii) upon the Holder's receipt of a
Call Notice (as defined in Section 8 hereof).

                        (b)        The
Holder may not exercise the Warrant hereunder to the extent such exercise would
result in the Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.999%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon exercise of the Warrant held by the Holder after application of
this Section; provided, however, that upon a holder of this
Warrant providing the Company with a Waiver Notice that such holder would like
to waive this Section 7(b) with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 7(b) shall be of no force
or effect with regard to those shares of Warrant Stock referenced in the Waiver
Notice; provided, further, that this provision shall be of no
further force or effect (i) during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant or (ii) upon the Holder's
receipt of a Call Notice (as defined in Section 8 hereof).

8.     
Call. 
Notwithstanding anything herein to the contrary, commencing on the Effective Date,
the Issuer, at its option, may call up to one hundred percent (100%) of this
Warrant if the Per Share Market Value of the Common Stock has been greater than
$5.25 (as may be adjusted for any stock splits or combinations of the Common
Stock) for a period of fifteen (15) consecutive Trading Days immediately prior
to the date of delivery of the Call Notice (a "Call Notice Period")
by providing the Holder of this Warrant written notice pursuant to Section 13
(the "Call Notice"); provided, that (i) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is then in effect, (ii) trading in the
Common Stock shall not have been suspended by the Securities and Exchange
Commission or the American Stock Exchange and (iii) the Issuer is in material
compliance with the terms and conditions of this Warrant and the other
Transaction Documents (as defined in the Advisory Agreement); provided,
further, that a registration statement under the Securities Act
providing for the resale of the Warrant Stock is in effect from the date of
delivery of the Call Notice until the date which is the later of (i) the date
the Holder exercises the Warrant pursuant to the Call Notice and (ii) the 20th
day after the Holder receives the Call Notice (the "Early Termination
Date").  The rights and privileges granted pursuant to this Warrant
with respect to the shares of Warrant Stock subject to the Call Notice (the
"Called Warrant Shares") shall expire on the Early Termination
Date if this Warrant is not exercised with respect to such Called Warrant
Shares prior to such Early Termination Date.  In the event this Warrant is not
exercised with respect to the Called Warrant Shares, the Issuer shall remit to
the Holder of this Warrant (i) $.01 per Called Warrant Share and (ii) a new
Warrant representing the number of shares of Warrant Stock, if any, which shall
not have been subject to the Call Notice upon the Holder tendering to the
Issuer the applicable Warrant certificate.

 

12

  

9.        
Definitions.  For the purposes of this Warrant, the following
terms have the following meanings:

            "Additional
Shares of Common Stock" means all shares of Common Stock issued by the
Issuer after the Original Issue Date, and all shares of Other Common, if any,
issued by the Issuer after the Original Issue Date, except: (i) securities
issued pursuant to an underwritten public offering of the Issuer's securities,
(ii) securities issued pursuant to the conversion or exercise of convertible or
excercisable securities issued or outstanding on or prior to the date hereof or
issued pursuant to the Series A Convertible Preferred Stock Purchase Agreement
or Series B Convertible Preferred Stock Purchase Agreement, (iii) the Warrant
Stock, (iv) securities issued in connection with strategic license agreements
so long as such issuances are not for the purpose of raising capital, (v)
Common Stock issued or options to purchase Common Stock granted or issued
pursuant to the Issuer's stock option plans and employee stock purchase plans
as they now exist, (vi) any warrants issued to the placement agent for the transactions
contemplated by the (ii) above, and (vii) the payment of any dividend on the
Series A Preferred Stock or Series B Preferred Stock of the Issuer.  

"Advisory
Agreement" means the Financial Advisory Agreement dated as of July 19,
2004, among the Issuer, Victus Capital, L.P., and Vicis Capital Master Fund.

"Board"
shall mean the Board of Directors of the Issuer.

"Capital
Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited)
in any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.

"Certificate
of Incorporation" means the Certificate of Incorporation of the Issuer
as in effect on the Original Issue Date, and as hereafter from time to time
amended, modified, supplemented or restated in accordance with the terms hereof
and thereof and pursuant to applicable law.

"Common
Stock" means the Common Stock, par value $.001 per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.

"Common
Stock Equivalent" means any Convertible Security or warrant, option or
other right to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Security.

13

  

"Convertible
Securities" means evidences of Indebtedness, shares of Capital Stock
or other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common Stock.  The term "Convertible
Security" means one of the Convertible Securities.

"Governmental
Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

"Holders"
mean the Persons who shall from time to time own any Warrant.  The term
"Holder" means one of the Holders.

"Independent
Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the
Holder of any Warrant.

"Issuer"
means Home Solutions of America, Inc., a Delaware corporation, and its
successors. 

"Majority
Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the Warrants at the time
outstanding.

"Nasdaq"
means the Nasdaq National Market or the Nasdaq SmallCap Market.

"Original
Issue Date" means March 1, 2004.

                        "OTC
Bulletin Board" means the over-the-counter electronic bulletin board.

"Other
Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.

            "Outstanding
Common Stock" means, at any given time, the aggregate amount of outstanding
shares of Common Stock, assuming full exercise, conversion or exchange (as
applicable) of all options, warrants and other Securities which are convertible
into or exercisable or exchangeable for, and any right to subscribe for, shares
of Common Stock that are outstanding at such time.

            "Person"
means an individual, corporation, limited liability company, partnership, joint
stock company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.

 

14

 

  

"Per
Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the American Stock Exchange
or another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the closing bid price
on such exchange or quotation system on the date nearest preceding such date,
or (b) if the Common Stock is not listed then on the American Stock Exchange,
Nasdaq or any other registered national stock exchange, the closing bid price
for a share of Common Stock in the over‐the‐counter market, as
reported by the OTC Bulletin Board or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith by the
holder, or (d) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by an Independent Appraiser
selected in good faith by the Majority Holders; provided, however,
that the Issuer, after receipt of the determination by such Independent
Appraiser, shall have the right to select an additional Independent Appraiser,
in which case, the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided, further
that all determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar transactions
during such period.  The determination of fair market value by an Independent
Appraiser shall be based upon the fair market value of the Issuer determined on
a going concern basis as between a willing buyer and a willing seller and
taking into account all relevant factors determinative of value, and shall be
final and binding on all parties.  In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any restrictions on
transfer of the Common Stock imposed by agreement or by federal or state
securities laws, or to the existence or absence of, or any limitations on,
voting rights.

"Securities"
means any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any
Security.  "Security" means one of the Securities.

"Securities
Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.

"Subsidiary"
means any corporation at least 50% of whose outstanding Voting Stock shall at
the time be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

"Term"
has the meaning specified in Section 1 hereof.

"Trading
Day" means (a) a day on which the Common Stock is traded on the
American Stock Exchange, or (b) if the Common Stock is not listed on the
American Stock Exchange, a day on which the Common Stock is traded on any other
registered national stock exchange, or (c) if the Common Stock is not traded on
any other registered national stock exchange, a day on which the Common Stock
is traded on the OTC Bulletin Board, or (d) if the Common Stock is not traded
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over‐the‐counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted
as set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other government action to close.

15

  

"Voting
Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.

"Warrants"
means the Warrants issued and sold pursuant to the Advisory Agreement,
including, without limitation, this Warrant, and any other warrants of like
tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants. 

"Warrant
Price" initially means U.S. $1.75, as such Warrant Price may be
adjusted from time to time as shall result from the adjustments specified in
this Warrant, including Section 4 hereto.

"Warrant
Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this
Warrant, after giving effect to all prior adjustments and increases to such
number made or required to be made under the terms hereof.

"Warrant
Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.

10.       Other Notices.  In case at any time:

(A)       the Issuer shall make any distributions
to the holders of Common Stock; or

(B)       the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital Stock
of any class or other rights; or

(C)       there shall be any reclassification of the Capital Stock of
the Issuer; or

(D)       there shall be any capital reorganization by the Issuer; or

(E)       there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or substantially all
of the Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation and its
shares of Capital Stock shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or

(F)       there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial liquidation of the
Issuer or distribution to holders of Common Stock;

 

16

  

then, in each of such cases, the
Issuer shall give written notice to the Holder of the date on which (i) the
books of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place.  Such notice also shall
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their certificates for Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding-up, as the case may
be.  Such notice shall be given at least twenty (20) days prior to the record
date or effective date for the event specified in such notice.

11.      
Amendment
and Waiver.  Any term, covenant, agreement or condition in this Warrant may
be amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by a written
instrument or written instruments executed by the Issuer and the Majority
Holders; provided, however, that no such amendment or waiver
shall reduce the Warrant Share Number, increase the Warrant Price, shorten the
period during which this Warrant may be exercised or modify any provision of
this Section 11 without the consent of the Holder of this Warrant.

12.      
Governing
Law.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.

13.      
Notices. 
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii)
the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59
p.m., eastern time, on such date, (iii) the Trading Day following the date of
mailing, if sent by overnight delivery by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given.  The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:

17

  

Home
Solutions of America, Inc.  

5565 Red Bird
  Center Drive

Dallas, Texas 75237

Attention: Rick J. O'Brien, CFO

Tel. No.: (214) 623-8446

Fax No.:  (214) 333-9400

Copies of notices to the Issuer
shall be sent to J. Paul Caver, Attorney
at Law, 2724 Routh Street, Dallas, Texas 75201, Tel. No.: (214) 468-8868; Fax
No.: (214) 468-8867.  Copies of notices to the Holder shall be sent to Jenkens
& Gilchrist Parker Chapin LLP, 405 Lexington Avenue, New York, New York
10174, Attention: Christopher S. Auguste,  Facsimile No.: (212) 704-6288.  Any
party hereto may from time to time change its address for notices by giving at
least ten (10) days written notice of such changed address to the other party
hereto.

14.      
Warrant
Agent.  The Issuer may, by written notice to each Holder of this Warrant,
appoint an agent having an office in New York, New York for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

15.      
Remedies. 
The Issuer stipulates that the remedies at law of the Holder of this Warrant in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

16.      
Successors
and Assigns.  This Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors and assigns of the Issuer,
the Holder hereof and (to the extent provided herein) the Holders of Warrant
Stock issued pursuant hereto, and shall be enforceable by any such Holder or
Holder of Warrant Stock.

17.      
Modification
and Severability.  If, in any action before any court or agency legally
empowered to enforce any provision contained herein, any provision hereof is
found to be unenforceable, then such provision shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.  If any such
provision is not enforceable as set forth in the preceding sentence, the
unenforceability of such provision shall not affect the other provisions of
this Warrant, but this Warrant shall be construed as if such unenforceable
provision had never been contained herein.

18.      
Headings. 
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.

 

 

 

18

IN WITNESS WHEREOF, the Issuer has executed this Series C Warrant as of
the day and year first above written.

                                                                       
HOME
SOLUTIONS OF AMERICA, INC.

                                                                        By:                                                                              

                                                                             
Name:

                                                                          
   Title:

 

 

 

 

 

 

 

19

 

 

EXERCISE FORM

SERIES C WARRANT

HOME SOLUTIONS OF AMERICA, INC. 

The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Home Solutions of
America, Inc. covered by the within Warrant.

Dated: _________________               Signature          ___________________________

Address           _____________________

                                                                                    _____________________

Number of shares of Common Stock beneficially owned or
deemed beneficially owned by the Holder on the date of Exercise:
_________________________

ASSIGNMENT

FOR VALUE RECEIVED,
_________________ hereby sells, assigns and transfers unto __________________
the within Warrant and all rights evidenced thereby and does irrevocably
constitute and appoint _____________, attorney, to transfer the said Warrant on
the books of the within named corporation.

Dated: _________________               Signature          ___________________________

Address           _____________________

                                                                                    ____________________

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________
hereby sells, assigns and transfers unto __________________ the right to
purchase _________ shares of Warrant Stock evidenced by the within Warrant
together with all rights therein, and does irrevocably constitute and appoint
___________________, attorney, to transfer that part of the said Warrant on the
books of the within named corporation.

Dated: _________________               Signature          ___________________________

Address           _____________________

                                                                                    _____________________

FOR USE BY THE ISSUER
ONLY:

This Warrant No. W-___ canceled
(or transferred or exchanged) this _____ day of ___________, _____, shares of
Common Stock issued therefor in the name of _______________, Warrant No.
W-_____ issued for ____ shares of Common Stock in the name of _______________.

 

 

20Exhibit 10.5

THIS WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR HOME SOLUTIONS OF AMERICA, INC. SHALL HAVE RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO HOME SOLUTIONS OF AMERICA, INC. THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

 

SERIES D WARRANT TO
PURCHASE

SHARES OF COMMON
STOCK

OF

 HOME SOLUTIONS OF
AMERICA, INC.

 Expires July 19, 2009

	
		No.: W-B-01-02    
		
	Number of Shares: 333,334
	
		Date of Issuance: July 19, 2004

			 

FOR VALUE
RECEIVED, subject to the provisions hereinafter set forth, the undersigned, Home
Solutions of America, Inc., a Delaware corporation (together with its
successors and assigns, the "Issuer"), hereby certifies that _________________
or its registered assigns is entitled to subscribe for and purchase, during the
Term (as hereinafter defined), up to Three Hundred Thirty-Three Thousand Three
Hundred Thirty-Four (333,334) shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an exercise price per share equal to the Warrant
Price then in effect, subject, however, to the provisions and upon the terms
and conditions hereinafter set forth.  Capitalized terms used in this Warrant
and not otherwise defined herein shall have the respective meanings specified
in Section 9 hereof.

1.        
Term. 
The term of this Warrant shall commence on July 19, 2004 and shall expire at 5:00 p.m., eastern time, on July 19, 2009 (such period being the "Term").

2.        
Method
of Exercise Payment; Issuance of New Warrant; Transfer and Exchange.

(a)       
Time
of Exercise.  Subject to Section 2(b), the purchase rights represented by
this Warrant may be exercised in whole or in part during the Term commencing on
 July 19, 2004 and expiring on July 19, 2009. 

(b)       
Method
of Exercise.  The Holder hereof may exercise this Warrant, in whole or in
part, by the surrender of this Warrant (with the exercise form attached hereto
duly executed) at the principal office of the Issuer, and by the payment to the
Issuer of an amount of consideration therefor equal to the Warrant Price in
effect on the date of such exercise multiplied by the number of shares of
Warrant Stock with respect to which this Warrant is then being exercised,
payable at such Holder's election by certified or official bank check or by wire transfer to an account designated by the Issuer. 
Notwithstanding anything herein to the contrary, the Holder hereof may exercise
this Warrant only up to such number of shares of Common Stock that the Holder
received pursuant to the exercise of the Holder's Series A Warrant issued by
the Issuer to the Holder on the date hereof.  

 

 

  

(c)       
Issuance
of Stock Certificates.  In the event of any exercise of the rights
represented by this Warrant in accordance with and subject to the terms and
conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such exercise or, at the request of the Holder (provided that a registration
statement under the Securities Act qualifying a public offering of the Warrant
Stock is then in effect), issued and delivered to the Depository Trust Company
("DTC") account on the Holder's behalf via the Deposit Withdrawal Agent
Commission System ("DWAC") within a reasonable time, not exceeding three
(3) Trading Days after such exercise, and the Holder hereof shall be deemed for
all purposes to be the holder of the shares of Warrant Stock so purchased as of
the date of such exercise and (ii) unless this Warrant has expired, a new
Warrant representing the number of shares of Warrant Stock, if any, with
respect to which this Warrant shall not then have been exercised (less any
amount thereof which shall have been canceled in payment or partial payment of
the Warrant Price as hereinabove provided) shall also be issued to the Holder
hereof at the Issuer's expense within such time.

(d)       
Transferability
of Warrant.  Subject to Section 2(f), this Warrant may be transferred by a
Holder without the consent of the Issuer.  If transferred pursuant to this
paragraph and subject to the provisions of subsection (f) of this Section 2,
this Warrant may be transferred on the books of the Issuer by the Holder hereof
in person or by duly authorized attorney, upon surrender of this Warrant at the
principal office of the Issuer, properly endorsed (by the Holder executing an
assignment in the form attached hereto) and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer.  This
Warrant is exchangeable at the principal office of the Issuer for Warrants for
the purchase of the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange.  All
Warrants issued on transfers or exchanges shall be dated the Original Issue
Date and shall be identical with this Warrant except as to the name of the
Holder or the number of shares of Warrant Stock, as applicable.

(e)       
Continuing
Rights of Holder.  The Issuer will, at the time of or at any time after each
exercise of this Warrant, upon the request of the Holder hereof, acknowledge in
writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if
any such Holder shall fail to make any such request, the failure shall not
affect the continuing obligation of the Issuer to afford such rights to such
Holder.

(f)        
Compliance
with Securities Laws.

(i)         The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not
as a nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any shares of Warrant
Stock to be issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the Securities
Act and any applicable state securities laws.

2

  

(ii)        Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon exercise
hereof shall be stamped or imprinted with a legend in substantially the
following form:

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR HOME SOLUTIONS OF
AMERICA, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO HOME SOLUTIONS OF AMERICA, INC. THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

(iii)       The restrictions imposed by this subsection (e) upon the
transfer of this Warrant or the shares of Warrant Stock to be purchased upon
exercise hereof shall terminate (A) when such securities shall have been resold
pursuant to an effective registration statement under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and substance reasonably
satisfactory to the Issuer, addressed to the Issuer to the effect that such
restrictions are no longer required to ensure compliance with the Securities
Act and state securities laws or (C) upon the Issuer's receipt of other
evidence reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are not
required.  Whenever such restrictions shall cease and terminate as to any such
securities, the Holder thereof shall be entitled to receive from the Issuer (or
its transfer agent and registrar), without expense (other than applicable
transfer taxes, if any), new Warrants (or, in the case of shares of Warrant
Stock, new stock certificates) of like tenor not bearing the applicable legend required
by paragraph (ii) above relating to the Securities Act and state securities
laws.

(g)        In no
event may the Holder exercise this Warrant in whole or in part unless the
Holder is an "accredited investor" as defined in Regulation D under the
Securities Act.

3

  

3.          Stock Fully Paid; Reservation and Listing of Shares;
Covenants.

(a)        Stock Fully Paid.  The Issuer represents, warrants,
covenants and agrees that all shares of Warrant Stock which may be issued upon
the exercise of this Warrant or otherwise hereunder will, when issued in
accordance with the terms of this Warrant, be duly authorized, validly issued,
fully paid and non-assessable and free from all taxes, liens and charges
created by or through Issuer.  The Issuer further covenants and agrees that during
the period within which this Warrant may be exercised, the Issuer will at all
times have authorized and reserved for the purpose of the issue upon exercise
of this Warrant a sufficient number of shares of Common Stock to provide for
the exercise of this Warrant.

(b)       
Reservation. 
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant or as otherwise provided hereunder require
registration or qualification with any governmental authority under any federal
or state law before such shares may be so issued, the Issuer will in good faith
use its reasonable best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock
has been registered pursuant to a registration statement under the Securities
Act then in effect), and, to the extent permissible under the applicable
securities exchange rules, all unissued shares of Warrant Stock which are at
any time issuable hereunder, so long as any shares of Common Stock shall be so
listed.  The Issuer will also so list on each securities exchange or market,
and will maintain such listing of, any other securities which the Holder of
this Warrant shall be entitled to receive upon the exercise of this Warrant if
at the time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.

(c)       
Covenants. 
The Issuer shall not by any action including, without limitation, amending the Certificate
of Incorporation or the by-laws of the Issuer, or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of the Holder hereof
against dilution (to the extent specifically provided herein) or impairment. 
Without limiting the generality of the foregoing, the Issuer will (i) not
permit the par value, if any, of its Common Stock to exceed the then effective
Warrant Price, (ii) not amend or modify any provision of the Certificate of
Incorporation or by-laws of the Issuer in any manner that would adversely
affect the rights of the Holders of the Warrants in their capacity as Holders
of the Warrants, (iii) take all such action as may be reasonably necessary in
order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock, free and clear of any liens, claims,
encumbrances and restrictions (other than as provided herein) upon the exercise
of this Warrant, and (iv) use its reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be reasonably necessary to enable the Issuer to
perform its obligations under this Warrant.

(d)       
Loss,
Theft, Destruction of Warrants.  Upon receipt of evidence satisfactory to
the Issuer of the ownership of and the loss, theft, destruction or mutilation
of any Warrant and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security satisfactory to the Issuer or, in the case of
any such mutilation, upon surrender and cancellation of such Warrant, the
Issuer will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Warrant, a new Warrant of like tenor and representing the right to
purchase the same number of shares of Common Stock.

 

4

 4.        
Adjustment
of Warrant Price and Warrant Share Number.  The number of shares of Common
Stock for which this Warrant is exercisable, and the price at which such shares
may be purchased upon exercise of this Warrant, shall be subject to adjustment
from time to time as set forth in this Section 4. The Issuer shall give the
Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with Section 5.  

(a)       
Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.

            (i) 
In case the Issuer after the Original Issue Date shall do any of the following
(each, a "Triggering Event"): (a) consolidate or merge with or
into another corporation where the holders of outstanding Voting Stock prior to
such merger or consolidation do not own over 50% of the outstanding Voting
Stock of the merged or consolidated entity immediately after such merger or
consolidation, or (b) sell all or substantially all of its properties or assets
to any other Person, or (c) change the Common Stock to the same or different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in
Section 4(b) or Section 4(c)), or (d) effect a capital reorganization (other
than by way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 4(b) or Section 4(c)), then, and in the
case of each such Triggering Event, proper provision shall be made so that,
upon the basis and the terms and in the manner provided in this Warrant, the
Holder of this Warrant shall be entitled upon the exercise hereof at any time
after the consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, to receive at the Warrant Price
in effect at the time immediately prior to the consummation of such Triggering
Event in lieu of the Common Stock issuable upon such exercise of this Warrant
prior to such Triggering Event, the securities, cash and property to which such
Holder would have been entitled upon the consummation of such Triggering Event
if such Holder had exercised the rights represented by this Warrant immediately
prior thereto, subject to adjustments (subsequent to such corporate action) as
nearly equivalent as possible to the adjustments provided for elsewhere in this
Section 4.

            (ii)        Notwithstanding
anything contained in this Warrant to the contrary, a Triggering Event shall
not be deemed to have occurred if, prior to the consummation thereof, each
Person (other than the Issuer) which may be required to deliver any securities,
cash or property upon the exercise of this Warrant as provided herein shall
assume, by written instrument delivered to, and reasonably satisfactory to, the
Holder of this Warrant, (A) the obligations of the Issuer under this Warrant
(and if the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the Issuer from,
any continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder a written acknowledgement executed by the
President or Chief Financial Officer of the Company, stating that this Warrant
shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the securities, cash or property which such Person may
be required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto. 

 

5

  

 

                        (b)       
Stock
Dividends, Subdivisions and Combinations.  If at any time the Issuer shall:

                        (i)         make
or issue or set a record date for the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock, 

                        (ii)
       effect a stock split of its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or

                        (iii)
      combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,

then (1) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant
Price then in effect shall be adjusted to equal (A) the Warrant Price then in
effect multiplied by the number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.

Notwithstanding the foregoing, if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Warrant Price shall be adjusted
pursuant to this paragraph as of the time of actual payment of such dividends
or distributions.

            (c)       
Certain
Other Distributions.  If at any time the Issuer shall make or issue or set
a record date for the determination of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution of:

(i)         cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer),

(ii)        any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Common Stock
Equivalents or Additional Shares of Common Stock), or

(iii)       any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Common Stock Equivalents or
Additional Shares of Common Stock), 

6

  

then (1) the number of shares of
Common Stock for which this Warrant is exercisable shall be adjusted to equal
the product of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such adjustment multiplied by a fraction (A)
the numerator of which shall be the Per Share Market Value of Common Stock at
the date of taking such record and (B) the denominator of which shall be such
Per Share Market Value minus the amount allocable to one share of Common Stock
of any such cash so distributable and of the fair value (as determined in good
faith by the Board of Directors of the Issuer and supported by an opinion from
an investment banking firm of recognized national standing acceptable to (but
not affiliated with) the Holder) of any and all such evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights so distributable, and (2) the Warrant Price then in effect
shall be adjusted to equal (A) the Warrant Price then in effect multiplied by
the number of shares of Common Stock for which this Warrant is exercisable immediately
prior to the adjustment divided by (B) the number of shares of Common Stock for
which this Warrant is exercisable immediately after such adjustment.  A
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Issuer to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 4(c) and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such
change shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4(b).      

Notwithstanding the foregoing, if such record date shall
have been fixed and such dividend is not fully paid or if such distribution is
not fully made on the date fixed therefor, the Warrant Price shall be adjusted
pursuant to this Section 4(c) as of the time of actual payment of such
dividends or distributions.

            (d)       
Issuance
of Additional Shares of Common Stock.  

                        (i)         In
the event the Issuer shall at any time following the Original Issue Date issue
any Additional Shares of Common Stock (otherwise than as provided in the
foregoing subsections (a) through (c) of this Section 4), at a price per share
less than the Warrant Price then in effect or without consideration, then the
Warrant Price upon each such issuance shall be adjusted to that price
determined by multiplying the Warrant Price then in effect by a fraction:

(A)       the
numerator of which shall be equal to the sum of (x) the number of shares of
Outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock plus (y) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase
at a price per share equal to the Warrant Price then in effect, and

7

  

(B)       the denominator of
which shall be equal to the number of shares of Outstanding Common Stock
immediately after the issuance of such Additional Shares of Common Stock.

                        (ii)        No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon the
issuance of any Additional Shares of Common Stock which are issued pursuant to
the exercise of any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such Common Stock Equivalents
(or upon the issuance of any warrant or other rights therefor) pursuant to
Section 4(e).

(e)         Intentionally Omitted.

(f)          Issuance of Common Stock Equivalents.  If at any time the Issuer
shall issue or sell any Common Stock Equivalents, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the aggregate
price per share for which Common Stock is issuable upon such conversion or
exchange plus the consideration received by the Issuer for issuance of such
Common Stock Equivalent divided by the number of shares of Common Stock
issuable pursuant to such Common Stock Equivalent shall be less than the
Warrant Price in effect immediately prior to the time of such issue or sale,
then the number of shares of Common Stock for which this Warrant is exercisable
and the Warrant Price then in effect shall be adjusted as provided in Section
4(d) on the basis that the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Common Stock
Equivalents shall be deemed to have been issued and outstanding and the Issuer
shall have received all of the consideration payable therefor, if any, as of
the date of actual issuance of such Common Stock Equivalents.  No further
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable and the Warrant Price then in effect shall be made under this
Section 4(e) upon the issuance of any Common Stock Equivalents which are issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any such adjustment shall previously have been made upon
the issuance of such warrants or other rights pursuant to this Section 4(e). 
No further adjustments of the number of shares of Common Stock for which this
Warrant is exercisable and the Warrant Price then in effect shall be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Common Stock Equivalents.

(g)          Superseding Adjustment.  If, at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is exercisable and
the Warrant Price then in effect shall have been made pursuant to Section 4(e)
as the result of any issuance of Common Stock Equivalents, and (i) such Common
Stock Equivalents, or the right of conversion or exchange in such Common Stock
Equivalents, shall expire, and all or a portion of such or the right of
conversion or exchange with respect to all or a portion of such Common Stock
Equivalents, as the case may be, shall not have been exercised, or (ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such Common Stock Equivalents shall be increased, then such previous
adjustment shall be rescinded and annulled and the Additional Shares of Common
Stock which were deemed to have been issued by virtue of the computation made
in connection with the adjustment so rescinded and annulled shall no longer be
deemed to have been issued by virtue of such computation.  Upon the occurrence
of an event set forth in this Section 4(g) above, there shall be a
recomputation made of the effect of such Common Stock Equivalents on the basis
of: (i) treating the number of Additional Shares of Common Stock theretofore
actually issued or issuable pursuant to the previous exercise of Common Stock
Equivalents or any such right of conversion or exchange, as having been issued
on the date or dates of any such exercise and for the consideration actually
received and receivable therefor, and (ii) treating any such Common Stock
Equivalents which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which Additional Shares of Common Stock are issuable under such Common Stock
Equivalents; whereupon a new adjustment of the number of shares of Common
Stock for which this Warrant is exercisable and the Warrant Price then in
effect shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.

8

  

(h)       
Purchase
of Common Stock by the Issuer.  If the Issuer at any time while this
Warrant is outstanding shall, directly or indirectly through a Subsidiary or
otherwise, purchase, redeem or otherwise acquire any shares of Common Stock at
a price per share greater than the Per Share Market Value, then the Warrant
Price upon each such purchase, redemption or acquisition shall be adjusted to
that price determined by multiplying such Warrant Price by a fraction (i) the
numerator of which shall be the number of shares of Outstanding Common Stock
immediately prior to such purchase, redemption or acquisition minus the number
of shares of Common Stock which the aggregate consideration for the total
number of such shares of Common Stock so purchased, redeemed or acquired would
purchase at the Per Share Market Value; and (ii) the denominator of which shall
be the number of shares of Outstanding Common Stock immediately after such
purchase, redemption or acquisition.  For the purposes of this subsection (h),
the date as of which the Per Share Market Price shall be computed shall be the
earlier of (x) the date on which the Issuer shall enter into a firm contract
for the purchase, redemption or acquisition of such Common Stock, or (y) the
date of actual purchase, redemption or acquisition of such Common Stock.  For
the purposes of this subsection (h), a purchase, redemption or acquisition of a
Common Stock Equivalent shall be deemed to be a purchase of the underlying
Common Stock, and the computation herein required shall be made on the basis of
the full exercise, conversion or exchange of such Common Stock Equivalent on
the date as of which such computation is required hereby to be made, whether or
not such Common Stock Equivalent is actually exercisable, convertible or
exchangeable on such date.

            (i)        
Other
Provisions applicable to Adjustments under this Section.  The following
provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect provided for in this Section 4:

                        (i)        
Computation
of Consideration.  To the extent that any Additional Shares of Common Stock
or any Common Stock Equivalents (or any warrants or other rights therefor)
shall be issued for cash consideration, the consideration received by the
Issuer therefor shall be the amount of the cash received by the Issuer
therefor, or, if such Additional Shares of Common Stock or Common Stock
Equivalents are offered by the Issuer for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Common Stock Equivalents are
sold to underwriters or dealers for public offering without a subscription
offering, the initial public offering price (in any such case subtracting any
amounts paid or receivable for accrued interest or accrued dividends and
without taking into account any compensation, discounts or expenses paid or incurred
by the Issuer for and in the underwriting of, or otherwise in connection with,
the issuance thereof).  In connection with any merger or consolidation in which
the Issuer is the surviving corporation (other than any consolidation or merger
in which the previously outstanding shares of Common Stock of the Issuer shall
be changed to or exchanged for the stock or other securities of another
corporation), the amount of consideration therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board, of such
portion of the assets and business of the nonsurviving corporation as the Board
may determine to be attributable to such shares of Common Stock or Common Stock
Equivalents, as the case may be.  The consideration for any Additional Shares
of Common Stock issuable pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received by the Issuer for
issuing such warrants or other rights plus the additional consideration payable
to the Issuer upon exercise of such warrants or other rights.  The
consideration for any Additional Shares of Common Stock issuable pursuant to
the terms of any Common Stock Equivalents shall be the consideration received
by the Issuer for issuing warrants or other rights to subscribe for or
purchase such Common Stock Equivalents, plus the consideration paid or payable
to the Issuer in respect of the subscription for or purchase of such Common
Stock Equivalents, plus the additional consideration, if any, payable to the
Issuer upon the exercise of the right of conversion or exchange in such Common
Stock Equivalents.  In the event of any consolidation or merger of the Issuer
in which the Issuer is not the surviving corporation or in which the previously
outstanding shares of Common Stock of the Issuer shall be changed into or
exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or substantially all of the assets of the Issuer for
stock or other securities of any corporation, the Issuer shall be deemed to
have issued a number of shares of its Common Stock for stock or securities or
other property of the other corporation computed on the basis of the actual
exchange ratio on which the transaction was predicated, and for a consideration
equal to the fair market value on the date of such transaction of all such
stock or securities or other property of the other corporation.  In the event
any consideration received by the Issuer for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board.  In the
event Common Stock is issued with other shares or securities or other assets of
the Issuer for consideration which covers both, the consideration computed as
provided in this Section 4(i)(i) shall be allocated among such securities and
assets as determined in good faith by the Board.

9

  

                        (ii)       
When
Adjustments to Be Made.  The adjustments required by this Section 4 shall
be made whenever and as often as any specified event requiring an adjustment
shall occur, except that any adjustment of the number of shares of Common Stock
for which this Warrant is exercisable that would otherwise be required may be
postponed (except in the case of a subdivision or combination of shares of the
Common Stock, as provided for in Section 4(b)) up to, but not beyond the date
of exercise if such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than one percent (1%) of the shares of
Common Stock for which this Warrant is exercisable immediately prior to the
making of such adjustment.  Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 4 and not previously made, would result in a minimum
adjustment or on the date of exercise. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.

                        (iii)      
Fractional
Interests.  In computing adjustments under this Section 4, fractional
interests in Common Stock shall be taken into account to the nearest one
one-hundredth (1/100th) of a share.

 

 

 

 

10

  

            (iv)      
When
Adjustment Not Required.  If the Issuer shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.

(j)        
Form
of Warrant after Adjustments.  The form of this Warrant need not be changed
because of any adjustments in the Warrant Price or the number and kind of
Securities purchasable upon the exercise of this Warrant.

            (k)       
Escrow
of Warrant Stock.  If after any property becomes distributable pursuant to
this Section 4 by reason of the taking of any record of the holders of Common
Stock, but prior to the occurrence of the event for which such record is taken,
and the Holder exercises this Warrant, any shares of Common Stock issuable
upon exercise by reason of such adjustment shall be deemed the last shares of
Common Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property shall be
held in escrow for the Holder by the Issuer to be issued to the Holder upon and
to the extent that the event actually takes place, upon payment of the current
Warrant Price.  Notwithstanding any other provision to the contrary herein, if
the event for which such record was taken fails to occur or is rescinded, then
such escrowed shares shall be cancelled by the Issuer and escrowed property
returned.

5.        
Notice
of Adjustments.  Whenever the Warrant Price or Warrant Share Number shall
be adjusted pursuant to Section 4 hereof (for purposes of this Section 5, each
an "adjustment"), the Issuer shall cause its Chief Financial Officer
to prepare and execute a certificate setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated (including a description of the basis on
which the Board made any determination hereunder), and the Warrant Price and
Warrant Share Number after giving effect to such adjustment, and shall cause
copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment.  Any dispute between the Issuer and the Holder
of this Warrant with respect to the matters set forth in such certificate may
at the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big four" selected by the
Holder, provided that the Issuer shall have ten (10) days after receipt
of notice from such Holder of its selection of such firm to object thereto, in
which case such Holder shall select another such firm and the Issuer shall have
no such right of objection.  The firm selected by the Holder of this Warrant as
provided in the preceding sentence shall be instructed to deliver a written
opinion as to such matters to the Issuer and such Holder within thirty (30)
days after submission to it of such dispute.  Such opinion shall be final and
binding on the parties hereto.  

6.        
Fractional
Shares.  No fractional shares of Warrant Stock will be issued in connection
with any exercise hereof, but in lieu of such fractional shares, the Issuer
shall make a cash payment therefor equal in amount to the product of the
applicable fraction multiplied by the Per Share Market Value then in effect.

 

11

  

            7.        
Ownership Cap and Certain
Exercise Restrictions.  (a)  Notwithstanding anything to the
contrary set forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant if the number of shares of Common Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares
of Common Stock owned by such Holder at such time, the number of shares of Common
Stock which would result in such Holder owning more than 4.999% of all of the
Common Stock outstanding at such time; provided, however, that upon a holder of
this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 13 hereof) (the "Waiver Notice") that such Holder would like
to waive this Section 7(a) with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 7(a) will be of no force
or effect with regard to all or a portion of the Warrant referenced in the
Waiver Notice; provided, further, that this provision shall be of no further
force or effect (i) during the sixty-one (61) days immediately preceding the
expiration of the term of this Warrant or (ii) upon the Holder's receipt of a
Call Notice (as defined in Section 8 hereof).

                        (b)        The
Holder may not exercise the Warrant hereunder to the extent such exercise would
result in the Holder beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules thereunder) in excess of 9.999%
of the then issued and outstanding shares of Common Stock, including shares
issuable upon exercise of the Warrant held by the Holder after application of
this Section; provided, however, that upon a holder of this Warrant
providing the Company with a Waiver Notice that such holder would like to waive
this Section 7(b) with regard to any or all shares of Common Stock issuable
upon exercise of this Warrant, this Section 7(b) shall be of no force or effect
with regard to those shares of Warrant Stock referenced in the Waiver Notice; provided,
further, that this provision shall be of no further force or effect (i)
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant or (ii) upon the Holder's receipt of a Call Notice (as defined
in Section 8 hereof).

8.     
Call. 
Notwithstanding anything herein to the contrary, commencing one hundred eighty
(180) days following the effective date of the registration statement covering
the resale of the Warrant Stock and the shares of Common Stock, the Issuer, at
its option, may call up to one hundred percent (100%) of this Warrant if the
Per Share Market Value of the Common Stock has been greater than $5.63 (as may
be adjusted for any stock splits or combinations of the Common Stock) for a
period of any fifteen (15) Trading Days during the twenty (20) consecutive
Trading Days immediately prior to the date of delivery of the Call Notice (a
"Call Notice Period") by providing the Holder of this Warrant
written notice pursuant to Section 13 (the "Call Notice"); provided,
that (i) a registration statement under the Securities Act providing for
the resale of the Warrant Stock is then in effect and has been effective,
without lapse or suspension of any kind, for a period of 60 consecutive
calendar days, (ii) trading in the Common Stock shall
not have been suspended by the Securities and Exchange Commission or the
American Stock Exchange and (iii) the Issuer is in material compliance with the
terms and conditions of this Warrant and the other Transaction Documents (as
defined in the Advisory Agreement); provided, further,
that a registration statement under the Securities Act providing for the resale
of the Warrant Stock is in effect from the date of delivery of the Call Notice
until the date which is the later of (i) the date the Holder exercises the
Warrant pursuant to the Call Notice and (ii) the 20th day after the
Holder receives the Call Notice (the "Early Termination Date"). 
The rights and privileges granted pursuant to this Warrant with respect to the
shares of Warrant Stock subject to the Call Notice (the "Called Warrant
Shares") shall expire on the Early Termination Date if this Warrant is
not exercised with respect to such Called Warrant Shares prior to such Early
Termination Date.  In the event this Warrant is not exercised with respect to
the Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant
(i) $.01 per Called Warrant Share and (ii) a new Warrant representing the
number of shares of Warrant Stock, if any, which shall not have been subject to
the Call Notice upon the Holder tendering to the Issuer the applicable Warrant
certificate.

 

12

  

9.        
Definitions.  For the purposes of this Warrant, the following
terms have the following meanings:

            "Additional
Shares of Common Stock" means all shares of Common Stock issued by the
Issuer after the Original Issue Date, and all shares of Other Common, if any,
issued by the Issuer after the Original Issue Date, except: (i) securities
issued pursuant to an underwritten public offering of the Issuer's securities,
(ii) securities issued pursuant to the conversion or exercise of convertible or
excercisable securities issued or outstanding on or prior to the date hereof or
issued pursuant to the Series A Convertible Preferred Stock Purchase Agreement
or Series B Convertible Preferred Stock Purchase Agreement, (iii) the Warrant
Stock, (iv) securities issued in connection with strategic license agreements
so long as such issuances are not for the purpose of raising capital, (v)
Common Stock issued or options to purchase Common Stock granted or issued
pursuant to the Issuer's stock option plans and employee stock purchase plans
as they now exist, (vi) any warrants issued to the placement agent for the
transactions contemplated by (ii) above, and (vii) the payment of any dividend
on the Series A Preferred Stock or Series B Preferred Stock of the Issuer. 

"Advisory
Agreement" means the Financial Advisory Agreement dated as of July 19,
2004, among the Issuer, Victus Capital, LP, and Vicis Capital Master Fund.

"Board"
shall mean the Board of Directors of the Issuer.

"Capital
Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited)
in any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.

"Certificate
of Incorporation" means the Certificate of Incorporation of the Issuer
as in effect on the Original Issue Date, and as hereafter from time to time
amended, modified, supplemented or restated in accordance with the terms hereof
and thereof and pursuant to applicable law.

"Common
Stock" means the Common Stock, par value $.001 per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.

"Common
Stock Equivalent" means any Convertible Security or warrant, option or
other right to subscribe for or purchase any Additional Shares of Common Stock
or any Convertible Security.

 

13

  

"Convertible
Securities" means evidences of Indebtedness, shares of Capital Stock
or other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common Stock.  The term "Convertible
Security" means one of the Convertible Securities.

"Governmental
Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

"Holders"
mean the Persons who shall from time to time own any Warrant.  The term
"Holder" means one of the Holders.

"Independent
Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the
Holder of any Warrant.

"Issuer"
means Home Solutions of America, Inc., a Delaware corporation, and its
successors. 

"Majority
Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the Warrants at the time
outstanding.

"Nasdaq"
means the Nasdaq National Market or the Nasdaq SmallCap Market.

"Original
Issue Date" means March 1, 2004.

                        "OTC
Bulletin Board" means the over-the-counter electronic bulletin board.

"Other
Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.

            "Outstanding
Common Stock" means, at any given time, the aggregate amount of outstanding
shares of Common Stock, assuming full exercise, conversion or exchange (as
applicable) of all options, warrants and other Securities which are convertible
into or exercisable or exchangeable for, and any right to subscribe for, shares
of Common Stock that are outstanding at such time.

             "Person"
means an individual, corporation, limited liability company, partnership, joint
stock company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.

 

 

14

  

 "Per
Share Market Value" means on any particular date (a) the closing bid
price per share of the Common Stock on such date on the American Stock Exchange
or another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the closing bid price
on such exchange or quotation system on the date nearest preceding such date,
or (b) if the Common Stock is not listed then on the American Stock Exchange,
Nasdaq or any other registered national stock exchange, the closing bid price
for a share of Common Stock in the over‐the‐counter market, as
reported by the OTC Bulletin Board or in the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet"
quotes for the relevant conversion period, as determined in good faith by the
holder, or (d) if the Common Stock is not then publicly traded the fair market
value of a share of Common Stock as determined by an Independent Appraiser
selected in good faith by the Majority Holders; provided, however,
that the Issuer, after receipt of the determination by such Independent
Appraiser, shall have the right to select an additional Independent Appraiser,
in which case, the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided, further
that all determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar transactions
during such period.  The determination of fair market value by an Independent
Appraiser shall be based upon the fair market value of the Issuer determined on
a going concern basis as between a willing buyer and a willing seller and
taking into account all relevant factors determinative of value, and shall be
final and binding on all parties.  In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any restrictions on
transfer of the Common Stock imposed by agreement or by federal or state
securities laws, or to the existence or absence of, or any limitations on,
voting rights.

"Securities"
means any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any
Security.  "Security" means one of the Securities.

"Securities
Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.

"Subsidiary"
means any corporation at least 50% of whose outstanding Voting Stock shall at
the time be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

 "Term"
has the meaning specified in Section 1 hereof.

 "Trading
Day" means (a) a day on which the Common Stock is traded on the
American Stock Exchange, or (b) if the Common Stock is not listed on the
American Stock Exchange, a day on which the Common Stock is traded on any other
registered national stock exchange, or (c) if the Common Stock is not traded on
any other registered national stock exchange, a day on which the Common Stock
is traded on the OTC Bulletin Board, or (d) if the Common Stock is not traded
on the OTC Bulletin Board, a day on which the Common Stock is quoted in the
over‐the‐counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other government
action to close.

 

15

  

"Voting
Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.

"Warrants"
means the Warrants issued and sold pursuant to the Advisory Agreement,
including, without limitation, this Warrant, and any other warrants of like
tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants. 

"Warrant
Price" initially means U.S. $1.75, as such Warrant Price may be
adjusted from time to time as shall result from the adjustments specified in
this Warrant, including Section 4 hereto.

"Warrant
Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this
Warrant, after giving effect to all prior adjustments and increases to such
number made or required to be made under the terms hereof.

"Warrant
Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.

10.       Other Notices.  In case at any time:

(A)       the Issuer shall make any distributions
to the holders of Common Stock; or

(B)       the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital Stock
of any class or other rights; or

(C)       there shall be any reclassification of the Capital Stock of
the Issuer; or

(D)       there shall be any capital reorganization by the Issuer; or

(E)       there shall be any (i) consolidation or merger involving the
Issuer or (ii) sale, transfer or other disposition of all or substantially all
of the Issuer's property, assets or business (except a merger or other
reorganization in which the Issuer shall be the surviving corporation and its shares
of Capital Stock shall continue to be outstanding and unchanged and except a
consolidation, merger, sale, transfer or other disposition involving a
wholly-owned Subsidiary); or

16

  

(F)       there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Issuer or any partial liquidation of the
Issuer or distribution to holders of Common Stock;

then, in each of such cases, the
Issuer shall give written notice to the Holder of the date on which (i) the
books of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place.  Such notice also shall
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their certificates for Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding-up, as
the case may be.  Such notice shall be given at least twenty (20) days prior to
the record date or effective date for the event specified in such notice.

11.      
Amendment
and Waiver.  Any term, covenant, agreement or condition in this Warrant may
be amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by a written
instrument or written instruments executed by the Issuer and the Majority
Holders; provided, however, that no such amendment or waiver
shall reduce the Warrant Share Number, increase the Warrant Price, shorten the
period during which this Warrant may be exercised or modify any provision of
this Section 11 without the consent of the Holder of this Warrant.

12.      
Governing
Law.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.

13.      
Notices. 
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii)
the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59
p.m., eastern time, on such date, (iii) the Trading Day following the date of
mailing, if sent by overnight delivery by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given.  The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:

17

  

Home
Solutions of America, Inc.  

5565 Red Bird
  Center Drive

Dallas, Texas 75237

Attention: Rick J. O'Brien, CFO

Tel. No.: (214) 333-9435

Fax No.:  (214) 333-9400

Copies of notices to the Issuer
shall be sent to J. Paul Caver, Attorney
at Law, 2724 Routh Street, Dallas, Texas 75201, Tel. No.: (214) 468-8868; Fax
No.: (214) 468-8867.  Copies of notices to the Holder shall be sent to Jenkens
& Gilchrist Parker Chapin LLP, 405 Lexington Avenue, New York, New York
10174, Attention: Christopher S. Auguste,  Facsimile No.: (212) 704-6288.  Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party hereto.

14.      
Warrant
Agent.  The Issuer may, by written notice to each Holder of this Warrant,
appoint an agent having an office in New York, New York for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

15.      
Remedies. 
The Issuer stipulates that the remedies at law of the Holder of this Warrant in
the event of any default or threatened default by the Issuer in the performance
of or compliance with any of the terms of this Warrant are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

16.      
Successors
and Assigns.  This Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors and assigns of the Issuer,
the Holder hereof and (to the extent provided herein) the Holders of Warrant
Stock issued pursuant hereto, and shall be enforceable by any such Holder or
Holder of Warrant Stock.

17.      
Modification
and Severability.  If, in any action before any court or agency legally
empowered to enforce any provision contained herein, any provision hereof is
found to be unenforceable, then such provision shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.  If any such
provision is not enforceable as set forth in the preceding sentence, the
unenforceability of such provision shall not affect the other provisions of
this Warrant, but this Warrant shall be construed as if such unenforceable
provision had never been contained herein.

18.      
Headings. 
The headings of the Sections of this Warrant are for convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.

 

 

18

IN WITNESS WHEREOF, the Issuer has executed this Series D Warrant as of
the day and year first above written.

                                                                       
HOME
SOLUTIONS OF AMERICA, INC.

                                                                        By:                                                                              

                                                                             
Name:

                                                                             
Title:

 

 

 

 

 

19

EXERCISE FORM

SERIES D WARRANT

HOME SOLUTIONS OF AMERICA, INC.

The
undersigned _______________, pursuant to the provisions of the within Warrant,
hereby elects to purchase _____ shares of Common Stock of Home Solutions of
America, Inc. covered by the within Warrant.

Dated: _________________               Signature          ___________________________

Address           _____________________

                                                                                    _____________________

Number of shares of Common Stock beneficially owned or
deemed beneficially owned by the Holder on the date of Exercise: _________________________

ASSIGNMENT

FOR VALUE RECEIVED,
_________________ hereby sells, assigns and transfers unto __________________
the within Warrant and all rights evidenced thereby and does irrevocably
constitute and appoint _____________, attorney, to transfer the said Warrant on
the books of the within named corporation.

Dated: _________________               Signature          ___________________________

Address           _____________________

                                                                                    _____________________

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED,
_________________ hereby sells, assigns and transfers unto __________________
the right to purchase _________ shares of Warrant Stock evidenced by the within
Warrant together with all rights therein, and does irrevocably constitute and
appoint ___________________, attorney, to transfer that part of the said
Warrant on the books of the within named corporation.

Dated: _________________               Signature          ___________________________

Address           _____________________

                                                                                    _____________________

FOR USE BY THE ISSUER
ONLY:

This Warrant No. W-___ canceled (or
transferred or exchanged) this _____ day of ___________, _____, shares of
Common Stock issued therefor in the name of _______________, Warrant No.
W-_____ issued for ____ shares of Common Stock in the name of _______________.

 

 

 

 

20

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