PLACEMENT AGENT AGREEMENT
November
18, 2005
Sanders Morris Harris
Inc.
320 Park Avenue, 17th Floor
New York, NY 10022
Dear Sirs:
1.
Introductory . Home Solutions of America, Inc., a
Delaware corporation (the "Company" ), proposes to sell
4,850,000 units (the "Units" ), each Unit consisting of (i)
one share of common stock, par value $.001 per share (the
"Common Stock" ), of the Company and (ii) one Common
Stock purchase warrant (the "Warrants" ), each entitling the
holder thereof to purchase 0.20 shares of Common Stock at
$5.50 per share at a purchase price of $5.50 per Unit (the
"Offering Price" ). The securities comprising the
Units shall at times be referred to as the "Securities"
herein.
2.
Representations and Warranties of the Company . The
Company represents, warrants, and agrees that:
(i) The
representations and warranties of the Company set forth in Section
3 of each of the Subscription Agreements (as defined below) are
true and correct.
(ii) The Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware, is duly qualified to do
business as a foreign corporation and in good standing in the State
of Texas, and has all requisite right, power, and authority to own
or lease its properties, to conduct its business as described in
the Exchange Act Documents (as defined in the Subscription
Agreements), and to execute, deliver, and perform this Agreement,
the Subscription Agreements between the Company and the purchasers
of the Units in the form attached as Exhibit A hereto (the
"Subscription Agreements" ), the Registration Rights
Agreement in the form attached as Exhibit B hereto (the
"Registration Rights Agreement" ), the Escrow Agreement
among the Company, you, and Sterling Bank (the "Escrow
Agent" ) in the form attached as Exhibit C hereto (the
"Escrow Agreement" and together with the Subscription
Agreements and the Registration Rights Agreement, the "Related
Agreements" ), to issue and sell the Units, and to carry out
the provisions of this Agreement and the Related Agreements and to
carry on its business as presently conducted. The Company is duly
qualified to do business and in good standing as a foreign
corporation in all other jurisdictions in which its ownership or
leasing of properties, or the conduct of its business requires or
may require such qualification except where the failure to be so
qualified would not have a Material Adverse Effect (as defined in
the Subscription Agreements). The Company has complied in all
material respects with all material laws, rules, regulations,
applicable to the Company's business, operations, properties,
assets, products, and services, and the Company is in possession of
and operating in compliance with all material permits, licenses,
and other authorization, required to conduct its business as
currently conducted.
(iii) All action required to be
taken by the Company necessary for the authorization of this
Agreement and the Related Agreements, the performance of all
obligations of the Company hereunder and thereunder at the Closing,
and as a condition to the due and proper authorization, issuance,
sale, and delivery of the Units to subscribers therefor in
accordance with the terms of this Agreement has been, or prior to
the Closing Date will have been, taken.
(iv) Except as contemplated by
this Agreement, or as described in the Exchange Act Documents or
the PPM (as defined in the Subscription Agreements), (a) there is
no commitment by the Company to issue any shares of capital stock,
subscriptions, warrants, options, convertible securities, or other
similar rights to purchase or receive Company securities or to
distribute to the holders of any of its equity securities any
evidence of indebtedness, cash, or other assets, (b) the Company is
under no obligation (contingent or otherwise) to purchase, redeem,
or otherwise acquire any of its equity or debt securities or any
interest therein, and (c) to the Company's knowledge there are no
voting trusts or similar agreements, shareholders' agreements,
pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights, or proxies relating to any securities of the
Company. To the knowledge of the Company, except as set forth
in the Exchange Act Documents or filings with the Commission made
by third parties pursuant to Schedule 13D or 13G or Form 3 or 4, no
person holds of record or beneficially, 5% or more of the
outstanding shares of the capital stock of the Company. All
outstanding securities of the Company were issued in compliance in
all material respects with applicable federal and state securities
laws.
(v) The Company is not in
violation of its certificate of incorporation or by-laws, or in
default, or with the giving of notice or lapse of time or both,
would be in default, in the performance of any material obligation,
agreement, or condition contained in any lease, license, material
contract, indenture, or loan agreement or in any bond, debenture,
note, or any other evidence of indebtedness, except for such
defaults as would not have a Material Adverse Effect. The
execution, delivery, and performance of this Agreement and the
Related Agreements, the incurrence of the obligations herein, the
issuance, sale, and delivery of the Units, and the consummation of
the transactions contemplated herein, have been duly authorized by
all requisite corporate action on the part of the Company and (a)
do not and will not conflict with the Company's certificate of
incorporation or by-laws, (b) do not and will not, with or
without the passage of time or the giving of notice, result in the
breach of, or constitute a default, cause the acceleration of
performance, or require any consent under, or result in the
creation of any lien, charge or encumbrance upon any property
assets of the Company pursuant to, any material loan agreement,
mortgage, deed of trust, indenture, or other instrument or
agreement to which the Company is a party or by which the Company
or its properties are bound, except such consents as have been
obtained as of the date hereof or to the extent that the same have
been, or prior to the Closing Date will be, waived or cured, and as
may be required by the American Stock Exchange, that the Company
undertakes to obtain as promptly as practicable, or (c) do not and
will not result in the violation of any law, statute, order, rule,
administrative regulation, or decree of any court, or governmental
agency or body having jurisdiction over the Company or its
properties.
(vi) Except as disclosed in the
Exchange Act Documents, there are no preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, the Units pursuant to the Company's
certificate of incorporation, by-laws, or any agreement or other
instrument to which the Company is a party. The issuance of
the Units is not subject to any preemptive right of any shareholder
of the Company or to any right of first refusal or other right in
favor of any person.
(vii) This Agreement has been duly
executed and delivered by or on behalf of the Company and
constitutes a legal, valid, and binding obligation of the Company
enforceable in accordance with its terms, except to the extent that
its enforceability is limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting the enforcement of creditors'
rights generally, and (b) laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies and except as enforceability of the indemnity and
contribution provisions contained in Section 7 may be limited by
applicable law or principles of public policy.
(viii) The Escrow Agreement has been
duly executed and delivered by or on behalf of the Company and
constitutes a legal, valid, and binding obligation of the Company
enforceable in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors'
rights generally and (b) laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies.
(ix) Except as would not have a
Material Adverse Effect, the Company has filed, or caused to be
filed, on a timely basis, all tax returns (including payroll,
unemployment, and other taxes related to its employees and
independent contractors) required to be filed with any Governmental
Body and has paid or caused to be paid all taxes, levies,
assessments, tariffs, duties or other fees imposed, assessed, or
collected by any federal, state, municipal, or other governmental
department, commission, board, bureau, agency, authority or
instrumentality, domestic or foreign (each, a "Governmental
Body" ), that have become due and payable pursuant to those tax
returns or otherwise except taxes being disputed by the Company in
good faith or with respect to which the Company has set aside
sufficient reserves and that are not delinquent. No deficiency
assessment with respect to or proposed adjustment of any of the
Company's Federal, state, municipal, or local tax returns has
occurred or is threatened. There has been no tax lien imposed by
any Governmental Body outstanding against the Company's assets or
properties, except the lien for current taxes not yet due. The
charges, accruals, and reserves on the books of the Company with
respect to taxes for all fiscal periods are adequate, in the
opinion of the Company, and the Company does not know of any actual
or proposed tax assessment for any fiscal period or of any basis
therefor against which adequate reserves have not been set
up. The Company has not been advised that any Federal income
tax return of the Company has been, or will be, examined or audited
by the Internal Revenue Service.
(x) The Common Stock is
registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934, amended (the "Exchange Act" ) and is quoted with
the symbol "HOM" on the American Stock Exchange.
(xi) The Company has not during
the past six months offered or sold any security by or for the
Company that is of the same or a similar class as the Units, other
than offers of securities made solely to accredited investors or
otherwise under an employee benefit plan as defined in Rule 405
under the Securities Act of 1933, as amended (the "Act" ),
securities issued in connection with acquisitions, or other
securities that will not invalidate the exemption from registration
relied on to offer and sell the Units.
(xii) Neither the Company nor any of
its subsidiaries, executive officers or directors is or has been
subject to any order, judgment, or decree of any court of competent
jurisdiction temporarily, preliminarily, or permanently enjoining
such person for failure to comply with Rule 503 under Regulation
D.
(xiii) (i) The execution, delivery,
and performance by the Company of this Agreement and the Related
Agreements and (ii) the offer and sale of the Units require no
consent of, action by or in respect of, or filing with, any person
or Governmental Body other than those consents that have been
obtained and filings that have been made pursuant to applicable
state securities laws and post-sale filings pursuant to applicable
state and federal securities laws, which the Company undertakes to
file within the applicable time periods.
(xiv) There are no brokers, representatives
or other persons who have an interest in commissions or
compensation payable by the Company in connection with the
transactions contemplated hereby other than you.
3.
Representations and Warranties of the Placement Agent
. You represent and warrant to, and agree with, the
Company that:
(i) You have been
duly organized and are validly existing and in good standing as a
corporation under the laws of the State of Texas, with power and
authority (corporate and other) to perform your obligations under
this Agreement and the Escrow Agreement; you are a broker-dealer
registered and in good standing under the Exchange Act and under
the securities or Blue Sky laws of each state in which the Units
are being offered or sold by you, and you are a member in good
standing of the National Association of Securities Dealers, Inc. (
"NASD" ); you are in possession of and operating in
compliance with all authorizations, licenses, permits, consents,
certificates, and orders required for the performance of your
duties under this Agreement and the Escrow Agreement, and your
performance of your duties hereunder and thereunder will be in
compliance with all applicable laws, including state securities and
Blue Sky laws.
(ii) There are no legal
or governmental proceedings pending to which you are a party or of
which any of your properties is the subject or, to your knowledge,
threatened, that, if determined adversely to you, would
individually or in the aggregate materially and adversely affect
your ability to perform your obligations under this Agreement or
the Escrow Agreement.
(iii) No consent, approval,
authorization or order of any court or governmental authority or
agency is required for the performance by you of your obligations
under this Agreement, except such as may be required by the NASD or
under Regulation D or state securities or Blue Sky laws.
(iv) This Agreement has been
duly and validly executed and delivered by or on behalf of you and
constitutes a legal, valid, and binding obligation of you
enforceable in accordance with its terms, except to the extent that
its enforceability is limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting the enforcement of creditors'
rights generally, and (b) laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies and except as enforceability of the indemnity and
contribution provisions contained in Section 7 may be limited by
applicable law or principles of public policy.
(v) The Escrow Agreement
has been duly and validly executed and delivered by or on behalf of
you and constitutes a legal, valid, and binding obligation of you
enforceable in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general
application relating to or affecting enforcement of creditors'
rights generally and (b) laws relating to the availability of
specific performance, injunctive relief, or other equitable
remedies.
4. Offering and
Sale of the Units . (a) On the basis of the
representations, warranties, and covenants herein contained, but
subject to the terms and upon the conditions herein set forth, you
are hereby appointed placement agent of the Company on an exclusive
basis during the term herein specified (the "Offering
Period" ) for the purpose of finding subscribers for the Units
on a best-efforts basis for the account of the Company at the
Offering Price through a private offering (the "Offering" )
to an unlimited number of " accredited investors "
(as such term is defined in Rule 501 of Regulation D) (
"Accredited Investors" ) pursuant to and in accordance with
the Act. Subject to the performance by the Company of all its
obligations to be performed hereunder, and to the completeness and
accuracy of all the representations and warranties contained
herein, you hereby accept such agency and agree on the terms and
conditions herein set forth to use your best efforts during the
Offering Period to find subscribers for Units at the Offering
Price. Your agency hereunder, which is terminable as provided
in Section 11, shall terminate at 11:59 p.m., New York time, on
December 16, 2005; provided, however, that such termination
date (the "Termination Date" ) may be extended by mutual
written agreement of the parties until December 30, 2005.
(b) Each Investor
desiring to purchase Shares will be required to: (i) complete,
execute, and deliver to you an executed copy of (a) a Subscription
Agreement between such Investor and the Company, and (b) an
Investor Questionnaire, in the form attached as Exhibit D
hereto, and (ii) deliver to the Escrow Agent payment for such
subscription in the form of a check payable to the order of "Home
Solutions of America - Escrow Account" or a wire transfer of
immediately available funds in the amount that such Investor
desires to purchase as provided in the Escrow Agreement or as
otherwise directed by you. Any payment you receive that does
not conform to this requirement will be returned to an Investor by
the end of the next business day following receipt. In the
event funds are received by you, you shall hold all such
Subscription Agreements and Investor Questionnaires for safekeeping
and immediately forward all funds delivered to you to the Escrow
Agent. The Escrow Agent, upon receipt of such funds, will hold the
funds in an escrow account pursuant to the Escrow Agreement. You
shall promptly forward each executed Subscription Agreement
received to the Company for acceptance or rejection together with a
schedule setting forth the name and address of each subscriber and
the amount received from each subscriber. The Company shall notify
you of such acceptance or rejection within ten days of receipt of a
Subscription Agreement.
(c) In the event that
acceptable subscriptions for 4,850,000 Units at the Offering Price
(the "Minimum Units" ) shall not have been received and
accepted by the Company by the Termination Date, all funds received
from subscribers (if any) shall be returned in full, and your
agency and this Agreement shall terminate without obligation on
your part or on the part of the Company.
(d) If, by the
Termination Date or such earlier time as may be agreed upon by you
and the Company, you have received subscriptions for the Minimum
Units and such subscriptions have been accepted by the Company (in
its sole discretion) and the other conditions to Closing the
Offering of Units have been satisfied, you shall promptly notify
the Company in writing of the aggregate amount of Units for which
you have received subscriptions (the "Notice Date" ).
Payment of the purchase price for the Units for which you have
found subscribers, and delivery, with respect to each subscriber
for Units, of a copy of a Subscription Agreement signed by such
subscriber (the "Closing" ), shall then be made at such
place and time as shall be agreed upon between you and the Company,
no later than the fifth full business day after the Notice Date
(the "Closing Date" ).
(e) As compensation for
your services, the Company shall pay you a cash commission with
respect to subscriptions received by you as to which the payments
and deliveries provided for in this Section 4 are made at the
Closing Date equal to 7.0% of the purchase price of each Unit
purchased at the Closing. Such commission shall be paid to
you on the Closing Date by bank wire transfer payable in
immediately available funds. In addition, the Company agrees
to reimburse you for your reasonable expenses in accordance with
Section 6.
(f) Neither you, the
Company, nor any Additional Agent (as hereinafter defined) shall,
directly or indirectly, pay or award any finder's fees, commissions
or other compensation to any person engaged by a potential investor
for investment advice as an inducement to such advisor to advise
the purchase of the Units; provided, however, that normal
sales commissions payable to a registered broker-dealer or other
properly licensed person for selling the Units shall not be
prohibited hereby.
(g) You will prepare and
file such statements and reports as are or may be required to
enable the Units to be qualified for sale under the securities laws
of such jurisdictions as you may designate.
(h) As additional
compensation, the Company will issue to you on the Closing Date a
Common Stock purchase warrant (the "Placement Agent Warrant"
) in substantially the form attached hereto as Exhibit E
granting you the right to purchase from the Company for a period
commencing on the Closing Date and ending five years after the
Closing Date, a number of shares of Common Stock equal to .00625
shares of Common Stock for each $1 of gross proceeds from the sale
of Units in the Offering (but in no event more than 125,000
shares), at a per share purchase price equal to the Offering
Price.
(i) In connection
with the Offering you will, to the extent within your control,
conduct the Offering in accordance with the applicable provisions
of the Act and Regulation D so as to preserve for the Company the
exemption provided by Rule 506 of Regulation D. You agree not to
offer or sell the Units by means of (a) any means of general
solicitation, including any advertisemen
