HOME SOLUTIONS OF AMERICA INC
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<TYPE>EX-10.2
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<FILENAME>ex10-2.htm
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<title>Exhibit 10.2</title>



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<p class=MsoHeading7 align="center"><u><b>REGISTRATION RIGHTS AGREEMENT</b></u></p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>This
Registration Rights Agreement (this &quot;<u>Agreement</u>&quot;) is made and
entered into as of July 19, 2004, by and among Home Solutions of America, Inc.,
a Delaware corporation (the &quot;<u>Company</u>&quot;), Victus Capital, LP,
and Vicis Capital Master Fund (each a &quot;<u>Purchaser</u>&quot; and together, the &quot;<u>Purchasers</u>&quot;).</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>This Agreement
is being entered into pursuant to the Series B Convertible Preferred Stock
Purchase Agreement, dated as of the date hereof among the Company and the Purchasers
(the &quot;<u>Purchase Agreement</u>&quot;).</p>
<p class=MsoNormal style='text-indent:1.0in'>The Company and the Purchasers
hereby agree as follows:</p>
<p class=MsoNormal style='text-indent:38.2pt'>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Definitions</u>.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>Capitalized
terms used and not otherwise defined herein shall have the meanings given such
terms in the Purchase Agreement.&nbsp; As used in this Agreement, the following terms
shall have the following meanings:</p>
<p class=MsoNormal style='text-indent:1.0in'>&quot;<u>Advice</u>&quot; shall
have meaning set forth in Section 3(m).</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Affiliate</u>&quot;
means, with respect to any Person, any other Person that directly or indirectly
controls or is controlled by or under common control with such Person.&nbsp; For the
purposes of this definition, &quot;<u>control</u>,&quot; when used with respect
to any Person, means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms of &quot;<u>affiliated</u>,&quot; &quot;<u>controlling</u>&quot; and
&quot;<u>controlled</u>&quot; have meanings correlative to the foregoing.</p>
<p class=MsoNormal style='text-indent:1.0in'>&quot;<u>Board</u>&quot; shall
have meaning set forth in Section 3(n).</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Business
Day</u>&quot; means 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
generally are authorized or required by law or other government actions to
close.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Closing
Date</u>&quot; means the date of the final closing of the purchase and sale of
the Preferred Stock pursuant to the Purchase Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Commission</u>&quot;
means the Securities and Exchange Commission.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Common
Stock</u>&quot; means the Company's Common Stock, par value $.001 per share.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Effectiveness
Date</u>&quot; means with respect to the Registration Statement the earlier of the
ninetieth (90<sup>th</sup>) day following the Filing Date or the date which is within five (5) days of the date on which
the Commission informs the Company that the Commission (i) will not review the
Registration Statement or (ii)<b> </b>that the Company may request the
acceleration of the effectiveness of the Registration Statement and the Company
makes such request.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Effectiveness
Period</u>&quot; shall have the meaning set forth in Section 2.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p><b>
<hr color="#000080"><br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Event</u>&quot;
shall have the meaning set forth in Section 7(e).</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Event
Date</u>&quot; shall have the meaning set forth in Section 7(e).</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Exchange
Act</u>&quot; means the Securities Exchange Act of 1934, as amended.</p>
<p class=MsoNormal style='text-align:justify;text-indent:71.8pt'>&quot;<u>Filing
Date</u>&quot; means the 30th day following notice from the Holder requiring
the Company to file a Registration Statement to register all or any portion of
the Holder's Registrable Securities, which notice may be given by the Holder at
any time following the six-month anniversary of the Closing Date.&nbsp; </p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Holder</u>&quot;
or &quot;<u>Holders</u>&quot; means the holder or holders, as the case may be,
from time to time of Registrable Securities.</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Indemnified
Party</u>&quot; shall have the meaning set forth in Section 5(c).</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Indemnifying
Party</u>&quot; shall have the meaning set forth in Section 5(c).</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Losses</u>&quot;
shall have the meaning set forth in Section<b> </b>5(a).</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Person</u>&quot;
means an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Preferred
Stock</u>&quot; means the Series B Convertible Preferred Stock, par value $.001
per share and stated value $25,000 per share, of the Company issued to the Purchasers
pursuant to the Purchase Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Proceeding</u>&quot;
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Prospectus</u>&quot;
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Registrable
Securities</u> means the shares of Common Stock issuable upon conversion of the
Preferred Stock; <u>provided</u>, <u>however</u>, that Registrable Securities
shall include (but not be limited<b> </b>to) a number of shares of Common Stock
equal to no less than 120% of the maximum number of shares of Common Stock
which would be issuable upon conversion of the Preferred Stock, assuming such
conversion occurred on the Closing Date or the Filing Date, whichever date
would result in the greater number of Registrable Securities.&nbsp; Such registered
shares of Common Stock shall be allocated among the Holders pro rata based on
the total number of Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the Commission.&nbsp;
Notwithstanding anything herein contained to the contrary, if the actual number
of shares of Common Stock issuable upon conversion of the Preferred exceeds
120% of the number of shares of Common Stock issuable upon conversion of the
Preferred Stock based upon a computation as at the Closing Date or the Filing
Date, the term &quot;Registrable Securities&quot; shall be deemed to include
such additional shares of Common Stock.</p>
<p class=MsoNormal style='text-align:center;'>2</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Registration
Statement</u>&quot; means the registration statements and any additional
registration statements contemplated by Section 2, including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in such registration statement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Rule
144</u>&quot; means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Rule
158</u>&quot; means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Rule
415</u>&quot; means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &quot;<u>Securities
Act</u>&quot; means the Securities Act of 1933, as amended.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&quot;<u>Special
Counsel</u>&quot; means any special counsel to the Holders, for which the
Holders will be reimbursed by the Company pursuant to Section 4.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Shelf
Registration.</u></p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>On or prior to
the Filing Date the Company shall prepare and file with the Commission a
&quot;shelf&quot; Registration Statement covering all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415.&nbsp; The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in
which case such registration shall be on another appropriate form in accordance
herewith).&nbsp; The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the Effectiveness
Date, and to keep such Registration Statement continuously effective under the
Securities Act until such date as is the earlier of (x) the date when all Registrable
Securities covered by such Registration Statement have been sold or (y) the
date on which the Registrable Securities may be sold without any restriction
pursuant to Rule 144 as determined by the counsel to the Company pursuant to a
written opinion letter, addressed to the Company's transfer agent to such
effect (the &quot;<u>Effectiveness Period</u>&quot;).&nbsp; If at any time and for
any reason, an additional Registration Statement is required to be filed
because at such time the actual number of shares of Common Stock into which the
Preferred Stock is convertible exceeds the number of shares of Registrable
Securities remaining under the Registration Statement, the Company shall have
twenty (20) Business Days to file such additional Registration Statement, and
the Company shall use its best efforts to cause such additional Registration
Statement to be declared effective by the Commission as soon as possible, but
in no event later than sixty (60) days after filing.&nbsp; </p>
<p class=MsoNormal style='text-align:center;'>3</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Registration
Procedures.</u></p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In
connection with the Company's registration obligations hereunder, the Company
shall:</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a) &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prepare
and file with the Commission, on or prior to the Filing Date, a Registration
Statement on Form S-3 (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith) including the method or
methods of distribution thereof as specified by the Holders (except if
otherwise directed by the Holders) and in accordance with applicable law, and
cause the Registration Statement to become effective and remain effective as
provided herein; <u>provided</u>, <u>however</u>, that not less than three (3)
Business Days prior to the filing of the Registration Statement or any related
Prospectus or any amendment or supplement thereto, the Company shall (i)
furnish to the Holders and any Special Counsel, copies of all such documents
proposed to be filed, which documents will be subject to the review of such
Holders and such Special Counsel, and (ii) cause its officers and directors,
counsel and independent certified public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of counsel to such
Holders, to conduct a reasonable review of such documents.&nbsp; The Company shall
not file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object in writing within
three (3) Business Days of their receipt thereof.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)
Prepare and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
(or any similar provisions then in force) promulgated under the Securities Act;
(iii) respond as promptly as possible, but in no event later than ten (10)
business days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as possible
provide the Holders true and complete copies of all correspondence from and to
the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notify
the Holders of Registrable Securities and any Special Counsel as promptly as
possible (and, in the case of (i)(A) below, not less than three (3) days prior
to such filing) and (if requested by any such Person) confirm such notice in
writing no later than two (2) Business Days following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is filed; (B) when the Commission notifies the Company
whether there will be a &quot;review&quot; of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or supplements
to the Registration Statement or Prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation or threatening of any Proceedings for
that purpose; (iv) if at any time any of the representations and warranties of
the Company contained in any agreement contemplated hereby ceases to be true
and correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation of any Proceeding for such purpose; and (vi) of
the occurrence of any event that makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.</p>
<p class=MsoNormal style='text-align:center;'>4</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Use
its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of, as promptly as possible, (i) any order suspending the effectiveness of the
Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable<b> </b>Securities for
sale in any jurisdiction.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
requested by the Holders of a majority in interest of the Registrable
Securities, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment to the Registration Statement such information as the
Company reasonably agrees should be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.</p>
<p class=MsoNormal style='margin-left:0in;text-align:justify;text-indent:1.0in'>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If requested by any Holder, furnish to such Holder and any Special
Counsel, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.</p>
<p class=MsoNormal style='margin-left:0in;text-align:justify;text-indent:1.0in'>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Promptly deliver to each Holder and any Special Counsel, without charge,
as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and subject to the provisions of Section 3(n), the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and sale
of the Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.</p>
<p class=MsoNormal style='margin-left:0in;text-align:justify;text-indent:1.0in'>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Prior to any public offering of Registrable Securities, use its best
efforts to register or qualify or cooperate with the selling Holders and any
Special Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Holder requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; <u>provided</u>, <u>however</u>,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where
it is not then so subject or subject the Company to any material tax in any
such jurisdiction where it is not then so subject.</p>
<p class=MsoNormal style='margin-left:0in;text-align:center;'>5</p><b>
<hr color="#000080"><br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='margin-left:0in;text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold pursuant to a
Registration Statement, which certificates, to the extent permitted by the
Purchase Agreement and applicable federal and state securities laws, shall be
free of all restrictive legends, and to enable such Registrable Securities to
be in such denominations and registered in such names as any Holder may request
in connection with any sale of Registrable Securities.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Use
its best efforts to cause all Registrable Securities relating to such
Registration Statement to be listed on the American Stock Exchange or any other
securities exchange, quotation system or market, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comply
in all material respects with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90
days after the end of any 12-month period if such period is a fiscal year)
commencing on the first day of the first fiscal quarter of the Company after
the effective date of the Registration Statement, which statement shall conform
to the requirements of Rule 158.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The
Company may require each selling Holder to furnish to the Company information
regarding such Holder and the distribution of such Registrable Securities as is
required by law to be disclosed in the Registration Statement, Prospectus, or
any amendment or supplement thereto, and the Company may exclude from such
registration the Registrable Securities of any such Holder who unreasonably
fails to furnish such information within a reasonable time after receiving such
request.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>Each Holder
covenants and agrees that (i) it will not sell any Registrable Securities under
the Registration Statement until it has received copies of the Prospectus as
then amended or supplemented as contemplated in Section 3(g) and notice from
the Company that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(c) and (ii) it and
its officers, directors or Affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to them in connection
with sales of Registrable Securities pursuant to the Registration Statement.</p>
<p class=MsoNormal style='text-align:center;'>6</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>Each Holder
agrees by its acquisition of such Registrable Securities that, upon receipt of
a notice from the Company of the occurrence of any event of the kind described
in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(n), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the &quot;<u>Advice</u>&quot;)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If
(i) there is material non-public information regarding the Company which the
Company's Board of Directors (the &quot;<u>Board</u>&quot;) reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose, then the Company may postpone or suspend filing or
effectiveness of a registration statement for a period not to exceed 20
consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate
during any 12 month period; <u>provided</u>, <u>however</u>, that no such
postponement or suspension shall be permitted for consecutive 20 day periods,
arising out of the same set of facts, circumstances or transactions.</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp; 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Registration
Expenses</u>.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>All fees and
expenses incident to the performance of or compliance with this Agreement by
the Company, except as and to the extent specified in Section 4, shall be borne
by the Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to
the Registration Statement.&nbsp; The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to
filings required to be made with each securities exchange or market on which
Registrable Securities are required hereunder to be listed, (B) with respect to
filings required to be made with the National Association of Securities
Dealers, Inc. and the NASD Regulation, Inc. and (C) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky qualifications
of the Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such jurisdictions as
the Holders of a majority of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company and Special Counsel for the Holders, in the case of the
Special Counsel, to a maximum amount of $5,000, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, including,
without limitation, the Company's independent public accountants (including the
expenses of any comfort letters or costs associated with the delivery by
independent public accountants of a comfort letter or comfort letters).&nbsp; In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions contemplated
by this Agreement (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.</p>
<p class=MsoNormal style='text-align:center;'>7</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp; 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Indemnification</u>.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Indemnification
by the Company</u>.&nbsp; The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors,
agents, brokers (including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a margin call
of Common Stock), investment advisors and employees of each of them, each
Person who controls any such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses (collectively, &quot;<u>Losses</u>&quot;),
as incurred, arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or based upon any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto), in the light of the circumstances under
which they were made, not misleading, except to the extent, but only to the
extent, that such untrue statements or omissions arise out of or are based upon
information regarding the Holders or such other Indemnified Party furnished in
writing to the Company by a Holder expressly for use therein, which information
was reasonably relied on by the Company for use therein or to the extent that
such information relates to a Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by a Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto.&nbsp; The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Indemnification
by Holders</u>.&nbsp; Each Holder shall, severally and not jointly, indemnify and
hold harmless the Company, the directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses, as incurred,
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto), in the light of the circumstances under which they were
made, not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
by such Holder or other Indemnified Party to the Company expressly for use
therein and that such information was reasonably relied upon by the Company for
use therein, or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or any
amendment or supplement thereto.&nbsp; Notwithstanding anything to the contrary
contained herein, the Holders shall be liable under this Section 5(b) for only
that amount as does not exceed the net proceeds to such Holder as a result of
the sale of Registrable Securities pursuant to such Registration Statement.</p>
<p class=MsoNormal style='text-align:center;'>8</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Conduct
of Indemnification Proceedings</u>.&nbsp; If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an &quot;<u>Indemnified
Party</u>&quot;), such Indemnified Party promptly shall notify the Person from
whom indemnity is sought (the &quot;<u>Indemnifying Party</u>) in writing, and
the Indemnifying Party shall be entitled to assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.</p>
<p class=MsoNormal style='text-align:justify;text-indent:71.9pt'>An Indemnified
Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless:
(1) the Indemnifying Party has agreed in writing to pay such fees and expenses;
or (2) the Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party and the Indemnifying Party, and such parties shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party).&nbsp; The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld or delayed.&nbsp; No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened Proceeding in respect of which any Indemnified Party is a
party and indemnity has been sought hereunder, unless such settlement includes
an unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp; All fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid
to the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party (regardless of whether it is
ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder;<b> </b>provided, that the Indemnified Party shall
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;</p>
<p class=MsoNormal style='text-align:center;'>9</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Contribution</u>.&nbsp;
If indemnification under Section 5(a) or 5(b) is due but unavailable to an
Indemnified Party because of a failure or refusal of a governmental authority
to enforce such indemnification in accordance with its terms (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations.&nbsp; The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying,
Party or Indemnified Party, and the<b> </b>parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action,
statement or omission.&nbsp; The amount paid or payable by a party as a result of
any Losses shall be deemed to include, subject to the limitations set forth in
Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp; The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5(d) were determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.&nbsp; No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp;
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties pursuant to the law.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Rule
144</u>.</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;&nbsp;&nbsp;&nbsp; As long as
any Holder owns Shares or Conversion Shares, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act.&nbsp; As long as any
Holder owns Shares or Conversion Shares, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act.&nbsp; The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Conversion Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions relating to such sale pursuant to Rule 144.&nbsp; Upon the
request of any Holder, the Company shall deliver to such Holder a written
certification of a duly authorized officer as to whether it has complied with
such requirements.</p>
<p class=MsoNormal style='text-align:center;'>10</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:.5in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:.5in;page-break-after:
avoid'>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Miscellaneous</u>.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in;page-break-after:
avoid'>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>Remedies</u>.&nbsp; In the event of a breach by the Company or
by a Holder, of any of their obligations under this Agreement, such Holder or
the Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this<b> </b>Agreement.&nbsp;
The Company and each Holder agree that monetary damages would not provide<b> </b>adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of
any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>No
Inconsistent Agreements</u>.&nbsp; Neither the Company nor any of its subsidiaries
has, as of the date hereof entered into and currently in effect, nor shall the
Company or any of its subsidiaries, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof.&nbsp; Except as disclosed in <u>Schedule 2.1(c)</u> of
the Purchase Agreement, neither the Company nor any of its subsidiaries has
previously entered into any agreement currently in effect granting any
registration rights with respect to any of its securities to any Person.&nbsp;
Without limiting the generality of the foregoing, without the written consent
of the Holders of a majority of the then outstanding Registrable Securities,
the Company shall not grant to any Person the right to request the Company to
register any securities of the Company under the Securities Act unless the
rights so granted are subject in all respects to the prior rights in full of
the Holders set forth herein, and are not otherwise in conflict with the
provisions of this Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>No
Piggyback on Registrations</u>.&nbsp; Neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto or as
disclosed in <u>Schedule 2.1(c)</u> of the Purchase Agreement) may include
securities of the Company in the Registration Statement, and the Company shall
not after the date hereof enter into any agreement providing such right to any
of its securityholders, unless the right so granted is subject in all respects
to the prior rights in full of the Holders set forth herein, and is not
otherwise in conflict with the provisions of this Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Piggy&#8209;Back
Registrations</u>.&nbsp; If at any time when there is not an effective Registration
Statement covering Conversion Shares, the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to each holder of
Registrable Securities written notice of such determination and, if within
thirty (30) days after receipt of such notice, or within such shorter period of
time as may be specified by the Company in such written notice as may be
necessary for the Company to comply with its obligations with respect to the
timing of the filing of such registration statement, any</p>
<p class=MsoNormal style='text-align:center;'>11</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;'>&nbsp;such holder shall so
request in writing, (which request shall specify the Registrable Securities
intended to be disposed of by the Purchasers), the Company will cause the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holder, to the extent
requisite to permit the disposition of the Registrable Securities so to be
registered, provided that if at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay expenses in accordance with Section 4 hereof), and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities being registered pursuant to this
Section 7(d) for the same period as the delay in registering such other
securities. The Company shall include in such registration statement all or any
part of such Registrable Securities such holder requests to be registered; <u>provided</u>,
<u>however</u>, that the Company shall not be required to register any
Registrable Securities pursuant to this Section 7(d) that are eligible for sale
pursuant to Rule 144(k) of the Securities Act.&nbsp; In the case of an underwritten
public offering, if the managing underwriter(s) or underwriter(s) should
reasonably object to the inclusion of the Registrable Securities in such
registration statement, then if the Company after consultation with the
managing underwriter should reasonably determine that the inclusion of such
Registrable Securities would materially adversely affect the offering
contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer or none of the
Registrable Securities of the Holders, then (x) the number of Registrable
Securities of the Holders included in such registration statement shall be
reduced pro&#8209;rata among such Holders<b> </b>(based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; <u>provided</u>, <u>however</u>, that if Securities are
being offered for the account of other persons or entities as well as the
Company, such reduction shall not represent a greater fraction of the number of
Registrable securities intended to be offered by the Holders than the fraction
of similar reductions imposed on such other persons or entities (other than the
Company).</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Failure
to File Registration Statement and Other Events</u>.&nbsp; The Company and the Purchasers
agree that the Holders will suffer damages if the Registration Statement is not
filed on or prior to the Filing Date and not declared effective by the
Commission on or prior to the Effectiveness Date and maintained in the manner
contemplated herein during the Effectiveness Time.&nbsp; The Company and the Holders
further agree that it would not be feasible to ascertain the extent of such
damages with precision.&nbsp; Accordingly, if, except as set forth in Section 3(n),
(A) the Registration Statement is not filed on or prior to the Filing Date, or
(B) the Registration Statement is not declared effective by the Commission on
or prior to the 100<sup>th</sup> day after the Filing Date (or in the event an
additional Registration Statement is filed because the actual number of shares
of Common Stock into which the Preferred Stock is convertible exceeds the
number of shares of Common Stock initially registered is not filed and declared
effective with the time periods set forth in Section 2), or (C) the Company
fails to file with the Commission a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act within five (5) Business Days of
the date that the Company is notified (orally or in writing, whichever is
earlier) by the Commission that a Registration Statement will not be
&quot;reviewed,&quot; or is not subject to further review, or (D) the
Registration Statement is filed with and declared effective by the Commission
but thereafter ceases to be effective as to all Registrable Securities at any
time prior to the expiration of the Effectiveness Period, without being
succeeded immediately by a subsequent Registration Statement filed with and
declared effective by the Commission in accordance with Section 2 hereof or (E)
the Company has breached Section 3(n), or (F) trading in the Common Stock shall
be suspended or if the Common Stock is delisted from the American Stock Exchange
for any reason for more than three Business Days in the aggregate without
subsequent listing on another securities exchange, quotation system or market
(any such failure or breach being referred to as an &quot;<u>Event</u>,&quot;
and for purposes of clauses (A) and (B) the date on which such Event occurs, or
for purposes of clause (C) the date on which such five Business Day period is
exceeded, or for purposes of clause (D) after more than fifteen Business Days,
or for purposes of clause (F) the date on which such three Business Day period
is exceeded, being referred to as &quot;<u>Event Date</u>&quot;), the Company
shall pay an amount as liquidated damages to each Holder equal to 2.0% for the
first calendar month or portion thereof and 1.5% per calendar month thereafter
or portion thereof of the Holder's initial investment in the Preferred Stock
from the Event Date (provided that, with respect to the Event described in
clause (B), the &quot;first calendar month&quot; shall be deemed to commence on the 10<sup>th</sup>
day prior to the applicable Event Date), less any amount of Preferred Stock
that has been converted or redeemed by such Holder, until the applicable Event
is cured.&nbsp; Notwithstanding anything to the contrary in this paragraph (e), if
(I) any of the Events described in clauses (A), (B) or (C) shall have occurred,
(II) on or prior to the applicable Event Date, the Company shall have exercised
its rights under Section 3(n) hereof and (III) the postponement or suspension
permitted pursuant to such Section 3(n) shall remain effective as of such applicable
Event Date, then the applicable Event Date shall be deemed instead to occur on
the second Business Day following the termination of such postponement or
suspension. </p>
<p class=MsoNormal style='text-align:center;'>12</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Amendments
and Waivers</u>.&nbsp; The provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and each of the Holders.&nbsp;
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; <u>provided</u>, <u>however</u>,
that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Notices</u>.&nbsp;
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., New York City time, on a Business Day,
(ii) the Business 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., New York City time, on any date and
earlier than 11:59 p.m., New York City time, on such date, (iii) the Business
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.&nbsp; The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on <u>Schedule 1</u> attached hereto, or with respect to the
Company, addressed to:</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:center;'>13</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style="margin-left: 3.5in">Home
Solutions of America, Inc.&nbsp; <br>
5565 Red Bird Center Drive<br>
Dallas, TX 75237 <br>
Attention: Rick J. O'Brien, CFO<br>
Tel. No.: (214) 623-8446<br>
Fax No.:&nbsp; (214) 333-9435</p>
<p class=MsoNormal>or to such other address or addresses or facsimile number or
numbers as any such party may most recently have designated in writing to the
other parties hereto by such notice.&nbsp; Copies of notices to the Company shall be
sent to <strong>J. Paul Caver, </strong>Attorney
at Law,2724 Routh Street, Dallas, Texas 75201, Tel. No.: (214) 468-8868; Fax
No.: (214) 468-8867.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(h)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Successors
and Assigns</u>.&nbsp; This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns and shall inure to the
benefit of each Holder and its successors and assigns.&nbsp; The Company may not
assign this Agreement or any of its rights or obligations hereunder without the
prior written consent of each Holder.&nbsp; Each Purchaser may assign its rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Assignment
of Registration Rights</u>.&nbsp; The rights of each Holder hereunder, including the
right to have the Company register for resale Registrable Securities in
accordance with the terms of this Agreement, shall be automatically assignable
by each Holder to any Affiliate of such Holder or any other Holder<b> </b>or
Affiliate of any other<b> </b>Holder of all or a portion<b> </b>of the
Preferred Stock or the Registrable Securities if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions of this
Agreement, (v) such transfer shall have been made in accordance with the
applicable requirements of the Purchase Agreement, and (vi) at least 100,000
shares of Registrable Securities (appropriately adjusted for any stock
dividend, split or combination of the Common Stock) are being transferred to
such transferee or assignee in connection with such assignment of rights.&nbsp; In
addition, each Holder shall have the right to assign its rights hereunder to
any other Person with the prior written consent of the Company, which consent
shall not be unreasonably withheld.&nbsp; The rights to assignment shall apply to
the Holders (and to subsequent) successors and assigns.&nbsp; </p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(j)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Counterparts</u>.&nbsp;
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.&nbsp; In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(k)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Governing
</u><u>Law</u>.&nbsp; This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law thereof.</p>
<p class=MsoNormal style='text-align:center;'>14</p><b><hr color="#000080">
<br clear="all" style="page-break-before:always">
&nbsp;</b><p class=MsoNormal style='text-align:justify;text-indent:1.0in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (l)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Cumulative
Remedies</u>.&nbsp; The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(m)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Severability</u>.
If any term, provision, covenant or restriction of this Agreement is held to be
invalid, illegal, void or unenforceable in any respect, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.&nbsp; It is hereby
stipulated and declared<b> </b>to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (n)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<u>Headings</u>.&nbsp;
The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.</p>
<p class=MsoNormal style='text-align:justify;text-indent:1.0in'>(o)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Shares
Held by the Company and its Affiliates</u>. Whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company or its Affiliates (other
than any Holder or transferees or successors or assigns thereof if such Holder
is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.</p>
<p class=MsoNormal align=center style='text-align:center'>[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]</p>
<p class=MsoNormal align=center style='text-align:center'>&nbsp;</p>
<p class=MsoNormal align=center style='text-align:center'>&nbsp;</p>
<p class=MsoNormal align=center style='text-align:center'>&nbsp;</p>
<p class=MsoNormal align=center style='text-align:center'>&nbsp;</p>
<p class=MsoNormal align=center style='text-align:center'>15</p>
<hr color="#000080"><br clear=all style='page-break-before:always'>
<p class=MsoNormal style='text-align:justify;text-indent:.5in'>IN WITNESS
WHEREOF, the parties hereto have caused this Registration Rights Agreement to
be duly executed by their respective authorized persons as of the date first
indicated above.</p>
<p class=MsoNormal style='text-align:justify;text-indent:3.0in'>HOME SOLUTIONS
OF AMERICA, INC.</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>By:_____________________________________<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Rick J. O'Brien<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief
Financial Officer</p>
<p class=MsoNormal style='text-align:justify;text-indent:3.0in'>PURCHASER:</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; VICTUS
CAPITAL, L.P.</p>
<p class=MsoNormal style='text-align:justify'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>By:_____________________________________<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Name: <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Title:</p>
<p class=MsoNormal style='text-align:justify;text-indent:3.0in'>PURCHASER:</p>
<p class=MsoNormal style='margin-left:2.5in;text-align:justify;text-indent:
.5in'>VICIS CAPITAL MASTER FUND</p>
<p class=MsoNormal style='margin-left:2.5in;text-align:justify;text-indent:
.5in'>BY: VICIS CAPITAL, LLC</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>By:_____________________________________&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Name: <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Title:</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>&nbsp;</p>
<p class=MsoNormal style='text-align:justify;margin-left:3in'>&nbsp;</p>
<p class=MsoNormal style='text-align:center;'>16</p>
<p class=MsoNormal style='text-align:center;'>&nbsp;</p>
<p class=MsoNormal style='text-align:center;'>&nbsp;</p>
<p class=MsoNormal style='text-align:center;'>&nbsp;</p>

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