Compensation Committee Charter

U.S. HOME SYSTEMS, INC.
COMPENSATION COMMITTEE CHARTER

I. PURPOSE

The primary purpose of the Compensation Committee is: (a) to discharge the Board’s responsibilities relating to compensation of the Company’s executive officers, (b) establish and review the overall compensation philosophy of the Company; and (c) to produce an annual report on executive compensation for inclusion in the Company’s proxy statement.

II. COMPOSITION

The Compensation Committee shall consist of at least two directors, each of whom shall satisfy the applicable independence requirements of the NASDAQ Stock Market and any other regulatory requirements. Committee members shall be elected annually by the Board at the first Board meeting after the annual meeting of shareholders. The Committee shall be comprised of at least two directors who qualify as independent directors under the listing standards of NASDAQ Stock Market and any other applicable regulatory requirements. The Committee’s chairperson shall be designated by the full Board or, if it does not do so, the Committee members shall elect a chairperson by vote of a majority of the full Committee. Vacancies on the Committee shall be filled by a majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy. No member of the Committee shall be removed except by majority vote of the independent Directors of the Board. The Committee may form and delegate authority to subcommittees when appropriate.

III. STRUCTURE AND MEETINGS

The chairperson of the Compensation Committee will preside at each meeting of the Committee and, in consultation with the other members of the Committee, will set the frequency and length of each meeting and the agenda of items to be addressed at each meeting. The chairperson will ensure that the agenda for each meeting is circulated to each Committee member in advance of the meeting.

IV. GOALS AND RESPONSIBILITIES

The Compensation Committee shall have the power and authority of the Board to perform the following duties and to fulfill the following responsibilities:

a. review the performance of senior officers of the Company, and review and recommend to the Board their compensation;

b. review and approve corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluate the Chief Executive Officer’s performance in light of these goals and objectives, and recommend to the Board the Chief Executive Officer’s compensation based on this evaluation;

c. make recommendations to the Board with respect to incentive-compensation plans and equity-based plans, and establish criteria for the granting of options to the Company’s officers and other employees and review and approve the granting of options in accordance with such criteria;

d. produce an annual report on executive compensation for inclusion in the Company’s proxy statement, in accordance with applicable rules and regulations;

e. establish and periodically review policies for the administration of executive compensation programs, review on a periodic basis the operation of the Company’s executive compensation programs to determine whether they are properly coordinated, and review new executive compensation programs;

f. establish and periodically review management benefits and perquisites, including retirement and termination benefits;

g. review director compensation levels and practices, and recommend, from time to time, changes in such compensation levels and practices to Board with equity ownership in the Company encouraged;

h. provide periodic reports on the Committee’s activities to the Board and circulate Committee minutes of meetings to all directors;

i. annually review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval; and j. perform any other activities consistent with this Charter, the Company’s Bylaws and governing law as the Committee or the Board deem appropriate.

V. COMMITTEE RESOURCES

The Compensation Committee shall have the authority to obtain advice and seek assistance from internal and external legal, accounting and other advisors. The Committee shall have sole authority to retain and terminate any compensation consultant to be used to evaluate director, CEO or senior officer compensation, including sole authority to approve the consulting firm’s fees and other retention terms.

VI. DISCLOSURE OF CHARTER

This Charter will be made available on the Company’s website at www.ushomesystems.com.

Approved by the Board of Directors on November 10, 2003

U.S. Home Systems Overview

U.S. Home Systems is engaged in the specialty product home improvement business. In its home improvement business, the Company manufactures or procures, designs, sells and installs custom kitchen and bathroom cabinet refacing products and organizational storage systems for closets and garages.

U.S. Home Systems, Inc. markets its products under the Home Depot brand for:

   Kitchen Cabinet Refacing
   Bathroom Refacing
   Garage Organization
   Closet Organization

The home improvement products are marketed through a variety of sources, including direct mail, marriage mail, magazines, newspaper inserts and in-store displays at selected The Home Depot stores. The Company’s home improvement business serves The Home Depot in 42 markets covering 27 states.

Ticker Symbol : USHS