Item
3.02.
Unregistered
Sales of Equity Securities.
On
December 13, 2007, we entered into an agreement dated December 12, 2007, with
The Resolution Group, Inc. (known as TRG), under which TRG will loan funds
up to
$4,500,000 to us and create and establish a joint venture with us to develop
a
product for the sub-prime home mortgage work-out/note modification market and
mortgage collections, integrating our online collection tools, DR-Default and
DR-Settle.
TRG,
located in Irvine, California, specializes in providing consulting, market
strategy and planning to the mortgage, banking and healthcare industries. The
principals of TRG have longstanding relationships at high executive levels
within the mortgage, banking and healthcare communities.
Under
the
agreement, TRG agreed to loan to us funds in the amount of $500,000 to
$4,500,000 pursuant to 12% senior secured notes. The principal and interest
under the notes would be due and payable 18 months after the date of issuance.
We would also issue to TRG warrants (with 30% warrant coverage) to purchase
shares of our common stock at an exercise price equal to 105% of the market
price per share of our common stock on the date of grant.
TRG
also
agreed to create and establish a joint venture with us to develop and implement
proprietary business methods in the sub-prime home mortgage work-out/rate
modification market. TRG will provide the sales, marketing and administrative
staff and supervision from a center to be located at our First Performance
(a
Debt Resolve subsidiary) facility in Las Vegas, Nevada and in Irvine,
California. Personnel at our First Performance subsidiary may be called upon
to
assist in this venture. The parties agreed to share evenly any net revenues (less
expenses and overhead) attributable to the joint development and deployment
of
future proprietary businesses, such as originating new real estate or consumer
loans, that are not currently being pursued by us.
TRG
also
agreed to introduce to us accounts from its creditor base in the healthcare,
mortgage and banking industries for integration into our collection system.
We
agreed to pay TRG a fee equal to 12.5% of gross introduced customer revenues
generated by creditor-clients referred to us by TRG. TRG will become a fully
authorized agent of ours, operating in California and the West Coast, in
offering our products and services.
Upon
our
execution of the agreement, we agreed to issue to TRG, subject to our compliance
with the market rules of the American Stock Exchange (where our shares trade),
(a) 400,000 shares of common stock, provided TRG funds to us at least $500,000
on or before December 20, 2007, (b) 250,000 additional shares of common stock,
provided TRG funds to us at least $2,000,000 on or before January 26, 2008,
and
(c) 250,000 additional shares of common stock, provided TRG funds to us at
least
$3,000,000 and up to $4,500,000 on or before June 12, 2008, plus delivers to
us
contracts with three hospitals by such date, as well as an aggregate portfolio
of face value debt of $50,000,000 on or before December 12, 2008. TRG is
entitled to a 5% note servicing fee in connection with its funding obligation
for amounts in excess of the initial $500,000.
The
foregoing summary description of the TRG agreement is qualified by reference
to
the full text thereof, a copy of which is attached hereto as Exhibit 10.1 and
incorporated herein in its entirety.
