Exhibit 10.1
 
 

 

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DEBT RESOLVE, INC.
 
and
 
THE SOLE STOCKHOLDER OF
FIRST PERFORMANCE CORPORATION
 
____________________
 
STOCK PURCHASE AGREEMENT
____________________
 
January 19, 2007
 
 
 
 
 
 

 

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TABLE OF CONTENTS

Section  
Page No.
     
1.
Sale and Purchase of the Shares
1
     
2.
The Closing; Purchase Price.
1
     
2.1.
The Closing
1
     
2.2.
Delivery of Shares
1
     
2.3.
Payment at Closing
1
     
3.
Representations and Warranties of the Seller
2
     
3.1.
Organization and Qualification
2
     
3.2.
No Subsidiaries
2
     
3.3.
Capitalization
2
     
3.4.
Agreement; Title to Shares
2
     
3.5.
Financial Statements
3
     
3.6.
Title to Property, Absence of Encumbrances, etc
3
     
3.7.
Inventories; Accounts Receivable; Company Payables
4
     
3.8.
Patents; Trademarks
4
     
3.9.
Employee Remuneration
5
     
3.10.
Union and Employment Agreements
5
     
3.11.
Officers, Directors and Bank Accounts
5
     
3.12.
No Adverse Change
6
     
3.13.
Absence of Certain Changes
6
     
3.14.
Environmental Matters
7
     
3.15.
Litigation
7
     
3.16.
Contracts
7
     
3.17.
Taxes.
8
     
3.18.
Licenses
9
     
3.19.
Internal Software Applications.
9
     
3.20.
Employee Benefit Plans and Arrangements.
10
     
3.21.
Compliance with Laws
12
     
3.22.
Other Liabilities
12
     
3.23.
Absence of Certain Payments
13

 
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3.24.
Disclosure
13
     
3.25.
Subsidiaries
13
     
3.26.
Investment Representation
13
     
4.
Representations and Warranties of the Buyer
13
     
4.1.
Organization and Qualification
13
     
4.2.
Agreement
13
     
4.3.
Validity of Shares
14
     
4.4.
Investment Representation
14
     
4.5.
Information
14
     
5.
Covenants of the Seller
14
     
5.1.
Action to Closing
14
     
5.2.
Access and Information
15
     
5.3.
Confidentiality
15
     
5.4.
Best Efforts
15
     
6.
Covenants of the Buyer
15
     
6.1.
Publicity
15
     
6.2.
Best Efforts
15
     
7.
Conditions to the Obligations of the Seller
15
     
7.1.
Representations and Warranties
15
     
7.2.
Performance
16
     
7.3.
Closing Certificate
16
     
7.4.
Execution of Other Documents
16
     
8.
Conditions to the Obligations of the Buyer
16
     
8.1.
Representations and Warranties
16
     
8.2.
Performance
16
     
8.3.
Closing Certificate
16
     
8.4.
Schedules
16
     
8.5.
Opinion of Counsel
16
     
8.6.
Employment Agreement
16
     
8.7.
Payment of Outstanding Fees and Invoices
16
     
9.
Survival of Representations and Warranties
16

 
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10.
Indemnification.
17
     
10.1.
In General
17
     
10.2.
Limit of Indemnification
17
     
10.3.
Third Party Claims
17
     
11.
Termination
18
 
 
 
12.
Dispute Resolution.
18
     
13.
Miscellaneous.
18
     
13.1.
Expenses
18
     
13.2.
Notices
19
     
13.3.
Further Assurances
19
     
13.4.
Amendments
19
     
13.5.
Miscellaneous
20

 

 
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LIST OF SCHEDULES AND EXHIBITS
 
Schedule 3.6
Real Property; Equipment, etc.
Schedule 3.7
Inventories; Accounts Receivable; Company Payables
Schedule 3.8
Patents, Trademarks and Copyrights
Schedule 3.9
Employees
Schedule 3.10
Union and Employment Agreements
Schedule 3.11
Officers, Directors and Bank Accounts
Schedule 3.12
Adverse Changes
Schedule 3.13
Certain Changes
Schedule 3.14
Environmental Matters
Schedule 3.15
Litigation
Schedule 3.16
Contracts and Other Agreements
Schedule 3.19
Software Applications
Schedule 3.20
Employee Benefit Plans
Schedule 3.21
Compliance with Laws

Exhibit I
Escrow Account
Exhibit II
Restricted Stock
Exhibit III
Opinion of Seller’s Counsel
Exhibit IV
Employment Agreement for John Tonetti

 
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STOCK PURCHASE AGREEMENT
 
STOCK PURCHASE AGREEMENT, dated as of January 19, 2007, between DEBT RESOLVE,
INC., a Delaware corporation (the “Buyer”), and LISA DiPINTO (the “Seller”).
 
WHEREAS, First Performance Corporation, a Nevada corporation (the “Company”), is
in the business of debt collection;
 
WHEREAS, the Seller owns all of the issued and outstanding shares of capital
stock, consisting of 100 shares of Common Stock (the “Shares”), of the Company;
and
 
WHEREAS, the Buyer desires to purchase from the Seller and the Seller desires to
sell to the Buyer all (and not less than all) of the Shares and the business of
the Company as a going concern;
 
NOW, THEREFORE, the parties hereto agree as follows:
 
1.  Sale and Purchase of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties and covenants contained
herein, the Seller will sell all (and not less than all) of the Shares to the
Buyer, and the Buyer will purchase all (and not less than all) of the Shares
from the Seller on the Closing Date (as defined in Section 2.1.)
 
2.  The Closing; Purchase Price.
 
2.1.  The Closing. The closing (the “Closing”) of the transactions contemplated
by this Agreement shall take place at the offices of Greenberg Traurig, LLP, at
10:00 a.m., New York time on January 19, 2007, or on such other date on or prior
to February 2, 2007, or such other time and place as may be agreed upon by the
Buyer and the Seller. The date of the Closing is herein referred to as the
Closing Date.
 
2.2.  Delivery of Shares. At the Closing, the Seller will deliver to the Buyer
certificates for the Shares endorsed for transfer by the Seller or accompanied
by stock powers duly executed by the Seller.
 
2.3.  Payment at Closing. At the Closing, the Buyer will deliver to the Seller:
 
(a)  the sum of $500,000.00 in cash (the “Cash Purchase Price”), by wire
transfer of immediately available funds to the account designated by the Seller
therefor, and shall deposit $209,748.13 of such Cash Purchase Price (the “Escrow
Funds”) in an interest bearing escrow account (the “Escrow Account”) with
Greenberg Traurig, LLP (the “Escrow Agent”), counsel to Buyer, to be held and
distributed in accordance with the terms of Exhibit I; and
 
(b)  a stock certificate representing shares of Common Stock of the Buyer (the
“Restricted Stock”) valued at $350,000 based on the average closing price per
share of the Buyer’s Common Stock for the five (5) trading days immediately
preceding the Closing Date, payable by delivery to the Seller at Closing, and
having the attributes set forth on Exhibit II.
 

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3.  Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer as follows:
 
3.1.  Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite power and authority to own, lease and operate its
properties and carry on its business as now being conducted. The Company is duly
qualified and in good standing as a foreign corporation authorized to do
business in the States of Florida and each other jurisdiction where the
character of the properties owned or leased or the nature of activities
conducted makes such qualification necessary.
 
3.2.  No Subsidiaries. Except for First Performance Recovery Corp., the Company
does not own or control, directly or indirectly, any shares of, or interest in,
any corporation, association or other business entity.
 
3.3.  Capitalization. The authorized capital stock of the Company consists of
13,000,000 shares of Common Stock, par value $.01 per share (the “Common
Stock”), of which 100 shares are issued and outstanding and no shares are held
as treasury shares. All of the issued and outstanding shares of Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. There are no options, warrants, calls, subscriptions,
convertible securities, or other rights or other agreements or commitments of
any character whatsoever obligating the Company to issue or sell any shares of
its capital stock, or any securities convertible into or exchangeable or
exercisable for or otherwise evidencing a right to acquire any shares of its
capital stock or other securities of any kind of the Company. There are no
voting trusts or other agreements or understandings to which the Company or the
Seller are a party with respect to the voting of the capital stock of the
Company.
 
3.4.  Agreement; Title to Shares. The Seller has the legal capacity to enter
into this Agreement. This Agreement has been duly executed and delivered by the
Seller and, assuming due execution by the Buyer, constitutes the legal and
binding obligation of the Seller enforceable in accordance with its terms. The
execution and delivery by the Seller of this Agreement, the consummation of the
transactions contemplated hereby, and the performance by the Seller of her
obligations hereunder will not conflict with or result in any violation of, or
default under (either immediately or with notice or lapse of time), or in any
right to accelerate or the creation of any lien, charge or encumbrance pursuant
to, any provision of (a) the Articles of Incorporation or By-laws of the
Company, (b) any agreement, contract, lease, license, note, bond, mortgage,
indenture, deed of trust or other instrument to which the Seller or the Company
is a party or by which any of the properties or assets of the Company is bound,
(c) any governmental franchise, license, permit or authorization, or any
judgment or order of any tribunal or governmental body applicable to the Seller
or the Company, or any of the properties or assets of the Company, or (d) any
law, statute, decree, rule or regulation of any jurisdiction. No authorization,
consent or approval of, or declaration of, filing with or notice to any
governmental body or authority by the Seller or the Company is necessary for the
execution of this Agreement by the Seller, the consummation by the Seller of the
transactions contemplated hereby or the performance by the Seller of her
obligations hereunder. The Seller owns beneficially and of record, free and
clear of any lien or other encumbrance, and has full power and authority to
convey free and clear of any lien or other encumbrance, the Shares, and, upon
delivery of and payment for the Shares as herein provided, the Buyer will
acquire good and valid title thereto, free and clear of any lien or other
encumbrance.
 
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3.5.  Financial Statements.
 
(a) The Company has previously delivered to the Buyer true and complete copies
of (i) the balance sheets of First Performance Recovery Corp. (the “Subsidiary,”
a wholly-owned subsidiary of the Company) as of December 31, 2004 and 2005, and
the related statements of income, changes in shareholder’s equity and cash flows
for the years then ended, as audited by Acquavella, Chiarelli, Shuster & Co.,
LLP, certified public accountants, and the supplemental schedules thereto (the
“Subsidiary Financials”), and (ii) unaudited consolidated balance sheet of the
Company and the Subsidiary as of November 30, 2006 and the related unaudited
consolidated statement of operations, for the period from January 1, 2006 to
November 30, 2006, certified by the President of the Company (the “Interim
Financials”). The Subsidiary Financials and the Interim Financials, including
the notes to all such statements, are referred to herein collectively as the
“Financial Statements.” The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods specified, and present fairly and in accordance
with generally accepted accounting principles the financial position of the
Company as of the respective dates specified and the results of operations and
changes in financial position of the Company for the respective periods
specified. The Interim Financials have been prepared consistently with the
Company’s past practice and present fairly the financial position of the Company
as of November 30, 2006, and the results of operations for the eleven months
ended November 30, 2006.
 
(b) The books and records of the Company and each subsidiary contain, in all
material respects: (i) all corporate action of the shareholders, directors and
any board committees of the Company and each subsidiary, except as otherwise
disclosed herein and (ii) are maintained in such a manner as to allow for the
orderly preparation of financial statements in accordance with generally
accepted accounting principles, as in effect in the United States (“GAAP”).
 
3.6.  Title to Property, Absence of Encumbrances, etc. Set forth in Schedule 3.6
is a complete and accurate list of (a) all real property and (b) all machinery,
equipment, tools, furniture and fixtures having an original cost in excess of
$25,000 owned or leased by the Company, and of all mortgages, liens and material
encumbrances to which such real property, machinery, equipment, tools, furniture
and fixtures are subject. Except for leased property and as specified in such
Schedule 3.6, the Company has good and marketable title to all assets, real or
personal, tangible or intangible, owned or used by it, including, without
limitation, all assets reflected in the balance sheet included in the Interim
Financials (other than any assets sold or otherwise disposed of in the ordinary
course of business since the date of the Interim Financials), free and clear of
all mortgages, pledges, liens, security interests or encumbrances of any nature
(other than liens for taxes, assessments or other governmental charges not yet
due and payable, or presently payable without penalty or interest) including,
without limitation, any governmental restrictions on the operation of such
assets, except for such leases and such mortgages, liens and encumbrances, or as
otherwise disclosed in Schedule 3.6 to this Agreement. Except as noted on
Schedule 3.6, all buildings, other improvements and leasehold improvements, and
all machinery, equipment, tools, furniture and fixtures listed on Schedule 3.6
owned or leased by the Company are in good operating condition and repair,
except for reasonable wear and tear. All real property owned or leased by the
Company has been constructed and operated in compliance with all applicable
Federal, state, county and municipal laws, regulations, ordinances, standards
and orders, including, without limitation, all zoning and environmental laws,
regulations, ordinances, standards and orders. Neither the Company nor any
subsidiary is in default under any mortgage or lease agreement for any such
property. There are no outstanding enforcement actions or notices of violation
issued by any Federal, state, county or municipal authority having jurisdiction
over any such property.
 
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3.7.  Inventories; Accounts Receivable; Company Payables. The inventories of the
Company are, as of the dates of the Financial Statements, and will be, as of the
Closing Date, (a) in the case of raw materials and work in progress, usable for
the production of currently produced products which meet the Company’s current
product specifications and, in the case of finished goods, saleable to customers
in the normal course of its business, and (b) not obsolete, deteriorated,
unusable or in excess of customary levels. All accounts receivable of the
Company as of the dates of the Financial Statements and uncollected on the date
hereof, to our knowledge, are collectible in the ordinary course of business
(without requirement of legal proceedings) in the full aggregate face amount
thereof. All accounts receivable created subsequent to the date of the Interim
Financials through the Closing Date will have been collected in full prior to
the Closing Date or, to our knowledge, are collectible thereafter in the full
aggregate face amount thereof less an applicable reserve for doubtful accounts
established in a manner consistent with the Company’s prior practices and not
greater, as a percentage of such accounts receivable, than the reserve for
doubtful accounts stated in such Financial Statements. Schedule 3.7 contains:
(i) a complete list of any outstanding Company payables as of the date of this
Agreement; (ii) a complete and accurate list of the Company’s accounts payable
aging summary as of January 16, 2007; and (iii) a complete and accurate list of
the Company’s accounts receivable aging summary as of January 16, 2007.
 
3.8.  Patents; Trademarks. Schedule 3.8 contains a complete and correct list of
all patents and trademarks registered or claimed by the Company, trade names,
service marks and registered copyrights owned or used by, or registered in the
name of, the Company, and all applications for patents or for registration of
trademarks, trade names, service marks or copyrights made by the Company, or by
any of its employees for the benefit of the Company. Except as otherwise
indicated on Schedule 3.8, the Company is the registered and beneficial owner of
all such patents, trademarks, trade names, service marks and registered
copyrights, free and clear of any license, royalty, lien, encumbrance or other
interest of a third party. The Company owns or has the right to use all patents,
patent applications, trademarks, trade names, service marks copyrights and other
intellectual property rights, including, without limitation, inventions,
processes, designs, formulae, trade secrets, technology and know-how necessary
for the conduct of its business. There is no pending or threatened claim by the
Company against any third party for infringement, misuse or misappropriation of
any patent, trademark, trade name, service mark, copyright or other intellectual
property (including, without limitation, any trade secrets or know-how), owned
by the Company or in which the Company has an interest, whether as licensee or
otherwise. Except as set forth in Schedule 3.8, there is no pending or
threatened action, suit or proceeding against the Company or the Seller for
infringement, misuse or appropriation by either of them of any patent,
trademark, trade name, service mark, copyright or other intellectual property
(including, without limitation, any trade secret or know-how) owned or claimed
by any third party or, to the knowledge of the Seller, any basis therefor.
 
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3.9.  Employee Remuneration. Schedule 3.9 lists the current salaries and bonuses
(together with pending or anticipated increases therein) of each director,
officer, employee, consultant or agent of the Company currently paid at a rate
in excess of $60,000 per year. No officer or other key employee of the Company
has indicated to the Seller, or to the Seller’s knowledge has, an intention to
terminate his or her employment with the Company. The Company has paid all
salaries, wages and benefits due to employees of the Company through January 15,
2007.
 
3.10.  Union and Employment Agreements. Except as disclosed in Schedule 3.10,
the Company is not a party to any collective bargaining agreement, or to any
written or oral employment agreement, with any of its officers, directors,
employees, consultants or agents. Copies of any written agreements disclosed in
Schedule 3.10 (or written summaries of oral agreements so disclosed) have been
delivered to the Buyer. Except as disclosed on Schedule 3.10, no attempts to
organize the employees of the Company have been made, nor are any such attempts
now threatened or being planned. The Company is in compliance with all
applicable Federal, state and local laws, rules and regulations regarding
employment conditions and practices, has withheld all amounts required by law or
agreement to be withheld from the wages or salaries of its employees and is not
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing. The Company has not engaged in any unfair labor
practices or discriminated on the basis of age, sex, race or other
discrimination prohibited by law in its employment conditions or practices.
Except as set forth on Schedule 3.10, there are no unfair labor practice or age,
sex or race discrimination charges or complaints or other charges or complaints
alleging illegal discriminatory practices pending or threatened against the
Company before any Federal, state or local board, department, commission or
agency nor does any basis therefor exist. There are no existing or threatened
labor strikes, disputes, grievances, controversies or other labor troubles
affecting the Company. There are no pending or threatened representation
questions respecting the employees of the Company or any pending arbitration
proceedings. The Company is not obligated to pay, and has not granted or
promised in writing or orally, to pay to any employee, officer, director or
provider of services to any of them, any special arrangements for the payment of
monies or provision of benefits pursuant to which the Company could have any
obligation to pay such persons in the event of, or as a consequence of, the
severance of their employment or relationship with the Company, or a change in
control of the Company.
 
3.11.  Officers, Directors and Bank Accounts. Schedule 3.11 lists (a) the names
of all directors and officers of the Company, (b) the name and location of each
bank or other institution in which the Company has any account or safe deposit
box, the number or other identification thereof and the names of all persons
authorized to draw thereon or have access thereto and (c) the beneficiary and
balance of any trust account held by the Company for any client.
 
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3.12.  No Adverse Change. Except as specified in Schedule 3.12, since January 1,
2006, there has not been any material adverse change in the assets, financial
condition, operations or business of the Company. Neither the Company nor the
Seller has received any notice or has reason to believe that any significant
customer of the Company has ceased, or will cease, to use the products,
equipment, goods or services of the Company, or has substantially reduced, or
will substantially reduce, the use of such products, equipment, goods and
services at any time.
 
3.13.  Absence of Certain Changes. Except as specified in Schedule 3.13, since
January 1, 2006, the Company has not (a) issued, sold or delivered or agreed to
issue, sell or deliver any shares of its capital stock or any options or rights
to acquire any such capital stock or securities convertible into or exchangeable
for such capital stock, (b) incurred any obligations or liabilities, whether
absolute, accrued, contingent or other, other than obligations and liabilities
incurred in the ordinary course of business, (c) mortgaged, pledged or subjected
to any lien, lease, security interest or other encumbrance (other than liens for
taxes, assessments or other governmental charges not yet due and payable, or
presently payable without penalty or interest) any of its assets, real or
personal, tangible or intangible, (d) acquired or disposed of any assets or
properties, or entered into any agreement for any such acquisition or
disposition, except in the ordinary course of business, (e) declared, made, paid
or set apart any sum for any dividend or other distribution to its shareholders,
or purchased or redeemed any shares of its capital stock or options, warrants or
other such rights, or granted any option, warrant or right to purchase any such
capital stock, (f) forgiven or cancelled any debts or claims or waived any
rights of material value not previously accrued for, (g) granted any increase in
compensation in any form to any officer, salaried employee or any class of other
employees, or granted any severance or termination pay, or entered into any
employment agreement, or any modification of a previously existing employment
agreement, with any officer or any other salaried employee, other than increases
in compensation of less than 10% granted in the ordinary course of business
consistent with prior practice to employees whose base pay at the time of such
increase was less than $60,000, (h) adopted, amended or entered into any
collective bargaining, bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation or other plan, agreement or
arrangement for the benefit of employees, (i) granted any rights or licenses
under any of its patents, trademarks, trade names, copyrights or other
industrial property rights, (j) suffered any material loss of, or adverse change
in its relationship with, any material supplier or customer or has knowledge
that any such supplier or customer intends or is contemplating any action which
would constitute or lead to such a loss or adverse change, (k) suffered any
damage, destruction or loss (whether or not covered by insurance) which has a
material adverse effect on its business, (1) suffered any strike or other labor
trouble which has materially affected its operations, (m) terminated or made any
substantial revision of, or engaged in any renegotiation of, any material
contract, (n) materially decreased the level of maintenance on, or its
expenditures for maintenance of, the real property, machinery, equipment, tools,
furniture and fixtures owned or leased by it, (o) made any change in accounting
principles or methods or in classification, depreciation or amortization
policies or rates, (p) settled any dispute involving payment by the Company in
excess of $25,000 or cancelled, forgiven or reduced any obligation of any person
or entity in an amount in excess of $25,000, (q) made any loan or advance in
excess of $10,000 to any person or entity other than travel or expense advances
in accordance with its normal policies which have been accounted for or repaid
and extensions of trade credit in accordance with its normal business practices,
or (r) entered into any material transaction other than in the ordinary course
of business.
 
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3.14.  Environmental Matters. Except as set forth in Schedule 3.14, there are
not, nor to the knowledge of the Seller is there any basis for, (a) any
proceedings or governmental investigations concerning or against the Company
pending or threatened in writing before any court or tribunal or governmental
instrumentality, (b) any citation, summons, directive, order or notice of
violation of any law, decree, rule, regulation, permit or order by or against,
the Company, or (c) any liens arising from Environmental Matters (as defined
below), or any governmental actions resulting or which are likely to result in
the imposition of any such lien on any of the properties owned or leased by the
Company, any of which is based upon or related in any way to Environmental
Matters. No toxic or hazardous substances have been improperly generated,
treated, released, stored, discharged, deposited or disposed of on or from any
of the premises of the Company or by the Company (whether directly or indirectly
through a third party) at any other location. As used herein, the term
“Environmental Matters” refers to all matters relating to ground, air and water
pollution or discharge, solid or hazardous wastes, toxic, hazardous or polluting
substances, occupational health, the transport, storage, recycling or disposal
of waste (including, without limitation, garbage, refuse, sludge and other
discarded materials, whether solid, liquid, semisolid or gaseous and whether
on-site or off-site), ground water and soil monitoring, and discharge or
emission of pollutants, contaminants or by-products (including, without
limitation, dredged soil, solid wastes, incinerator residue, sewage, garbage,
sewage sludge, chemical wastes, biological materials, radioactive materials,
heat, wrecked or discarded equipment, industrial waste, chemicals, metals or
other substances), whether such pollution or discharge was caused by (i) the
Company, (ii) any third party arising from off-site transport, storage, disposal
or treatment on behalf of the Company, (iii) any lessee or sublessee of any real
property owned or leased by the Company, or (iv) any partnership, joint venture
or other similar business arrangement to which the Company is a party.
 
3.15.  Litigation. Other than as disclosed on Schedules 3.8, 3.10, 3.14 and
3.15, there are no judicial or administrative actions, suits, proceedings or
governmental investigations pending or to the knowledge of the Seller threatened
before any court or tribunal or governmental instrumentality, or any citation,
order or notice of violation of any law, decree, rule or regulation, by or
against the Seller or the Company or any of their respective properties, or
which relate in any way to the Company’s business, properties, assets or
operations, or which have or are likely to result in an imposition of a lien on
any of the properties or assets owned or leased by the Company, or which
question the validity of this Agreement or any action to be taken in connection
herewith, nor is there any such action, suit, proceeding or investigation, to
the knowledge of the Seller, pending or threatened, which involves any director,
officer, employee, consultant or independent contractor of the Company in its or
his or her capacity as such. Except as set forth in Schedule 3.15, neither the
Seller, the Company nor any property or assets of the Company is subject to any
judicial or administrative order, judgment, injunction or decree.
 
3.16.  Contracts. Schedule 3.16 contains a complete and correct list of each (a)
mortgage, debenture, note or installment obligation, or other instrument or
contract for the borrowing or lending of money by the Company, including,
without limitation, any agreement or arrangement relating to the maintenance of
compensating balances or the availability of a line of
 
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credit, (b) license agreement, sales agency agreement or distribution agreement
to which the Company is a party, (c) guaranty of any obligation by the Company,
including, without limitation, any keep-well, make-whole or maintenance of
working capital or earnings or similar agreement, (d) agreement for the sale of
any properties or assets by the Company other than sales of products and
services in the ordinary course of business, (e) contract, other than a
contract, purchase order or other agreement for the purchase of raw materials or
other supplies in the ordinary course of business or for the purchase of
machinery, equipment, tools, furniture or fixtures with a cost of less than
$25,000, pursuant to which the Company is or may be obligated to make payments,
contingent or otherwise, on account of or arising out of the acquisition, prior,
pending or future, of the shares, business or other assets of another
enterprise, (f) secrecy or invention agreement under which the Seller or the
Company or, to the Seller’s knowledge, any of the present officers or employees
of the Company has any obligation and relating to the business of the Company,
(g) requirements contract with the Company as purchaser or Seller or other
agreement for the purchase or sale of goods or services not terminable without
liability by the Company on 30 days’ (or less) notice or involving payments by
or to the Company in excess of $25,000, (h) agreement or arrangement with a
customer or supplier of the Company for rebates, sharing of expenses or any
similar device for the effective reduction or increase of prices or other
charges and involving products with a value in excess of $25,000, (i) agreement
of the Company with, or loan or advance by the Company to or from, or other
obligation of the Company to or from any officer or director of the Company, (j)
lease of real or personal property with the Company as lessor or lessee,
involving rents of more than $2,500 per year, (k) agreement or arrangement
limiting the freedom of the Seller or the Company or any of the present officers
or employees of the Company to compete in any line of business similar to the
Company’s business, with any person or other entity or in any geographical area,
(1) governmental license, franchise, permit or authorization held by and
material to the business of the Company and not listed on any other Schedule
hereto, (m) insurance policy relating to the properties, businesses or products
of the Company having a currently unexpired term or, as to any casualty,
workers’ compensation, general or product liability or excess liability
insurance policy currently in effect, (n) joint venture agreement or
partnership, profit sharing or other agreements to which the Company is a party,
(o) agreement pursuant to which the Company has indemnified or shared tax
liability with any party, and (p) contract, commitment or agreement not referred
to above in this Section 3.16 or in any other Schedule to this Agreement and
which involves aggregate payments by or to the Company of $25,000 or more. All
such contracts and agreements are in full force and effect, the Company is not
in default thereunder and no event has occurred which, whether with notice,
lapse or time or otherwise, would constitute a default thereunder. The Company
has paid all amounts payable under any contract due on or before January 15,
2007.
 
3.17.  Taxes.
 
(a)  The Company has duly and timely filed (giving due regard to permitted
extensions) all Federal, state and local income, sales, franchise and other tax
reports and returns required to be filed by them, which reports and returns are
true, complete and correct in all material respects. All taxes due and payable
in respect of the operations of the Company, including, but not limited to,
Federal, state and local income, sales and franchise taxes, have been paid in
full or provided for in the Company Financials. The reserves for taxes reflected
on the balance sheets included in the Company Financials are adequate for the
periods to which such balance sheets relate. There are no tax liens upon any
property or assets of the Company except liens for current taxes not yet due.
The Company has paid any and all taxes due or payable on or before January 15,
2007.
 
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(b)  (i) The Federal income tax returns of the Company are closed for all years
ended on or prior to the end of the taxable year ended December 31, 2005, (ii)
there are no outstanding proposed adjustments, (iii) all income tax returns of
the Company for taxable years ended through December 31, 2005, have been filed
and (iv) there are no pending audits.
 
(c)  No deficiency for any other tax has been asserted or assessed against the
Company, and there are neither unresolved claims concerning, nor proceedings or
actions pending which relate to, either the tax liability of the Company or the
collection or assessment of tax for any period for which returns covering the
Company have been filed or were due.
 
(d)  There are no outstanding agreements, extensions or waivers extending the
statutory period of limitation applicable to any Federal, state or local
franchise, income or other tax returns covering the Company.
 
(e)  The Company has not agreed to, nor is the Company required to, make any
adjustment pursuant to Section 481(a) of the Internal Revenue Code of 1986, as
amended (the “Code”), or any predecessor provision by reason of any change in
any accounting method of the Company (other than any changes mandated by
regulations under the Code), and the Company has not made any application
pending with any taxing authority requesting permission for any changes in any
of their respective accounting methods.
 
(f)  The Company has not consented to the application of Section 341(f)(2) of
the Code (or any predecessor provision).
 
(g)  The Company has duly and timely withheld from all salaries, wages and other
compensation of their respective employees and has duly and timely paid over to
the appropriate governmental authorities all amounts required to be so withheld
and paid over for all periods under all applicable laws.
 
3.18.  Licenses. The Company has obtained and holds all licenses, permits,
authorizations, consents and orders or approvals of all foreign, Federal, state
or local governmental or regulatory bodies that are necessary for the lawful
conduct of its business (the “Permits”) including, without limitation, any
licenses or filings, permits to operate as a debt collection agency. All of the
Permits are validly issued and in full force and effect and the Company is in
compliance therewith. No proceeding is pending or threatened which seeks or may
result in canceling, suspending, restricting or modifying any Permit. The
business of the Company is being operated in all respects in accordance with the
terms and conditions of the Permits.
 
3.19.  Internal Software Applications.
 
(a)  Owned Software. To the extent that any of the Software has been designed or
developed by the Seller or the Company’s management information or development
staff or by consultants on the Seller’s or the Company’s behalf, such Software
is original and capable of copyright protection in the United States, and the
Company has complete rights to and ownership of such Software, including
possession of, or ready access to, the source code for such Software in its most
recent version. No part of any such Software is an imitation or copy of, or
infringes upon, the software of any other person or entity, or violates or
infringes upon any common law or statutory rights of any other person or entity,
including, without limitation, rights relating to defamation, contractual
rights, copyrights, trade secrets, and rights of privacy or publicity. Neither
the Seller nor the Company has sold, assigned, licensed, distributed or in any
other way disposed of or encumbered any of the Software.
 
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(b)  Licensed Software. The Software, to the extent it is licensed from any
third party licensor or constitutes “off-the-shelf” software, is held by the
Company legitimately and is fully transferable hereunder without any third party
consent. All of the Company’s computer hardware has legitimately licensed
software installed therein.
 
(c)  No Errors; Nonconformity. The Software is free from any significant defect
or programming or documentation error, operates and runs in a reasonable and
efficient business manner, conforms to the stated specifications thereof, and,
with respect to owned Software, the applications can be recreated from their
associated source codes.
 
(d)  No Bugs or Viruses. The Company has not knowingly altered its data, or any
Software or supporting software which may, in turn, damage the integrity of the
data, stored in electronic, optical, or magnetic or other form. Except as set
forth on Schedule 3.19, the Seller has no knowledge of the existence of any bugs
or viruses with respect to the Software.
 
(e)  Documentation. The Seller and the Company have furnished the Buyer with
true and accurate copies of all documentation (end user or otherwise) relating
to the use, maintenance and operation of the Software.
 
3.20.  Employee Benefit Plans and Arrangements.
 
(a)  No Retirement or Deferred Compensation Plans. The Company does not sponsor,
maintain, support, and is not otherwise a party to, and has no liability under,
any plan, fund, program, understanding, policy, arrangement, contract or
commitment, whether or not qualified for federal income tax purposes, whether or
not terminated, partially terminated, “frozen,” or otherwise suspended as to
benefit accruals, whether or not funded, whether formal or informal, and whether
for the benefit of a single individual or more than one individual, which is in
the nature of (i) an employee pension benefit plan (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
(ii) an incentive, bonus, profit-sharing, deferred compensation, or other
retirement benefit or additional compensation arrangement for employees, former
employees, their dependents and/or their beneficiaries, or (iii) any other
arrangement that could be characterized as providing for incentive, deferred,
retirement or additional compensation.
 
(b)  Welfare Benefit Plans. The Company does not sponsor, maintain, support, and
is not otherwise a party to, and has no liability under, any plan, fund,
program, understanding, policy, arrangement, contract or commitment, whether or
not terminated or partially terminated, whether or not funded, whether formal or
informal, and whether for the benefit of a single individual or more than one
individual, which is in the nature of (i) an employee welfare benefit plan (as
defined in Section 3(l) of ERISA), (ii) any hospitalization, medical,
disability, health or life insurance or arrangement, or vacation pay or
severance pay arrangement, or (iii) any other arrangement that could be
characterized as providing other welfare benefits, perquisites or fringe
benefits, except as disclosed on Schedule 3.20 (collectively referred to herein
as the "Employee Plans").
 
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(c)  Compliance with Law. Each Employee Plan, the administrators and fiduciaries
of each Employee Plan, the Company and the Seller has at all times complied with
all applicable requirements of ERISA and of any other applicable law (including
regulations and rulings thereunder) governing each Employee Plan, and each
Employee Plan has at all times been properly administered in accordance with all
such requirements of law and in accordance with its terms to the extent
consistent with all such requirements of law.
 
(d)  Excise Taxes and Liabilities. Neither any Employee Plan, any administrator
or fiduciary of any Employee Plan, the Company nor the Seller has taken any
action, or failed to take any action, that could subject it or any other person
to any liability, either directly or by way of indemnification, for any excise
tax or for breach of fiduciary duty with respect to or in connection with any
Employee Plan.
 
(e)  Communications and Reports. Neither any Employee Plan, any administrator or
fiduciary of any Employee Plan, the Company nor the Seller has any liability
under any provision of ERISA or any other applicable law by reason of any
communication or failure to communicate with respect to or in connection with
any Employee Plan, or any filing or failure to file with any government entity.
 
(f)  Payment of Benefits and Contributions. Neither any Employee Plan, any
administrator or fiduciary of any Employee Plan, the Company nor the Seller has
any liability to any plan participant, beneficiary or other person under any
provision of ERISA or any other applicable law by reason of any payment of
benefits or other amounts or failure to pay benefits with respect to or in
connection with any Employee Plan. The Company is not delinquent or in arrears
on other amounts owed to or with respect to any payments or contributions under
any Employee Plan and has paid any such amount due or payable on or before
January 15, 2007.
 
(g)  Other Liabilities. The Company has not incurred any liability to any
employee, beneficiary or other person or entity prior to and including the
Closing Date in connection with any Employee Plan, by reason of any action or
inaction by the Company, the Seller or any person affiliated with the Seller, or
any plan administrator or fiduciary, or any other person other than liabilities
for benefits that have been paid. The Seller hereby agrees that no liability to
any employee, beneficiary or other person or entity shall be incurred following
the Closing Date in connection with any Employee Plan, by reason of any action
or inaction by the Seller or any person affiliated with the Seller, or any plan
administrator or fiduciary, or any other person other than liabilities
undertaken by them under the terms of the Employee Plan.
 
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(h)  Information. All employees of the Company and their beneficiaries and
dependents, and other participants and beneficiaries of any Employee Plan, all
available data and benefits applicable to each of them under the terms of each
Employee Plan (including, without limitation, complete pertinent pay history and
all administrative records), shall be correctly identified and set forth in
records to be delivered on or prior to the Closing Date by the Seller to the
Buyer. The Seller has provided to the Buyer all plan documents, administrative
forms, employee booklets, summary plan descriptions and other employee
communication materials used in connection with each Employee Plan.
 
(i)  No Multiemployer Plan Liabilities. The Company is not now, nor has at any
time been, a “substantial employer” within the meaning of that term as defined
in Section 4001(a)(2) of ERISA with respect to any “multiemployer plan” as that
term is defined in Section 4001(a)(3) of ERISA. The Company is not now, nor has
the Company at any time been, a party to, or become subject to, any collective
bargaining agreement pursuant to which the Company has been, is, or will become
obligated to contribute to a "multiemployer plan" as that term is defined in
section 4001(a)(3) of ERISA.
 
(j)  Plans of Affiliates of the Company. Other than the Employee Plans (and then
only as set forth in this Section 3.20), the Company is not presently or
potentially liable with respect to any employee benefit plan sponsored by any
element(s) of any controlled group of corporations, groups of trades or
businesses under common control or affiliated service groups, whether such plan
is a single employer plan, a multiple employer plan or a multiemployer plan.
 
3.21.  Compliance with Laws. Except as set forth in Schedule 3.21, the operation
of the business of each of the Company has been conducted in accordance with all
applicable laws (including the Fair Debt Collection Practices Act, the Fair
Credit Reporting Act, the Real Estate Settlement Procedures Act, mortgage laws
and other state laws covering comparable subject matter), regulations, orders
and other requirements of all courts and Governmental Entities having
jurisdiction over the Company and its business, assets, properties and
operations. Except as set forth in Schedule 3.21, the Company has not received
any notice of any violation of any such law, regulation, order or other legal
requirement that is pending as of the date hereof. The Company is not in default
with respect to any order, writ, judgment, award, injunction or decree of any
Governmental Entity applicable to its business or any of its assets, properties
or operations. For purposes of this section, “Governmental Entity” shall mean
any government or governmental or regulatory body thereof, or political
subdivision thereof, whether federal, state, local or foreign, or any agency,
instrumentality, or authority thereof, or any court or arbitrator (public or
private).
 
3.22.  Other Liabilities. The Company does not have any liabilities or
obligations (direct or indirect, contingent or absolute, matured or unmatured)
of whatever nature, whether arising out of contract, tort, statute or otherwise,
except (a) as reflected in the balance sheets included in the Company
Financials, (b) disclosed in the Schedules to this Agreement, (c) as
contemplated by this Agreement and (d) liabilities and obligations incurred in
the ordinary course of business since December 31, 2006.
 
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3.23.  Absence of Certain Payments. Neither the Seller nor the Company nor any
officers, directors, employees, agents, representatives, or independent
contractors of the Company has made, or arranged for the making of, any unlawful
payment to any official, officer or employee of any Federal, state, county,
municipal or other governmental or regulatory body or authority or any
self-regulatory body or authority, or made any payment to any customer or
supplier of the Company or any officer, director, partner, employee or agent of
any customer or supplier, for the unlawful sharing of fees or to any such
customer or supplier or any such officer, director, partner, employee or agent
for the unlawful rebating of charges, or engaged in any other unlawful
reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or supplier or any such officer,
director, partner, employee or agent, in respect of the Company.
 
3.24.  Disclosure. This Agreement (except for Sections 4 and 6), the Schedules
hereto and the Financial Statements do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained therein not false or misleading. There is no fact known to
the Seller which has not been disclosed to the Buyer which materially adversely
affects the assets, properties, liabilities, business, results of operations or
financial condition of the Company.
 
3.25.  Subsidiaries. Each representation and warranty made by the Seller in this
Section 3, as well as each covenant in Section 5, shall also apply to each
subsidiary of the Company and each Schedule to this Agreement shall contain
relevant information with respect to each such subsidiary.
 
3.26.  Investment Representation. The Seller represents and warrants that it is
acquiring the Restricted Stock for its own account only, for investment purposes
and not with a view to distribution and acknowledges that the Restricted Stock
is and will be “restricted securities” within the meaning of the Rules and
Regulations under the Securities Act of 1933, as amended (the “Securities Act”),
that the disposition of such securities is subject to compliance with the
provisions of the Securities Act, and that certificates for the securities
issued hereunder will bear a legend to that effect. The Seller has sufficient
experience in business, financial and investment matters to be able to evaluate
the risks involved in the acquisition of the Restricted Stock and to make an
informed decision with respect to such acquisition.
 
4.  Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller as follows:
 
4.1.  Organization and Qualification. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority to own, lease and operate its
properties and carry on its business as it is now being conducted.
 
4.2.  Agreement. This Agreement has been duly executed and delivered by the
Buyer and constitutes the legal and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms. The execution and delivery by
the Buyer of this Agreement, the consummation of the transactions contemplated
hereby, and the performance by the Buyer of its obligations hereunder will not
conflict with or result in any violation of, or default under (either
immediately or with notice or lapse of time), or in any right to accelerate or
the creation of any lien, charge or encumbrance pursuant to, any provision of
(a) the certificate of incorporation or by-laws of the Buyer, (b) any agreement,
contract, lease, license, note, bond, mortgage, indenture, deed of trust or
other instrument to which the Buyer is a party or by which any of the Buyer's
properties or other assets is bound, (c) any governmental franchise, license,
permit or authorization, or any judgment or order of any tribunal or
governmental body applicable to the Buyer, or any of the Buyer's properties or
other assets, or (d) any law, statute, decree, rule or regulation of any
jurisdiction. No authorization, consent or approval of, or declaration of,
filing with or notice to any governmental body or authority by the Buyer is
necessary for the execution of this Agreement by the Buyer, the consummation by
the Buyer of the transactions contemplated hereby and thereby or the performance
by the Buyer of its obligations hereunder.
 
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4.3.  Validity of Shares. The shares of Restricted Stock to be issued at the
Closing pursuant to Section 2.3 hereof, when issued and delivered in accordance
with the terms hereof, shall be duly and validly issued, fully paid and, except
as provided in Section 10 hereof, nonassessable. Based in part on the
representations and warranties of the Seller in this Agreement and assuming the
accuracy thereof, the issuance of the Restricted Stock at the Closing pursuant
to Section 2.3 will be exempt from the registration requirements of the
Securities Act and from the qualification or registration requirements of any
applicable state blue sky or securities laws.
 
4.4.  Investment Representation. The Buyer represents and warrants that it is
acquiring the Shares for its own account only, for investment purposes and not
with a view to distribution and acknowledges that the Shares are and will be
“restricted securities” within the meaning of the Rules and Regulations under
the Securities Act, that the disposition of such securities is subject to
compliance with the provisions of the Securities Act, and that certificates for
the securities issued hereunder will bear a legend to that effect.
 
4.5.  Information. The Buyer has made available to the Seller true and complete
copies of the Buyer’s (i) Annual Report on Form 10-KSB for the year ended
December 31, 2005, (ii) Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 2006, June 30, 2006, and September 30, 2006, and (iii) Registration
Statement on Form SB-2 (No. 333-135911), effective November 1, 2006 (the “SEC
Documents”). None of the SEC Documents, as of their respective dates, contained
any untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements contained therein not misleading.
 
5.  Covenants of the Seller. The Seller covenants as follows:
 
5.1.  Action to Closing. From the date of this Agreement until the Closing Date,
the Seller will use its best efforts to cause the Company to (a) conduct its
operations only in the ordinary course, in substantially the manner as
heretofore conducted and in accordance with all applicable laws, rules,
regulations, orders, approvals, authorizations, exemptions, classifications and
registrations applicable to the Company or relating to their respective
operations, (b) maintain its respective real and personal property in as good
condition and repair as of the date hereof, (c) perform in all material respects
all of the respective obligations under all contracts listed on Schedule 3.16,
and not amend, alter or modify any provision of any such contract or enter into
any new contract or transaction involving consideration in excess of $25,000 or
dispose of any asset having a value in excess of $25,000 without the prior
written consent of the Buyer, (d) use its best efforts to maintain the existing
relationships of the Company with its suppliers and customers, (e) use its best
efforts to keep available the services of its present officers and employees,
(f) promptly deliver to the Buyer interim financial statements as regularly
prepared for its internal use, which financial statements shall be in accordance
with the last sentence of Section 3.5, (g) not issue any shares of capital stock
or any options, warrants or other rights to acquire capital stock, (h) confer on
a regular and frequent basis with representatives of the Buyer to report
material operational matters and the general status of ongoing operations, and
(i) not, without the prior written consent of the Buyer, take any action or
engage in any transaction not expressly permitted by this Section 5.1 or
otherwise contemplated by this Agreement which would cause any of
representations made by the Seller herein to be untrue as of the Closing Date or
a breach of the terms and conditions of this Agreement.
 
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5.2.  Access and Information. The Seller agrees to cause the Company to afford
the Buyer and the Buyer’s employees, accountants, counsel and other authorized
representatives reasonable access to the Company’s plants, properties, books and
records and the Seller will, and will cause the Company to, furnish to the Buyer
and its representatives all additional financial and operating data and other
information as the Buyer may from time to time reasonably request.
 
5.3.  Confidentiality. Notwithstanding anything to the contrary contained in
this Agreement, none of the Seller, the Company or any subsidiary or of their
respective affiliates shall at any time divulge, disclose, disseminate, announce
or release any information to any person concerning this Agreement or the
transactions contemplated hereby without first obtaining the prior written
consent of the Buyer.
 
5.4.  Best Efforts. The Seller agrees to use her reasonable best efforts to
satisfy the conditions to the obligations of the Buyer hereunder set forth in
Section 8.
 
6.  Covenants of the Buyer. The Buyer covenants as follows:
 
6.1.  Publicity. The Buyer will not, without the consent of the Seller, issue or
cause the publication of any press release or other announcement with respect to
this Agreement except where such release or announcement is required by law.
 
6.2.  Best Efforts. The Buyer will use its reasonable best efforts to satisfy
the conditions to the obligations of the Seller hereunder set forth in Section
7.
 
7.  Conditions to the Obligations of the Seller. The obligations of the Seller
to effect the transactions contemplated hereby are subject to the fulfillment to
its satisfaction, prior to or at the Closing, of the following conditions:
 
7.1.  Representations and Warranties. The representations and warranties of the
Buyer contained herein shall have been true and correct when made and shall be
true and correct at and as of the Closing as though such representations and
warranties were made at and as of the Closing.
 
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7.2.  Performance. The Buyer shall have performed and complied with each
covenant or condition required by this Agreement to be performed or complied
with by it prior to or at the Closing.
 
7.3.  Closing Certificate. The Buyer shall have delivered to the Seller a
certificate, dated the Closing Date and executed by a principal executive or
financial officer, certifying that the conditions specified in Sections 7.1 and
7.2 have been fulfilled.
 
7.4.  Execution of Other Documents. The Buyer shall have executed and delivered
to the Seller the shares of Restricted Stock at the Closing pursuant to Section
2.3 hereof.
 
8.  Conditions to the Obligations of the Buyer. The obligations of the Buyer to
effect the transactions contemplated hereby are subject to the fulfillment to
its satisfaction, prior to or at the Closing, of the following conditions:
 
8.1.  Representations and Warranties. The representations and warranties of the
Seller contained herein and in the Schedules hereto shall have been true and
correct when made and, except for such changes expressly consented to in writing
by the Buyer or expressly permitted by this Agreement, shall be true and correct
in all material respects at and as of the Closing as though such representations
and warranties were made at and as of the Closing.
 
8.2.  Performance. The Seller shall have performed and complied with each
covenant and condition required by this Agreement to be performed or complied
with by the Seller prior to or at the Closing.
 
8.3.  Closing Certificate. The Seller shall have delivered to the Buyer a
certificate, dated the Closing Date and executed by the Seller, certifying that
the conditions specified in Sections 8.1 and 8.2 have been fulfilled.
 
8.4.  Schedules. The Schedules to this Agreement to be delivered by the Seller
to the Buyer shall be reasonably satisfactory to the Buyer.
 
8.5.  Opinion of Counsel. The Buyer shall have received from Gersten Savage LLP,
counsel for the Seller, an opinion, dated the Closing Date, in substantially the
form attached hereto as Exhibit III.
 
8.6.  Employment Agreement. The Company and John Tonetti shall have executed and
delivered an Employment Agreement in the form attached hereto as Exhibit IV,
which shall include provisions to the effect that a material breach of the
Seller’s representations and warranties shall be grounds for a for cause
termination of the Employment Agreement.
 
8.7.  Payment of Outstanding Fees and Invoices. The Seller shall cause the
Company to pay all outstanding tax, audit, payroll, insurance or related fees
and/or invoices that that become due and/or payable on or before January 15,
2007.
 
9.  Survival of Representations and Warranties. Except as otherwise provided,
all representations and warranties contained in this Agreement shall survive the
Closing and any
 
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investigations made by any party but shall expire and be extinguished on the
first anniversary of the Closing Date. The representations and warranties
contained in Section 3.17 shall survive the Closing until the expiration of the
applicable statute of limitations. All statements contained in the Schedules
hereto, the Financial Statements and the certificates delivered pursuant to
Sections 7.3 and 8.3 shall be deemed representations and warranties of such
party under this Agreement.
 
10.  Indemnification.
 
10.1.  In General. The Seller shall indemnify and hold harmless the Buyer
against and in respect of any and all costs, claims, liabilities, damages,
losses or deficiencies, whether suffered by the Buyer or the Company:
 
(a)  resulting from any misrepresentation or breach of any warranty or covenant
by the Seller made herein, in any Schedule hereto, the Financial Statements
and/or the certificate delivered pursuant to Section 8.3;
 
(b)  arising out of any claim for fees or expenses of any finder, broker, agent
or other intermediary who has acted on behalf of the Seller or the Company in
connection with this Agreement or the transaction contemplated hereby; and
 
(c)  any and all actions, suits, procedures, demands, assessments, judgments,
damages, fines, awards, costs and expenses (including but not limited to
reasonable fees and disbursements of counsel, interest and penalties) incident
to the foregoing. All such damages, losses, deficiencies, assessments,
judgments, fines, awards, costs and expenses are referred to in this Section 10
as “Losses.”
 
10.2.  Limit of Indemnification. The indemnification of the Buyer hereunder
shall be subject to the following limitations:
 
(a)  Notwithstanding any other provision of this Agreement, except with respect
to any Losses involving proven fraud by the Seller or with respect to Losses
relating to any breach of any warranties under Section 3.17, the Seller shall
first satisfy its indemnification obligations by tendering to the Buyer for
cancellation a number of shares of Restricted Stock having a value (for purposes
hereof, the shares of the Restricted Stock shall be valued at the same value per
share utilized for purposes of Section 2.3(b)) equal to the amount of the
subject indemnification claim being satisfied in such manner. To the extent that
all of the shares of Restricted Stock have been so tendered to the Buyer, the
Seller shall satisfy any additional indemnification obligations through cash
payments to the Buyer.
 
(b)  The Buyer shall be entitled to indemnification by the Seller for Losses
only in respect of claims arising on or before the one year anniversary of the
Closing Date, or, with respect to Losses relating to any breach of any warranty
under Section 3.17 or any Losses involving proven fraud, the expiration of the
applicable statute of limitations.
 
10.3.  Third Party Claims. If the facts giving rise to any claim for
indemnification shall involve any actual or threatened action or demand by any
third party against the Buyer or the Company, the Buyer will promptly give
notice of a such claim to the Seller stating the nature thereof and enclosing
copies of any complaint, summons, written
 
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assertion of such claim or similar document. The Seller shall be entitled
(without prejudice to the Buyer’s right to participate at its own expense
through counsel of its choosing), at her expense and through a single counsel of
her own choosing, to defend or prosecute such claim in the name of the Buyer or
the Company; provided, that if the Seller fails to timely defend such claims,
the Buyer may defend through its own counsel but at Seller’s expense. In any
event, the Seller shall give the Buyer advance written notice of any proposed
compromise or settlement of any such claim; provided, that no settlement shall
be made without the Buyer’s prior written consent. If such settlement provides
solely for the payment of monies and the Buyer provides notice to the Seller
within 20 days of such notice that it objects to such settlement or compromise,
then the Buyer shall be required to undertake, conduct and control, through
counsel of its own choosing and at its sole expense, the settlement or defense
thereof, and the Seller shall cooperate with the Buyer in connection therewith.
 
11.  Termination. This Agreement may be terminated at any time prior to the
Closing Date:
 
(a)  by mutual written consent of the Buyer and the Seller;
 
(b)  by either the Buyer or the Seller if the Closing has not occurred prior to
February 2, 2007, provided that the non-occurrence of the Closing is not
attributable to a breach of the terms hereof by the party seeking termination;
or
 
(c)  by either the Seller or the Buyer if any court of competent jurisdiction or
any governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
 
12.  Dispute Resolution.
 
(a)  Any controversy or dispute between the Buyer and the Seller involving the
construction, interpretation, application or performance of the terms, covenants
or conditions of this Agreement or in any way arising under this Agreement
shall, on demand by either the Buyer or the Seller by written notice to the
other, be finally settled by arbitration in New York, New York in accordance
with the American Arbitration Association Rules of Arbitration before one
arbitrator appointed pursuant thereto. Any counterclaim shall take place in the
same venue. The arbitration award shall be final, shall be binding upon the
parties hereto, and may be entered in any court having jurisdiction thereof.
 
13.  Miscellaneous.
 
13.1.  Expenses. The Buyer and the Seller shall pay their own respective
expenses and costs, including, without limitation, expenses of their respective
counsel and auditors, incidental to the preparation of this Agreement, the
performance and compliance with all agreements and conditions contained in this
Agreement to be performed or complied with by them and the consummation of the
transactions contemplated hereby and thereby. The Seller expressly agrees that
the Company shall not pay or be liable for any expenses and costs of the Seller
in connection with this Agreement or the transactions contemplated hereby.
 
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13.2.  Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered or mailed by
first-class registered or certified mail, postage prepaid, addressed as follows:
 
(a)  If to the Buyer, at:
 
Debt Resolve, Inc.
707 Westchester Avenue
Suite L7
White Plains, New York 10604
Attention: Mr. James D. Burchetta
                    Chief Executive Officer

with a copy to:
 
Greenberg Traurig, LLP
MetLife Building
200 Park Avenue, 15th Floor
New York, New York 10166
Attention: Spencer G. Feldman, Esq.
 
(b)  If to the Seller, at:
 
Lisa DiPinto
12 Woodfield Lane
Old Brookville, New York 11545
 
with a copy to:
 
Gersten Savage LLP
600 Lexington Avenue
9th Floor
New York, New York 10022
Attention: Arthur S. Marcus, Esq.

or, in each case, at such other address as may be specified in writing to the
other parties.
 
13.3.  Further Assurances. The parties hereto shall do and perform or cause to
be done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments or documents as the
other party hereto may reasonably request in order to carry out, the intent and
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
13.4.  Amendments. This Agreement may be amended, waived, discharged or
terminated only by an instrument in writing executed by the party against which
enforcement of such amendment, waiver, discharge or termination is sought.
 
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13.5.  Miscellaneous. This Agreement and the agreements and instruments referred
to herein embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof. The headings in this Agreement
are for convenience of reference only and shall not constitute a part of this
Agreement. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to the choice of law
principles thereof. This Agreement may be executed in several counterparts and
by fax or electronic signature, each of which is an original but all of which
shall constitute one instrument. Neither this Agreement nor any rights or
obligations hereunder may be assigned by one party without the consent of the
other, except that the Buyer may assign this Agreement to any of its
subsidiaries or affiliates, such assignment not to discharge the Buyer from its
obligations hereunder. Subject to the previous sentence, this Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the Buyer
and the successors, assigns, heirs, administrators, executors and legal
representatives of the Seller.
 
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
 
The Buyer:
DEBT RESOLVE, INC.
 
By:  /s/ James D. Burchetta                         
James D. Burchetta
Chief Executive Officer
 
The Seller:
 
/s/ Lisa DiPinto                                             
Lisa DiPinto

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EXHIBIT I
 
ESCROW ACCOUNT
 
1.
The following tax and other liabilities (collectively, the “Liabilities”) shall
be paid by the Company from funds in the Escrow Account immediately following
the Closing:

 
First Performance Corporation:
 
Florida Department of Revenue
 
1,677.15
 
Florida Third Quarter 2006 Suta payable
Nevada Employment Security Division
 
304.76
 
Nevada Third Quarter 2006 Suta Payable
NYS Employment Taxes
 
13.62
 
NYS Unemployment interest Assessment Charge
United States Treasury
 
28,591.66
 
Paydates 11/17, 12/01 Federal & Fica Taxes
United HealthCare Insurance Company
 
40,000.00
December 2006 and January 07 Health Insurance Premium

First Performance Recovery Corporation:
 
Florida Department of Revenue
 
3,095.57
 
Florida Third Quarter 2006 Suta payable
Nevada Employment Security Division
 
10,280.90
 
Nevada Third Quarter 2006 Suta Payable
NYS Employment Taxes
 
2.14
 
NYS Unemployment interest Assessment Charge
Tennessee Department of Revenue
 
508.42
 
Fiscal YE09/30/05 Late Tax filing Charge
Texas Workforce Commission
 
257.25
 
Texas Third Quarter 2006 Suta payable
United States Treasury
 
28,591.66
 
Paydates 11/17 Federal & Fica Taxes
Vermont Department of Taxes
 
-450.00
 
Corporate Tax overpayment due from Vermont

 
2.
The following accounts payable (the “Accounts Payable”) shall be paid by the
Company, in accordance with paragraph 3, out of monies held in the Escrow
Account:

 
First Performance Corporation:
 
ACSB & Co., LLP
 
16,875.00
 
9 months retainer for outside accountants (April - Dec)
ADP-Automatic Data Process
 
40,000.00
 
Payroll processing charges & Directs Deposit by ADP

First Performance Recovery Corporation:
 
ADP Automatic Data Processing
 
40,000.00
       
209,748.13
   

3.
For a period of six months from the date hereof (the “Settlement Period”), the
Seller shall (i) have sole authority and control over the settlement and defense
of the Accounts Payable, (ii) shall actively pursue, at her own expense, the
resolution of such Accounts Payable and (iii) shall give notice to the Company
of any and all developments concerning the settling or contesting of such
Accounts Payable. During the Settlement Period, the disbursement of funds from
the Escrow Account by the Company in satisfaction of each Accounts Payable shall
be preceded by a written notice from the Seller to the Company and the Escrow
Agent setting forth in reasonable detail, among other things, written proof that
the Accounts Payable party has received payment in full for such Accounts
Payable or agreed to settle such Accounts Payable for the full or a lesser
amount, the amount (if any) to be disbursed in final settlement of such Accounts
Payable and the material facts supporting the disbursement (including copies of
relevant documentation). During the Settlement Period, to the extent that an
Accounts Payable have been paid or settled in full satisfaction, the Company
shall instruct the Escrow Agent to release the balance of the funds in the
Escrow Account allocated for that Accounts Payable to the Seller. Immediately
after the Settlement Period, if any Accounts Payable have not been satisfied in
full, they shall be paid by the Company from funds in the Escrow Account, and,
if there is any remaining balance in the Escrow Account after all remaining
Accounts Payable have been satisfied in full, the Company shall instruct the
Escrow Agent to release the balance of the funds in the Escrow Account allocated
for that Accounts Payable to the Seller.

 
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4.
It is hereby understood and agreed as follows:

 

 
(a)
The Escrow Agent agrees that it shall at all times maintain the Escrow Funds in
a segregated interested-bearing account demand deposit account at the Escrow
Agent’s regular commercial bank. In no event and under no circumstances will the
Escrow Agent commingle any of the Escrow Funds with any funds or property of the
Escrow Agent or any other person.

 

 
(b)
In the event of any bona fide dispute with respect to the circumstances or
reasons for termination of this Agreement, the Escrow Agent shall retain the
Escrow Funds until such dispute is finally resolved, and shall thereafter
disburse the Escrow Funds in accordance with the resolution of such dispute.

 

 
(c)
Upon the Closing of the transactions contemplated by this Agreement, (i) the
principal of the Escrow Funds shall immediately be paid to the Seller by wire
transfer of immediately available funds, and the principal of the Escrow Funds
shall be a payment by the Buyer on account of the Cash Purchase Price, and (ii)
the interest portion of the Escrow Funds shall be paid to the Buyer.

 
5.
The Escrow Agent shall have no authority to disburse Escrow Funds for any
purpose or reason or in any manner other than as expressly provided in this
Agreement. The Escrow Agent shall not be required, at any time or under any
circumstances, to disburse any funds other than Escrow Funds, and upon the
disbursement of all of the Escrow Funds in accordance with this agreement, or
otherwise upon the written agreement of the Buyer and the Seller, the Escrow
Agent shall be deemed to have completed and discharged all of its duties
hereunder.

 
6.
The Escrow Agent shall have no duties or obligations hereunder other than as
expressly set forth in this agreement, and no other duties or obligations shall
be inferred upon the Escrow Agent at any time. The Escrow Agent shall not incur
any liability for any action taken by it, except to the extent that same
constitutes gross negligence or willful misconduct by the Escrow Agent or its
agents. The Escrow Agent shall be entitled to rely upon and assume to be
accurate all notices and advice given to the Escrow Agent hereunder (absent
specific actual knowledge to the contrary), to rely upon any document and/or
signature believed by it in good faith to be genuine and rendered by an
authorized representative of the subject person, and to seek and rely upon (and
be protected in relying upon) advice of counsel in taking or refraining from
taking any action hereunder. The Escrow Agent shall look solely to the Seller
for reimbursement of any reasonable out-of-pocket fees, costs and expenses which
it may incur in acting hereunder. If the Escrow Agent shall at any time or from
time to time, in good faith, be in doubt as to the entitlement of the Buyer or
the Seller to any of the Escrow Funds, or if there shall be bona fide
conflicting claims with respect to any Escrow Funds, then the Escrow Agent may
refrain from making the subject disbursement until such uncertainty is resolved
by written agreement of the Buyer and the Seller, or by a judgment or order of a
court of competent jurisdiction, evidenced by a certified judgment or order. The
Escrow Agent may resign at any time, provided that such resignation shall not
become effective until a substitute escrow agent is appointed by mutual
agreement of the Buyer and the Seller, and the Escrow Agent has delivered to its
successor all Escrow Funds then held hereunder. The Buyer and the Sellers
acknowledge that the Escrow Agent has rendered and will continue to render legal
advice to the Buyer in connection with the transactions contemplated by this
Agreement, and the Buyer and the Seller hereby waive any claims of conflict of
interest by reason of such legal representation.

 

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EXHIBIT II
 
TERMS OF RESTRICTED STOCK
 
1.
The Restricted Stock delivered to the Seller pursuant to Section 2.3 shall be
subject to forfeiture for a period of one year following the Closing Date (the
“Forfeiture Deadline Date”) in the event and to the extent of any judicial or
arbitral determination or settlement agreement that indemnification is due in an
action brought by the Buyer against the Seller on or before the Forfeiture
Deadline Date.

 
2.
The Restricted Stock certificates delivered to the Seller shall bear the
following legend:

 
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933 OR AN EXEMPTION THEREFROM AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES LAWS.
 
UNTIL JULY 19, 2008, THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCK PURCHASE AGREEMENT
DATED AS OF JANUARY 19, 2007, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO
REGISTRATION OR TRANSFER OF THESE SHARES WILL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH.
 
3.
The Restricted Stock shall be subject to a lock-up agreement for a period of 18
months following the Closing Date or until all pending claims for
indemnification are resolved, whichever is later.

4.
The Buyer shall deliver a stop transfer instruction to the transfer agent with
respect to the Restricted Stock which shall only be withdrawn upon the later to
occur of: (a) the Forfeiture Deadline Date or (b) the satisfaction of any
judicial or arbitral determination or settlement agreement that indemnification
is due in an action brought by the Buyer against the Seller on or before the
Forfeiture Deadline Date.

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