Exhibit
10.1


 


MODIFICATION
AGREEMENT


 


This Modification Agreement (this “Agreement”)
is made as of January 8, 2003 between RevCare, Inc., a Nevada corporation
(the “Company”),
and Russ Mohrmann (“Executive”).


 


RECITALS


 


A.                                   Executive
and/or Executive’s affiliates made certain loans to the Company and/or its
affiliates, which loans were evidenced by the promissory notes listed in Exhibit
A attached hereto (collectively, the “Original Notes”).


 


B.                                     The
Company also owes the following portions to Executive as the remaining amount
of “permitted distributions” owed under that certain Purchase Agreement dated
May 30, 2000 between the Company and the parties named therein and that
certain Asset Purchase Agreement dated May 30, 2000 between the Company,
Hospital Employee Labor Pool, a California corporation, and the parties named
therein (collectively, the “Purchase Agreements”):  (i) 
$72,578.43 with respect to Hospital Employee Labor Pool and (ii) $46,754
with respect to Insource Medical Solutions, LLC.


 


C.                                     The
Original Notes were secured by a Security Agreement dated August 14, 2000
(the “Original
Security Agreement”).


 


D.                                    Executive
and Orange County Professional Services, Inc., a California corporation and
wholly-owned subsidiary of the Company, entered into that certain Employment
Agreement dated August 14, 2000 ( the “Original Employment Agreement”).


 


E.                                      The
Company is negotiating certain credit accommodations with Bridge Bank NA, in
respect of which such bank is requiring Executive and Executive’s affiliates
subordinate their rights under the Original Notes and the Original Security
Agreement pursuant to the terms and conditions of a Subordination Agreement
substantially in the form attached hereto as Exhibit B (the “Subordination
Agreement”).


 


F.                                      The
Company also desires to extend the due date under the Original Notes and
Executive has agreed to such extension upon the terms and conditions set forth
below.


 


G.                                     The
Company and Executive have entered into this Agreement to set forth the terms
and conditions upon which they have agreed to amend and restate the Original
Notes, the Original Security Agreement and the Original Employment Agreement.


 


NOW THEREFORE, the Company and Executive agree as
follows:


 


1.                                       Payments
to Executive.  On or before the
Closing Date (as defined below), the Company will pay or cause to be paid to
the client trust account for Andrew A. Talley, Esq. (“Escrow Holder”), as escrow
holder for the benefit of Executive, the aggregate sum of $300,000 (the “Cash Payment”)
in immediately available funds.  The
Escrow Holder shall deliver the Cash Payment to Executive upon confirmation
from the Company in writing of its


 


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receipt of all of the documents and instruments described in Section 2
below.  The “Closing Date” shall be the
earlier of (i) the consummation of the closing of the sale of the Company’s
office building located at 5400 Orange Avenue, Cypress, CA, (ii) the
consummation of the closing of the credit facility described in that letter
agreement between the Company and Bridge Bank, NA dated December 12, 2002
and (iii) March 31, 2003.


 


(a)                                  The
parties acknowledge and agree that $275,000 of the Cash Payment shall be
applied as follows:  (i) $119,332.43
shall be applied against the then outstanding amount of permitted distributions
owed to Executive under the Purchase Agreements and (ii) $155,667.57 shall be
applied against the then outstanding principal owing under the Original Notes,
as such Original Notes are amended pursuant to the amended and restated
promissory notes described in Section 2(a) below.  The balance of any permitted distributions still owed to
Executive by the Company following the Closing Date shall be paid in full on
the earlier of January 5, 2004 or the occurrence of an event of default
under Section 4 of the promissory notes referenced in Section 2(a) below.


 


(b)                                 The
parties further acknowledge and agree that the $25,000 balance of the Cash
Payment shall be paid to Executive to cover Executive’s expenses incurred in
renegotiating the terms of the Original Notes, Original Security Agreement and
Original Employment Agreement, negotiating the terms of the Subordination
Agreement and consummating the transactions contemplated herein and in the
documents referenced herein.  Executive
shall provide invoices or receipts to the Company for such expenses, which the
Company shall absorb as costs.  Any
portion of the $25,000 for which Executive fails to provide the Company with
such invoices or receipts shall be reported by the Company on IRS Form 1099.


 


2.                                       Delivery
of Documents by Executive.


 


(a)                                  Concurrently
upon the execution of this Agreement, Executive shall cause to be delivered to
the Company the following documents and instruments:


 


(i)                                     an
Amended and Restated Secured Convertible Promissory Note in the form attached
hereto as Exhibit C, duly executed and delivered by Executive and
Suzette Mohrmann.  The original
principal balance of such note shall be $1,373,981.03.


 


(ii)                                  an
Amended and Restated Secured Convertible Promissory Note in the form attached
hereto as Exhibit C, duly executed and delivered by RBA Rem-Care,
Inc.  The original principal balance of
such note shall be $412,435.40.


 


(iii)                               an
Amended and Restated Secured Convertible Promissory Note in the form attached
hereto as Exhibit C, duly executed and delivered by Insource Medical
Solutions, LLC.  The original principal
balance of such note shall be $198,442.10.


 


(iv)                              an
Amended and Restated Secured Convertible Promissory Note in the form attached
hereto as Exhibit C, duly executed and delivered by Hospital Employee
Labor Pool.  The original principal
balance of such note shall be $583,653.23.


 


(v)                                 an
Amended and Restated Security Agreement in the form attached hereto as Exhibit
D, duly executed and delivered by the parties named as “Secured Parties”
therein.


 


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(vi)                              an
Amended and Restated Employment Agreement in the form attached hereto as Exhibit
E, duly executed and delivered by Executive.


 


(b)                                 Subordination
Agreement.  Upon receipt of the Cash
Payment by the Escrow Holder, but prior to the release of any portion of the
Escrow Payment by the Escrow Holder to Executive, Executive shall cause to be
delivered to the Company a Subordination Agreement in favor of Bridge Bank NA substantially
in the form attached hereto as Exhibit B, duly executed and delivered by
Executive and the “Secured Parties” named in the Amended and Restated Security
Agreement attached hereto as Exhibit D.


 


3.                                       Delivery
of Documents by the Company.


 


(a)                                  Concurrently
upon the execution of this Agreement, the Company shall deliver to Executive
the following documents and instruments:


 


(i)                                     an
Amended and Restated Secured Convertible Promissory Note in favor of Executive
and Suzette Mohrmann in the form attached hereto as Exhibit C, duly
executed and delivered by the Company. 
The original principal balance of such note shall be $1,373,981.03.


 


(ii)                                  an
Amended and Restated Secured Convertible Promissory Note in favor of RBA
Rem-Care, Inc. in the form attached hereto as Exhibit C, duly executed
and delivered by the Company.  The
original principal balance of such note shall be $412,435.40.


 


(iii)                               an
Amended and Restated Secured Convertible Promissory Note in favor of Insource
Medical Solutions, LLC in the form attached hereto as Exhibit C, duly
executed and delivered by the Company. 
The original principal balance of such note shall be $198,442.10.


 


(iv)                              an
Amended and Restated Secured Convertible Promissory Note in favor of Hospital
Employee Labor Pool in the form attached hereto as Exhibit C, duly
executed and delivered by the Company. 
The original principal balance of such note shall be $583,653.23.


 


(v)                                 an
Amended and Restated Security Agreement in the form attached hereto as Exhibit
D, duly executed and delivered by the Company.


 


(vi)                              an
Amended and Restated Employment Agreement in the form attached hereto as Exhibit
E, duly executed and delivered by the Company.


 


(vii)                           an
Option Agreement in the form attached hereto as Exhibit F, duly executed
and delivered by the Company, granting Executive an option to purchase up to
50,000 shares of the Common Stock of the Company at an exercise price of $0.25
per share.


 


4.                                       Notices.  Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, sent by reputable
overnight courier service or mailed by first class mail, return receipt
requested, to the recipient at the address below indicated:


 


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Notices to
Executive:


 


Russ Mohrmann

9432 Walker Ranch Circle

Villa Park, CA 92816-2820


 


With a copy to:


 


Andrew A. Talley,
Esq.

Attorney at Law

500 N. State College Blvd., Suite 1030

Orange, CA 92868


 


Notices to the
Company:


 


RevCare, Inc.

5400 Orange Avenue, Suite 200

Cypress, CA 90630

attn: Chief Financial Officer


 


With a copy to:


 


George L. McCabe,
Jr.

Managing Partner

FBR Financial Services Partners LP

1001 19th Street North, 10th Floor

Arlington, VA 22209


 


or such other address or
to the attention of such other person as the recipient party shall have
specified by prior written notice to the sending party.  Any notice under this Agreement shall be
deemed to have been given when so delivered, sent or mailed.


 


5.                                       Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any action in any other jurisdiction, but
this Agreement shall be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.


 


6.                                       Complete
Agreement.  This Agreement embodies
the complete agreement and understanding among the parties and supersedes and
preempts any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way, including, without limitation, any prior understandings,
agreements or representations between Executive, on the one hand, and the
Company and its subsidiaries, on the other hand.


 


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7.                                       No
Strict Construction.  The language
used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall
be applied against any party.


 


8.                                       Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.


 


9.                                       Successors
and Assigns.  This Agreement is
intended to bind and inure to the benefit of and be enforceable by Executive,
the Company and their respective heirs, successors and assigns


 


10.                                 Choice
of Law.  All issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of California, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.


 


11.                                 Amendment
and Waiver.  The provisions of this
Agreement may be amended or waived only with the prior written consent of the
Company and Executive, and no course of conduct or course of dealing or failure
or delay by any party hereto in enforcing or exercising any of the provisions
of this Agreement shall affect the validity, binding effect or enforceability
of this Agreement or be deemed to be an implied waiver of any provision of this
Agreement.


 


IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.


 


	
   

  	
  REVCARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred McGee

  
	
   

  	
  Name:

  	
  Fred McGee

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Russell E. Mohrmann

  
	
   

  	
  RUSS MOHRMANN

  



 


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