Exhibit 10.7


 


AMENDED AND RESTATED
SECURITY AGREEMENT


 


THIS
AMENDED AND RESTATED SECURITY AGREEMENT (this “Agreement”) is dated as of
the 8th day of January, 2003 by and among RevCare, Inc., a Nevada corporation
(“Debtor”),
and the persons listed on the signature pages hereto (collectively, the “Secured
Parties”).


 


W
I  T  N  E  S  S  E  T  H:


 


WHEREAS,
Debtor and its subsidiary, Orange County Professional Services, Inc., a
California corporation (“OCPS”), previously issued certain
Convertible Secured Promissory Notes dated August 14, 2000 (as the same
may have been amended, restated, supplemented or otherwise modified from time
to time prior to the date hereof, collectively, the “Original Notes”), in favor of
the Secured Parties, in an aggregate original principal sum of Four Million Two
Hundred Thousand Dollars ($4,200,000).


 


WHEREAS,
the obligations of Debtor and OCPS under the Original Notes were secured
pursuant to the terms of a Security Agreement dated August 14, 2000 (the “Original
Security Agreement”).


 


WHEREAS,
Debtor has paid in full certain of the Original Notes and is concurrently
herewith amending and restating the terms and conditions with respect to the
sums still outstanding under the remaining Original Notes pursuant to the terms
and conditions of the following promissory notes (collectively, the “Notes”):


 


(1)                                  That
certain Secured Convertible Promissory Note dated January 8, 2003 issued
by Debtor in favor of Russ Mohrmann and Suzette Mohrmann in the original
principal amount of $1,373,981.03;


 


(2)                                  That
certain Secured Convertible Promissory Note dated January 8, 2003 issued
by Debtor in favor of RBA Rem-Care, Inc. in the original principal amount of
$412,435.40;


 


(3)                                  That
certain Secured Convertible Promissory Note dated January 8, 2003 issued
by Debtor in favor of Insource Medical Solutions, LLC in the original principal
amount of $198,442.10;


 


(4)                                  That
certain Secured Convertible Promissory Note dated January 8, 2003 issued
by Debtor in favor of Hospital Employee Labor Pool in the original principal amount
of $583,653.23; and


 


(5)                                  That
certain Secured Convertible Promissory Note dated August 14, 2000 issued
by Debtor in favor of Rob and Barbara Perez in the original principal amount of
$1,225,000, as amended by that certain Modification Agreement dated
January 8, 2003.


 


WHEREAS,
the parties desire to amend and restate the Original Security Agreement in its
entirety.


 

















 


NOW,
THEREFORE, in consideration of the foregoing and in order to induce the Secured
Parties to make the financial accommodations to Debtor as set forth under the
Notes, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Debtor hereby agrees with the
Secured Parties as follows:


 


1.                                       Grant
of Security Interests.  In order to
secure the prompt and complete payment and performance of the Secured
Obligations (as defined below) in accordance with the terms thereof, Debtor
hereby grants to the Secured Parties a security interest in and to all right,
title and interest of Debtor in the following property, (all being collectively
referred to as the “Collateral”):


 


(a)                                  All
goods, inventory, merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Debtor’s custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;


 


(b)                                 All
general intangibles (other than the “Intellectual Property” described in
paragraph (e)), contract right, leases, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind;


 


(c)                                  All
accounts, contract rights, royalties, license rights and all other forms of
obligations owing to Debtor, whether or not arising out of the sale or lease of
goods, the licensing of technology or the rendering of services by Debtor, and
whether or not earned by performance, and any and all credit insurance, guaranties,
and other security therefor, as well as all merchandise returned to or
reclaimed by Debtor;


 


(d)                                 All
documents, cash, deposit accounts, securities, investment property, letters of
credit, certificates of deposit, instruments and chattel paper and Debtor’s
books relating to the foregoing;


 


(e)                                  All
goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent
applications, copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished; all trade secret rights, including all rights
to unpatented inventions, know-how, operating manuals, license rights and
agreements and confidential information, now owned or hereafter acquired; all
mask work or similar rights available for the protection of semiconductor
chips; all claims for damages by way of any past, present and future
infringement of any of the foregoing, , collectively the “Intellectual
Property”. Lender’s Security Interest in any Intellectual Property is only to
the extent that (i) such Intellectual Property is proceeds of collateral other
than Intellectual Property or (ii) any collateral described in paragraph (c)
above is proceeds of such Intellectual Property; and


 


2

















 


(f)                                    All
Debtor’s books relating to the foregoing and any and all claims, rights and
interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.


 


(g)                                 All
shares of capital stock in OCPS held by Debtor (the “Shares”); and


 


(h)                                 All
proceeds of, and all other profits, rentals or receipts, in whatever form,
arising from the collection, sale, lease, exchange, assignment, licensing or
other disposition of, or realization upon, any of the Collateral described in
subclauses (a) through (g) above including, without limitation, all claims of
Debtor against third parties for loss of, damage to or destruction of, or for
proceeds payable under, or unearned premiums with respect to, policies of
insurance with respect to any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing or
hereafter arising.


 


2.                                       Security
for Secured Obligations.  This
Agreement secures the prompt and complete payment and performance of the debts,
obligations and liabilities of Debtor to the Secured Parties under the Notes,
together with any renewals, extensions, restructurings and refinancings thereof
(all such debts, obligations and liabilities of Debtor being collectively
referred to herein as the “Secured Obligations”).


 


3.                                       Debtor
Remains Liable.  Anything herein to
the contrary notwithstanding: (a) Debtor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed; (b) the exercise by the
Secured Parties of any of the rights granted hereunder shall not release Debtor
from any of its duties or obligations under the contracts and agreements
included in the Collateral; and (c) the Secured Parties shall not have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Secured Parties be
obligated to perform any of the obligations or duties of Debtor thereunder or
to take any action to collect or enforce any claim for payment assigned
hereunder.


 


4.                                       Further
Assurances; Covenants.


 


4.1                                 Other
Documents and Actions.  Debtor will,
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable, or
that the Secured Parties may reasonably request, in order to perfect and protect
the security interests granted hereby or to enable the Secured Parties to
exercise and enforce their rights and remedies hereunder with respect to any
Collateral.  Without limiting the
generality of the foregoing, Debtor will: (a) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments
or notices, as may be necessary or desirable, or as the Secured Parties may
request, in order to perfect and preserve the security interests granted hereby
and (b) upon the Secured Parties’ reasonable request, appear in and defend any
action or proceeding that may affect Debtor’s title to or the security
interests of the Secured Parties in the Collateral.


 


4.2                                 The
Secured Parties Authorized.  Debtor
hereby authorizes the Secured Parties to file one or more financing or
continuation statements, and amendments thereto,


 


3

















 


relating to
all or any part of the Collateral without the signature of Debtor to the extent
permitted by law.


 


4.3                                 Taxes
and Claims.  Debtor will pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims against, the Collateral
(including claims for labor, materials and supplies), except to the extent the
validity thereof is being contested in good faith.


 


4.4                                 Insurance.  Debtor shall insure the Collateral against
risk of loss or damage by fire, including extended coverage, theft, and other
casualties in an amount equal to the full replacement cost thereof, without
deduction for depreciation.


 


4.5                                 Corporate
or Name Change.  Debtor will give
the Secured Parties sixty (60) days prior written notice of any change in
Debtor’s name, identity, corporate structure or place of business.


 


4.6                                 No
Distributions.  OCPS shall not, and
Debtor shall not cause OCPS to, pay any dividend or make any distribution to
Debtor in respect of the Shares; provided, however, that
nothing contained herein shall prohibit payments on the Notes out of the assets
of OCPS.


 


5.                                       The
Secured Parties Appointed Attorney-in-Fact.  Debtor hereby irrevocably appoints the Secured Parties as
Debtor’s attorney-in-fact, with full authority in the place and stead of Debtor
and in the name of Debtor, the Secured Parties or otherwise, from time to time
in the Secured Parties’ discretion to take any action and to execute any
instrument that the Secured Parties may deem reasonably necessary or advisable
to accomplish the purposes of this Agreement. 
This power, being coupled with an interest, is irrevocable so long as
this Agreement shall remain in force.


 


6.                                       Transfers
and Other Liens.  Debtor shall not:


 


(a)                                  sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to, any of the Collateral, except in the ordinary course of
business; or


 


(b)                                 create
or suffer to exist any lien, security interest or other charge or encumbrance
upon or with respect to any of the Collateral to secure indebtedness of any
person except in the ordinary course of business, as disclosed on Schedule 1
or as otherwise permitted under the Notes or this Agreement.


 


7.                                       Pledgeholder,
Delivery of Share Certificates.


 


(a)                                  Debtor
and the Secured Parties hereby designate Andrew Talley, counsel to the Secured
Parties, to act as the pledgeholder (the “Pledgeholder”) of the Shares during the
term of this Agreement.  Except as
provided above, the designated Pledgeholder may be changed only upon the mutual
consent of the parties.  Concurrently
with the execution of this Agreement, Debtor shall deliver to Pledgeholder a
certificate registered in the name of Debtor with separate stock assignment
forms endorsed in blank and undated evidencing the Shares to be held by
Pledgeholder in accordance with the terms of this Agreement.  Debtor agrees to deposit with


 


4

















 


Pledgeholder
in the same manner all additional share certificates evidencing additional
Shares which may from time to time be issued by OCPS to Debtor during the term
of this Agreement.


 


(b)                                 Pledgeholder
is not the agent of the Secured Parties or Debtor for the purposes of the
Pledgeholder’s duties hereunder and is not responsible for knowing or
interpreting any provision of the Notes or this Agreement.  Pledgeholder shall perform his duties and
obligations under this Agreement only upon receipt of written instructions of
either the Secured Parties or Debtor, as the case may be, or their authorized
agents or representatives.  Copies of
all instructions delivered to Pledgeholder shall concurrently be delivered to
the noninstructing party at the address set forth on the signature page.


 


(c)                                  In
the event Pledgeholder receives conflicting instructions or demands or an
objection to any one set of instructions, Pledgeholder shall immediately notify
the parties of such conflict or objection and shall take no action of any
nature whatsoever so long as such conflict or objection continues.  In so doing, Pledgeholder shall not be or
become liable for any damages to the parties for Pledgeholder’s failure to
comply with conflicting demands or instructions.  Pledgeholder shall continue to refrain from taking any action
until all differences have been resolved by the mutual agreement of the
parties, a copy of which shall be delivered to Pledgeholder, or until the
rights of the parties have been finally adjudicated in a court of proper
jurisdiction.  Upon the request of
either Debtor or the Secured Parties, Pledgeholder shall file a suit in
interpleader or for a declaratory judgment for the purpose of having the
respective rights of the parties adjudicated in respect to this Agreement and
the Shares held by Pledgeholder.  The
parties jointly and severally agree to pay all costs and expenses, including
reasonable attorneys’ fees, incurred by Pledgeholder; provided, however,
the prevailing party in such action shall have the right to reimbursement from
the other party for all costs and expenses including attorneys’ fees paid by
such prevailing party to Pledgeholder pursuant to this Agreement.


 


(d)                                 The
parties shall jointly and severally indemnify, defend and hold Pledgeholder
harmless from and against any and all claims, losses and liabilities, including
attorneys’ fees, arising out of or in connection with serving as Pledgeholder,
provided Pledgeholder shall not be indemnified for bad faith conduct or
intentional misconduct.


 


(e)                                  The
parties agree so long as there is no default under the Notes or this Agreement,
the Shares shall be held of record by Debtor. 
Debtor shall not vote the Shares for any plan to terminate, liquidate,
or wind-up or dissolve, or merge, consolidate, reorganize or otherwise alter
the form of OCPS, or to sell or otherwise transfer all or substantially all of
the assets of OCPS without obtaining the prior written consent of the Secured
Parties.  In the event of default, the
Shares shall be held of record by the Secured Parties, and they may vote the
Shares for all purposes as they determine in their sole discretion.


 


(f)                                    Debtor
agrees that if any of the following events of default occur, and such default
is not cured within ten (10) days after written notice thereof is delivered to
Debtor at its last known address, Pledgeholder may transfer the Shares to the
Secured Parties without any further instruction from Debtor, and Debtor shall
not object to or contest any such transfer of the Shares by Pledgeholder:


 


5

















 


(i):                                  the
failure of Debtor to make the payments required under Section 1 of that certain
Modification Agreement between Russ Mohrmann and Debtor dated January
    , 2003 by March in accordance with the terms set
forth therein; or


 


(ii):                               the
failure of Debtor to make the payments required under Section 1 of that certain
Modification Agreement between Rob Perez and Debtor dated January
    , 2003 by March in accordance with the terms set
forth therein; or


 


(iii):                            the
failure of Debtor to pay any Note in full on January 5, 2004; or


 


(iv)                              the
filing by Debtor of any form, report or document required to be filed with the
Securities and Exchange Commission (“SEC”) in accordance with the requirements
of the Securities Act or the Securities and Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder which reflects that total
shareholders’ equity is below Two Million Seven Hundred Thousand Dollars
($2,700,000).


 


8.                                       Remedies.  Debtor’s default in the payment of
indebtedness under the Secured Obligations or material default in the
performance of its obligations under the Notes or this Agreement shall
constitute an event of default.  If any
default shall have occurred and be continuing for a period of thirty (30) days
after notice thereof to Debtor, the Secured Parties shall have (a) in respect
of the Collateral, all rights and remedies provided for herein or otherwise
available to it all the rights and remedies of a secured party on default under
the Uniform Commercial Code as in effect on the date hereof in the State of
California (“UCC”), and (b) all rights and remedies of the Secured Parties
provided for herein or otherwise available to it under the Notes.


 


9.                                       Termination
of Security Interests; Release of Collateral.  Upon payment in full of the Notes, the security interests granted
hereunder shall terminate and all rights to the Collateral shall revert to
Debtor.  Upon such termination of the
security interests or release of any Collateral, the Secured Parties will
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence the termination of such security interests or the release of such
Collateral, as the case may be.


 


10.                                 Attorneys’
Fees.  Should any Secured Obligation
or any part thereof be collected at law or in equity or through any bankruptcy,
receivership, probate or other court proceedings or by any judicial or
nonjudicial foreclosure proceeding, or if any Secured Obligation is referred to
an attorney for collection after default, Debtor agrees to pay reasonable
attorneys’ fees and  collection and
enforcement costs and expenses.


 


11.                                 Severability.  If any of the provisions of this Agreement
shall be held to be invalid or unenforceable, this Agreement shall be construed
as if not containing those provisions and the rights and obligations of the
parties hereto shall be construed and enforced accordingly.


 


12.                                 Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


6

















 


13.                                 Choice
of Law.  This Agreement shall be construed
in accordance with and governed by the laws of the State of California without
regard to the conflicts of law principals thereof.  The UCC as it now exists and as it may hereafter be amended, is
hereby expressly incorporated into this Agreement as if it were fully set forth
herein.


 


14.                                 Integration.  This Agreement and the Notes contain the
entire agreement of the parties relating to the subject matter hereof and
supersedes all prior agreements, understandings, representations and
acknowledgements of the parties.  There
are no representations, agreements, arrangements or understandings, oral or
written, between the parties hereto relating to the subject matter of this
Agreement which are not fully expressed in this Agreement and the Notes.


 


15.                                 Waivers
and Amendments.  No change,
modification, extension, termination or waiver of the Agreement, or any of the
provisions herein contained, shall be valid unless made in writing and signed
by duly authorized representatives of the parties hereto.


 


16.                                 Successors
and Assigns.  In the event of an
assignment of all or any of the Secured Obligations, the rights hereunder, to
the extent applicable to the Secured Obligations so assigned, may be
transferred with such Secured Obligations. 
This Agreement shall be binding on Debtor and its successors and
assigns.


 


17.                                 Headings.  Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any substantive
effect.


 


18.                                 Notices.  Any notices or other communications pursuant
to this Agreement shall be deemed to have been given when delivered personally,
or five (5) days after delivery when deposited in the United States mail,
registered or certified, with proper postage and registration or certification
fees prepaid, or one (1) day after delivery when delivered to Federal Express
or a similar overnight carrier, addressed to parties at the addresses set forth
on the signature pages hereto or to such other addresses as may be designated
by any of the parties from time to time by written notice given to the other
party(ies) in the aforesaid manner.


 


19.                                 Subordination.  The Notes, this Agreement and the rights of
the Secured Parties hereunder and under the Notes are or will be subordinate to
the rights of Bridge Bank, NA pursuant to the terms of a Subordination
Agreement (the “Subordination Agreement”). 
Nothing contained in the Notes or this Agreement shall directly or
indirectly modify the provisions of the Subordination Agreement in any manner
which might terminate or impair the subordination of the Subordinated Debt (as
defined in the Subordination Agreement) or the subordination of the security
interest or lien that the Secured Parties may have in any property of Debtor or
its subsidiaries.


 


[Remainder of page
intentionally left blank]


 


7

















 


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


 


	
   

  	
  DEBTOR:

  
	
   

  	
   

  
	
   

  	
  REVCARE,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred McGee

  
	
   

  	
  Name:

  	
  Fred McGee

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  5400
  Orange Avenue, Suite 200

  Cypress, CA 90630

  
				



 


8

















 


	
   

  	
  SECURED
  PARTIES:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Russell E. Mohrmann

  
	
   

  	
  Russ
  Mohrmann

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Suzette M. Mohrmann

  
	
   

  	
  Suzette
  M. Mohrmann

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  9432
  Walker Ranch Circle

  Villa Park, CA 92861-2820

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RBA
  Rem-Care, Inc.,

  a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Russell E. Mohrmann

  
	
   

  	
  Name:

  	
  Russell
  E. Mohrmann

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Insource
  Medical Solutions, LLC,

  
	
   

  	
  a
  California limited liability corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Russell E. Mohrmann

  
	
   

  	
  Name:

  	
  Russell
  E. Mohrmann

  
	
   

  	
  Its:

  	
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Hospital
  Employee Labor Pool, a California

  Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Russell E. Mohrmann

  
	
   

  	
  Name:

  	
  Russell
  E. Mohrmann

  
	
   

  	
  Its:

  	
  President

  
					



 


9

















 


	
   

  	
  /s/ Rob Perez

  
	
   

  	
  Rob
  Perez

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Barbara C. Perez

  
	
   

  	
  Barbara
  C. Perez

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  9752
  Villa Woods Dr.

  Villa Park, CA 92861

  



 


10

















 


SCHEDULE I


 


Permitted Encumbrances and Security Interests


 


1.                                       The Collateral
is subject to certain liens created by security interests granted to Bridge
Bank, NA.  Any and all claims Bridge
Bank, NA may have for payment, damages and/or any sums relating to the secured
obligations of Debtor to such holder are and shall be superior and prior to any
and all existing or future Secured Obligations.


 


11