Exhibit
10.5


 


AMENDED AND RESTATED SECURED
CONVERTIBLE PROMISSORY NOTE


 


THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE LAWS
OF ANY STATE.  THIS NOTE AND THE SECURITIES
ISSUABLE UPON THE CONVERSION HEREOF MAY BE PLEDGED, HYPOTHECATED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED ONLY IF REGISTERED AND QUALIFIED PURSUANT TO
THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF MAKER IS
PROVIDED AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY IN FORM AND
SUBSTANCE TO MAKER, TO THE EFFECT THAT SUCH REGISTRATION AND QUALIFICATION IS
NOT REQUIRED.


 


THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER AND THE VOTING OF THE
SECURITIES REPRESENTED BY THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
CERTAIN STOCK RESTRICTION AGREEMENT BY AND BETWEEN MAKER AND CERTAIN HOLDERS OF
SECURITIES OF MAKER.  COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF MAKER.


 


 


	
  $198,442.10

  	
   

  	
  January 8, 2003

  



 


FOR VALUE RECEIVED, RevCare Inc., a Nevada corporation
(“Maker”),
promises to pay to Insource Medical Solutions, LLC (“Holder”), at 9432 Walker
Ranch Circle, Villa Park, CA 92861 the principal sum of One Hundred Ninety
Eight Thousand Four Hundred Forty Two and 10/100 Dollars ($198,442.10), plus
interest thereon from the date hereof until paid on the terms set forth below; provided,
however, that in the event this Note is converted into Common Stock (as
defined herein) as provided herein, any obligation of Maker with respect to
payment of such amount, other than any interest accrued but unpaid thereon,
shall be terminated.


 


1.                                       Maturity
Date.  The unpaid principal balance
of this Note and all accrued but unpaid interest shall be due and payable on
January 5, 2004, unless this Note is earlier converted or paid in
accordance with the terms hereof.


 


2.                                       Interest.  The unpaid principal balance outstanding
under this Note shall bear interest at a rate equal to eight percent (8%) per
annum, compounded annually in the event this Note is not paid in full on
January 5, 2004.


 


3.                                       Security
Interest.  Payment of this Note is
secured by a security interest in certain collateral, pursuant to the terms and
conditions of that certain Security Agreement entered into between Maker and
Holder concurrently with the execution of this Note (the “Security Agreement”).


 


4.                                       Default;
Acceleration.  The entire sum of
unpaid principal and any accrued but unpaid interest hereunder shall become
immediately due and payable without further notice,


 


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demand or presentment, at Holder’s option, upon the occurrence at any
time of any of the following events of default:


 


4.1                                 Default
in the payment of any installment of principal or interest when due should such
default not be cured within ten (10) days after written notice thereof is
delivered to Maker at its last known address; or


 


4.2                                 Default
under the Security Agreement should such default not be cured within ten (10)
days after written notice thereof is delivered to Maker at its last known
address; or


 


4.3                                 Termination
of that certain Employment Agreement between Russ Mohrmann (“Executive”) and
Maker of even date herewith by Maker for any reason other than “Cause.”  For purposes of this Note, “Cause”
shall mean (i) commission of a felony or other crime involving moral turpitude
or the commission of any other act or omission involving dishonesty, disloyalty
or fraud with respect to Maker or any of its subsidiaries or any of their
customers, (ii) reporting to work under the influence of alcohol or illegal
drugs, the use of illegal drugs (whether or not at the workplace) or other
repeated conduct causing Maker or any of its subsidiaries substantial public
disgrace or disrepute or economic harm, (iii) substantial and repeated failure
to perform duties as reasonably directed by the Board of Directors of Maker
(the “Board”), (iv) gross negligence or willful misconduct with respect to
Maker or any of its subsidiaries or (v) any material breach of the Employment
Agreement; or


 


4.4                                 An
assignment by Maker of substantially all of its assets for the benefit of
creditors; or


 


4.5                                 The
adjudication of Maker as a bankrupt (in involuntary or voluntary proceedings);
or


 


4.6                                 The
filing by Maker of a petition under the Federal Bankruptcy Act or any
comparable state law for a reorganization, arrangement or other judicial
protection upon insolvency; or


 


4.7                                 The
incurrence of any indebtedness by Maker or any of its subsidiaries other than
to pay off indebtedness owed by Maker to Bridge Bank, NA; or


 


4.8                                 The
sale of capital stock of Maker or any of its subsidiaries with gross proceeds
to Maker and/or its subsidiaries in excess of One Million Dollars ($1,000,000),
other than to pay off indebtedness owed by Maker to Bridge Bank, NA; or


 


4.9                                 The
sale of substantially all of the assets of Maker or any of its subsidiaries
other than to pay off indebtedness owed by Maker to Bridge Bank, NA; or


 


4.10                           The
filing 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


 


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Million Seven Hundred Thousand Dollars ($2,700,000); should such
default not be cured within ten (10) days after written notice thereof is
delivered to Maker at its last known address.


 


The foregoing option to
accelerate the indebtedness evidenced hereby may be exercised by Holder at any
time after the occurrence of any of the events of default.  The failure to exercise said option upon the
occurrence of one or more of such events of default shall not prevent its
exercise upon the reoccurrence of such an event of default or upon the
occurrence of any other event of default.


 


5.                                       Conversion.


 


5.1                                 Optional
Conversion.  All or any portion of
the unpaid principal balance outstanding under this Note may be converted into
fully paid and nonassessable shares of Common Stock, $.001 par value per share,
of Maker (the “Common Stock”) at any time during the term of this Note at the
option of Holder.  The number of shares
of Common Stock into which this Note is to be converted shall be determined by
dividing said unpaid principal balance by $0.735 (the “Conversion
Price”), subject to adjustment as provided in Section 7 below, with any accrued
but unpaid interest paid in cash at the time of conversion.


 


5.2                                 Notice
of Conversion.  If Holder desires to
convert the Note, Holder shall provide written notice to Maker at 5400 Orange
Avenue, Suite 200, Cypress, California 90630, Attention:  Manuel Occiano, notifying Maker of the
requested conversion to be effected. 
Within ten (10) days of receipt of such notice, Maker shall respond to
Holder’s request in writing, specifying the number of shares of Common Stock to
be issued upon conversion, the amount of accrued interest to be paid in cash
and the date on which such conversion will occur and calling upon such Holder
to surrender to Maker, in the manner and at the place designated, this
Note.  Such response by Maker shall be
delivered to Holder at the address last shown on the records of Maker for
Holder or given by Holder to Maker for the purpose of notice.


 


5.3                                 Mechanics
and Effect of Conversion.  No
fractional shares of Common Stock shall be issued upon conversion of this
Note.  In lieu of issuing any fractional
shares to Holder upon the conversion of this Note, Maker shall pay to Holder
the amount of outstanding principal that is not so converted.  Upon the conversion of this Note, Holder
shall surrender this Note, duly endorsed, at the principal office of Maker.  Upon conversion of this Note, Maker shall be
forever released from all its obligations and liabilities under this Note.


 


5.4                                 Delivery
of Stock Certificates.  As promptly
as practicable after the conversion of this Note, Maker at its expense will
cause to be issued and delivered to Holder a certificate or certificates for the
number of full shares of Common Stock issuable upon such conversion (bearing
such legends as are required by applicable state and federal securities laws in
the opinion of counsel to Maker), together with a check payable to Holder for
any cash amounts payable for any accrued but unpaid interest and fractional
shares as described above.  In the event
only a portion of this Note is converted, Maker shall, at the time of delivery
of the stock certificate or certificates, deliver to Holder a new Note evidencing
the remaining unpaid principal balance of this Note, which Note shall in all
other respects be identical with this Note.


 


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6.                                       Maker
Right to Prepay Note.  Subject to
the earlier conversion of this Note pursuant to Section 5 above, all or any
portion of the unpaid principal balance outstanding under this Note may be
prepaid at any time during the term of this Note at the option of Maker.  In the event Maker elects to prepay this
Note, notice of such election shall be given to Holder not less than sixty (60)
days prior to the date of prepayment. 
Each such notice shall state the amount of principal to be paid in cash,
the date on which such prepayment will occur and the place at which Holder is
to surrender this Note to Maker.  Such
notice by Maker shall be delivered to Holder at the address last shown on the
records of Maker for Holder or given by Holder to Maker for the purpose of
notice.  In the event only a portion of
this Note is prepaid, Maker shall, at the time of prepayment and receipt of
this Note, deliver to Holder a new Note evidencing the remaining unpaid
principal balance of this Note, which Note shall in all other respects be
identical with this Note.


 


7.                                       Adjustments.  The Conversion Price and the number of
shares into which this Note may be converted are subject to adjustment from
time to time as follows:


 


7.1                                 Reclassifications,
etc.  If Maker, at any time while
this Note, or any portion thereof, remains outstanding and unexpired by
reclassification of securities or otherwise, shall change any of the securities
as to which conversion rights under this Note exist into the same or a
different number of securities or any other class or classes, this Note shall
thereafter represent the right to acquire such number and kinds of securities
that were subject to the conversion rights under this Note immediately prior to
such reclassification or other change and the Conversion Price therefor shall
be appropriately adjusted.


 


7.2                                 Split,
Subdivision or Combination of Shares. 
If Maker, at any time with this Note, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as
to which conversion rights under this Note exist into a different number of
securities of the same class, then (i) in the case of a split or subdivision,
the Conversion Price for such securities shall be proportionately decreased and
the securities issuable upon conversion of this Note shall be proportionately
increased, and (ii) in the case of a combination, the Conversion Price for such
securities shall be proportionately increased and the securities issuable upon
conversion of this Note shall be proportionately decreased.


 


8.                                       Investment
Representations.  Holder
acknowledges that this Note and the Common Stock issuable upon the conversion
of this Note (i) constitute “securities” under federal and applicable state
securities laws, (ii) will be unregistered as such, and (iii) are being
transferred in reliance upon exemptions from registration based, in part, upon
Holder’s representations contained herein. 
Holder is acquiring such securities for its own account and not with a
view to, or for sale in connection with, any distribution thereof.


 


9.                                       Offset.  Maker shall be entitled to offset amounts
otherwise payable by Holder to Maker pursuant to Sections 1.4.3 and 7.1.1 of
that certain Purchase Agreement made and effective as of May 30, 2000
among Maker, Holder and certain other parties named therein.


 


10.                                 No
Assignment.  Neither Maker nor
Holder shall be entitled to assign, pledge, transfer or otherwise convey the
benefits or burdens of this Note without the prior written consent of the
other, except that any entity acquiring all or substantially all of the assets
or stock


 


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of Maker shall automatically acquire the burdens of this Note, however,
Maker shall not be released from its obligations hereunder.


 


11.                                 No
Stockholder Rights.  Prior to the
conversion hereof, nothing contained in this Note shall be construed as
conferring upon Holder or any other person the right to vote or to consent or
to receive notice as a stockholder in respect of meetings of stockholders for
the election of directors of Maker or any other matters or any rights
whatsoever as a stockholder of Maker.


 


12.                                 Applicable
Law.  This Note and the rights and
obligations of the parties hereunder shall be construed under, and governed by,
the laws of the State of California without giving effect to conflict of laws
provisions.


 


13.                                 Attorneys’
Fees.  In the event of any suit,
action or arbitration to enforce any of the terms or provisions of this Note,
the prevailing party shall be entitled to its reasonable attorneys’ fees and
costs.  The foregoing entitlement shall
also include attorneys’ fees and costs of the prevailing party on any appeal of
a judgment and for any action to enforce a judgment.


 


14.                                 Amendment
and Restatement of Prior Note.  This
Note contemporaneously amends and restates, in its entirety, that certain
Secured Convertible Promissory Note dated August 14, 2000 issued by
Maker’s affiliate, Orange County Professional Services, Inc., in favor of
Holder in the original principal amount of $178,500.


 


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intentionally left blank]


 


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15.                                 Subordination.  This Note and the rights of Holder hereunder
and under the Security Agreement are subordinate to the rights of Bridge Bank,
NA pursuant to the terms of a Subordination Agreement (the “Subordination
Agreement”).  Nothing
contained in this Note 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 Holder
may have in any property of Maker or its subsidiaries.


 


 


	
   

  	
  RevCare, Inc.

  
	
   

  	
  a Nevada
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Fred McGee

  	
   

  
	
   

  	
  Name:

  	
     Fred
  McGee

  	
   

  
	
   

  	
  Title:

  	
     CFO

  	
   

  
	
   

  
	
  Acknowledged and
  Agreed:

  
	
   

  
	
   

  
	
  Insource Medical
  Solutions, LLC

  
	
   

  
	
  By:

  	
    /s/
  Russell E. Mohrmann

  	
   

  
	
  Name:

  	
  Russell E.
  Mohrmann

  	
   

  
	
  Title:

  	
     Member

  	
   

  
									



 


 


DO NOT DESTROY THIS ORIGINAL NOTE:
When paid, said original Note must be surrendered to Maker for cancellation and
retention.


 


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