Exhibit
10.18


 


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 THE COMPANY IS PROVIDED
AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY, TO THE EFFECT THAT SUCH REGISTRATION AND QUALIFICATION IS NOT
REQUIRED.


 


CONVERTIBLE
PROMISSORY NOTE


 




	
  Open Line of Credit

  	
   

  	
   

  
	
  Maximum Principal Amount $1,000,000

  	
   

  	
  September 19, 2002

  






 


In payment of monies loaned or to be loaned, RevCare, Inc., a Nevada
corporation (the “Company”), the
principal offices of which are located at 5400 Orange Avenue, Suite 200,
Cypress, California 90630, for value received hereby promises to pay to FBR
Financial Services Partners, L.P. (the “Holder”),
the principal sum of all
outstanding amounts advanced or to be advanced from time to time by the Holder
to or on behalf of the Company on the terms and conditions set forth
hereinafter.  Each advance made by the Holder and all payments made by the Company under
this Note shall be recorded by the Holder on the attached Schedule of Advances
and Payments.  The outstanding
principal and any accrued and unpaid interest thereon shall be due and payable
on the earlier of (i) demand by the Holder or (ii) when declared due and
payable by the Holder upon the occurrence of an Event of Default (as defined
below) (the occurrence of any event under either subclause (i) or (ii) shall
constitute the “Maturity Date”); provided, however, that the
Holder shall not be entitled to demand any payment hereunder prior to  such time
as the Senior Indebtedness has been paid in full.  For purposes of this Note, the “Senior Indebtedness” shall
mean all amounts owed by the Company to Manual Occiano, Russell and Suzette M.
Mohrmann, RBA Rem-Care, Inc., Insource Medical Solutions, LLC and
Hospital Employee Labor Pool (collectively,
the “Senior
Lenders”) under any promissory note and/or security agreement
between the Company and any Senior Lender in effect as of the date hereof and; provided,
further, that in the event
this Note is converted into Common Stock (as defined below) as provided herein, any obligation of the Company with respect to payment of such amount shall be
terminated.  Payment for all amounts due hereunder shall
be made by mail to the address of the Holder.


 


The following is a
statement of the rights of the Holder and the conditions to which this Note is
subject, and to
which the Holder hereof, by the acceptance of this Note, agrees:


 


1.             Interest.  This Note shall bear interest at the rate of
twelve percent (12%) per annum, compounded quarterly.  The interest shall be paid on the Maturity Date.


 


2.             Events of Default.  If any of the following events specified in
this Section 2 shall occur (herein individually referred to as an “Event of
Default”), the Holder may, so long as such 


 

















 


condition
exists, declare the entire outstanding principal and any accrued and unpaid
interest thereon immediately due and payable, by notice in writing to the
Company:


 


(a)           The institution by the Company of
proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to
the institution of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking reorganization or
release under the federal Bankruptcy Act, or any other similar federal or state
bankruptcy or insolvency law, or the consent by it to the filing of any such
petition or the appointment of a receiver, liquidator, assignee, trustee or
other similar official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit of creditors, or
the taking of corporate action by the Company in furtherance of any such
action; or


 


(b)           If, within
thirty (30) days after the commencement of an action against the Company (and
service of process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action shall
not have been resolved in favor of the Company or all orders or proceedings
thereunder affecting the operations or the business of the Company stayed, or
if the stay of any such order or proceeding shall thereafter be set aside, or
if, within thirty (30) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company,
such appointment shall not have been vacated; or


 


(c)           If the Company fails to pay (i) any interest
or principal when due and payable hereunder, or (ii) any obligations other than
interest and principal payable hereunder within five (5) days of the date
written notice of demand for payment is received; or


 


(d)           Upon the occurrence of
an event of default as defined in any material agreement or instrument to which
the Company is bound, beyond any period of grace.


 


3.             Prepayment.  The Company may prepay, in whole or in part
at any time, without any penalty, the outstanding principal balance under this
Note, provided the Company has paid all Senior Indebtedness in full.


 


4.             Company Covenant.  The Company 
hereby covenants and agrees that it will not incur any additional
indebtedness for borrowed money without the written consent of the Holder.


 


5.             Optional Conversion.  All or any portion of the unpaid principal
balance and any accrued but unpaid interest outstanding under this Note may be
converted into fully paid and nonassessable shares of capital stock of the Company (the “Stock”) concurrently upon or at any time following a Financing (as defined below) at
the option of Holder.  The Stock shall
have all of the rights, preferences and privileges of the capital stock issued
in the Financing.  The number of shares
of Stock into which this Note is to be converted shall be determined by
dividing said unpaid principal balance and all accrued but unpaid interest by the Conversion Price.  The “Conversion Price” shall be determined at such time as
the Company closes an equity financing of Stock with gross proceeds to the Company of least $4,000,000 (the “Financing”) and the Conversion Price shall be equal to
eighty-five percent (85%) of the price per share at which the
Stock is sold in the Financing.


 


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6.             Conversion Procedure.


 


6.1           Notice
of Conversion.  If Holder desires to
convert the Note, Holder shall provide written notice to the Company at RevCare, Inc., 5400 Orange Avenue, Suite 200, Cypress, California
90630, Attention:  Manuel Occiano, Chief
Executive Officer, notifying the Company
of the requested conversion to be effected. 
Within ten (10) days of receipt of such notice, Company 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,
the date on which such conversion will occur and calling upon such Holder to
surrender to the Company, in the
manner and at the place designated, this Note. 
Such response by the
Company shall be delivered to Holder at the address last shown on the records
of the Company for Holder or given
by Holder to the Company for the
purpose of notice.


 


6.2           Mechanics
and Effect of Conversion.  No
fractional shares of Common Stock shall be issued upon conversion of this
Note.  In lieu of the Company issuing any fractional
shares to Holder upon the conversion of this Note, the Company 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 the Company.  Upon conversion of this Note, the Company shall be forever released
from all its obligations and liabilities under this Note.


 


6.3           Delivery
of Stock Certificates.  As promptly
as practicable after the conversion of this Note, the Company at its expense will issue
and deliver 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 the Company), together
with any other securities and property to which Holder is entitled upon such
conversion under the terms of this Note, including 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, the Company 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.


 


7.             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.


 


8.             Assignment.  Subject to the restrictions on transfer
described in Section 10 below, the rights and obligations of the Company and the Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.


 


9.             Amendments; Waivers.  Any term of this Note may be amended or
waived with the written consent of the Company and the Holder. Any amendment or
waiver effected in accordance with this Section 9 shall be binding upon the Holder,
each future Holder and the 


 


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Company.
 No waivers of, or exceptions to, any
term, condition or provision of this Note, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
term, condition or provision and shall not be valid unless in writing.


 


10.           Transfers.  This Note may not be transferred or assigned
in whole or in part without compliance with all applicable federal and state
securities laws by the transferor and the transferee (including the delivery of
investment representation letters). 
Subject to compliance with such applicable federal and state securities
laws, title to this Note may be transferred by endorsement and delivery in the
same manner as a negotiable instrument transferable by endorsement and
delivery.


 


11.           Attorneys’
Fees; Waivers.   The Company agrees
to pay the Holder’s reasonable costs incurred in collecting and enforcing this
Note, including reasonable attorneys’ fees. 
The Company hereby waives demand, notice, presentment, protest and
notice of dishonor.


 


12.           Governing Law.  This Agreement shall be governed by and
construed under the laws of the State of California (irrespective of its
conflict of laws principles).


 


IN WITNESS WHEREOF, the Company has caused this Note to be issued in
Cypress, CA as of the date set forth above.


 


	
   

  	
  REVCARE,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Manuel
  Occiano

  	
   

  
	
   

  	
  Name:

  	
    Manuel
  Occiano

  	
   

  
	
   

  	
  Title:

  	
      CEO

  	
   

  
						



 


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


 


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