**Exhibit 10.19**

 

THIS WARRANT ANDTHE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERREDWITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITSCOUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

WARRANT TO PURCHASE STOCK

 

Issuer: Revcare, Inc., aNevada corporation (the “Company”)

 

Number of Shares:100,000, as the same may be from time to time adjusted pursuant to Article 2hereof.

 

Class of Stock:Common

 

Exercise Price:$.25 per share as the same may be from time to time adjusted pursuant to Article 2hereof.

 

Issue Date: August 5,2004

 

Expiration Date: August 5,2011

 

THIS WARRANTCERTIFIES THAT, for the agreed upon value of $1.00 and for other good andvaluable consideration, BRIDGE BANK, NATIONAL ASSOCIATION (“Holder”) isentitled to purchase the number of fully paid and nonassessable Shares of theCompany at the Exercise Price per Share set forth above (the “Shares”), subjectto the provisions and upon the terms and conditions set forth in this Warrant.

 

ARTICLE 1                                   EXERCISE.

 

1.1                                  Methodof Exercise. This Warrant is exercisable, in whole or in part and in 50,000share increments, at any time and from time to time on or before the ExpirationDate set forth above. Holder may exercise this Warrant by delivering a dulyexecuted Notice of Exercise, in substantially the form attached as Appendix 1,to the principal office of Company. Unless Holder is exercising the conversion rightset forth in Section 1.2, Holder shall also deliver to Company a check forthe aggregate Exercise Price for Shares being purchased.

 

1.2                                  ConversionRight. In lieu of exercising this Warrant as specified in Section 1.1,Holder may from time to time convert this Warrant, in whole or in part in50,000 share increments, into a number of Shares determined by dividing (a) theaggregate fair market value of Shares or other securities otherwise issuableupon exercise of this Warrant minus the aggregate Exercise Price of such Sharesby (b) the fair market value of one Share. The fair market value of Sharesshall be determined pursuant to Section 1.3.

 

1.3                                  FairMarket Value. If the Shares are traded in a public market, the fair marketvalue of the Shares shall be the closing price of the Shares (or the closingprice of the Company’s stock into which the Shares are convertible) reportedfor the business day immediately before Holder delivers its Notice of Exerciseto the Company. If the Shares are not traded in a public market, the Board ofDirectors of Company shall determine fair market value in its reasonable goodfaith judgment. The foregoing notwithstanding, if Holder advises the Board ofDirectors in writing that Holder disagrees with such determination, thenCompany and Holder shall promptly agree upon a reputable investment bankingfirm to undertake such valuation. If the valuation of such investment bankingfirm is greater than that determined by the Board of Directors, then all feesand expenses of such investment banking firm shall be paid by Company. In allother circumstances, such fees and expenses shall be paid by Holder.

 

1.4                                  Deliveryof Certificate and New Warrant. Promptly after Holder exercises or convertsthis Warrant, Company shall deliver to Holder certificates for Shares acquiredand, if this Warrant has not been fully exercised or converted and has notexpired, a new Warrant representing Shares not so acquired.

 

1.5                                  Replacementof Warrants. On receipt of evidence reasonably satisfactory to Company ofthe loss, theft, destruction or mutilation of this Warrant and, in the case ofloss, theft or destruction, on

 

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delivery of anindemnity agreement reasonably satisfactory in form and amount to Company or,in the case of mutilation, on surrender and cancellation of this Warrant,Company at its expense shall execute and deliver, in lieu of this Warrant, anew warrant of like tenor.

 

1.6                                 Repurchaseon Sale, Merger, or Consolidation of Company. For the purpose of thisWarrant, “Acquisition” means any sale, license, or other disposition of all orsubstantially all of the assets of Company, or any reorganization,consolidation, or merger of Company where the holders of Company’s securitiesbefore the transaction beneficially own less than 50% of the outstanding votingsecurities of the surviving entity after the transaction. Upon the closing ofany Acquisition, the successor entity shall assume the obligations of thisWarrant, and this Warrant shall be exercisable for the same securities, cash,and property as would be payable for Shares issuable upon exercise of theunexercised portion of this Warrant as if such Shares were outstanding on therecord date for the Acquisition and subsequent closing, and the Exercise Priceshall be adjusted accordingly; provided that if pursuant to suchAcquisition the entire outstanding class of Shares issuable upon exercise ofthe unexercised portion of this Warrant are cancelled and the totalconsideration payable to the holders of such class of Shares consists entirelyof cash, then, upon payment to the holder of this Warrant of an amount equal tothe amount such holder would receive if such holder held Shares issuable uponexercise of the unexercised portion of this Warrant and such Shares wereoutstanding on the record date for the Acquisition less the aggregateExercise Price of such Shares, this Warrant shall be cancelled.

 

ARTICLE 2                                   ADJUSTMENTS.

 

2.1                                  StockDividends, Splits, Etc. If Company declares or pays a dividend on itscommon stock (or Shares if Shares are securities other than common stock)payable in common stock or other securities, subdivides the outstanding commonstock into a greater amount of common stock, or, if Shares are securities otherthan common stock, subdivides Shares in a transaction that increases the amountof common stock into which Shares are convertible, then upon exercise of thisWarrant, for each Share acquired, Holder shall receive, without cost to Holder,the total number and kind of securities to which Holder would have beenentitled had Holder owned Shares of record as of the date the dividend or subdivisionoccurred.

 

2.2                                  Reclassification,Exchange or Substitution. Except in the case of an Acquisition to which Section 1.6is applicable, upon any reclassification, exchange, substitution, or otherevent that results in a change of the number and/or class of the securitiesissuable upon exercise or conversion of this Warrant, Holder shall be entitledto receive, upon exercise or conversion of this Warrant, the number and kind ofsecurities and property that Holder would have received for Shares if thisWarrant had been exercised immediately before such reclassification, exchange,substitution, or other event. Company or its successor shall promptly issue toHolder a new Warrant for such new securities or other property. The new Warrantshall provide for adjustments which shall be as nearly equivalent as may bepracticable to the adjustments provided for in this Article 2 including,without limitation, adjustments to the Exercise Price and to the number ofsecurities or property issuable upon exercise of the new Warrant. The provisionsof this Section 2.2 shall similarly apply to successive reclassifications,exchanges, substitutions, or other events.

 

2.3                                  Adjustmentsfor Combinations, Etc. If the outstanding Shares are combined orconsolidated, by reclassification or otherwise, into a lesser number of shares,the Exercise Price shall be proportionately increased and the number of Sharesas to which this warrant is exercisable shall be proportionately decreased.

 

2.4                                  Adjustmentsfor Diluting Issuances. The Exercise Price and the number of Sharesissuable upon exercise of this Warrant or, if Shares are Preferred Stock, thenumber of shares of common stock issuable upon conversion of Shares, shall besubject to adjustment, from time to time in the manner set forth on Exhibit Ain the event of Diluting Issuances (as defined on Exhibit A).

 

2.5                                  NoImpairment. Company shall not, by amendment of its Articles/Certificate ofIncorporation or through a reorganization, transfer of assets, consolidation,merger, dissolution, issue, or sale of securities or any other voluntaryaction, avoid or seek to avoid the observance or performance of any of theterms to be observed or performed under this Warrant by Company, but shall atall times in good faith assist in carrying out of all the provisions of this Article 2and in taking all such action as may be

 

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necessary orappropriate to protect Holder’s rights under this Article againstimpairment. If Company takes any dilutive action affecting Shares or its commonstock other than as described above that adversely affects Holder’s rightsunder this Warrant, the Exercise Price shall be adjusted downward and thenumber of Shares issuable upon exercise of this Warrant shall be adjustedupward in such a manner that such dilutive action is offset and the aggregateExercise Price of this Warrant is unchanged.

 

2.6                                  FractionalShares. No fractional Shares shall be issuable upon exercise or conversionof the Warrant and the number of Shares to be issued shall be rounded down tothe nearest whole Share. If a fractional share interest arises upon anyexercise or conversion of the Warrant, Company shall eliminate such fractionalshare interest by paying Holder an amount computed by multiplying thefractional interest by the fair market value of a full Share.

 

2.7                                  Certificateas to Adjustments. Upon each adjustment of the Exercise Price, Company atits expense shall promptly compute such adjustment, and furnish Holder with acertificate of its Chief Financial Officer setting forth such adjustment andthe facts upon which such adjustment is based. Company shall, upon writtenrequest, furnish Holder a certificate setting forth the Exercise Price ineffect upon the date thereof and the series of adjustments leading to suchExercise Price.

 

ARTICLE 3                                   COVENANTSOF COMPANY

 

3.1                                  ValidIssuance. Company shall take all steps necessary to insure that all Shareswhich may be issued upon the exercise of this Warrant, and all securities, ifany, issuable upon conversion of Shares, shall, upon issuance, be dulyauthorized, validly issued, fully paid and nonassessable, and free of any liensand encumbrances except for restrictions on transfer provided for herein orunder applicable federal and state securities laws.

 

3.2                                  Noticeof Certain Events. If Company proposes at any time (a) to declare anydividend or distribution upon its common stock, whether in cash, property,stock, or other securities and whether or not a regular cash dividend; (b) tooffer for subscription pro rata to the holders of any class or series of its stockany additional shares of stock of any class or series or other rights; (c) toeffect any reclassification or recapitalization of common stock; (d) to mergeor consolidate with or into any other corporation, or sell, lease, license, orconvey all or substantially all of its assets, or to liquidate, dissolve orwind up; or (e) offer holders of registration rights the opportunity toparticipate in an underwritten public offering of the Company’s securities forcash, then, in connection with each such event, Company shall give Holder (1)in the case of the matters referred to in (a) and (b) above at least 20 daysprior written notice of the date on which a record will be taken for suchdividend, distribution, or subscription rights (and specifying the date onwhich the holders of common stock will be entitled thereto) or for determiningrights to vote, if any, in respect of the matters referred to in (c) and (d)above; (2) in the case of the matters referred to in (c) and (d) above at least20 days prior written notice of the date when the same will take place (and specifyingthe date on which the holders of common stock will be entitled to exchangetheir common stock for securities or other property deliverable upon theoccurrence of such event); and (3) in the case of the matter referred to in (e)above, the same notice as is given to the holders of such registration rights.

 

3.3                                  Information.So long as the Holder holds this Warrant and/or any of the Shares, Companyshall deliver to Holder (a) promptly, copies of all notices or other writtencommunications to which Holder would be entitled if it held Shares as to whichthis Warrant was then exercisable and (b) such other financial statementsrequired under and in accordance with any loan documents between Holder andCompany, or if there are no such requirements or if the subject loan(s) are nolonger outstanding, then within 45 days after the end of each of the firstthree quarters of each fiscal year, Company’s quarterly, unaudited financialstatements and within 90 days after the end of each fiscal year, Company’sannual, audited financial statements.

 

3.4                                  Noticeof Expiration. Company shall give Holder written notice of Holder’s rightto exercise this Warrant in the form attached as Appendix 2 not more than 90days and not less than 15 days before the Expiration Date and, in the case ofan Acquisition to which the proviso of Section 1.6 shall be applicable, 15days notice of such Acquisition. If the notice is not so given, the ExpirationDate shall automatically be extended until 15 days after the date Companydelivers the notice to Holder.

 

3.5                                  RegistrationRights. The Company agrees that the Shares shall have the registrationrights set forth on Exhibit B hereto.

 

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ARTICLE 4                                   MISCELLANEOUS.

 

4.1                                  Legends.This Warrant and the Shares (and the securities issuable, directly orindirectly, upon conversion of Shares, if any) shall be imprinted with a legendin substantially the following form:

 

THIS SECURITY HASNOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOTBE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATIONTHEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSELREASONABLY SATISFACTORY TO COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION ISNOT REQUIRED.

 

4.2                                  Compliancewith Securities Laws on Transfer. This Warrant and the Shares issuable uponexercise of this Warrant (and the securities issuable, directly or indirectly,upon conversion of Shares, if any) may not be transferred or assigned in wholeor in part without compliance with applicable federal and state securities lawsby the transferor and the transferee (including, without limitation, thedelivery of investment representation letters and legal opinions reasonablysatisfactory to Company, as reasonably requested by Company). Company shall notrequire Holder to provide an opinion of counsel if the transfer is to anaffiliate of Holder or if there is no material question as to the availabilityof current information as referenced in Rule 144(c), Holder represents that ithas complied with Rule 144(d) and (e) in reasonable detail, the selling brokerrepresents that it has complied with Rule 144(f), and the Company is providedwith a copy of Holder’s notice of proposed sale.

 

4.3                                  TransferProcedure. Subject to the provisions of Section 4.3 Holder maytransfer all or part of this Warrant or the Shares issuable upon exercise ofthis Warrant (or the securities issuable, directly or indirectly, uponconversion of Shares, if any) at any time to any other transferee acceptable toCompany (which acceptance shall not be unreasonably withheld or delayed) bygiving Company notice of the portion of the Warrant being transferred settingforth the name, address and taxpayer identification number of the transfereeand surrendering this Warrant to Company for reissuance to the transferee(s) (andHolder if applicable). Unless Company is filing financial information with theSEC pursuant to the Securities Exchange Act of 1934, Company shall have theright to refuse to transfer any portion of this Warrant to any person whodirectly competes with Company.

 

4.4                                  Notices.All notices and other communications from Company to Holder, or vice versa,shall be in writing and shall be deemed delivered and effective when givenpersonally or mailed by first-class registered or certified mail, postageprepaid, or by overnight courier, at such address as may have been furnished toCompany or Holder, as the case may be, in writing by Company or such Holder fromtime to time.

 

4.5                                  AttorneysFees. In the event of any dispute between the parties concerning the termsand provisions of this Warrant, the party prevailing in such dispute shall beentitled to collect from the other party all costs incurred in such dispute,including reasonable attorneys’ fees.

 

4.6                                  GoverningLaw. This Warrant shall be governed by and construed in accordance with thelaws of the State of California, without giving effect to its principlesregarding conflicts of law.

 

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INWITNESS WHEREOF, Company has caused this Warrant to be duly executed by itsauthorized officers, all as of the day and year first above written.

 
|   | COMPANY:                             |
|--------|--------------------------------------|
|   |                                 |
|   | REVCARE, INC., a Nevada  corporation |
|   |                                 |
|   | By                                   | /s/ Manuel Occiano |   |
|   | Name:                                | MANUEL OCCIANO |   |
|   | Title:                               | PRESIDENT |   |
|   |                                 |   |   |
|   | By:                                  | /s/ Lee A. Shodiss |   |
|   | Name:                                | LEE A. SHODISS |   |
|   | Title:                               | SVP |   |
|        |                                      |  |  |  |  |  |  |

 

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APPENDIX 1

 

Notice of Exercise

 

1.                                       Theundersigned hereby elects to purchase             sharesof the Common Stock of                                                pursuantto the terms of the attached Warrant, and tenders herewith payment of thepurchase price of such shares in full.

 

1.                                       Theundersigned hereby elects to convert the attached Warrant into Shares/cash[strike one] in the manner specified in the Warrant. This conversion isexercised with respect to                                           of the Shares covered by the Warrant.

 

2.                                       Pleaseissue a certificate or certificates representing said shares in the name of theundersigned or in such other name as is specified below:

 

Name:                                               

 

Address:                                            

 

3.                                       Theundersigned represents it is acquiring the shares solely for its own accountand not as a nominee for any other party and not with a view toward the resaleor distribution thereof except in compliance with applicable securities laws.

 

 
|   | (Signature) |
|--------|-------------|
|   |        |
|   | (Date)      |

 

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APPENDIX 2

 

Notice that Warrant Is About to Expire

 

[Insert Date of Notice]

 

To:                           BridgeBank, National Association

Attn: Mike Field

2120 El CaminoReal

Santa Clara, CA95050

 

The Warrant issued to youdescribed below will expire on                                  

 

Issuer:

 

Issue Date:

 

Class of SecurityIssuable:

 

Exercise Price perShare:

 

Number of SharesIssuable:

 

Procedure forExercise:

 

Please contact                     at (       )               with any questions you may have concerning exercise of the Warrant. This isyour only notice of pending expiration.

 

 
|   | (Name of Issuer) |
|--------|------------------|
|   |             |
|   | By               |   |
|   |             |
|   | Its:             |   |

 

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EXHIBIT A

 

Anti-Dilution Provisions

 

(For Common Stock Warrants Where

 

Anti-Dilution Protection is inadequate or Non-existent)

 

In the event ofthe issuance (a “Diluting Issuance”) by Company, after the Issue Date of theWarrant, of Common Stock (or options or other rights to subscribe thereto orsecurities convertible into or exchangeable for Common Stock) at a price pershare less than the Exercise Price or less than the fair market value of theCommon Stock at the date of such issuance, then the number of Shares issuableupon exercise of the Warrant and the Exercise Price, shall be adjusted as aresult of Diluting Issuances in accordance with the following (providedthat under no circumstances shall the aggregate Exercise Price payable byHolder upon exercise of the Warrant increase as a result of any adjustmentarising from a Diluting Issuance):

 

1.             Definitions.As used in these Antidilution Provisions, the following terms have thefollowing respective meanings:

 

(a)                                   “Option”means any right, option, or warrant to subscribe for, purchase, or otherwiseacquire common stock or Convertible Securities.

 

(b)                                  “ConvertibleSecurities” means any evidences of indebtedness, shares of stock, or other securitiesdirectly or indirectly convertible into or exchangeable for common stock.

 

(c)                                   “Issue”,means to grant, issue, self, assume, or fix a record date for determiningpersons entitled to receive, any security (including Options), whichever of theforegoing is the first to occur. Any variation of the term “Issue” including,without limitation, “Issuable”, “Issuance” or “Issued” shall have the same meaningas set forth in this section 1 (c).

 

(d)                                  “AdditionalCommon Shares” means all common stock (including reissued shares) issued (or deemedto be issued pursuant to Section 2) after the date of the Warrant.Additional Common Shares does not include, however, any common stock issued ina transaction described in Sections 2.1 and 2.2 of the Warrant; any commonstock Issued upon conversion of preferred stock outstanding on the date of theWarrant; the Shares; or common stock Issued as incentive or in a nonfinancingtransaction to employees, officers, directors, or consultants to Company.

 

(e)                                   Theshares of common stock ultimately Issuable upon exercise of an Option(including the shares of common stock ultimately Issuable upon conversion orexercise of a Convertible Security Issuable pursuant to an Option) are deemedto be Issued when the Option is Issued. The shares of common stock ultimatelyIssuable upon conversion or exercise of a Convertible Security (other than aConvertible Security Issued pursuant to an Option) shall be deemed Issued uponIssuance of the Convertible Security.

 

2.             DeemedIssuance of Additional Common Shares. The shares of common stock ultimatelyIssuable upon exercise of an Option (including the shares of common stockultimately Issuable upon conversion or exercise of a Convertible SecurityIssuable pursuant to an Option) are deemed to be Issued when the Option isIssued. The shares of common stock ultimately Issuable upon conversion orexercise of a Convertible Security (other than a Convertible Security Issuedpursuant to an Option) shall be deemed Issued upon Issuance of the ConvertibleSecurity. The maximum amount of common stock Issuable is determined withoutregard to any future adjustments permitted under the instrument creating theOptions or Convertible Securities.

 

3.             Adjustmentof Exercise Price for Diluting Issuances

 

3.1                    WeightedAverage Adjustment. if Company issues Additional Common Shares after thedate of the Warrant and the consideration per Additional Common Share(determined pursuant to Section 9) is less than the Exercise Price ineffect immediately before such Issue, the Exercise Price shall be reduced,concurrently with such Issue, to a price (calculated to the nearest hundredthof a cent) determined by multiplying the Exercise Price by a fraction:

 

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(a)                                    thenumerator of which is the amount of such common stock outstanding immediately beforesuch Issue plus the amount of common stock that the aggregate considerationreceived by Company for the Additional Common Shares would purchase at theExercise Price in effect immediately before such Issue, and

 

(b)                                   thedenominator of which is the amount of common stock outstanding immediatelybefore such Issue plus the number of such Additional Common Shares.

 

3.2                    Adjustmentof Number of Shares. Upon each adjustment of the Exercise Price, the numberof Shares issuable upon exercise of the Warrant shall be increased to equal thequotient obtained by dividing (a) theproduct resulting from multiplying (i) the number of Shares issuable uponexercise of the Warrant and (ii) the Exercise Price, in each case as in effectimmediately before such adjustment, by (b) the adjusted Exercise Price.

 

3.3                    SecuritiesDeemed Outstanding. For the purpose of this Section 3, all securitiesissuable upon exercise of any outstanding Convertible Securities or Options,warrants, or other rights to acquire securities of Company shall be deemed tobe outstanding.

 

4.             NoAdjustment for Issuances Following Deemed Issuances. No adjustment to theExercise Price shall be made upon the exercise of Options or conversion ofConvertible Securities.

 

5.             AdjustmentFollowing Changes in Terms of Options or Convertible Securities. If theconsideration payable to, or the amount of common stock Issuable by, Companyincreases or decreases, respectively, pursuant to the terms of any outstandingOptions or Convertible Securities, the Exercise Price shall be recomputed toreflect such increase or decrease. The recomputation shall be made as of thetime of the Issuance of the Options or Convertible Securities. Any changes inthe Exercise Price that occurred after such Issuance because other AdditionalCommon Shares were Issued or deemed Issued shall also be recomputed.

 

6.             RecomputationUpon Expiration of Options or Convertible Securities. The Exercise Pricecomputed upon the original Issue of any Options or Convertible Securities, andany subsequent adjustments based thereon, shall be recomputed when any Optionsor rights of conversion under Convertible Securities expire without having beenexercised. In the case of Convertible Securities or Options for common stock, theExercise Price shall be recomputed as if the only Additional Common Shares Issuedwere the shares of common stock actually Issued upon the exercise of suchsecurities, if any, and as if the only consideration received therefor was theconsideration actually received upon the Issue, exercise or conversion of theOptions or Convertible Securities. In the case of Options for ConvertibleSecurities, the Exercise Price shall be recomputed as if the only ConvertibleSecurities Issued were the Convertible Securities actually Issued upon theexercise thereof, if any, and as if the only consideration received thereforwas the consideration actually received by Company (determined pursuant to Section 9),if any, upon the Issue of the Options for the Convertible Securities.

 

7.             Limiton Readjustments. No readjustment of the Exercise Price pursuant toSections 5 or 6 shall increase the Exercise Price more than the amount of anydecrease made in respect of the Issue of any Options or Convertible Securities.

 

8.             30Day Options. In the case of any Options that expire by their terms not morethan 30 days after the date of Issue thereof, no adjustment of the ExercisePrice shall be made until the expiration or exercise of all such Options.

 

9.             Computationof Consideration. The consideration received by Company for the Issue ofany Additional Common Shares shall be computed as follows:

 

(a)                                    Cashshall be valued at the amount of cash received by Company, excluding amounts paidor payable for accrued interest or accrued dividends.

 

(b)                                   Property.Property other than cash shall be computed at the fair market value thereof at thetime of the Issue as determined in good faith by the Board of Directors ofCompany.

 

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(c)                                    MixedConsideration. The consideration for Additional Common Shares Issuedtogether with other property of Company for consideration that covers bothshall be determined in good faith by the Board of Directors of Company.

 

(d)                                   Optionsand Convertible Securities. The consideration per Additional Common Sharefor Options and Convertible Securities shall be determined by dividing:

 

(i)                 the total amount,if any, received or receivable by Company for the Issue of the Options orConvertible Securities, plus the minimum amount of additional consideration (asset forth in the instruments relating thereto, without regard to any provisioncontained therein for a subsequent adjustment of such consideration) payable toCompany upon exercise of the Options or conversion of the ConvertibleSecurities, by

 

(ii)              the maximum amountof common stock (as set forth in the instruments relating thereto, withoutregard to any provision contained therein for a subsequent adjustment of suchnumber) ultimately Issuable upon the exercise of such Options or the conversionof such Convertible Securities.

 

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EXHIBIT B

 

REGISTRATION RIGHTS AGREEMENT

 

ThisREGISTRATION RIGHTS AGREEMENT, dated as of August 5, 2004, is betweenBridge Bank, National Association (“Purchaser”) and the Company whose nameappears on the last page of this Agreement.

 

Recitals

 

A.                                     Concurrentlywith the execution of this Agreement, the Purchaser is purchasing from the Companya Warrant to Purchase Stock (the “Warrant”) pursuant to which Purchaser has theright to acquire from the Company the Shares (as defined in the Warrant).

 

B.                                       Bythis Agreement, the Purchaser and the Company desire to set forth theregistration rights of the Shares all as provided herein.

 

NOW, THEREFORE, in consideration of the mutualpromises, covenants and conditions hereinafter set forth, the parties heretoagree as follows:

 

1.                                         RegistrationRights.

 

1.1                                            Definitions.For purposes of this Section 1:

 

(a)                                          Theterm “register,” “registered,” and “registration” refer to a registration effectedby preparing and filing a registration statement or similar document incompliance with the Securities Act of 1933, as amended (the “Securities Act”),and the declaration or ordering of effectiveness of such registration statementor document;

 

(b)                                         Theterm “Registrable Securities” means (i) the Shares (if Common Stock) or allshares of Common Stock of the Company issuable or issued upon conversion of theShares and (ii) any Common Stock of the Company issued as (or issuable upon theconversion or exercise of any warrant, right or other security which is issuedas) a dividend or other distribution with respect to, or in exchange for or inreplacement of, any stock referred to in (i).

 

(c)                                          Theterms “Holder” or “Holders” means the Purchaser or qualifying transferees undersubsection 1.8 hereof who hold Registrable Securities.

 

(d)                                         Theterm “SEC” means the Securities and Exchange Commission.

 

1.2                                            CompanyRegistration.

 

(a)                                          Registration.If at any time or from time to time, the Company shall determine to registerany of its securities, for its own account or the account of any of itsshareholders, other than a registration on Form S-1 or S-8 relating solely toemployee stock option or purchase plans, or a registration on Form S-4 relatingsolely to an SEC Rule 145 transaction, or a registration on any other form(other than Form S-1, S-2, S-3 or S-18, or their successor forms) or anysuccessor to such forms, which does not include substantially the sameinformation as would be required to be included in a registration statementcovering the sale of Registrable Securities, the Company will:

 

(i)                                              promptlygive to each Holder written notice thereof (which shall include a list of thejurisdictions in which the Company intends to attempt to qualify suchsecurities under the applicable blue sky or other state securities laws); and

 

(ii)                                           includein such registration (and compliance), and in any underwriting involvedtherein, all the Registrable Securities specified in a written request orrequests, made within 30 days after receipt of such written notice from theCompany, by any Holder or Holders, except as set forth in subsection 1.2(b)below.

 

(b)                                         Underwriting.if the registration of which the Company gives notice is for a registeredpublic offering involving an underwriting, the Company shall so advise theHolders as a part

 

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of the writtennotice given pursuant to subsection 1.2(a)(i). In such event the right ofany Holder to registration pursuant to this subsection 1.2 shall be conditionedupon such Holder’s participation in such underwriting and the inclusion of suchHolder’s Registrable Securities in the underwriting to the extent providedherein. All Holders proposing to distribute their securities through suchunderwriting shall (together with the Company and the other shareholdersdistributing their securities through such underwriting) enter into anunderwriting agreement in customary form with the underwriter or underwritersselected for such underwriting by the Company.

 

1.3                                             Expensesof Registration. All expenses incurred in connection with any registration,qualification or compliance pursuant to this Section 1 including withoutlimitation, all registration, filing and qualification fees, printing expenses,fees and disbursements of counsel for the Company and expenses of any specialaudits incidental to or required by such registration, shall be borne by theCompany except the Company shall not be required to pay underwriters’ fees,discounts or commissions relating to Registrable Securities. All expenses ofany registered offering not otherwise borne by the Company shall be borne prorata among the Holders participating in the offering and the Company.

 

1.4                                             RegistrationProcedures. In the case of each registration, qualification or complianceeffected by the Company pursuant to this Registration Rights Agreement, theCompany will keep each Holder participating therein advised in writing as tothe initiation of each registration, qualification and compliance and as to thecompletion thereof. Except as otherwise provided in subsection 1.3, at itsexpense the Company will:

 

(a)                                         Prepareand file with the SEC a registration statement with respect to such RegistrableSecurities and use its best efforts to cause such registration statement tobecome effective, and, upon the request of the Holders of a majority of theRegistrable Securities registered thereunder, keep such registration statementeffective for up to 120 days.

 

(b)                                        Prepareand file with the SEC such amendments and supplements to such registrationstatement and the prospectus used in connection with such registrationstatement as may be necessary to comply with the provisions of the SecuritiesAct with respect to the disposition of all securities covered by such registrationstatement.

 

(c)                                         Furnishto the Holders such numbers of copies of a prospectus, including a preliminaryprospectus, in conformity with the requirements of the Securities Act, and suchother documents as they may reasonably request in order to facilitate thedisposition of Registrable Securities owned by them.

 

(d)                                        Useits best efforts to register and qualify the securities covered by such registrationstatement under such other securities or Blue Sky laws of such jurisdictions asshall be reasonably requested by the Holders, provided that the Company shallnot be required in connection therewith or as a condition thereto to qualify todo business or to file a general consent to service of process in any suchstates or jurisdictions.

 

(e)                                         Inthe event of any underwritten public offering, enter into and perform its obligationsunder an underwriting agreement, in usual and customary form, with the managingunderwriter of such offering. Each Holder participating in such underwritingshall also enter into and perform its obligations under such an agreement.

 

(f)                                           Notifyeach Holder of Registrable Securities covered by such registration statement atany time when a prospectus relating thereto is required to be delivered underthe Securities Act or the happening of any event as a result of which theprospectus included in such registration statement, as then in effect, includesan untrue statement of a material fact or omits to state a material factrequired to be stated therein or necessary to make the statements therein notmisleading in the light of the circumstances then existing.

 

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1.5                                             Indemnification.

 

(a)                                         TheCompany will indemnify each Holder of Registrable Securities and each of itsofficers, directors and partners, and each person controlling such Holder, withrespect to which such registration, qualification or compliance has beeneffected pursuant to this Registration Rights Agreement, and each underwriter,if any, and each person who controls any underwriter of the RegistrableSecurities held by or issuable to such Holder, against all claims, losses,expenses, damages and liabilities (or actions in respect thereto) arising outof or based on any untrue statement (or alleged untrue statement) of a materialfact contained in any prospectus, offering circular or other document(including any related registration statement, notification or the like)incident to any such registration, qualification or compliance, or based on anyomission (or alleged omission) to state therein a material fact required to be statedtherein or necessary to make the statement therein not misleading, or anyviolation or alleged violation by the Company of the Securities Act, theSecurities Exchange Act of 1934, as amended, (“Exchange Act”) or any statesecurities law applicable to the Company or any rule or regulation promulgatedunder the Securities Act, the Exchange Act or any such state law and relatingto action or inaction required of the Company in connection with any suchregistration, qualification of compliance, and will reimburse each such Holder,each of its officers, directors and partners, and each person controlling suchHolder, each such underwriter and each person who controls any suchunderwriter, within a reasonable amount of time after incurred for anyreasonable legal and any other expenses incurred in connection withinvestigating, defending or settling any such claim, loss, damage, liability oraction; provided, however, that the indemnity agreement contained in this subsection 1.5(a)shall not apply to amounts paid in settlement of any such claim, loss, damage,liability, or action if such settlement is effected without the consent of theCompany (which consent shall not be unreasonably withheld); and providedfurther, that the Company will not be liable in any such case to the extentthat any such claim, loss, damage or liability arises out of or is based on anyuntrue statement or omission based upon written information furnished to theCompany by an instrument duly executed by such Holder or underwriter specificallyfor use therein,

 

(b)                                        EachHolder will, if Registrable Securities held by or issuable to such Holder areincluded in the securities as to which such registration, qualification orcompliance is being effected, indemnify the Company, each of its directors andofficers, each underwriter, if any, of the Company’s securities covered by sucha registration statement, each person who controls the Company within themeaning of the Securities Act, and each other such Holder, each of itsofficers, directors and partners and each person controlling such Holder,against all claims, losses, expenses, damages and liabilities (or actions inrespect thereof) arising out of or based on any untrue statement (or allegeduntrue statement) of a material fact contained in any such registrationstatement, prospectus, offering circular or other document, or any omission (oralleged omission) to state therein a material fact required to be statedtherein or necessary to make the statements therein not misleading, and willreimburse the Company, such Holders, such directors, officers, partners,persons or underwriters for any reasonable legal or any other expenses incurredin connection with investigating, defending or settling any such claim, loss,damage, liability or action, in each case to the extent, but only to theextent, that such untrue statement (or alleged untrue statement) or omission(or alleged omission) is made in such registration statement, prospectus,offering circular or other document in reliance upon and in conformity withwritten information furnished to the Company by an instrument duly executed bysuch Holder specifically for use therein; provided, however, that the indemnityagreement contained in this subsection 1.5(b) shall not apply to amountspaid in settlement of any such claim, loss, damage, liability or action if suchsettlement is effected without the consent of the Holder, (which consent shallnot be unreasonably withheld); and provided further, that the total amount forwhich any Holder shall be liable under this subsection 1.5(b) shall not inany event exceed the aggregate proceeds received by such Holder from the saleof Registrable Securities held by such Holder in such registration.

 

(c)                                         Eachparty entitled to indemnification under this subsection 1.5 (the “IndemnifiedParty”) shall give notice to the party required to provide indemnification (the“Indemnifying Party”) promptly after such Indemnified Party has actualknowledge of any claim as to which indemnity may be sought, and shall permit theIndemnifying Party to assume the defense of any such claim or any

 

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litigation resultingtherefrom; provided that counsel for the Indemnifying Party, who shall conductthe defense of such claim or litigation, shall be approved by the IndemnifiedParty (whose approval shall not be unreasonably withheld), and the IndemnifiedParty may participate in such defense at such party’s expense; and providedfurther, that the failure of any Indemnified Party to give notice as providedherein shall not relieve the Indemnifying Party of its obligations hereunder,unless such failure resulted in prejudice to the Indemnifying Party; andprovided further, that an Indemnified Party (together with all otherIndemnified Parties which may be represented without conflict by one counsel)shall have the right to retain one separate counsel, with the fees and expensesto be paid by the Indemnifying Party, if representation of such IndemnifiedParty by the counsel retained by the Indemnifying Party would be inappropriatedue to actual or potential differing interests between such Indemnified Partyand any other party represented by such counsel in such proceeding. NoIndemnifying Party, in the defense of any such claim or litigation, shall,except with the consent of each Indemnified Party, consent to entry of anyjudgment or enter into any settlement which does not include as anunconditional term thereof the giving by the claimant or plaintiff to suchIndemnified Party of a release from all liability in respect to such claim or litigation.

 

1.6                                             Informationby Holder. Any Holder or Holders of Registrable Securities included in anyregistration shall promptly furnish to the Company such information regardingsuch Holder or Holders and the distribution proposed by such Holder or Holdersas the Company may request in writing and as shall be required in connectionwith any registration, qualification or compliance referred to herein.

 

1.7                                             Rule144 Reporting. With a view to making available to Holders the benefits of certainrules and regulations of the SEC which may permit the sale of the RegistrableSecurities to the public without registration, the Company shall at all times:

 

(a)                                         makeand keep public information available, as those terms are understood anddefined in SEC Rule 144, after 90 days after the effective date of the firstregistration filed by the Company for an offering of its securities to thegeneral public;

 

(b)                                        filewith the SEC in a timely manner all reports and other documents required of theCompany under the Securities Act and the Exchange Act (at any time after it hasbecome subject to such reporting requirements); and

 

(c)                                         solong as a Holder owns any Registrable Securities, to furnish to such Holderforthwith upon request a written statement by the Company as to its compliancewith the reporting requirements of said Rule 144 (at any time after 90 daysafter the effective date of the first registration statement filed by theCompany for an offering of its securities to the general public), and of theSecurities Act and the Exchange Act (at any time after it has become subject tosuch reporting requirements), a copy of the most recent annual or quarterlyreport of the Company, and such other reports and documents so filed by theCompany as the Holder may reasonably request in complying with any rule or regulationof the SEC allowing the Holder to sell any such securities withoutregistration.

 

1.8                                             Transferof Registration Rights. Holders’ rights to cause the Company to register theirsecurities and keep information available, granted to them by the Company undersubsections 1.2 and 1.7 may be assigned to a transferee or assignee of a Holder’sRegistrable Securities not sold to the public, provided, that the Company isgiven written notice by such Holder at the time of or within a reasonable timeafter said transfer, stating the name and address of said transferee orassignee and identifying the securities with respect to which such registrationrights are being assigned. The Company may prohibit the transfer of any Holders’rights under this subsection 1.8 to any proposed transferee or assigneewho the Company reasonably believes is a competitor of the Company.

 

2.                                         General.

 

2.1                                             Waiversand Amendments. With the written consent of the record or beneficialholders of at least a majority of the Registrable Securities, the obligationsof the Company and the rights of the Holders of the Registrable Securitiesunder this agreement may be waived (either generally or in a particularinstance, either retroactively or prospectively, and either for a specifiedperiod of time or indefinitely), and with the same consent the Company, whenauthorized by resolution of its Board of

 

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Directors, may enter intoa supplementary agreement for the purpose of adding any provisions to orchanging in any manner or eliminating any of the provisions of this Agreement;provided, however, that no such modification, amendment or waiver shall reducethe aforesaid percentage of Registrable Securities without the consent of allof the Holders of the Registrable Securities. Upon the effectuation of eachsuch waiver, consent, agreement of amendment or modification, the Company shallpromptly give written notice thereof to the record holders of the RegistrableSecurities who have not previously consented thereto in writing. This Agreementor any provision hereof may be changed, waived, discharged or terminated onlyby a statement in writing signed by the party against which enforcement of thechange, waiver, discharge or termination is sought, except to the extentprovided in this subsection 2.1.

 

2.2                                             GoverningLaw. This Agreement shall be governed in all respects by the laws of theState of California as such laws are applied to agreements between Californiaresidents entered into and to be performed entirely within California.

 

2.3                                             Successorsand Assigns. Except as otherwise expressly provided herein, the provisionshereof shall inure to the benefit of, and be binding upon, the successors,assigns, heirs, executors and administrators of the parties hereto.

 

2.4                                             EntireAgreement. Except as set forth below, this Agreement and the other documentsdelivered pursuant hereto constitute the full and entire understanding andagreement between the parties with regard to the subjects hereof and thereof.

 

2.5                                             Notices,etc. All notices and other communications required or permitted hereundershall be in writing and shall be mailed by first class mail, postage prepaid,certified or registered mail, return receipt requested, addressed (a) if toHolder, at such Holder’s address as set forth below, or at such other addressas such Holder shall have furnished to the Company in writing, or (b) if to theCompany, at the Company’s address set forth below, or at such other address asthe Company shall have furnished to the Holder in writing.

 

2.6                                             Severability.In case any provision of this Agreement shall be invalid, illegal, or unenforceable,the validity, legality and enforceability of the remaining provisions of thisAgreement or any provision of the other Agreement s shall not in any way beaffected or impaired thereby.

 

2.7                                             Titlesand Subtitles. The titles of the sections and subsections of this Agreementare for convenience of reference only and are not to be considered inconstruing this Agreement.

 

2.8                                             Counterparts.This Agreement may be executed in any number of counterparts, each of whichshall be an original, but all of which together shall constitute oneinstrument.

 

IN WITNESS WHEREOF, the parties have caused thisAgreement to be executed and delivered by their duly authorized officers as ofthe date first above written.

 
| COMPANY: | REVCARE, INC. a Nevada  corporation              |
|----------|--------------------------------------------------|
|     |                                             |
|     | By                                               | /s/ Manuel Occiano |   |
|     | Name:                                            | MANUEL OCCIANO |   |
|     | Title: Chairman of the  Board, President or Vice |
|     | President                                        |
|          |                                                  |  |  |  |

 

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|   | By                                          | /s/ Alan Harrer |   |
|--------|---------------------------------------------|-----------------|--------|
|   | Name:                                       | Alan Harrer     |   |
|   | Title: Chief Financial  Officer, Secretary, |
|   | Assistant Treasurer or  Assistant Secretary |
|   |                                        |
|   | Address:                                    |            |   |
|   |                                        |            |   |
|   |                                        |            |
|        |                                             |                 |        |  |  |

 
| PURCHASER: | BRIDGE BANK, NATIONAL  ASSOCIATION |
|------------|------------------------------------|
|       |
|       | By                                 | /s/ Lee A. Shodiss |   |
|       | Name:                              | LEE  A. SHODISS |   |
|       |                               | SVP |   |
|       |                               |   |
|       | Address:                           |   |   |
|       |                               |   |
|       |                               |   |
|            |                                    |  |  |  |  |

 

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