Document:

exv10w1

 

Exhibit 10.1

NEITHER THE SECURITIES REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS
(1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER
OF THIS WARRANT OR SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT THIS WARRANT OR SUCH SECURITIES, AS APPLICABLE, MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

THE TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.

CLAIMSNET.COM INC.

Warrants for the Purchase

of

1,000,000 Shares of Common Stock, Par Value $.001 per share

			
	 	 	 
	No. W- 2006-EE01
	 	May 30, 2006               

     THIS CERTIFIES that, for value received, Kent McRee (together with all permitted assigns, the
“Holder”) is entitled to subscribe for, and purchase from, CLAIMSNET.COM, INC., a Delaware
corporation (the “Company”), upon the terms and conditions set forth herein 1,000,000 shares of
common stock, par value $.001 per share, of the Company. This Warrant is exercisable at an
exercise price per share equal to $0.15 per share; provided, however, that upon the occurrence of
any of the events specified in Section 5 hereof, the rights granted by this Warrant, including the
number of shares of Common Stock to be received upon such exercise, shall be adjusted as therein
specified.

     This Warrant, together with warrants issuable upon the transfer hereof, are hereinafter
referred to as the Warrants. Each share of Common Stock issuable upon the exercise hereof shall be
hereinafter referred to as a “Warrant Share”.

 

 

     Section 1 Exercise of Warrant and Payment for Shares.

          The Warrants shall become exercisable according to the following vesting schedule:

	 	 	 	 	 
	Period of Warrant Holder’s Continuous	 	 
	Relationship With the Company or	 	 
	Affiliate From the Date the Warrant is	 	Portion of Total Warrant Which is
	Granted	 	Exercisable
	1 year
	 	 	33.3	%
	2 years
	 	 	66.6	%
	3 years
	 	 	100	%

     Subject to the vesting schedule described above, this Warrant may be exercised during the
period commencing from the date of grant and ending on the earlier of (i) ten years from the date
of grant, (ii) immediately upon termination of the Holder for cause, which shall mean dismissal for
dishonesty, conviction or confession of a crime punishable by law (except minor violations), fraud,
misconduct, or disclosure of confidential information, (iii) three months after cessation of the
Holder’s relationship with the Company or an Affiliate thereof, other than for cause unless
cessation is due to death or total disability, in which case the Warrant shall terminate twelve
months after cessation of such relationship, or (iv) five years after cessation of the Holder’s
relationship with the Company or an Affiliate thereof in the event of a Reclassification,
Reorganization, or Merger event, as defined in section 6, provided, that the Holder’s employment is
terminated within twelve months following the date of such Reclassification, Reorganization, or
Merger event (the “Exercise Period”).

     This Warrant may be exercised during the Exercise Period, either in whole or in part, by the
surrender of this Warrant (with the election at the end hereof duly executed) to the Company at its
office at 14860 Montfort Dr., Suite 250, Dallas, Texas 75254, or at such other place as is
designated in writing by the Company, together with a certified or bank cashier’s check payable to
the order of the Company in an amount equal to the product of the Exercise Price and the number of
Warrant Shares for which this Warrant is being exercised.

     The Warrant may be exercised by the delivery of:

          (a) Cash, personal check (unless at the time of exercise the Board of Directors
determines otherwise), or bank certified or cashier’s checks;

          (b) Unless the Board of Directors in their sole discretion determine otherwise, shares of the
capital stock of the Company held by you having a fair market value at the time of exercise, as
determined in good faith by the Board of Directors, equal to the exercise price;

          (c) Unless the Board of Directors in their sole discretion determine otherwise, a properly
executed Notice of Exercise, together with instructions to the Company to withhold from the shares
that would otherwise be issued upon exercise that number of shares having a fair market value equal
to the option exercise price; or

          (d) Unless the Board of Directors in their sole discretion determine otherwise, a properly
executed Notice of Exercise, together with irrevocable instructions to a broker to promptly deliver
to the Company the amount of sale or loan proceeds to pay the exercise price.

     Section 2 Rights Upon Exercise; Delivery of Securities.

 

 

          Upon each exercise of the Holder’s rights to purchase Warrant Shares, the Holder shall be
deemed to be the holder of record of the Warrant Shares, notwithstanding that the transfer books of
the Company shall then be closed or certificates representing the Warrant Shares with respect to
which this Warrant was exercised shall not then have been actually delivered to the Holder. As
soon as practicable after each such exercise of this Warrant, the Company shall issue and deliver
to the Holder a certificate or certificates representing the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute
and deliver a Warrant evidencing the right of the Holder to purchase the balance of the aggregate
number of Warrant Shares purchasable hereunder as to which this Warrant has not been exercised or
assigned.

     Section 3 Transferability.

          Except as otherwise expressly provided herein, this Warrant shall not be transferable. This
Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other
Warrants of different denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender to the Company or
its duly authorized agent.

     Section 4 Reservation of Shares.

          The Company shall at all times reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of
shares of Common Stock as shall, from time to time, be sufficient therefor. The Company represents
that all shares of Common Stock issuable upon exercise of this Warrant are duly authorized and,
upon receipt by the Company of the full payment for such Warrant Shares, will be validly issued,
fully paid, and nonassessable, without any personal liability attaching to the ownership thereof
and will not be issued in violation of any preemptive or similar rights of stockholders.

     Section 5 Antidilution.

          (a) In the event that the Company shall at any time after the Initial Exercise Date: (i)
declare a dividend on the outstanding Common Stock payable in shares of its capital stock; (ii)
subdivide the outstanding Common Stock; (iii) combine the outstanding Common Stock into a smaller
number of shares; or (iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Exercise Price per Warrant
Share in effect at the time of the record date for the determination of stockholders entitled to
receive such dividend or distribution or of the effective date of such subdivision, combination, or
reclassification shall be adjusted so that it shall equal the price determined by multiplying such
Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action, and the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action. Such adjustment shall be
made successively whenever any event listed above shall occur and shall become effective at the
close of business on such record date or at the close of business on the date immediately preceding
such effective date, as applicable.

          (b) All calculations under this Section 5 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.

          (c) In any case in which this Section 5 shall require that an adjustment in the number of
Warrant Shares be made effective as of a record date for a specified event, the Company may elect
to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised this
Warrant after such record date, the Warrant Shares, if any, issuable upon such exercise over and
above the number of Warrant Shares issuable upon such exercise on the basis of the number of shares
of Common Stock in effect prior to such adjustment; provided, however, that the Company shall
deliver to the Holder a due bill or other appropriate instrument evidencing the Holder’s right to
receive such additional shares of Common Stock upon the occurrence of the event requiring such
adjustment.

 

 

          (d) Whenever there shall be an adjustment as provided in this Section 5, the Company
shall within 15 days thereafter cause written notice thereof to be sent by registered mail, postage
prepaid, to the Holder, at its address as it shall appear in the books and records of the Company,
which notice shall be accompanied by an officer’s certificate setting forth the number of Warrant
Shares issuable and the Exercise Price thereof after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation thereof, which officer’s
certificate shall be conclusive evidence of the correctness of any such adjustment absent manifest
error.

          (e) The Company shall not be required to issue fractions of shares of Common Stock or other
capital stock of the Company upon the exercise of this Warrant. If any fraction of a share of
Common Stock would be issuable on the exercise of this Warrant (or specified portions thereof), the
Company shall pay lieu of such fraction an amount in cash equal to the same fraction of the average
closing sale price (or average of the closing bid and asked prices, if closing sale price is not
available) of Common Stock for the 10 trading days ending on and including the date of exercise of
this Warrant.

          (f) No adjustment in the Exercise Price per Warrant Share shall be required if such adjustment
is less than $.05; provided, however, that any adjustments which by reason of this Section 5 are
not required to be made shall be carried forward and taken into account in any subsequent
adjustment.

          (g) Whenever the Exercise Price payable upon exercise of this Warrant is adjusted pursuant to
subsection (a) above, the number of Warrant Shares issuable upon exercise of this Warrant shall
simultaneously be adjusted by multiplying the number of Warrant Shares theretofore issuable upon
exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.

     Section 6 Reclassification; Reorganization; Merger; Change of Control.

          (a) Cash, Stock, or Other Property for Stock. Except as provided in
Section 6(b) hereof, upon a merger (other than a merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportionate ownership of common stock
in the surviving corporation immediately after the merger), consolidation, acquisition of property
or stock, separation, reorganization (other than mere reincorporation or creation of a holding
company), or liquidation of the Company (each, an “event”), as a result of which the stockholders
of the Company receive cash, stock, or other property in exchange for, or in connection with, their
shares of Common Stock, any warrant granted hereunder shall terminate, but the time during which
such warrants may be exercised shall be accelerated as follows: the Holder shall have the right
immediately prior to any such event to exercise such Holder’s option in whole or in part whether or
not the vesting requirements set forth in Section 1 have been satisfied.

          (b) Conversion of Options on Stock for Exchange Stock. If the stockholders of the
Company receive capital stock of another corporation (“Exchange Stock”) in exchange for their
shares of Common Stock in any transaction involving a merger (other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the same proportionate
ownership of common stock in the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation, or reorganization (other than mere
reincorporation or creation of a holding company), all warrants granted hereunder shall be
converted into warrants to purchase shares of Exchange Stock unless the Company and
corporation issuing the Exchange Stock, in their sole discretion, determine that any or all
such warrants granted hereunder shall not be converted into warrants to purchase shares of Exchange

 

 

Stock but instead shall terminate in accordance with the provisions of Section 6(a) hereof. The
amount and price of converted warrants shall be determined by adjusting the amount and price of the
warrants granted hereunder in the same proportion as used for determining the number of shares of
Exchange Stock the holders of the Common Stock receive in such merger, consolidation, acquisition,
separation, or reorganization. Unless the Board determines otherwise, the converted warrants shall
be fully vested whether or not the vesting requirements set forth in Section 1 have been satisfied.

          (c) In case of any capital reorganization, other than in the cases referred to in Section
5(a) hereof, or the consolidation or merger of the Company with or into another corporation (other
than a merger or consolidation in which the Company is the continuing corporation and which does
not result in any reclassification of the outstanding shares of Common Stock or the conversion of
such outstanding shares of Common Stock into shares of other stock or other securities or
property), or in the case of any sale, lease, or conveyance to another corporation of the property
and assets of any nature of the Company as an entirety or substantially as an entirety (such
actions being hereinafter collectively referred to as “Reorganizations”), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Warrant Shares theretofore
deliverable) the number of shares of stock or other securities or property to which a holder of the
respective number of Warrant Shares which would otherwise have been deliverable upon the exercise
of this Warrant would have been entitled upon such Reorganization if this Warrant had been
exercised in full immediately prior to such Reorganization. In case of any Reorganization,
appropriate adjustment, as determined in good faith by the Board of Directors of the Company, shall
be made in the application of the provisions herein set forth with respect to the rights and
interests of the Holder so that the provisions set forth herein shall thereafter be applicable, as
nearly as possible, in relation to any shares or other property thereafter deliverable upon
exercise of this Warrant. Any such adjustment shall be made by, and set forth in, a supplemental
agreement between the Company, or any successor thereto, and the Holder, with respect to this
Warrant, and shall for all purposes hereof conclusively be deemed to be an appropriate adjustment.
The Company shall not effect any such Reorganization unless, upon or prior to the consummation
thereof, the successor corporation, or if the Company shall be the surviving corporation in any
such Reorganization and is not the issuer of the shares of stock or other securities or property to
be delivered to holders of shares of the Common Stock outstanding at the effective time thereof,
then such issuer, shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities, cash, or other property as such Holder shall be entitled to purchase
in accordance with the foregoing provisions. In the event of sale, lease, or conveyance or other
transfer of all or substantially all of the assets of the Company as part of a plan for liquidation
of the Company, all rights to exercise this Warrant shall terminate 30 days after the Company gives
written notice to the Holder that such sale or conveyance or other transfer has been consummated.

          (d) In case of any reclassification or change of the shares of Common Stock issuable upon
exercise of this Warrant (other than a change in par value or from a specified par value to no par
value, or as a result of a subdivision or combination, but including any change in the shares into
two or more classes or series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation and in which there
is a reclassification or change (including a change to the right to receive cash or other property)
of the shares of Common Stock (other than a change in par value, or from no par value to a
specified par value, or as a result of a subdivision or combination, but including any change in
the shares into two or more classes or series of shares), the Holder or holders of this Warrant
shall have the right thereafter to receive upon exercise of this Warrant solely the kind and amount
of shares of stock and other securities, property, cash, or any combination thereof receivable upon
such reclassification, change, consolidation, or merger by a holder of the number of Warrant Shares
for which this Warrant might have been exercised immediately prior to such reclassification,
change, consolidation, or merger. Thereafter, appropriate
provision shall be made for adjustments which shall be as nearly equivalent as practicable to
the adjustments in Section 5.

          (e) The above provisions of this Section 6 shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive consolidations, mergers,
sales, leases, or conveyances.

 

 

     Section 7 Notice of Certain Events.

          In case at any time the Company shall propose:

     (a) to pay any dividend or make any distribution on shares of Common Stock in shares of Common
Stock or make any other distribution (other than regularly scheduled cash dividends which are not
in a greater amount per share than the most recent such cash dividend) to all holders of Common
Stock; or

     (b) to issue any rights, warrants, or other securities to all holders of Common Stock
entitling them to purchase any additional shares of Common Stock or any other rights, warrants, or
other securities; or

     (c) to effect any reclassification or change of outstanding shares of Common Stock or any
consolidation, merger, sale, lease, or conveyance of property, as described in Section 6; or

     (d) to effect any liquidation, dissolution, or winding-up of the Company; or

     (e) to take any other action which would cause an adjustment to the Exercise Price per Warrant
Share;

then, and in any one or more of such cases, the Company shall give written notice thereof by
registered mail, postage prepaid, to the Holder at the Holder’s address as it shall appear in the
Warrant Register, mailed at least 15 days prior to: (i) the date as of which the holders of record
of shares of Common Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined; (ii) the date on which any such
reclassification, change of outstanding shares of Common Stock, consolidation, merger, sale, lease,
conveyance of property, liquidation, dissolution, or winding-up is expected to become effective and
the date as of which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution, or winding-up; or (iii) the date of such action which would
require an adjustment to the Exercise Price per Warrant Share.

     Section 8 Charges and Taxes.

          The issuance of any shares or other securities upon the exercise of this Warrant and the
delivery of certificates or other instruments representing such shares or other securities shall be
made without charge to the Holder for any tax or other charge in respect of such issuance. The
Company shall not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other than that of the
Holder and the Company shall not be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that such tax has been
paid.

     Section 9 Periodic Reports.

          The Company agrees that until all the Warrant Shares shall have been sold pursuant to Rule 144
under the Securities Act or a Registration Statement under the Securities Act, it shall keep
current in filing all reports, statements, and other materials required to be filed with the
Commission to permit holders of the Warrant Shares to sell such securities under Rule 144 under the
Securities Act.

     Section 10 Legend.

          Until sold pursuant to the provisions of Rule 144 or otherwise registered under the Securities
Act, the Warrant Shares issued on exercise of the Warrants shall be subject to a stop transfer
order and the certificate or certificates representing the Warrant Shares shall bear the following
legend:

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THE SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED, OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.

     Section 11 Loss; Theft; Destruction; Mutilation.

          Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction, or
mutilation of any Warrant (and upon surrender of any Warrant if mutilated), and upon receipt by the
Company of reasonably satisfactory indemnification, the Company shall execute and deliver to the
Holder thereof a new Warrant of like date, tenor, and denomination.

     Section 12 Stockholder Rights.

          The Holder of any Warrant shall not have, solely on account of such status, any rights of a
stockholder of the Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in this Warrant.

     Section 13 Governing Law.

          This Warrant shall be construed in accordance with the laws of the State of New York
applicable to contracts made and performed within such State, without regard to principles of
conflicts of law.

     IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	CLAIMSNET.COM INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:            Don Crosbie	 	 

	 	1.	 	Title: Chief Executive Officer

 

 

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the attached Warrant.)

     FOR VALUE RECEIVED,                      hereby sells, assigns, and transfers unto
                     a Warrant to purchase                                 shares of Common Stock, without par value, of
Claimsnet.com inc., a Delaware corporation (the “Company”), and does hereby irrevocably constitute
and appoint                      attorney to transfer such Warrant on the books of the Company, with full
power of substitution.

Dated:                                         

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Signature	 	 	 	 
	 

	 	 	 	 	 	 

NOTICE

     The signature on the foregoing Assignment must correspond to the name as written upon the face
of this Warrant in every particular, without alteration or enlargement or any change whatsoever.

 

 

ELECTION TO EXERCISE

     To:      Claimsnet.com inc.

     The undersigned hereby exercises his, her, or its rights to purchase shares of Common Stock,
par value $.001 per share (“the Common Stock”), of Claimsnet.com inc., a Delaware corporation (the
“Company”), covered by the within Warrant and tenders
payment herewith in the amount of $___ in
accordance with the terms thereof, and requests that certificates for the securities constituting
such shares of Common Stock be issued in the name of, and delivered to:

(Print Name, Address, and Social Security or Tax Identification Number)

and, if such number of shares of Common Stock shall not constitute all such shares of Common Stock
covered by the within Warrant, that a new Warrant for the balance of the shares of Common Stock
covered by the within Warrant shall be registered in the name of, and delivered to, the undersigned
at the address stated below.

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	Name	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	(Print)	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	     (Signature)exv10w3

 

Exhibit 10.3

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE (COLLECTIVELY WITH THIS NOTE,
THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”)
OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED, UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR UPON DELIVERY TO THE ISSUER OF THE SECURITIES OF AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THE SECURITIES THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT
OR SUCH APPLICABLE STATE SECURITIES LAWS PURSUANT TO AVAILABLE EXEMPTIONS THEREFROM. THE TRANSFER
OF THE SECURITIES REPRESENTED HEREBY IS RESTRICTED PURSUANT TO THE TERMS HEREOF.

Claimsnet.com Inc.

Unsecured Convertible Promissory Note

	 	 	 
	$50,000.00

	 	Dallas, Texas
	 

	 	June 15, 2006

     Claimsnet.com Inc., a Delaware corporation (the “Company”), for value received, hereby
promises unconditionally to pay to Elmira United Corporation, or its permitted transferees or
assigns (collectively, the “Holder”), in immediately available and lawful money of the United
States of America (“Dollars” or “$”), the principal amount of Fifty Thousand Dollars ($50,000) (the
“Principal”), plus any accrued and unpaid Interest thereon, on the Maturity Date (as such terms are
defined below).

     This Unsecured Convertible Promissory Note (this “Note”) is issued to the Holder in connection
with the issuance by the Company, from time to time of substantially identical Unsecured
Convertible Promissory Notes, provided that such other promissory notes may vary as to their
principal amounts and the dates of issuance thereof, which other promissory notes, in the aggregate
together with this Note, are not greater in principal amount than $300,000 (such other Unsecured
Convertible Promissory Notes, collectively with this Note, the “Investor Notes”, and the holders of
such Investor Notes, collectively with the Holder, the “Investors”). 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, by the acceptance of this Note, agrees.

     1. Certain Definitions; Certain Interpretations.

          1.1. Certain Definitions. As used herein, the following terms shall have the
following meanings:

          “Business Day” means any day that is not a Saturday, Sunday or a legal holiday in the State of
Texas.

 

 

          “Common
Stock” means the common stock, par value $0.001 per share,
of the Company.

          “Conversion Price” means $0.25 per share, subject to adjustment as provided in this Note.

          “Conversion Securities” means the shares of Common Stock issuable upon conversion of this Note
in accordance with Sections 5.1 and 5.2(d).

          “Event of Default” shall have the meaning assigned to such term in Section 4.

          “Interest” shall have the meaning assigned to such term in Section 2.2.

          “Investors” shall have the meaning assigned to such term in the Preamble.

          “Investor Notes” shall have the meaning assigned to such term in the Preamble.

          “Issue Date” means the first date written above, which is the date of execution and issuance
of this Note.

          “Maturity Date” means December 31, 2008.

          “Person” means any individual, corporation, limited liability company, partnership, limited
partnership, limited liability partnership, firm, joint venture, association, joint stock company,
trust or other entity or organization, including a government or political subdivision or an agency
or instrumentality thereof.

          “Securities Act” means the Securities Act of 1933, as amended.

          1.2. Certain Interpretations. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference to any law, rule or
regulation herein shall be construed as referring to any amendment or modification of such law,
rule or regulation, (c) any reference herein to any Person shall be construed to include such
Person’s permitted successors and assigns, (d) the words “herein”, “hereof” and “hereunder”, and
words of similar import, shall be construed to refer to this Note in its entirety and not to any
particular provision hereof, (e) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement, except as otherwise expressly provided, and (f) the
words “asset” and “property” shall be construed to have the same meaning and effect and to refer to
any and all tangible and intangible assets and properties, including cash, securities, accounts and
contract rights.

 

 

     2. Repayment.

          2.1. Principal. Unless earlier paid, converted or accelerated in accordance with the
provisions hereof, the entire outstanding Principal shall be due and payable on the Maturity Date.
Promptly following the payment in full of this Note, the Holder shall surrender this Note to the
Company for cancellation.

          2.2. Interest. Interest on the unpaid Principal (“Interest”) during the period from
the Issue Date through the Maturity Date, shall accrue at a rate of seven and one-half percent
(7.5%) per annum, non-compounding. Interest shall be computed on the basis of a 365-day year
applied to actual days elapsed. Unless the Interest on this Note is earlier paid, converted or
accelerated in accordance with the provisions hereof, all Interest then accrued and unpaid shall be
due and payable in cash on the Maturity Date (concurrently with the payment of Principal as
provided in Section 2.1).

          2.3. Location and Extension of Time for Repayments. All payments (including any
prepayments) of Principal, Interest and other amounts due and payable by the Company pursuant to
this Note shall be paid to the Holder at such Holder’s address for notice pursuant to Section 7.8.
If the outstanding Principal and Interest become due and payable on any day other than a Business
Day, the payment date thereof (including, without limitation, the Maturity Date) shall be
automatically extended to the next succeeding Business Day, and to such payable amounts shall
automatically be added the Interest which shall have accrued during such extension period at the
rate per annum herein specified.

     3. Prepayments.

          3.1. Optional Prepayment. Outstanding amounts under this Note may be prepaid, in
whole or in part, at any time at the option of the Company upon at least thirty days’ prior written
notice to the Holder (a “Prepayment Notice”), which Prepayment Notice shall set forth the amount of
Principal and Interest to be prepaid by the Company and the date thereof; provided, that, such
prepayment is made substantially simultaneously and pari passu with prepayment of the other
Investor Notes, in each case, as provided in Section 3.2.

          3.2. Application of Prepayments. Prepayments made by the Company pursuant to this
Section 3 shall be applied as follows:

               (i) First, to repayment of accrued and unpaid interest on the Investor Notes, pro rata
based on each Investor’s share of the aggregate amount of accrued interest then owed to the
Investors under all Investor Notes; and

               (iii) Second, to repayment of the unpaid principal under the Investor Notes, pro rata
based on each Investor’s share of the aggregate principal amount then owed to the Investors
under all Investor Notes.

 

 

          3.4. No Premiums, Penalties or Consent. No premium or penalty shall be payable, and
no consent of the Holder or the other Investors shall be required, in connection with any
prepayment of this Note or other Investor Notes.

     4. Events of Default.

          If one or more of the following events shall have occurred and be continuing (each, an “Event
of Default”):

          (a) the Company shall fail to pay within ten (10) days of when due any principal of, or
accrued interest on, this Note or any of the other Investor Notes;

          (b) the Company shall consummate the sale of all or substantially all of its assets, or
liquidate, dissolve or wind up;

          (c) the Company shall commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing;
or

          (d) an involuntary case or other proceeding shall be commenced against the Company seeking
liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed for a period of
sixty (60) days; or an order for relief shall be entered against the Company under the federal
bankruptcy laws as now or hereafter in effect.

then, and in each and every such Event of Default, the Holder may, by written notice to the
Company, declare this Note to be, and this Note shall thereupon become, immediately due and payable
in full without presentment, demand, protest or other notice of any kind, all of which are hereby
waived by the Company; provided, however, that in the case of any of the Events of Default
specified in clauses (c) or (d) above, without any notice to the Company or any other act by the
Holder or the other Investors, this Note shall become immediately due and payable in full without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Company.

     5. Conversion.

          5.1. Conversion. At the option of the Holder, exercised in accordance with
this Section 5, at any time or from time to time prior to the Maturity Date, all or any portion of

 

 

the outstanding Principal and Interest shall be converted into a number of shares of Common Stock
equal to the quotient obtained by dividing (i) the aggregate Principal and Interest then
outstanding by (ii) the Conversion Price. Notwithstanding anything herein to the contrary, Holder
shall have the right to exercise its conversion rights hereunder after receipt of a Prepayment
Notice and on or prior to the date of any such prepayment by the Company in accordance with such
Prepayment Notice.

          5.2. Adjustment of Conversion Price. (a) In case the Company shall at any time issue
shares of Common Stock for no consideration by way of dividend or other distribution on the
outstanding Common Stock of the Company or subdivide or combine the outstanding shares of Common
Stock of the Company, the Conversion Price shall forthwith be proportionately decreased in the case
of such dividend, distribution or subdivision, or increased in the case of combination and, in
either case, rounded up or down to the nearest one cent. An adjustment made pursuant to this
Section 5.2 shall become effective when such dividend, distribution, subdivision or combination, as
the case may be, is actually made or becomes effective.

          (b) No adjustment in the Conversion Price or in the number of shares of Common Stock issuable
upon conversion pursuant to Section 5.1 shall be made by reason of the issuance in exchange for
cash, property or services of shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, Common Stock, or carrying the right to purchase any of the
foregoing.

          (c) In case of any reorganization, recapitalization or reclassification of the Company or the
outstanding Common Stock or in the case of any consolidation or merger of the Company with another
entity as a result of which the Company is not the surviving entity, or in the case of any sale of
all, or substantially all, of its property, the Holder shall instead thereafter have the right
pursuant to Section 5.1 to convert the outstanding Principal and Interest under this Note into the
kind and amount of shares of stock or other securities or property receivable upon such
reorganization, reclassification, consolidation, merger or sale by a holder of the number of shares
of Common Stock which the Holder would have had the right to convert this Note into immediately
prior to such reorganization, reclassification, consolidation, merger or sale, at a price equal to
the Conversion Price then in effect pertaining to this Note (the kind, amount and price of such
stock or other securities or property to be subject to subsequent adjustment as provided in this
Section 5.2). Notwithstanding anything contained herein to the contrary, no adjustment of the
Conversion Price shall be made by reason of the issuance of Common Stock or other securities
pursuant to the acquisition by the Company of all or substantially all of the stock, other
securities or property of any other entity.

          (d) Irrespective of any adjustments in the Conversion Price, this Note and any replacement
notes theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this Note.

          5.3. Mechanics of Conversion. If the Holder determines to convert all or any portion
of this Note pursuant to Section 5.1, the Holder shall (i) notify the Company, in writing, at least
three (3) Business Days prior to the contemplated date, of the Holder’s election to

 

 

convert all or
any portion of this Note, and (ii) surrender this Note for cancellation, duly endorsed, at the
office of the Company, or at such other place designated by the Company. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date of the surrender of
this Note as provided in the immediately preceding sentence.

          5.4. Issuance of Certificates; Issuance Tax. Promptly upon conversion of any
outstanding Principal and Interest, the Company shall issue to the Holder certificates representing
the number of shares of Common Stock into which such Principal and Interest, have been converted.
Upon conversion of an amount less than the total outstanding Principal and Interest then, subject
to Section 5.5, the Company shall issue to the Holder a duly authorized, validly issued replacement
note evidencing the portion of the outstanding Principal and Interest that was not so converted.
The issuance of certificates for Conversion Securities or a replacement note shall be made without
charge to the Holder for any issuance tax in respect thereof, if any, other than taxes in
connection with the issuance of a certificate for Conversion Securities in the name of any Person
other than the Holder.

          5.5. No Fractional Shares; Release of Obligations under Note. No fractional
Conversion Securities shall be issued upon conversion of the outstanding Principal and Interest
under this Note; rather, the Company shall round the number of Conversion Securities to be issued
to the nearest whole number. Upon conversion or payment in full of the outstanding Principal and
Interest and any other amounts due and payable under this Note and the issuance of any securities
or other property issuable in connection with the conversion hereof, the Company shall be forever
released from all of its obligations, undertakings and liabilities under this Note.

     6. Replacement of Note.

          Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Note, and in case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (with or without requirement of a surety bond in the Company’s sole discretion),
and upon reimbursement to the Company of all reasonable expenses incidental thereto, and (if
mutilated) upon surrender and cancellation of this Note, the Company shall make and deliver to the
Holder a new promissory note of like tenor in lieu of this Note. Any replacement promissory note
made and delivered in accordance with this Section 6 shall be dated as of the date hereof.

     7. Miscellaneous.

          7.1. Survival. All agreements and covenants contained in this Note shall survive the
execution hereof and shall remain in full force and effect until the earlier to occur of (i) the
payment in full of all outstanding Principal and Interest, and any other amounts due and
payable, under this Note, and (ii) the conversion of all outstanding Principal and Interest
under this Note, if applicable, into Conversion Securities in accordance with Section 5.

          7.2. Assignment. The Holder may not assign or otherwise dispose of this Note or the
rights and obligations hereunder (including by operation of law) without the prior written consent
of the Company. Notwithstanding anything to the contrary in the foregoing, this Note

 

 

may not be
assigned or otherwise disposed of by the Holder unless (i) registered under the Securities Act and
applicable state securities laws or (ii) the Company receives an opinion of counsel to the proposed
transferor in form and substance satisfactory to the Company, to the effect that such proposed
assignment or other disposition is exempt from the registration requirements of the Securities Act
and applicable state securities laws. Any instrument purporting to make an assignment or other
disposition in violation of this Section 7.2 shall be void.

          7.3. Benefits of Note. The terms and provisions of this Note shall be binding upon
the successors, assigns, heirs, executors and administrators of the Company and the Holder and
shall inure to the benefit of, and be enforceable by, each Person who shall be a registered holder
of this Note from time to time. The Holder shall have no rights as a member of the Company solely
by virtue of the ownership of this Note.

          7.4. Severability. In case any provision of this Note shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

          7.5. Further Assurances. The Holder agrees to execute such other documents,
instruments, agreements and consents, and take such other actions as may be reasonably requested by
the Company hereto to effectuate the purposes of this Note.

          7.6. Amendment and Waiver. The terms and provisions of this Note may only be
modified, amended or waived in writing signed by the Company and the Holder. All modifications,
amendments, waivers and consents shall be effective only in the specific instance for the purpose
for which given.

          7.7. Delays or Omissions. No delay by the Holder or the Holder’s agents in exercising
any powers or rights hereunder shall operate as a waiver of such power or right, nor shall any
single or partial exercise of any power or right preclude other or further exercise thereof, or the
exercise of any other power or right hereunder or otherwise.

          7.8. Notices. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b)
when sent by confirmed facsimile transmission if sent during normal business hours of the
recipient, if not, then on the next business day, (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent as follows:

	 	 	 	 	 
	 

	 	If to the Company:
	 	Claimsnet.com Inc.
	 

	 	 	 	14860 Montfort Drive, Suite 250
	 

	 	 	 	Dallas, Texas 75254
	 

	 	 	 	Attention: Chief Executive Officer

	 

	 	 	 	Facsimile: (214) 458-1737

 

 

	 	 	 	 	 
	 

	 	With a copy to:
	 	Reitler Brown & Rosenblatt LLC
	 

	 	 	 	800 Third Avenue, 21st Floor
	 

	 	 	 	New York, New York 10022
	 

	 	 	 	Attention: John F. Watkins, Esq.
	 

	 	 	 	Facsimile: (212) 371-5500
	 
	 	 	 	 
	 

	 	If to Holder:
	 	Elmira United Corporation
	 

	 	 	 	53rd Street
	 

	 	 	 	Urbanizacion Obarrio
	 

	 	 	 	Swiss Tower, 16th Floor
	 

	 	 	 	Panama City, Republic of Panama
	 

	 	 	 	Attention: Hans Schellenberg

or, to such other address or facsimile number as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith.

          7.9. Titles and Subtitles. The titles of the sections and subsections of this Note
are for convenience of reference only and are not to be considered in construing this Note.

          7.90. Governing Law. This Note shall be construed in accordance with, and governed
by, the laws of the State of Delaware (without giving effect to conflict of laws principles).

          7.11. Consent to Exclusive Jurisdiction and Service of Process. The Company and the
Holder each hereby irrevocably and unconditionally submits to the jurisdiction of the courts of the
State of Texas and of the Federal courts sitting in the State of Texas in any action or proceeding
directly or indirectly arising out of or relating to this Note or the transactions contemplated
hereby (whether based in contract, tort, equity or any other theory). The Company and the Holder
each agrees that all actions or proceedings arising out of or relating to this Note must be
litigated exclusively in any such court that sits in the County of Dallas, and accordingly, each
party irrevocably waives any objection which he or it may now or hereafter have to the laying of
the venue of any such action or proceeding in any such court. The Company and the Holder each
further irrevocably consents to service of process in the manner provided for notices in Section
7.8. Nothing in this Note will affect the right of the Company or the Holder to serve process in
any other manner permitted by law.

[Signature Page Follows]

 

 

     In Witness Whereof, the Company has caused its duly authorized representative to
execute this Note, and the Company has caused this Note to be issued, each as of the date first set
forth above.

	 	 	 	 	 
	 	 	Claimsnet.com inc.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name: Don Crosbie

	 

	 	 	 	Title: CEO

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