CLAIMSNET.COM INC. UNSECURED CONVERTIBLE PROMISSORY NOTE

Exhibit 10.16

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

      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 One Hundred Fifty Thousand Dollars ($150,000) (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 on or prior to December 31, 2004, 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 $400,000 (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 . 10 . 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 $0.40 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 28, 2007.

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           “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 . 11 . 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 percent (7%) 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

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          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” ):

          (e) 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 rel