PROMISSORY NOTE
$240,000.00
December 1, 2003
Louisville, Kentucky
FOR VALUE
RECEIVED, the undersigned, MASTEL PRECISION HEALTH INFORMATION
SERVICES, INC., a South Dakota corporation
(the "Borrower"), promises to pay
to the order of Marlene McCoy (the
"Lender"), at such place designated in
writing by the Lender, the principal sum of
TWO HUNDRED FORTY THOUSAND AND
NO/100 DOLLARS ($240,000.00) or so much
thereof as may be outstanding from
time to time, with interest on the unpaid
principal balance accruing from the
effective date hereof at the rate of
interest and on the terms and conditions
set forth in this Note.
1. Quarterly
Payments of Principal and Interest.
(a) The outstanding
principal balance of this Note shall
bear interest at an annual rate equal to
five percent (5%).
(b) Quarterly
installments of principal in the amount of
$30,000.00 plus interest shall be payable
in arrears on the thirtieth day
after every third (3rd) month, commencing
on February 28, 2004, and continuing
on the thirtieth day after every third
(3rd) month thereafter until July
November 30, 2005 (the "Maturity Date"), at
which time the remaining unpaid
principal balance and all accrued and
unpaid interest shall become due and
payable.
2. Adjustments.
The Borrower and the
Lender entered into an
Asset Purchase Agreement dated November
___, 2003 (the "Asset Purchase
Agreement"), pursuant to which the Borrower
purchased certain assets from the
Lender. The parties agreed that if certain
events occurred after the purchase
of such assets, there would be an
adjustment to the purchase price.
Accordingly, if any of the events described
in Section "Earn-Out Provision" of
the Asset Purchase Agreement shall occur,
there shall be an increase or
decrease in the principal amounts of this
Note in the amounts described in
such Section.
3. Application
of Payments. All sums
paid by the Borrower to
the Lender in connection with this Note
shall be applied first to accrued and
unpaid interest, and the balance, if any,
to principal. All
amounts due under
this Note shall be payable in lawful money
of the United States of America.
4. Prepayment.
The Borrower may
prepay from time to time or at
any time all or any portion of then unpaid
principal balance, together with
accrued and unpaid interest, without
penalty or premium.
5. Security.
This Note is secured
by a Security Agreement (the
"Security Agreement") dated the same date
as this Note, executed by the
Borrower as "Debtor", in favor of the
Lender as "Secured Party", covering
certain of the assets purchased pursuant to
the Asset Purchase Agreement.
(This Note, the Security Agreement, and any
other documents or instruments
evidencing or securing the Loan are
referred to as the "Loan Documents.")
6. Default.
The failure of the
Borrower to make a payment
required under this Note within ten (10)
days after it becomes due shall
constitute a late payment and be subject to
a late fee in the amount of five
percent (5%) of the overdue payment,
immediately due and owing. Failure of the
borrower to make a payment required under
this note within thirty (30) days
shall constitute a default under this note.
Upon the occurrence of a default
under this Note, at the option of the
holder of this Note either: : (a) all
amounts then unpaid under this Note shall
bear interest for the period
beginning with the date of occurrence of
such default at a default rate equal
to ten percent (10%) payable monthly on the
first day of each and every month,
or (b) the holder of this Note may, at its
option, declare immediately due and
owing the entire principal sum of this Note
together with all interest
thereon, plus any other sums owing at the
time of such declaration pursuant to
this Note or the other Loan Documents.
7. Waivers.
The Borrower hereby
waives presentment and demand
for payment, notice of dishonor, notice of
nonpayment, protect of any
dishonor, and notice of protest, and all
other notices and demands in
connection with the delivery, acceptance,
performance, default or enforcement
of this Note. The Borrower agrees that none of
the terms or provisions of
this Note may be waived, altered, modified,
or amended, except as the Lender
may consent thereto in writing.
8. Successors
and Assigns. Subject
to the terms and conditions
contained herein, the provisions of this
Note shall inure to the benefit of
and shall be binding upon the assigns,
successors in interest, or personal
representatives of the Borrower and the
Lender, respectively.
9. Costs of
Collection. In the
event of any failure on the
part of the Borrower to repay all or any
portion of this Note when the same is
due, the Lender shall be entitled to
recover from the Borrower all costs of
collecting the same, including but not
limited to reasonable attorneys' fees
and other costs of suit.
10. Severability.
Every provision in
this Note is intended to
be severable. In the event any term or provision
hereof is declared by a
court of competent jurisdiction to be
illegal or invalid for any reason
whatsoever, such illegality or invalidity
shall not affect the balance of the
terms and provisions hereof, which terms
and provisions shall remain binding
and enforceable.
11. Governing Law.
This Note shall be
governed by and
interpreted in accordance with the laws of
the State of Kentucky without
reference to the State's conflict of laws
provisions, and venue of any legal
actions brought to enforce or to interpret
the terms of this Note shall be in
Jefferson County, Kentucky.
12. Time is of the
Essence. Time is of
the essence of this
Note.
IN WITNESS WHEREOF, the Borrower executed this Note as of the
date
first written above.
"BORROWER":
OMNI MEDICAL SERVICES, INC. ,
a South Dakota corporation
By:/s/Arthur D. Lyons
Arthur D. Lyons, its President
"GUARANTOR":
OMNI HOLDINGS, INC. ,
a South Dakota corporation
By:/s/Arthur D. Lyons
Arthur D. Lyons, its President
<PAGE>
SECURITY AGREEMENT
THIS SECURITY
AGREEMENT (this "Agreement") is entered into as of June
December 1, 2003 (the "Effective Date"), by
and between OMNI MEDICALSERVICES,
INC. a South Dakota corporation whose
address is 2843 Samco Road,
Suite A, Rapid City, SD 57702 (the
"Debtor"), and Marlene McCoy, an individual
whose address is 9213 Springbrooke Circle,
Louisville, KY 40241 (the "Secured
Party").
Recitals
A. Concurrently herewith, the
Debtor is securing from the Secured
Party the Secured Party's covenant not to
compete with the Debtor, as
described more particularly in that certain
Asset Purchase Agreement between
the parties dated as of June 30, 2003 (the
"Asset Purchase Agreement"). The
purchase price for that covenant shall be
paid pursuant to a promissory note
dated the same date as this Agreement (the
"Note"), made by the Debtor
promising to pay to the order of the
Secured Party the principal amount of
$240,000.00, plus interest.
B. The Debtor wishes to secure
its obligations under the Note by
providing the Secured Party with a security
interest in certain of the assets
being purchased under the Asset Purchase
Agreement, as described in this
Agreement.
Agreement
NOW, THEREFORE,
in consideration of the mutual promises contained in
this Agreement, and for other valuable
consideration, the receipt and adequacy
of which are acknowledged, the parties
agree as follows:
1. Grant of Security Interest.
To induce the Secured
Party to accept
the Note, the Debtor hereby collaterally
assigns to the Secured Party (and
grants to the Secured Party, pursuant to
the Kentucky Uniform Commercial Code,
a security interest in) any and all of the
Debtor's right, title and interest,
whether now existing or hereafter arising,
in and to the collateral described
in Schedule "1" attached hereto and
incorporated herein (the "Collateral"):
During the first twelve month period, all
equipment, client accounts and cash
flow generated from those accounts will be
assigned as collateral. In the
ensuing second twelve month period, only
the client accounts and cash flow
will be assigned, with no liens or claims
to any equipment during that period.
2. Obligations. The collateral assignment and
security interest
described in paragraph 1 above are granted
as security for the following
obligations (the "Obligations"):
2.1 Payment to the
Secured Party of all amounts payable pur
