Promissory Note between e.Digital Corporation and Davric Corporation dated June 30, 2006

Summary

e.Digital Corporation promises to repay Davric Corporation $290,164.36, plus interest, under the terms of this promissory note. Payments are to be made in monthly installments, with a final lump sum due at the end of the year. The note sets an interest rate of 15% per year, increasing to 18% if there is a default. If e.Digital fails to pay or enters bankruptcy, Davric can demand immediate payment of the full amount. The agreement also covers the retirement of previous debts between the parties. The note is governed by California law.

EX-4.40(6) 6 v048312_ex4-406.txt EXHIBIT 4.40.6 (ALL AMOUNTS IN U.S. DOLLARS) E.DIGITAL CORPORATION PROMISSORY NOTE Note Date: June 30, 2006 US $290,164.36 San Diego, California FOR VALUE RECEIVED, e.Digital Corporation, the undersigned Delaware corporation (together with all successors, the "Company"), hereby promises to pay to Davric Corporation, or order ("Noteholder") at 980 American Pacific Drive, Suite #111 Henderson, NV 89014, or at such other address as Noteholder may subsequently designate in writing to the Company, the principal sum of Two Hundred Ninety Thousand One Hundred Sixty Four Dollars and Thirty Six Cents ($290,164.36), together with interest on unpaid principal as provided below. The following is a statement of the rights of the Noteholder and the conditions to which this Note is subject, and to which the Noteholder, by the acceptance of this Note, agrees: 1. The unpaid principal balance of this Note outstanding from time to time shall bear interest from the date hereof until paid at a rate equal to the lower of (a) fifteen percent (15%) per annum; or (b) the maximum legal rate permitted under applicable law. Notwithstanding the foregoing, however, during any period during which there is an uncured Event of Default, as defined below, the unpaid principal balance of this Note outstanding from time to time during that period shall bear interest at a rate equal to the lower of (i) eighteen percent (18%) per annum; or (b) the maximum legal rate permitted under applicable law. Interest shall be computed on a 360 day year and 30 day months. 2. Principal and interest on this Note shall be paid in monthly installments of Five Thousand Dollars ($5,000.00), commencing on July 31, 2006 and continuing on the same day of each calendar month thereafter to and including November 30, 2006, and a final payment of Two Hundred Eighty Six Thousand Six Hundred Sixty Four Dollars and Ninety-Three Cents ($286,664.93) on December 31, 2006; provided, however, that if any of the foregoing dates for any monthly installment falls on a weekend or national holiday, the due date for that installment shall be the following business day. Any payment shall be deemed timely made if received by Noteholder within fifteen (15) calendar days of the due date. All payments made on this Note shall be applied first to accrued interest, and the balance of such payment, if any, shall be applied to principal, and interest shall thereupon cease upon the principal so credited. 3. An "Event of Default" shall occur if (a) the Company does not make any monthly installment on this Note when the same becomes due and payable and such default shall continue for a period of fifteen (15) calendar days; or (b) pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined), the Company: (i) commences a voluntary case; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian (as hereinafter defined) of it or for all or substantially all of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an involuntary case; (B) appoints a Custodian of the Company or for all or substantially all of its property; or (C) orders the liquidation of the Company, and any such order or decree remains unstayed and in effect for a period of sixty (60) days. As used herein, the term "Bankruptcy Law" means Title 11 of the United States Code or any similar federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. 4. If an Event of Default occurs and is continuing, the Noteholder, by written notice to the Company, may declare the principal of and accrued interest on this Note to be due and payable immediately. 5. This Note assumes and therefore retires and cancels in full all amounts due and payable related to the note between the parties dated January 31, 2005 in the original principal amount of $150,000 with an outstanding balance of $121,414.36 as of the effective date of assumption of June 30, 2006. The balance of this note of $168,750.00 incorporates all accrued and unpaid interest as of June 30, 2006 related to that certain September 11, 2002 Note, as amended, between the parties in the principal amount of $750,000. 6. The Company may prepay this Note at any time and from time to time, in whole or in part, without premium or penalty. Upon payment in full of the principal amount of this Note and interest thereon, the Noteholder shall surrender this Note for cancellation. 7. If the indebtedness represented by this Note or any part thereof is collected in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after an Event of Default, the Company agrees to pay, in addition to the principal and interest payable hereunder, reasonable attorneys' fees and costs incurred by the Noteholder. 8. Any notice, demand, consent or other communication hereunder shall be in writing addressed to the Company at its principal office or, in the case of the Noteholder, at the Noteholder's address appearing above, or to such other address as such party shall have theretofore furnished by like notice, and either served personally, sent by express, registered or certified first class mail, postage prepaid, sent by facsimile transmission, or delivered by reputable commercial courier. Such notice shall be deemed given (a) when so personally delivered, or (b) if mailed as aforesaid, five (5) days after the same shall have been posted, or (c) if sent by facsimile transmission, as soon as the sender receives written or telephonic confirmation that the message has been received and such facsimile is followed the same day by mailing by prepaid first class mail, or (d) if delivered by commercial courier, upon receipt. 9. The Company hereby waives presentment, demand for performance, notice of non-performance, protest, notice of protest and notice of dishonor. No delay on the part of Noteholder in exercising any right hereunder shall operate as a waiver of such right or any other right. 10. This Note shall be governed by and construed in accordance with the laws of the State of California applicable to contracts between residents of such state entered into and to be performed entirely within such state. 11. Each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Note. IN WITNESS WHEREOF, the Company has executed this Note and has affixed hereto its corporate seal. "COMPANY" E.DIGITAL CORPORATION, a Delaware corporation By: /s/ WILLIAM BLAKELEY -------------------------------------- Title: President and CTO "NOTEHOLDER" DAVRIC CORPORATION, a Nevada corporation By: /s/ JERRY E. POLIS -------------------------------------- Title: President 2