1
EXHIBIT 10.6
PROMISSORY NOTE
$225,000.00 ISSUED AS OF THE 12 DAY OF JUNE, 1998 FREMONT, CALIFORNIA
FOR VALUE RECEIVED, NHANCEMENT TECHNOLOGIES INC., A DELAWARE
CORPORATION ("DEBTOR"), hereby promises to pay (in lawful money of the United
States of America) to the order of DOUGLAS S. ZORN ("LENDER"), at such other
place as Lender or a future holder hereof (Lender or such other holder being
sometimes referenced herein as "HOLDER") may from time to time designate in
writing, the principal sum of TWO HUNDRED AND TWENTY-FIVE THOUSAND ($225,000.00)
together with interest on the unpaid principal balance hereof, all as specified
below. All payments made hereon shall be applied first to the payment of all
unpaid accrued interest (at the rates specified herein) to the date of payment
and the balance, if any, (after deduction of any other charges due from Debtor)
shall be applied to the payment of principal. Interest shall thereupon cease on
the principal so credited. All interest accruing at the annual percentage rates
specified herein shall be calculated on the basis of a Three Hundred Sixty-Five
(365) day year and actual days elapsed and any such accrued interest which is
not paid when due shall be added to unpaid principal and shall thereafter bear
interest in the same manner as the unpaid principal balance hereof.
Additionally, notwithstanding any provision of this Note, it is the intent and
agreement of the Lender in the event any interest specified herein is found to
violate any applicable law or regulation, that this Note shall be construed or
deemed amended so that the interest is reduced to the extent necessary to comply
with such applicable law or regulation.
1. PAYMENTS OF PRINCIPAL AND INTEREST.
1.1 PAYMENTS. During the term hereof, the principal amount hereof, from
time to time outstanding, shall bear interest at the rate of Ten percent (10%)
per annum (the "STANDARD RATE"). Principal and all interest shall be all due and
payable ninety (90) days from the issue date hereof ("MATURITY DATE"), and shall
include any of the following that apply: (1) all accrued interest at the
Standard Rate which has not been paid when due, (2) all principal remaining
unpaid and (3) any unpaid late charges and other amounts chargeable against
Debtor pursuant to the terms hereof (as defined below).
1.2 PREPAYMENT. The indebtedness hereunder may be prepaid in whole or
in part at any time, without penalty or premium and in principal amounts of
$5,000 or more, all at the election of Debtor.
2. EVENTS OF DEFAULT.
The occurrence of the failure to cure any default in payment of
principal or interest due pursuant to the terms hereof within five (5) days
after Holder gives notice of such default shall be deemed to be an event of
default ("EVENT OF DEFAULT").
3. ACCELERATION AND LATE CHARGE.
3.1 ACCELERATION. Upon the occurrence of Event of Default, the entire
payoff balance then applicable (an amount equal to the sum of unpaid principal,
accrued and unpaid interest at the annual rates specified herein) shall become
immediately due and payable.
3.2 LATE CHARGES. In the event any installment of principal or interest
shall become overdue for a period in excess of five (5) calendar days after the
due date, the Holder may, at its option, charge a "late charge" of five cents
for each dollar so overdue. In connection therewith, Debtor and Lender, by its
acceptance of this Note, agree as follows: (1) such late payment will cause
Holder to incur administrative costs, collection costs, loss of interest, and
other direct and indirect costs in uncertain amounts, (2) it would be
impractical or extremely difficult to fix the exact amount of such costs in such
event, (3) the late charge is a reasonable estimate of such costs and is fair
compensation to Holder for its anticipated losses and additional risks resulting
from such late payment, and (4) without limiting its rights to recover such
installment and to exercise all other rights under this Note, Lender agrees to
accept such late charge in lieu of its right to recover its actual damages
resulting from such late payment.
2
Promissory Note
NHancement Technologies Inc.
Page 2
4. MISCELLANEOUS PROVISIONS.
4.1 ATTORNEYS' FEES. Should suit be brought to enforce, interpret or
collect any part of this Note, the Holder shall be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees and
other costs of enforcement and collection.
4.2 JURISDICTION. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, U.S.A.
(IRRESPECTIVE OF ITS CHOICE OF LAW PRINCIPLES. EXCEPT AS SET FORTH BELOW, HOLDER
AND DEBTOR HEREBY AGREE THAT ANY SUIT TO ENFORCE ANY PROVISION OF, OR TO
COLLECT, THIS NOTE SHALL BE BROUGHT IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA. EXCEPT AS SET FORTH BELOW, EACH PARTY HEREBY
AGREES THAT SUCH COURT SHALL HAVE EXCLUSIVE IN PERSONAM JURISDICTION AND VENUE
WITH RESPECT TO SUCH PARTY, AND EACH PARTY HEREBY SUBMITS TO THE EXCLUSIVE IN
PERSONAM JURISDICTION AND VENUE OF SUCH COURT.
4.3 WAIVER OF TRIAL BY JURY. LENDER AND DEBTOR HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR ANY OTHER DEBT
INSTRUMENT OR THE CONDUCT OF THE RELATIONSHIP BETWEEN LENDER AND DEBTOR.
4.4 OBLIGATION UNCONDITIONAL. No provision of this Note shall alter,
impair or render conditional the payment obligations of Debtor, which are
absolute and unconditional, to pay the principal and interest on this Note at
the place and at the respective times herein prescribed. Debtor shall in all
events remain absolutely and unconditionally liable for the payment and
performance of all its obligations under the Note to fully satisfy all amounts
due Holder pursuant to the Note in the case of Event of Default by Debtor.
4.5 DEBTOR'S WAIVERS. Except as expressly provided to the contrary
herein, Debtor (and all guarantors, endorsers and other parties now or hereafter
becoming liable for the payment of this Note) hereby waives diligence,
presentment, protest, demand of payment, notice of protest, dishonor and
nonpayment, and waives the legal effect of Holder's failure to give all notices
not expressly provided for herein. Debtor expressly agrees that, without in any
way affecting the liability of Debtor hereunder, the Holder may extend the
Maturity Date or the time for payment of any amount due hereunder, accept
additional security, release any party liable hereunder, and release any
security now or hereafter securing this Note. Debtor further waives, to the full
extent permitted by law, the right to plead any and all statutes of limitation
as a defense to any demand on this Note, or on any agreement now or hereafter
securing this Note.
4.6 LOSS OR DESTRUCTION. Upon receipt of evidence reasonably
satisfactory to Debtor of the loss or mutilation of this Note, Debtor will
execute and deliver, in substitution hereof, a replacement note.
4.7 SEVERANCE. Every provision of this Note is intended to be
severable. In the event any term or provision hereof is declared to be illegal
or invalid for any reason by a court of competent jurisdiction, such illegality
or invalidity shall not affect the balance of the terms and provisions hereof,
which terms and provisions shall remain binding and enforceable. Lender and
Debtor further agree to replace any such void or unenforceable provision of this
Note with valid and enforceable provisions which will achieve, to the extent
possible, the economic, business and other purposes of the void or unenforceable
provision.
4.8 WAIVERS AND DELAYS BY HOLDER TO BE STRICTLY LIMITED. Any waiver,
express or implied, of any breach or default hereunder shall not be considered a
waiver of any subsequent or different breach or default. No delay or omission on
the part of Holder in exercising any right under this Note shall operate as a
waiver of such right or of any other right of the Holder hereunder.
3
Promissory Note
NHancement Technologies Inc.
Page 3
4.9 MODIFICATION. No provision of this Note may be waived, modified or
discharged other than by an express writing signed by the party against whom
enforcement of such waiver, modification or discharge is sought.
DEBTOR:
NHANCEMENT TECHNOLOGIES INC.
By: /s/ Esmond T. Goei
-------------------------------------
Esmond T. Goei
President and Chief Executive Officer