Unassociated Document


    EXHIBIT
      4.50.1

    
 

    AMENDMENT
      

    TO

    12%
      SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE
      AGREEMENT

    


    THIS
      AMENDMENT TO 12% SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT
      (this “Amendment”)
      is
      made and entered into as of October 25, 2005, by and among e.Digital
      Corporation, a Delaware corporation (the “Company”),
      and
      each of those persons and entities, severally and not jointly, whose names
      are
      set forth on the Schedule of Purchasers attached hereto as Exhibit A (which
      persons and entities are hereinafter collectively referred to as “Purchasers”
      and
      each individually as a “Purchaser”).

    


    R E C I T A L S

    


    A. Whereas,
      the Company has previously entered into that certain 12% Subordinated Promissory
      Note and Warrant Purchase Agreement dated on or about July 1, 2004 (the
“Agreement”)
      and,
      in connection therewith, issued to Purchasers certain 12% Subordinated
      Promissory Note (individually, a “Note”
      and
      collectively, the “Notes”)
      and
      certain Stock Purchase Warrants of even date (individually, a “Warrant”
      and
      collectively, the “Warrants”);
      

    


    B. 
      Whereas,
      holders of at least fifty-one percent (51%) in the aggregate principal amount
      of
      the Notes outstanding may amend, modify and/or waive certain requirements and
      obligations of the Company under the Agreement and bind all Purchasers with
      respect to such amendment, modification and waiver; 

    


    C. Whereas,
      the Company desires to amend, modify and/or waive certain requirements and
      obligations of the Company under the Agreement and Purchaser, consents to such
      modification as set forth herein.

    


    NOW,
      THEREFORE, for a valuable consideration, the receipt and adequacy of which
      is
      hereby acknowledged, the parties hereto agree as follows:

    


    1.  Aggregate
      Principal Amount.
      The
      Company is hereby authorized to issue an additional $500,000 in principal amount
      of Notes. In connection therewith, the aggregate principal amount of Notes
      referenced in (i) the first unnumbered Recital and (ii) Section 7 of the
      Agreement, is hereby increased from $1,000,000 to $1,500,000. Section 2.3 is
      hereby revised to delete the phrase “June 30, 2004” and replace it with November
      30, 2005.” No increase in the number of Warrants is authorized by this
      Amendment.

    


    2.  Amendments
      to Note.
      Exhibit
      B is hereby deleted in its entirety and replaced with the Amended and Restated
      12% Subordinated Promissory Note attached hereto as Exhibit A. Purchasers hereby
      consent to the revised terms contained therein including, without limitation,
      (i) a “Maturity
      Date”
      of
      December 31, 2006, (ii) amended “conversion” rights and (iii) a royalty to be
      paid solely to the purchasers of the additional $500,000 in Notes (the
“Additional
      Notes”)
      as
      consideration for the additional financing necessary for the development of
      the
      Company’s new MedeViewer product, which shall, in the aggregate, shall be equal
      to up to Twenty Dollars ($20.00) for each MedeViewer sold for a period of three
      years (the “Royalty”).
      Purchaser hereby consents to the payment of the aggregate Royalty to the holders
      of the Additional Notes pro rata. Purchaser understands that Purchaser will
      not
      receive the Royalty unless Purchaser is a purchaser of Additional
      Notes.

    


    3.  Effective
      Amendment.
      Except
      as expressly modified, altered or supplemented herein, all of the provisions
      of
      the Note remain in full force and effect; provided,
      however,
      that in
      the event of any conflict between the provisions of the Note and the provisions
      of this Amendment, the provisions of this Amendment shall control.

    


    4.  Counterparts.
      This
      Amendment may be executed in two or more counterparts each of which shall be
      deemed an original but all of which taken together shall constitute but one
      and
      the same Amendment.

    


    IN
      WITNESS WHEREOF, the parties hereto have duly executed this Amendment to 12%
      Subordinated Promissory Note and Warrant Purchase Agreement as of the date
      first
      above written.

     

    [SIGNATURE
      PAGE FOLLOWS]

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    


    SIGNATURE
      PAGE 

    TO

    AMENDMENT

    TO

    12%
      SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE
      AGREEMENT

    


    


    


    
      	“COMPANY”	 	“PURCHASER”
	E.DIGITAL CORPORATION	 	 
	13114 Evening Creek Drive South	 	Name
	San Diego, California 92128	 	 
	 	 	By:
              ____________________________
	By: ____________________________	 	 
	
              Robert
                Putnam

            	 	Title: ____________________________
	
              Senior
                Vice President and Secretary 

            	 	 
	 	 	Address:
              ____________________________
	 	 	 


    

     

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

        
        

      

    

    



    EXHIBIT
      A

    NOTE
      SERIES 04-A

    


    THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
      AS
      AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS, AND IS A “RESTRICTED
      SECURITY” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THIS NOTE MAY NOT
      BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
      EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR AN OPINION
      OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION
      IS AVAILABLE.

    


    THIS
      NOTE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN THAT CERTAIN
      12% SUBORDINATED PROMISSORY NOTE AND WARRANT PURCHASE AGREEMENT (“PURCHASE
      AGREEMENT”) THEREFOR BETWEEN THE COMPANY AND THE ORIGINAL HOLDER
      HEREOF.

    


    (ALL
      AMOUNTS IN U.S. DOLLARS)

    


    E.DIGITAL
      CORPORATION

    


    AMENDED
      AND RESTATED

    12%
      SUBORDINATED PROMISSORY NOTE

    


    Due
      December 31, 2006

     

    
 

    
      	Note Date: _________________	 	
              US$_____________.
00

            
	San Diego, California	 	 
	 	 	 


    

      

    FOR
      VALUE
      RECEIVED, e.Digital Corporation, the undersigned Delaware corporation (together
      with all successors, the “Company”),
      hereby promises to pay to the order of

    


    Payee:  

    or
      his,
      her or its successors or assigns 

    (collectively,
      “Noteholder”)
      at

    


    Address:

    


    


    or
      at
      such other address or addresses as Noteholder may subsequently designate in
      writing to the Company, the principal sum of ________________ and NO/100 Dollars
      ($______________.00), due and payable in one installment on December 31, 2006
      (“Maturity
      Date”),
      plus
      simple interest thereon at the rate of twelve percent (12.00%) per annum, in
      lawful monies of the United States of America. Interest shall be paid in monthly
      installments on or before the first day of each month, computed on the basis
      of
      a 360 day year and a 30 day month. If the Maturity Date should fall on a weekend
      or national holiday, payment shall be due on the following business day. This
      Note is one of a duly authorized issue of Notes of the Company designated as
      its
      12% Subordinated Promissory Notes (herein called the “Notes”),
      limited in aggregate principal amount to $1,500,000.

     

    1.  Payment.
      Any
      payment shall be deemed timely made if received by Noteholder within fifteen
      (15) calendar days of the due date. Payments received shall be imputed first
      to
      late or penalty charges, if any, then due, next to interest payments then due,
      and next to the remaining unpaid principal balance.

     

    An
      “Event
      of Default”
      occurs
      if (a) the Company does not make the payment of interest or principal of this
      Note when the same becomes due and payable and such default shall continue
      for a
      period of fifteen (15) calendar days, (b) the Company fails to comply with
      any
      of its other agreements in this Note that do not otherwise have separate
      remedies or provisions and such failure continues for the period and after
      the
      notice specified below, (c) 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 or (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 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. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    A
      default
      above is not an Event of Default until the holders of at least 25% in aggregate
      principal amount of the Notes then outstanding notify the Company of such
      default and the Company does not cure it within sixty (60) days after receipt
      of
      such notice, which must specify the default, demand that it be remedied and
      state that it is a “Notice
      of Default.”
      If an
      Event of Default occurs and is continuing, the Noteholder hereof by notice
      to
      the Company, may declare the principal of and accrued interest on this Note
      to
      be due and payable immediately; provided, however, that the holders of at least
      51% in aggregate principal amount of the Notes then outstanding, by written
      notice to the Company, may rescind and annul such declaration and its
      consequences.

     

    2.  Prepayment.
      The
      Company may prepay this Note at any time and from time to time, in whole or
      in
      part, without the prior written agreement of Noteholder, upon payment of a
      prepayment fee equal to thirty days’ interest (on the portion of principal that
      is being prepaid). Any prepayment of this Note shall be applied first against
      any prepayment fee, then against accrued interest and then against principal.
      Upon payment in full of the principal amount of this Note and interest thereon,
      the Noteholder shall surrender this Note for cancellation. The Company shall
      only make principal reductions or prepayments pro rata among the Noteholders
      of
      this series. Likewise any Noteholder who receives any payments or proceeds
      from
      any enforcement of a security interest or any distribution in connection with
      a
      bankruptcy, liquidation, reorganization, dissolution, winding-up or similar
      proceedings, shall be obligated to pro rate such amounts among the other
      Noteholders of this series as provided in the Purchase Agreement between the
      Company and the original holder hereof.

     

    3.  Intercreditor
      Agreement.
      Relationships between the Noteholder and each of the other Noteholders shall
      be
      determined pursuant to the intercreditor agreements set forth in Section 7
      of
      the 12% Subordinated Promissory Note and Warrant Purchase Agreement of even
      date
      (the “Purchase
      Agreement”)
      and
      Sections 1 and 2 herein on a pari
      passu
      basis.


     

    4.  Warrants.
      This
      Note is being issued in conjunction with certain warrants. A portion of the
      original issue price of this investment unit (consisting of this Note and its
      associated warrants) has been allocated to these warrants. The original issue
      price of this Note is therefore less than its principal amount. Because the
      excess of the principal amount of this Note over its original issue price is
      less than (a) one-quarter of one percent of this Note’s principal amount (b)
      multiplied by the number of complete years to this Note’s maturity, this Note
      will not have “original
      issue discount”
      as that
      phrase is defined for United States income tax purposes. Any Noteholder may
      contact the Company’s Chief Financial Officer, Treasurer or Chief Accounting
      Officer at its principal office (or such other address as the Company shall
      subsequently furnish to the Noteholder) for further information concerning
      the
      computation of original issue discount under the terms of this
      Note.

     

    5.  Conversion.

     

    5.1 Voluntary
      Conversion.
      Any
      Noteholder of this Note has the right, at the Noteholder’s option, at any time
      beginning forty-eight (48) hours after the date of the Note, and prior to
      payment in full of the principal balance of this Note at Maturity or any
      prepayment date, to convert this Note, in accordance with the provisions of
      Section 5.2.1 hereof, in whole or in part, into fully paid and nonassessable
      shares of common stock, $.001 par value per share, of the Company (the “Common
      Stock”). The number of shares of Common Stock into which this Note may be
      converted (“Conversion Shares”) shall be determined by dividing the aggregate
      principal amount of the Note by the Conversion Price (as defined below) in
      effect at the time of such conversion. The initial Conversion Price shall be
      equal to nineteen cents ($0.19).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    5.2 Conversion
      Procedure.

     

    5.2.1 Notice
      of Conversion Pursuant to Section 5.1.
      Before
      the Noteholder shall be entitled to voluntarily convert this Note into shares
      of
      Common Stock, it shall surrender this Note at the office of the Company and
      shall give five day advance written notice by mail, postage prepaid, to the
      Company at its principal corporate office, of the election to convert the same
      pursuant to this Section 5.2, and shall state therein the name or names in
      which
      the certificate or certificates for shares of Common Stock are to be issued.
      Unless waived by the Company in its sole discretion, the minimum conversion
      amount accepted by the Company for conversion hereunder shall be the lesser
      of:
      a $25,000 principal balance on the Noteholder’s Note, or the remaining principal
      balance on the Noteholder’s Note. The Company shall, as soon as practicable
      after the fifth day from the date of the written notice, issue and deliver
      at
      such office to the Noteholder of this Note a certificate or certificates for
      the
      number of shares of Common Stock to which the Noteholder of this Note shall
      be
      entitled as aforesaid. Such conversion shall be deemed to have been made on
      the
      close of business on the fifth day from the date of written notice, and the
      person or persons entitled to receive the shares of Common Stock issuable upon
      such conversion shall be treated for all purposes as the record holder or
      holders of such shares of Common Stock as of such date.

     

    5.2.2 Delivery
      of Stock Certificates.
      As
      promptly as practicable after the conversion of this Note, the Company at its
      expense will issue and deliver to the Noteholder of this Note a certificate
      or
      certificates for the number of full shares of Common Stock issuable upon such
      conversion.

     

    5.3 Mechanics
      and Effect of Conversion.
      No
      fractional shares of Common Stock shall be issued upon conversion of this Note.
      In lieu of the Company issuing any fractional shares to the Noteholder upon
      the
      conversion of this Note, the Company shall pay to the Noteholder the amount
      of
      outstanding principal that is not so converted, such payment to be in the form
      as provided below. Upon the conversion of this Note pursuant to Section 5.1
      above, the Noteholder shall surrender this Note, duly endorsed, at the principal
      office of the Company. At its expense, the Company shall, as soon as practicable
      after the notice period, issue and deliver to such Noteholder at such principal
      office a certificate or certificates for the number of shares of such Common
      Stock to which the Noteholder shall be entitled upon such conversion (bearing
      such legends as are required hereby and by applicable state and federal
      securities laws in the opinion of counsel to the Company), together with any
      other securities and property to which the Noteholder is entitled upon such
      conversion under the terms of this Note, including a check payable to the
      Noteholder for any cash amounts payable as described above. Upon conversion
      of
      this Note and irrespective of whether the Noteholder complies with its
      obligation under this paragraph to surrender the endorsed Note to the Company,
      the Company shall be forever released from all its obligations and liabilities
      under this Note, except that the Company shall be obligated to pay the
      Noteholder, within thirty (30) days after the date of such conversion, any
      interest accrued and unpaid to and including the date of such conversion, and
      no
      more.

     

    5.4 Conversion
      Price Adjustments.

     

    5.4.1 Shares
      Issued for Less Than Conversion Price.
      If at
      any time or from time to time prior to the Maturity Date, the Company sells
      any
      Common Stock or any indebtedness, bonds, debentures, notes, preferred stock
      or
      similar equity securities which are convertible into or exercisable for Common
      Stock at a price less than the Conversion Price, the Conversion Price shall
      thereupon be reduced to such lesser price. Notwithstanding anything to the
      contrary herein, the provisions of this Section 5.4 shall not apply to any
      such
      securities issued or to be issued pursuant to (i) securities issued to
      employees, consultants, officers or directors of the Company pursuant to any
      stock option, stock purchase or stock bonus plan, agreement or arrangement
      approved by the Board of Directors; (ii) securities issued pursuant to the
      acquisition of another business entity or business segment of any such entity
      by
      the Company by merger, purchase of substantially all of the assets or other
      reorganization whereby the Company will own more than fifty (50%) of the voting
      power of such business segment of any such entity; (iii) securities issued
      to
      vendors or customers or to other persons in similar commercial situations with
      the Company if such issuance is approved by the Board of Directors; (iv)
      securities issued in corporate partnering transactions on terms approved by
      the
      Board of Directors; (v) securities issued in accordance with the terms of any
      of
      the Company’s preferred stock or warrants outstanding on the date hereof, if
      any; and (vi) borrowings, direct or indirect, from financial institutions
      regularly engaged in the business of lending money, whether or not presently
      authorized with an equity component which is not a major component of such
      borrowing. Notwithstanding anything to the contrary herein, the provisions
      of
      this Section 5.4 shall not apply to the first $100,000 in proceeds received
      by
      the Company from the sale of any Common Stock or any securities convertible
      into
      or exercisable for Common Stock or similar equity securities sold in any
      successive 180-day period beginning on the date of this Note and continuing
      through the Maturity Date. For example, to demonstrate the operation of the
      preceding sentence, the Company may sell such equity securities and receive
      $100,000 in the first 180-day period after the date of this Note, and after
      the
      expiration of the first 180-day period may sell another $100,000 in such
      securities during the succeeding 180-day period and the $200,000 in total
      proceeds received from the sales in both such transactions shall not apply
      to
      and shall be exempt from the operation of this Section 5.4. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.5 Adjustments
      for Stock Splits and Subdivisions.
      In the
      event the Company should at any time or from time to time after the date of
      issuance hereof fix a record date for the effectuation of a split or subdivision
      of the outstanding shares of Common Stock or the determination of holders of
      Common Stock entitled to receive a dividend or other distribution payable in
      additional shares of Common Stock or other securities or rights convertible
      into, or entitling the holder thereof to receive directly or indirectly,
      additional shares of Common Stock (hereinafter referred to as “Common Stock
      Equivalents”) without payment of any consideration by such holder for the
      additional shares of Common Stock or the Common Stock Equivalents (including
      the
      additional shares of Common Stock issuable upon conversion or exercise thereof),
      then, as of such record date (or the date of such dividend distribution, split
      or subdivision if no record date is fixed), the Conversion Price of this Note
      shall be appropriately decreased so that the number of shares of Common Stock
      issuable upon conversion of this Note shall be increased in proportion to such
      increase of outstanding shares.

     

    5.6 Adjustment
      for Reverse Stock Splits.
      If the
      number of shares of Common Stock outstanding at any time after the date hereof
      is decreased by a combination of the outstanding shares of Common Stock, then,
      following the record date of such combination, the Conversion Price for this
      Note shall be appropriately increased so that the number of shares of Common
      Stock issuable on conversion hereof shall be decreased in proportion to such
      decrease in outstanding shares. 

     

    6.  Subordination.
      The
      indebtedness evidenced by this Note is hereby expressly subordinated, to the
      extent and in the manner hereinafter set forth, in right of payment to the
      prior
      payment in full of all of the Company’s Senior Indebtedness, as hereinafter
      defined; provided, however, that the maximum aggregate amount of the Company’s
      Senior Indebtedness to which the indebtedness evidenced by this Note shall
      be
      subordinated shall not exceed One Million Dollars ($1,000,000). The Company
      may,
      however, in its sole and absolute discretion, incur and/or have outstanding
      from
      time to time Senior Indebtedness in excess of the amount stated in the
      immediately preceding sentence, and the existence of such Senior Indebtedness
      shall not diminish in any way the subordination of the indebtedness evidenced
      by
      this Note.

     

    As
      used
      in this Note, the term “Senior
      Indebtedness”
      shall
      mean the principal of and unpaid accrued interest on: (a) all indebtedness
      of
      the Company to banks, insurance companies or other financial institutions
      regularly engaged in the business of lending money, which is for money borrowed
      by the Company (whether or not secured and whether or not existing as of the
      date of this Note or hereafter incurred); (b) the 15% Unsecured Promissory
      Note
      in the original principal amount of $750,000 issued by the Company on December
      11, 2002, as amended (the “15%
      Unsecured Note”);
      and
      (c) any such indebtedness issued in exchange for such Senior Indebtedness,
      or
      any indebtedness arising from the satisfaction of such Senior Indebtedness
      by a
      guarantor.

     

    If
      there
      should occur any receivership, insolvency, assignment for the benefit of
      creditors, bankruptcy, reorganization or arrangement with creditors (whether
      or
      not pursuant to bankruptcy or other insolvency laws), sale of all or
      substantially all of the assets, dissolution, liquidation or any other
      marshalling of the assets and liabilities of the Company, or if this Note shall
      be declared due and payable upon the occurrence of an event of default with
      respect to any Senior Indebtedness, then (a) no amount shall be paid by the
      Company in respect of the principal of or interest on this Note at the time
      outstanding, unless and until the principal and interest on the Senior
      Indebtedness then outstanding shall be paid in full; and (b) no claim or proof
      of claim shall be filed with the Company by or on behalf of the Noteholder
      that
      shall assert any right to receive any payments in respect of the principal
      of
      and interest on this Note, except subject to the payment in full of the
      principal of and interest on all of the Senior Indebtedness then outstanding.
      If
      there occurs an event of default that has been declared in writing with respect
      to any Senior Indebtedness, or in the instrument under which any Senior
      Indebtedness is outstanding, permitting the holder of such Senior Indebtedness
      to accelerate the maturity thereof, then, unless and until such event of default
      shall have been cured and waived or shall have ceased to exist, or all Senior
      Indebtedness shall have been paid in full, no payment shall be made in respect
      of the principal of or interest on this Note, unless within three (3) months
      after the happening of such event of default, the maturity of such Senior
      Indebtedness shall not have been accelerated.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Subject
      to the rights, if any, of the holders of Senior Indebtedness under this Section
      6 to receive cash, securities and other properties otherwise payable or
      deliverable to the Noteholder, nothing contained in this Section 6 shall impair,
      as between the Company and the Noteholder, the obligation of the Company,
      subject to the terms and conditions hereof, to pay to the Noteholder the
      principal hereof and interest hereon as and when the same become due and
      payable, or shall prevent the Noteholder, upon default hereunder, from
      exercising all rights, powers and remedies otherwise provided herein or by
      applicable law.

     

    Subject
      to the payment in full of all Senior Indebtedness and until this Note shall
      be
      paid in full, the Noteholder shall be subrogated to the rights of the holders
      of
      Senior Indebtedness (to the extent of payments or distributions previously
      made
      to such holders of Senior Indebtedness pursuant to the provisions of this
      Section 6) to receive payments or distributions of assets of the Company
      applicable to the Senior Indebtedness. No such payments or distributions
      applicable to the Senior Indebtedness shall, as between the Company and its
      creditors, other than the holders of Senior Indebtedness and the Noteholder,
      be
      deemed to be a payment by the Company to or on account of this Note; and for
      the
      purposes of such subrogation, no payments or distributions to the holders of
      Senior Indebtedness to which the Noteholder would be entitled except for the
      provisions of this Section 6 shall, as between the Company and its creditors,
      other than the holders of Senior Indebtedness and the Noteholder, be deemed
      to
      be a payment by the Company to or on account of the Senior
      Indebtedness.

     

    By
      its
      acceptance of this Note, the Noteholder agrees to execute and deliver such
      documents as may be requested from time to time by the Company or the lender
      of
      any Senior Indebtedness in order to implement the foregoing provisions of this
      Section 6.

     

    7.  Replacement.
      If this
      Note becomes worn, defaced or mutilated but is still substantially intact and
      recognizable, the Company or its agent may issue a new Note in lieu hereof
      upon
      its surrender. Where the Noteholder claims that the Note has been lost,
      destroyed or wrongfully taken, the Company shall issue a new Note of like tenor
      in place of the original Note if the Noteholder so requests by written notice
      to
      the Company together with an affidavit of the Noteholder setting forth the
      facts
      concerning such loss, destruction or wrongful taking and such other information
      in such form with such proof or verification as the Company may request. The
      Company in addition may require, at its sole discretion, indemnification and/or
      an indemnity bond in such amount and issued by such surety as the Company deems
      satisfactory.

     

    8.  Attorneys
      Fees.
      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 default, the Company agrees
      to
      pay, in addition to the principal and interest payable hereunder, reasonable
      attorneys’ fees and costs incurred by the Noteholder.

     

    9.  Notice.
      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 Noteholder,
      at 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. 

     

    10.  Waiver.
      The
      Company hereby waives present, 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. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    11.  Governing
      Law.
      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.

     

    12.  Severability.
      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 Agreement.

     

    13.  Royalty.
      Noteholders acquiring Notes on or after October 26, 2005 shall be entitled
      to
      receive a royalty (“Royalty”) equal to (i) the principal of this Note divided by
      (ii) $500,000 (the aggregate principal of the additional Notes sold concurrently
      herewith) (the “Additional Notes”) multiplied by (iii) Twenty Dollars ($20.00)
      for each MedeViewer sold during calendar years 2006, 2007 and 2008. The Royalty
      shall be paid quarterly to holders of the Additional Notes in lieu of warrants
      referenced in Section 4. 

     

    IN
      WITNESS WHEREOF,
      the
      undersigned Company has executed this Note and has affixed hereto its corporate
      seal.

     

    
      
        	 	 	 
	 	E.DIGITAL
                CORPORATION,
	 	a Delaware corporation
	 
 	 
 	 
 
	Date: 	By:  	 
	 	
                
Robert
                Putnam
	 	Vice
                President and Secretary