Unassociated Document


     

    Exhibit
      4.51.2

     

    SECOND
      AMENDMENT

    TO

    12%
      SUBORDINATED PROMISSORY NOTE

    


    THIS
      SECOND AMENDMENT TO 12% SUBORDINATED PROMISSORY NOTE (this “Amendment”) is made
      and entered into as of October 25, 2005, by E.DIGITAL
      CORPORATION,
      a
      Delaware corporation (“Maker”) in favor of [_____________________________],
      or its
      registered assigns (“Payee”). 

    


    R E C I T
 A L S

    


    A. Whereas,
      Maker has previously executed and delivered to Payee that certain 12%
      Subordinated Promissory Note dated on or about July 1, 2004 (the “Note”) and, in
      connection therewith, issued to Payee a Stock Purchase Warrant of even date
      (the
“Warrant”); 

    


    B. Whereas,
      Payee is one of several holders of the 12% Subordinated Promissory Notes
      (collectively, the “Notes”) and one of several holders of Stock Purchase
      Warrants (collectively, the “Warrants”);

    


    C. 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 Maker under the 12% Subordinated Promissory Notes and bind
      all holders with respect to such amendment, modification and waiver;


    


    D. Whereas,
      the terms of the 12% Subordinated Promissory Notes were previously amended
      on
      June 30, 2005 to extend the Maturity Date from July 1, 2005 to December 31,
      2005
      and adjust the exercise price of the Warrants; and 

    


    E. Whereas,
      Maker desires to further amend, modify and/or waive certain requirements and
      obligations of the Maker under the 12% Subordinated Promissory Notes and Payee,
      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.  Maturity
      Date.
      The
“Maturity Date” referenced in the first unnumbered paragraph of the Note, as
      amended, is hereby extended from December 31, 2005 to December 31,
      2006.

    


    2.  Aggregate
      Principal Amount.
      Maker
      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 the first unnumbered paragraph of the Note, as amended, is hereby
      increased from $1,000,000 to $1,500,000. . No increase in the number of Warrants
      is authorized by this Amendment.

    


    3.  Royalty
      for New Financing.
      Payee
      understands that Maker intends to offer purchasers of the additional $500,000
      in
      Notes (the “Additional Notes”) a royalty as consideration for the additional
      financing necessary for the development of its new MedeViewer product and that
      such royalty, 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”). Payee
      hereby consents to the payment of the aggregate Royalty to the holders of the
      Additional Notes pro rata. Payee understands that Payee will not receive the
      Royalty unless Payee is a purchaser of Additional Notes.

    


    4.  Conversion.
      Paragraph 5 of the Note is hereby is hereby deleted in its entirety and replaced
      with provisions set forth on Exhibit A attached hereto.

    


    5.  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.

    


    
      
         

      

      
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    6.  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 Second Amendment
      to
      12% Subordinated Promissory Note as of the date first above
      written.

    


    [SIGNATURE
      PAGE FOLLOWS]


    
      
         

      

      
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    SIGNATURE
      PAGE 

    TO

    SECOND
      AMENDMENT

    TO

    12%
      SUBORDINATED PROMISSORY NOTE

    


    


    


    
      	“MAKER”	 	“PAYEE”
	 	 	 
	E.DIGITAL CORPORATION	 	Name
	13114 Evening Creek Drive South	 	 
	San Diego, California 92128	 	By: ____________________________
	 	 	Title: ____________________________ 
	By: ____________________________	 	Address:
              ____________________________
	
              Robert
                Putnam

            	 	 
	
              Senior
                Vice President and Secretary  

            	 	 


    

     

     

    
      
         

      

      
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    EXHIBIT
      A

    


    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. 

    


    
      
         

      

      
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    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. 

    


    
      
         

      

      
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