Exhibit
      4.3

     

    e.Digital
      Corporation

    SPECIAL
      STOCK OPTION GRANT NOTICE

    


        e.Digital
      Corporation (the “Company”) hereby grants to the Optionee named below, an
      employee of the Company, as an inducement material to the Optionee’s continuing
      employment with the Company, a stock option to purchase the number of shares
      of
      the Company’s common stock set forth below. This option is subject to all of the
      terms and conditions as set forth herein and the Stock Option Agreement
      (attached hereto), which is incorporated herein in its entirety.

    

      
        	
                Optionee:

              	
                Alfred
                  Falk

              
	
                Grant
                  No:

              	
                S-03

              
	
                Date
                  of Grant:

              	
                3/30/2006

              
	
                Shares
                  Subject to Option:

              	
                250,000
                  common shares

              
	
                Exercise
                  Price Per Share:

              	
                $0.145

              
	
                Expiration
                  Date:

              	
                3/30/2010

              
	
                Intended
                  to be Incentive Stock Option:

              	
                Yes
                  (Subject to limit)

              
	 	 
	
                VESTING
                  SCHEDULE:

              	 
	
                Vesting
                  Start Date

              	
                Vesting
                  Schedule

              
	
                (Shares
                  vest on 3/30/2008)

              	
                Subject
                  to continuing Service (as defined in the Stock Option Agreement)
                  this
                  option becomes exercisable with respect to the Shares Subject to
                  Option on
                  3/30/2008.

              


      

    

     

    ADDITIONAL
      TERMS/ACKNOWLEDGMENTS: This grant is a part of a total grant of 750,000 shares
      by the Board as an inducement to your continued employment with the Company
      with
      the balance documented in a separate option agreement. The undersigned Optionee
      acknowledges receipt of, and represents that the Optionee has read, understands,
      accepts and agrees to the terms of this Grant Notice and the Stock Option
      Agreement. Optionee hereby accepts the Option subject to all of its terms and
      conditions and further acknowledges that as of the Date of Grant, this Grant
      Notice and the Stock Option Agreement set forth the entire understanding between
      Optionee and the Company regarding the acquisition of stock in the Company
      and
      supersede all prior oral and written agreements pertaining to this particular
      option.

    


    NOTE:
      THE
      OPTIONEE IS SOLELY RESPONSIBLE FOR ANY ELECTION TO EXERCISE THE OPTION, AND
      THE
      COMPANY SHALL HAVE NO OBLIGATION WHATSOEVER TO PROVIDE NOTICE TO THE OPTIONEE
      OF
      ANY MATTER, INCLUDING, BUT NOT LIMITED TO, THE DATE THE OPTION
      TERMINATES.

    

      
        	
                e.Digital
                  Corporation:

              	
                Optionee:

              
	 	 
	 	 
	 	 
	
                By:
                  /s/W. A. Blakeley

              	
                /s/Alfred
                  Falk

              
	
                President

              	 


      

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    e.Digital
      Corporation

    SPECIAL
      STOCK OPTION AGREEMENT

    


    Pursuant
      to the Grant Notice and this Stock Option Agreement (“Agreement”), e.Digital
      Corporation (the “Company”) has granted to the Optionee named in the Grant
      Notice (“you” or the “Optionee”) an Option to purchase the number of shares of
      the Company’s common stock (“Stock”) indicated in the Grant Notice at the
      exercise price indicated in the Grant Notice.

    


    The
      details of this Option are as follows:

    


    1.
      Definitions And Construction.

    


    1.1
      Definitions. Whenever used herein, the following terms shall have their
      respective meanings set forth below:

    


    (a)
      “Affiliate” means (i) an entity, other than a Parent Corporation, that directly,
      or indirectly through one or more intermediary entities, controls the Company
      or
      (ii) an entity, other than a Subsidiary Corporation, that is controlled by
      the
      Company directly, or indirectly through one or more intermediary entities,
      or
      (iii) an entity which the Board designates as an Affiliate. For this purpose,
      the term “control” (including the term “controlled by”) means the possession,
      direct or indirect, of the power to direct or cause the direction of the
      management and policies of the relevant entity, whether through the ownership
      of
      voting securities, by contract or otherwise; or shall have such other meaning
      assigned such term for the purposes of registration on Form S-8 under the
      Securities Act.

    


    (b)
      “Board” means the Board of Directors of the Company. If one or more Committees
      have been appointed by the Board to administer outstanding stock options,
“Board” also means such Committee(s).

    


    (c)
      A
“Change In Control” means the occurrence of any of the following
      events:

    


    (i) The
      agreement to acquire or a tender offer that is accepted for beneficial ownership
      (within the meaning of Rule 13d-3 promulgated under the Exchange Act) by any
      individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2)
      of the Exchange Act) (a “Person”), of 50% or more of either (x) the then
      outstanding shares of Stock (the “Outstanding Stock”) or (y) the combined voting
      power of the then outstanding voting securities of the Company entitled to
      vote
      generally in the election of directors (the “Outstanding Company Voting
      Securities”); provided, however, that for purposes of this subsection (i), the
      following acquisitions shall not constitute a Change in Control: (A) any
      acquisition directly from the Company, (B) any acquisition by the Company,
      (C)
      any acquisition by any employee benefit plan (or related trust) sponsored or
      maintained by the Company or any corporation controlled by the Company, (D)
      any
      acquisition by any corporation pursuant to a transaction which complies with
      clauses (A), (B) and (C) of paragraph (iii) below; or

    


    (ii) Individuals
      who constitute the Incumbent Board cease for any reason to constitute at least
      a
      majority of the Board; or

    


    (iii) Consummation
      of a reorganization, merger or consolidation or sale or other disposition of
      all
      or substantially all of the assets of the Company or an acquisition of assets
      of
      another corporation (a “Business Combination”), in each case, unless, following
      such Business Combination, (A) the Outstanding Stock and Outstanding Company
      Voting Securities immediately prior to such Business Combination represent
      or
      are converted into or exchanged for securities which represent or are
      convertible into more than 50% of, respectively, the then outstanding shares
      of
      common stock and the combined voting power of the then outstanding voting
      securities entitled to vote generally in the election of directors, as the
      case
      may be, of the corporation resulting from such Business Combination (including,
      without limitation, a corporation which as a result of such transaction owns
      the
      Company, or all or substantially all of the Company’s assets either directly or
      through one or more subsidiaries), (B) no Person (excluding any employee benefit
      plan (or related trust) of the Company or the corporation resulting from such
      Business Combination) beneficially owns, directly or indirectly, 20% or more
      of,
      respectively, the then outstanding shares of common stock of the corporation
      resulting from such Business Combination or the combined voting power of the
      then outstanding voting securities of such corporation except to the extent
      that
      such ownership of the Company existed prior to the Business Combination and
      (C)
      at least a majority of the members of the board of directors of the corporation
      resulting from such Business Combination were members of the Incumbent Board
      at
      the time of the execution of the initial agreement, or of the action of the
      Board, providing for such Business Combination; or

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (iv) Consummation
      of a reorganization, merger or consolidation or sale or other disposition of
      all
      or substantially all of the assets of the Company (a “Business Combination”),
      unless, following such Business Combination, the Outstanding Stock and
      Outstanding Company Voting Securities immediately prior to such Business
      Combination represent or are converted into or exchanged for securities which
      represent or are convertible into more than 50% of, respectively, the then
      outstanding shares of common stock and the combined voting power of the then
      outstanding voting securities entitled to vote generally in the election of
      directors, as the case may be, of the corporation resulting from such Business
      Combination (including, without limitation, a corporation which as a result
      of
      such transaction owns the Company, or all or substantially all of the Company’s
      assets either directly or through one or more subsidiaries); or

    


    (v) Approval
      by the stockholders of the Company of a complete liquidation or dissolution
      of
      the Company.

    


    (d)
      “Code” means the Internal Revenue Code of 1986, as amended, and any applicable
      regulations promulgated thereunder.

    


    (e)
      “Committee” means the Compensation Committee or other committee of the Board
      duly appointed to administer this Agreement and having such powers as shall
      be
      specified by the Board. Unless the powers of the Committee have been
      specifically limited, the Committee shall have all of the powers of the Board
      granted herein.

    


    (f)
      “Company” means e.Digital Corporation, a Delaware corporation, or any
      Successor.

    


    (g)
      “Consultant” means a person engaged to provide consulting or advisory services
      (other than as an Employee or a Director) to a Participating
      Company.

    


    (h)
      “Director” means a member of the Board or of the board of directors of any other
      Participating Company.

    


    (i)
      “Disability” means the Optionee has been determined by the long-term disability
      insurer of the Participating Company Group as eligible for disability benefits
      under the long-term disability plan of the Participating Company Group or the
      Optionee has been determined eligible for Supplemental Security Income benefits
      by the Social Security Administration of the United States of
      America.

    


    (j)
      “Employee” means any person treated as an employee (including an Officer or a
      Director who is also treated as an employee) in the records of a Participating
      Company. The Company shall determine in good faith and in the exercise of its
      discretion whether the Optionee has become or has ceased to be an Employee
      and
      the effective date of the Optionee’s employment or termination of employment, as
      the case may be.

    


    (k)
      “Exchange Act” means the Securities Exchange Act of 1934, as
      amended.

    


    (l)
“Fair
      Market Value” means, as of any date, the value of the Stock determined as
      follows:

    


    (vi) if
      shares
      of Stock of the same class are listed or admitted to unlisted trading privileges
      on any national or regional securities exchange at the date of determining
      the
      Fair Market Value, then the last reported sale price, regular way, on the
      composite tape of that exchange on that business day or, if no such sale takes
      place on that business day, the average of the closing bid and asked prices,
      regular way, in either case as reported in the principal consolidated
      transaction reporting system with respect to securities listed or admitted
      to
      unlisted trading privileges on that securities exchange or, if no such closing
      prices are available for that day, the last reported sale price, regular way,
      on
      the composite tape of that exchange on the last business day before the date
      in
      question; or

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (vii) if
      shares
      of Stock of the same class are not listed or admitted to unlisted trading
      privileges as provided in subparagraph (i) and if sales prices for shares of
      Stock of the same class in the over-the-counter market are reported by the
      OTC
      Bulletin Board (“OTCBB”) as of the date of determining the Fair Market Value,
      then the last reported sales price so reported on that business day or, if
      no
      such sale takes place on that business day, the average of the high bid and
      low
      asked prices so reported or, if no such prices are available for that day,
      the
      last reported sale price so reported on the last business day before the date
      in
      question; or

    


    (viii) if
      shares
      of Stock of the same class are not listed or admitted to unlisted trading
      privileges as provided in subparagraph (i) and sales prices for shares of Stock
      of the same class are not reported by the OTCBB (or a similar system then in
      use) as provided in subparagraph (ii), and if bid and asked prices for shares
      of
      Stock of the same class in the over-the-counter market are reported by OTCBB
      (or, if not so reported, by the National Quotation Bureau Incorporated) as
      of
      the date of determining the Fair Market Value, then the average of the high
      bid
      and low asked prices on that business day or, if no such prices are available
      for that day, the average of the high bid and low asked prices on the last
      business day before the date in question; or

    


    (ix) if
      shares
      of Stock of the same class are not listed or admitted to unlisted trading
      privileges as provided in subparagraph (i) and sales prices or bid and asked
      prices therefor are not reported by OTCBB (or the National Quotation Bureau
      Incorporated) as provided in subparagraph (ii) or subparagraph (iii) as of
      the
      date of determining the Fair Market Value, then the value determined in good
      faith by the Committee, which determination shall be conclusive for all
      purposes; or if shares of Stock of the same class are listed or admitted to
      unlisted trading privileges as provided in subparagraph (i) or sales prices
      or
      bid and asked prices therefor are reported by OTCBB (or the National Quotation
      Bureau Incorporated) as provided in subparagraph (ii) or subparagraph (iii)
      as
      of the date of determining the Fair Market Value, but the volume of trading
      is
      so low that the Board of Directors determines in good faith that such prices
      are
      not indicative of the fair value of the Stock, then the value determined in
      good
      faith by the Committee, which determination shall be conclusive for all purposes
      notwithstanding the provisions of subparagraphs (i), (ii) or (iii).

    


    (m)
      “Incentive Stock Option” means an Option intended to be (as set forth in the
      Option Agreement) and which qualifies as an incentive stock option within the
      meaning of Section 422(b) of the Code.

    


    (n)
      “Insider” means an Officer, a Director of the Company or other person whose
      transactions in Stock are subject to Section 16 of the Exchange
      Act.

    


    (o)
      “Non-Control Affiliate” means any entity in which any Participating Company has
      an ownership interest and which the Board shall designate as a Non-Control
      Affiliate.

    


    (p)
      “Officer” means any person designated by the Board as an officer of the
      Company.

    


    (q)
      An
“Ownership Change Event” shall be deemed to have occurred if any of the
      following occurs with respect to the Company: (i) the direct or indirect sale
      or
      exchange in a single or series of related transactions by the stockholders
      of
      the Company of more than fifty percent (50%) of the voting stock of the Company;
      (ii) a merger or consolidation in which the Company is a party; (iii) the sale,
      exchange, or transfer of all or substantially all, as determined by the Board
      in
      its discretion, of the assets of the Company; or (iv) a liquidation or
      dissolution of the Company.

    


    (r)
      “Parent Corporation” means any present or future “parent corporation” of the
      Company, as defined in Section 424(e) of the Code.

    


    (s)
      “Participating Company” means the Company or any Parent Corporation or
      Subsidiary Corporation or Affiliate.

    


    (t)
      “Participating Company Group” means, at any point in time, all entities
      collectively which are then Participating Companies.

    


    (u)
“Rule
      16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or
      any successor rule or regulation.

    


    (v)
      “Securities Act” means the Securities Act of 1933, as amended.

    


    (w)
      “Service” means

    


    (i)
      the
      Optionee’s employment or service with the Participating Company Group, whether
      in the capacity of an Employee, a Director or a Consultant. The Optionee’s
      Service shall not be deemed to have terminated merely because of a change in
      the
      capacity in which the Optionee renders Service to the Participating Company
      Group or a change in the Participating Company for which the Optionee renders
      such Service, provided that there is no interruption or termination of the
      Optionee’s Service. Furthermore, only to such extent as may be provided by the
      Company’s leave policy, the Optionee’s Service with the Participating Company
      Group shall not be deemed to have terminated if the Optionee takes any military
      leave, sick leave, or other leave of absence approved by the Company.
      Notwithstanding the foregoing, a leave of absence shall be treated as Service
      for purposes of vesting only to such extent as may be provided by the Company’s
      leave policy. The Optionee’s Service shall be deemed to have terminated either
      upon an actual termination of Service or upon the entity for which the Optionee
      performs Service ceasing to be a Participating Company; except that if the
      entity for which Optionee performs Service is a Subsidiary Corporation and
      ceases to be a Participating Company as a result of the distribution of the
      voting stock of such Subsidiary Corporation to the stockholders of the Company,
      Service shall not be deemed to have terminated as a result of such distribution.
      Subject to the foregoing, the Company, in its discretion, shall determine
      whether the Optionee’s Service has terminated and the effective date of such
      termination.

    


    (ii)
      Notwithstanding any other provision of this Section, an Optionee’s Service shall
      not be deemed to have terminated merely because the Participating Company for
      which the Optionee renders Service ceases to be a member of the Participating
      Company Group by reason of a Spinoff Transaction, nor shall Service be deemed
      to
      have terminated upon resumption of Service from the Spinoff Company to a
      Participating Company. For all purposes under this Agreement, the Optionee’s
      Service shall include Service, whether in the capacity of an Employee, Director
      or a Consultant, for the Spinoff Company provided the Optionee was employed
      by
      the Participating Company Group immediately prior to the Spinoff Transaction.
      Notwithstanding the foregoing, if the Company’s auditors determine that the
      provisions or operation of the preceding two sentences would cause the Company
      to incur a compensation expense and provided further that in the absence of
      the
      preceding two sentences no such compensation expense would be incurred, then
      the
      two preceding sentences shall be without force or effect, and the vesting and
      exercisability of each outstanding Option and any shares acquired upon the
      exercise thereof shall be determined under any other applicable provision of
      this Agreement.

    


    (x)
      “Spinoff Company” means a Participating Company which ceases to be such as a
      result of a Spinoff Transaction.

    


    (y)
      “Spinoff Transaction” means a transaction in which the voting stock of an entity
      in the Participating Company Group is distributed to the shareholders of a
      parent corporation as defined by Section 424(e) of the Code, of such
      entity.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (z)
      “Stock” means the common stock of the Company, as adjusted from time to time in
      accordance with Section 9.

    


    (aa)
      “Subsidiary Corporation” means any present or future “subsidiary corporation” of
      the Company, as defined in Section 424(f) of the Code.

    


    (bb)
      “Successor” means a corporation into or with which the Company is merged or
      consolidated or which acquires all or substantially all of the assets of the
      Company and which is designated by the Board as a Successor for purposes of
      this
      Agreement.

    


    1.2
      Construction. Captions and titles contained herein are for convenience only
      and
      shall not affect the meaning or interpretation of any provision of this
      Agreement. Except when otherwise indicated by the context, the singular shall
      include the plural and the plural shall include the singular. Use of the term
      “or” is not intended to be exclusive, unless the context clearly requires
      otherwise.

    


    2.
      Vesting. Except as otherwise provided in this Agreement, this option will vest
      as provided in the Grant Notice.

    


    3.
      Exercise Of The Option.

    


    3.1
      Method Of Exercise. You may exercise the vested portion of this Option at any
      time prior to the expiration of the Option by delivering a notice of exercise
      in
      such form as may be designated by the Company from time to time together with
      the exercise price to the Secretary of the Company, or to such other person
      as
      the Company may designate, during regular business hours and prior to the
      expiration of the Option, together with such additional documents as the Company
      may then require.

    


    3.2
      Method Of Payment. Payment of the exercise price may be by cash (or check),
      or
      pursuant to a program developed under Regulation T as promulgated by the Federal
      Reserve Board which, prior to the issuance of Stock, results in either the
      receipt of cash (or check) by the Company or the receipt of irrevocable
      instructions to a broker which provides for the payment of the aggregate
      exercise price to the Company, or a combination of the above methods, as the
      Company may designate from time to time. The Company reserves, at any and all
      times, the right, in the Company’s sole and absolute discretion, to establish,
      decline to approve or terminate any program or procedures for the exercise
      of
      Options by means of a Cashless Exercise.

    


    3.3
      Tax
      Withholding. By exercising this Option you agree that as a condition to any
      exercise of this Option, the Company may withhold from your pay and any other
      amounts payable to you, or require you to enter an arrangement providing for
      the
      payment by you to the Company of any tax withholding obligation of the Company
      arising by reason of (1) the exercise of this Option; or (2) the disposition
      of
      Stock acquired upon such exercise.

    


    3.4
      Responsibility For Exercise. You are responsible for taking any and all actions
      as may be required to exercise this Option in a timely manner and for properly
      executing any such documents as may be required for exercise in accordance
      with
      such rules and procedures as may be established from time to time. By signing
      this Agreement you acknowledge that information regarding the procedures and
      requirements for this exercise of the Option is available to you on request.
      The
      Company shall have no duty or obligation to notify you of the expiration date
      of
      this Option.

    


    4.
      Securities Law Compliance. Notwithstanding anything to the contrary contained
      herein, this Option may not be exercised unless the Stock issuable upon exercise
      of this Option is then registered under the Securities Act or, if such Stock
      is
      not then so registered, the Company has determined that such exercise and
      issuance would be exempt from the registration requirements of the Securities
      Act.

    


    5.
      Termination Of The Option. The term of this Option commences on the Date of
      Grant (as specified in the Grant Notice) and expires and shall no longer be
      exercisable upon the earliest of:

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.1
      the
      Expiration Date indicated in the Grant Notice;

    


    5.2
      the
      last day for exercising the Option following termination of your Service as
      described in Section 6 below; or

    


    5.3
      a
      Change of Control, to the extent provided in Section 7 below.

    


    6.
      Effect
      Of Termination Of Service.

    


    6.1
      Option Exercisability. Subject to earlier termination of the Option as otherwise
      provided herein, the Option shall be exercisable after the Optionee’s
      termination of Service only during the applicable time period determined in
      accordance with this Section 6 and thereafter shall terminate.

    


    (a)
      Disability. If the Optionee’s Service terminates because of the Disability of
      the Optionee, the Option shall continue for a period of one year from
      termination of employment resulting from such Disability and may be exercised
      by
      the Optionee at any time during the one year period but in any event no later
      than the Expiration Date.

    


    (b)
      Death. If the Optionee’s Service terminates because of the death or because of
      the Disability of the Optionee and such termination is subsequently followed
      by
      the death of the Optionee, (A) the exercisability and vesting of the Option
      shall be accelerated effective upon the Optionee’s death, and (B) the Option, to
      the extent unexercised and exercisable on the date of the Optionee’s death, may
      be exercised by the Optionee’s legal representative or other person who acquired
      the right to exercise the Option by reason of the Optionee’s death at any time
      prior to the expiration of twelve (12) months after the date of the Optionee’s
      death, but in any event no later than the Expiration Date.

    


    (c)
      Termination After Change In Control. If the Optionee’s Service ceases as a
      result of Termination After Change in Control (as defined below), then (A)
      the
      exercisability and vesting of the Option shall be accelerated effective as
      of
      the date on which the Optionee’s Service terminated, and (B) the Option, to the
      extent unexercised and exercisable on the date on which the Optionee’s Service
      terminated, may be exercised by the Optionee (or the Optionee’s guardian or
      legal representative) at any time prior to the expiration of six (6) months
      after the date on which the Optionee’s Service terminated, but in any event no
      later than the Expiration Date.

    


    (e)
      Other
      Termination Of Service. If the Optionee’s Service with the Participating Company
      Group terminates for any reason except Disability, death, Transfer to a
      Non-Control Affiliate, or Termination after Change in Control, the Option,
      to
      the extent unexercised and exercisable by the Optionee on the date on which
      the
      Optionee’s Service terminates, may be exercised by the Optionee at any time
      prior to the expiration of one month after the date on which the Optionee’s
      Service terminates, but in any event no later than the Expiration
      Date.

    


    6.2
      Extension If Exercise Prevented By Law. Notwithstanding the foregoing, other
      than termination for Cause, if the exercise of an Option within the applicable
      time periods set forth in Section 6.1 is prevented by the provisions of Section
      4 above, the Option shall remain exercisable until three (3) months after the
      date the Optionee is notified by the Company that the Option is exercisable,
      but
      in any event no later than the Expiration Date.

    


    6.3
      Extension If Optionee Subject To Section 16(b). Notwithstanding the foregoing,
      other than termination for Cause, if a sale within the applicable time periods
      set forth in Section 6.1 of shares acquired upon the exercise of the Option
      would subject the Optionee to suit under Section 16(b) of the Exchange Act,
      the
      Option shall remain exercisable until the earliest to occur of (i) the tenth
      (10th) day following the date on which a sale of such shares by the Optionee
      would no longer be subject to such suit, (ii) the one hundred and ninetieth
      (190th) day after the Optionee’s termination of Service, or (iii) the Expiration
      Date.

    


    6.4
      Certain Definitions.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a)
      “Cause” shall mean any of the following: (1) the Optionee’s theft, dishonesty,
      or falsification of any Participating Company documents or records; (2) the
      Optionee’s improper use or disclosure of a Participating Company’s confidential
      or proprietary information; (3) any action by the Optionee which has a
      detrimental effect on a Participating Company’s reputation or business; (4) the
      Optionee’s failure or inability to perform any reasonable assigned duties after
      written notice from a Participating Company of, and a reasonable opportunity
      to
      cure, such failure or inability; (5) any material breach by the Optionee of
      any
      employment or service agreement between the Optionee and a Participating
      Company, which breach is not cured pursuant to the terms of such agreement;
      (6)
      the Optionee’s conviction (including any plea of guilty or nolo contendere) of
      any criminal act which impairs the Optionee’s ability to perform his duties with
      a Participating Company; or (7) violation of a material Company
      policy.

    


    (b)
“Good
      Reason” shall mean any one or more of the following:

    


    (i)
      without the Optionee’s express written consent, the assignment to the Optionee
      of any duties, or any limitation of the Optionee’s responsibilities,
      substantially inconsistent with the Optionee’s positions, duties,
      responsibilities and status with the Participating Company Group immediately
      prior to the date of the Change in Control;

    


    (ii)
      without the Optionee’s express written consent, the relocation of the principal
      place of the Optionee’s employment or service to a location that is more than
      fifty (50) miles from the Optionee’s principal place of employment or service
      immediately prior to the date of the Change in Control, or the imposition of
      travel requirements substantially more demanding of the Optionee than such
      travel requirements existing immediately prior to the date of the Change in
      Control;

    


    (iii)
      any
      failure by the Participating Company Group to pay, or any material reduction
      by
      the Participating Company Group of, (A) the Optionee’s base salary in effect
      immediately prior to the date of the Change in Control (unless reductions
      comparable in amount and duration are concurrently made for all other employees
      of the Participating Company Group with responsibilities, organizational level
      and title comparable to the Optionee’s), or (B) the Optionee’s bonus
      compensation, if any, in effect immediately prior to the date of the Change
      in
      Control (subject to applicable performance requirements with respect to the
      actual amount of bonus compensation earned by the Optionee);

    


    (iv)
      any
      failure by the Participating Company Group to (A) continue to provide the
      Optionee with the opportunity to participate, on terms no less favorable than
      those in effect for the benefit of any employee or service provider group which
      customarily includes a person holding the employment or service provider
      position or a comparable position with the Participating Company Group then
      held
      by the Optionee, in any benefit or compensation plans and programs, including,
      but not limited to, the Participating Company Group’s life, disability, health,
      dental, medical, savings, profit sharing, stock purchase and retirement plans,
      if any, in which the Optionee was participating immediately prior to the date
      of
      the Change in Control, or their equivalent, or (B) provide the Optionee with
      all
      other fringe benefits (or their equivalent) from time to time in effect for
      the
      benefit of any employee group which customarily includes a person holding the
      employment or service provider position or a comparable position with the
      Participating Company Group then held by the Optionee;

    


    (v)
      any
      breach by the Participating Company Group of any material agreement between
      the
      Optionee and a Participating Company concerning Optionee’s employment;
      or

    


    (vi)
      any
      failure by the Company to obtain the assumption of any material agreement
      between the Optionee and the Company concerning the Optionee’s employment by a
      successor or assign of the Company.

    


    (c)
      “Termination After Change In Control” shall mean either of the following events
      occurring within twenty-four (24) months after a Change in Control:

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (i)
      termination by the Participating Company Group of the Optionee’s Service with
      the Participating Company Group for any reason other than for Cause;
      or

    


    (ii)
      the
      Optionee’s resignation for Good Reason from all capacities in which the Optionee
      is then rendering Service to the Participating Company Group within a reasonable
      period of time following the event constituting Good Reason.

    


    Notwithstanding
      any provision herein to the contrary, Termination After Change in Control shall
      not include any termination of the Optionee’s Service with the Participating
      Company Group which (1) is for Cause; (2) is a result of the Optionee’s death or
      Disability; (3) is a result of the Optionee’s voluntary termination of Service
      other than for Good Reason; or (4) occurs prior to the effectiveness of a Change
      in Control.

    


    7.
      Change
      In Control. In the event of a Change in Control, the surviving, continuing,
      successor, or purchasing corporation or other business entity or parent thereof,
      as the case may be (the “Acquiring Corporation”), may, without the consent of
      the Optionee, either assume the Company’s rights and obligations the Option or
      substitute for the Option substantially equivalent options for the Acquiring
      Corporation’s stock. In the event the Acquiring Corporation elects not to assume
      or substitute for the Option in connection with a Change in Control, the
      exercisability and vesting of the Option shall be accelerated, effective as
      of
      the date ten (10) days prior to the date of the Change in Control. The exercise
      or vesting of this Option that was permissible solely by reason of this Section
      shall be conditioned upon the consummation of the Change in Control. To the
      extent this Option is neither assumed or substituted for by the Acquiring
      Corporation in connection with the Change in Control nor exercised as of the
      date of the Change in Control, it shall terminate and cease to be outstanding
      effective as of the date of the Change in Control. Notwithstanding the
      foregoing, shares acquired upon exercise of the Option prior to the Change
      in
      Control and any consideration received pursuant to the Change in Control with
      respect to such shares shall continue to be subject to all applicable provisions
      of the Agreement. Furthermore, notwithstanding the foregoing, if the corporation
      the stock of which is subject to the Option immediately prior to an Ownership
      Change Event described in Section 1.1(q)(i) constituting a Change in Control
      is
      the surviving or continuing corporation and immediately after such Ownership
      Change Event less than fifty percent (50%) of the total combined voting power
      of
      its voting stock is held by another corporation or by other corporations that
      are members of an affiliated group within the meaning of Section 1504(a) of
      the
      Code without regard to the provisions of Section 1504(b) of the Code, the Option
      shall not terminate unless the Board otherwise provides in its
      discretion.

    


    8.
      Option
      Not A Service Contract. This Option is not an employment or service contract
      and
      nothing in this Agreement or the Grant Notice shall be deemed to create in
      any
      way whatsoever any obligation on your part to continue in the service of the
      Company, or of the Company to continue your service with the Company. In
      addition, nothing in your Option shall obligate the Company, its stockholders,
      Board, Officers or Employees to continue any relationship which you might have
      as a Director or Consultant for the Company.

    


    9.
      Adjustments For Changes In Capital Structure. In the event of any stock
      dividend, stock split, reverse stock split, recapitalization, combination,
      reclassification or similar change in the capital structure of the Company,
      appropriate adjustments shall be made in the number and class of shares subject
      to the Option and in the exercise price per share of the Option. If a majority
      of the shares of Stock are exchanged for, converted into, or otherwise become
      (whether or not pursuant to an Ownership Change Event) shares of another
      corporation (the “New Shares”), the Board may unilaterally amend this Agreement
      to provide that the Option is exercisable for New Shares. In the event of any
      such amendment, the number of shares subject to, and the exercise price per
      share of, the Option shall be adjusted in a fair and equitable manner as
      determined by the Board, in its discretion. Notwithstanding the foregoing,
      any
      fractional share resulting from an adjustment pursuant to this Section shall
      be
      rounded down to the nearest whole number, and in no event may the exercise
      price
      of the Option be decreased to an amount less than the par value, if any, of
      the
      Stock subject to the Option.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    10.
      Representations. By executing this Agreement, you hereby warrant and represent
      that you are acquiring this Option for your own account and that you have no
      intention of distributing, transferring or selling all or any part of this
      Option except in accordance with the terms of this Agreement and Section
      25102(f) of the California Corporations Code. You also hereby warrant and
      represent that you have either (i) preexisting personal or business
      relationships with the Company or any of its officers, directors or controlling
      persons, or (ii) the capacity to protect your own interests in connection with
      the grant of this Option by virtue of the business or financial expertise of
      you
      or any of your professional advisors who are unaffiliated with and who are
      not
      compensated by the Company or any of its affiliates, directly or
      indirectly.

    


    11.
      Notices. Any notices provided for in this Agreement or the Grant Notice shall
      be
      given in writing and shall be deemed effectively given upon receipt or, in
      the
      case of notices delivered by the Company to you, five (5) days after deposit
      in
      the United States mail, postage prepaid, addressed to you at the last address
      you provided to the Company.

    


    12.
      Transferability. This Option shall not be transferable in any manner (including
      without limitation, sale, alienation, anticipation, pledge, encumbrance, or
      assignment) other than, (i) by will or by the laws of descent and distribution,
      (ii) by written designation of a beneficiary, in a form acceptable to the
      Company, with such designation taking effect upon the death of the Optionee,
      (iii) by delivering written notice to the Company, in a form acceptable to
      the
      Company (including such representations, warranties and indemnifications as
      the
      Company shall require the Optionee to make to protect the Company’s interests
      and ensure that this Option has been transferred under the circumstances
      approved by the Company), by gift to the Optionee’s spouse, former spouse,
      children, stepchildren, grandchildren, parent, stepparent, grandparent, sibling,
      niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
      brother-in-law, or sister-in-law, persons having one of the foregoing types
      of
      relationship with the Optionee due to adoption, any person sharing the
      Optionee’s household (other than a tenant or employee), a foundation in which
      these persons or the Optionee control the management of assets, and any other
      entity in which these persons (or the Optionee) own more than fifty percent
      of
      the voting interests. A transfer to an entity in which more than fifty percent
      of the voting interests are owned by these persons (or the Optionee) in exchange
      for an interest in that entity is specifically included as a permissible type
      of
      transfer. In addition, a transfer to a trust created solely for the benefit
      (i.e., the Optionee and/or any or all of the foregoing persons hold more than
      50
      percent of the beneficial interest in the trust) of the Optionee and/or any
      or
      all of the foregoing persons is also a permissible transferee, or (iv) such
      other transferees as may be authorized by the Board in its sole and absolute
      discretion. During the Optionee’s life this Option is exercisable only by the
      Optionee or a transferee satisfying the above conditions. Except in the event
      of
      the Optionee’s death, upon transfer of this Option to any or all of the
      foregoing persons, the Optionee is liable for any and all taxes due upon
      exercise of this transferred Option. At no time will a transferee who is
      considered an affiliate under Rule 144(a)(1) be able to sell any or all such
      Stock without complying with Rule 144. The right of a transferee to exercise
      the
      transferred portion of this Option shall terminate in accordance with the
      Optionee’s right of exercise under this Option and is further subject to such
      representations, warranties and indemnifications from the transferee that the
      Company requires the transferee to make to protect the Company’s interests and
      ensure that this Option has been transferred under the circumstances approved
      by
      the Company. Once a portion of this Option is transferred, no further transfer
      may be made of that portion of this Option.

    


    13.
      Arbitration. Any dispute or claim concerning the Option, the Grant Notice or
      this Agreement shall be fully, finally and exclusively resolved by binding
      arbitration conducted by the American Arbitration Association pursuant to the
      commercial arbitration rules in San Diego, California. By accepting the Option,
      the Optionee and the Company waive their respective rights to have any such
      disputes or claims tried by a judge or jury.

    


    14.
      Amendment. The Board may amend your Option at any time, provided no such
      amendment may adversely affect the Option or any unexercised portion of your
      Option, without your consent unless such amendment is necessary to comply with
      any applicable law or government regulation. No amendment or addition to this
      Agreement shall be effective unless in writing or, in such electronic form
      as
      may be designated by the Company.