Document:

Exhibit 4.7

                     AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

                                     between

                                 NANNACO, INC.,

                                       and

                               ANDREW DEVRIES, III

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         This Amendment No. 1 to the Employment Agreement (the "AGREEMENT"),  is
dated  September  30,  2003,  by and  among  NANNACO,  Inc.,  Texas  corporation
("NANNACO"), and Andrew DeVries, III ("DeVries").

         WHEREAS,  the parties to the Employment  Agreement,  attached hereto as
Exhibit A (the "Employment Agreement"), desire to amend the Employment Agreement
to provide  that  NANNACO has the option of granting  DeVries  stock  bonuses in
connection with him employment with NANNACO;

         NOW,  THEREFORE,  in  consideration  of the premises and the mutual and
independent  covenants  hereinafter  set  forth,  the  parties  hereto  agree as
follows:

Section 3. of the  Employment  Agreement  is hereby  deleted in its entirety and
amended to read as follows:

"3. Compensation and Benefits.

         (a)      Compensation.

                  (1) In consideration of the services to be rendered under this
Agreement,  Employee  shall receive a minimum  salary in the total amount of Two
Hundred Thousand Dollars ($200,000) per year, payable semi-monthly,  pursuant to
the  procedures  regularly  established  and as they may be amended by  Employer
during the Period of Employment. This compensation may be deferred at the option
of Employee,  and in such case,  the salary shall accrue  interest at prime plus
1%.  The  Employee  has the option to convert  any or all  salary  with  accrued
interest to Nannaco,  Inc. stock  restricted under Rule 144 at a conversion rate
thirty  percent (30%) off the average  closing bid during the month prior to the
month being compensated.

                  (2) In connection  with the minimum salary in the total amount
of Two Hundred  Thousand  Dollars  ($200,000)  per year,  listed in section 3(1)
above,  the board of  directors of Employer,  in its sole  discretion,  shall be
entitled to grant Employee,  and Employee shall be entitled to receive,  certain
stock bonuses in such amount as the board of directors determines in reasonable.

                  (3) All  compensation  and  comparable  payments to be paid to
Employee under this Agreement shall be less withholdings required by law.

         (b)      Benefits.

                  Employee  shall be entitled to fringe  benefits  comparable to
similarly situated executives,  officers or directors, including paid annual tax
preparation assistance. As Employee becomes eligible, he shall have the right to
participate in and to receive benefits from all present and future benefit plans
generally made available to similarly situated employees of Employer. The amount
and extent of  benefits to which  Employee is entitled  shall be governed by the
specific  benefit  plans,  as  amended.  Employee  shall also be entitled to any
benefits or compensation  tied to termination as described in Section 4. No oral
statement  concerning  benefits or  compensation  to which  Employee is entitled
shall alter in any way the term of this Agreement or its termination.

<PAGE>

         (c)      Insurance and Indemnity.

                  Employer  shall obtain for the benefit of Employee  director's
and officer's  liability  insurance  coverage to protect  Employee from personal
liability to the fullest extent allowed by law for acts undertaken as an officer
or  director of Employer or an  Affiliate.  Furthermore,  to the fullest  extent
allowed by law, Employer shall indemnify Employee for and hold Employee harmless
from any and all claims or causes of action  arising out of Employee's  exercise
of his duties as an employee, officer or director of Employer or an Affiliate."

Dated as of the date first written above.

NANNACO, INC.

---------------------------------------
Name: Mark Triesch
Title: Director

---------------------------------------
Name: Andrew DeVries
Title: President and C.E.O.

                                       2<PAGE>

                                                                  Exhibit 4.46

                 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

         THIS CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"),
dated  as of  November  19,  2003,  is  entered  into  by  and  among  e.Digital
Corporation, a Delaware corporation (the "COMPANY"), and the investors signatory
hereto  (each  such  investor  is a  "PURCHASER"  and all  such  investors  are,
collectively, the "PURCHASERS").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement  and  pursuant  to  Section  4(2) of the  Securities  Act of 1933 (the
"SECURITIES  ACT"),  as amended,  the  Company  desires to issue and sell to the
Purchasers  and the  Purchasers,  severally and not jointly,  desire to purchase
from the Company (i) shares of the Company's 8% Series E  Convertible  Preferred
Stock, par value $.001 per share (the "PREFERRED STOCK"),  which are convertible
into  shares of the  Company's  common  stock,  par value  $.001 per share  (the
"COMMON STOCK"),  and (ii) certain other securities of the Company as more fully
described in this Agreement.

         NOW,  THEREFORE,  IN CONSIDERATION of the mutual covenants contained in
this Agreement,  and for other good and valuable  consideration  the receipt and
adequacy of which are hereby acknowledged,  the Company and the Purchasers agree
as follows:

                                    ARTICLE I
                                PURCHASE AND SALE

         1.1      THE CLOSING.

                  (a) THE CLOSING (i)  Subject to the terms and  conditions  set
forth in this  Agreement the Company shall issue and sell to the  Purchasers and
the Purchasers shall, severally and not jointly,  purchase an aggregate of up to
15,000 shares of Preferred  Stock  ("SHARES")  and certain Common Stock purchase
warrants as described  below in this Section for an aggregate  purchase price of
up to $1,500,000.  The closing of the purchase and sale of such  securities (the
"CLOSING")  shall take place at the  offices of Higham,  McConnell & Dunning LLP
("HM&D"), 15, Enterprise,  Suite 360, Aliso Viejo, California 92656, immediately
following  the  execution  hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "CLOSING DATE."

                  (ii) At the Closing,  the parties shall deliver or shall cause
to be delivered the  following:  (A) the Company shall deliver to each Purchaser
(1) a stock certificate registered in the name of such Purchaser, representing a
number of Shares equal to the quotient  obtained by dividing the purchase  price
indicated below such Purchaser's name on the signature page to this Agreement by
100, (2) a Common Stock purchase warrant, in the form of EXHIBIT C-1, registered
in the name of such  Purchaser,  pursuant to which such Purchaser shall have the
right to  acquire  the  number of Warrant  Shares  (as  defined in the  Warrant)
indicated  below such  Purchaser's  name on the signature page to this Agreement
(collectively, the "SERIES A WARRANTS"), (3) a Common Stock purchase warrant, in
the form of EXHIBIT C-2,  registered in the name of such Purchaser,  pursuant to
which,  such  Purchaser  shall have the right to acquire  shares of Common Stock
pursuant  to the terms  thereof  (collectively,  the  "SERIES B  WARRANTS",  and
together with the Series A Warrants,  the  "WARRANTS"),  (3) an executed copy of
this Agreement and an executed  Registration  Rights Agreement,  dated as of the
date hereof, among the Company and the Purchasers, in the form of EXHIBIT B (the
"REGISTRATION  RIGHTS  AGREEMENT") and (4) Transfer Agent  Instructions,  in the

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form of EXHIBIT E, executed by the Company and delivered to and  acknowledged by
the Company's transfer agent (the "TRANSFER AGENT  INSTRUCTIONS");  and (B) each
Purchaser shall deliver (1) the purchase price indicated below such  Purchaser's
name on the  signature  page to this  Agreement  in  United  States  dollars  in
immediately available funds by wire transfer to an account designated in writing
by the Company for such  purpose  or, with the consent of the  Company,  through
conversion  of  outstanding  indebtedness,  and  (2) an  executed  copy  of this
Agreement and Registration Rights Agreement.

         1.2 TERMS OF PREFERRED STOCK. The Preferred Stock shall have the rights
preferences  and  privileges  set forth in EXHIBIT A, and shall be  incorporated
into a Certificate of Designation (the "CERTIFICATE OF DESIGNATION") to be filed
prior to the Closing by the Company with the Secretary of State of Delaware,  in
form and substance mutually agreed to by the parties.

         1.3 CERTAIN DEFINED TERMS.  For purposes of this  Agreement,  "ORIGINAL
ISSUE DATE" and "TRADING DAY" shall have the meanings set forth in EXHIBIT A and
"BUSINESS  DAY"  shall mean any day  except  Saturday,  Sunday and any day which
shall be a federal legal holiday or a day on which banking  institutions  in the
State of  California  are  authorized  or required by law or other  governmental
action to close.  A "PERSON"  means an individual or  corporation,  partnership,
trust,  incorporated  or  unincorporated  association,  joint  venture,  limited
liability company, joint stock company,  government (or an agency or subdivision
thereof) or other entity of any kind.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

         2.1 REPRESENTATIONS  AND WARRANTIES OF THE COMPANY.  The Company hereby
makes the following representations and warranties to the Purchasers:

                  (a)   ORGANIZATION  AND   QUALIFICATION.   The  Company  is  a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of Delaware,  with the requisite corporate power and authority
to own and use its  properties  and  assets  and to  carry  on its  business  as
currently conducted.  The Company has no subsidiaries other than as set forth in
SCHEDULE 2.1(a) (collectively, the "SUBSIDIARIES").  Each of the Subsidiaries is
an entity,  duly  incorporated or otherwise  organized,  validly existing and in
good  standing  under  the  laws of the  jurisdiction  of its  incorporation  or
organization (as applicable),  with the requisite power and authority to own and
use its  properties  and  assets  and to  carry  on its  business  as  currently
conducted.  Each of the Company and the  Subsidiaries  is duly  qualified  to do
business  and is in good  standing as a foreign  corporation  or other entity in
each  jurisdiction  in which the nature of the  business  conducted  or property
owned by it makes such qualification  necessary,  except where the failure to be
so qualified or in good standing, as the case may be, could not, individually or
in the aggregate, (x) adversely affect the legality,  validity or enforceability
of the Securities (as defined below) or any of this Agreement,  the Registration
Rights   Agreement,   the  Certificate  of   Designation,   the  Transfer  Agent

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<PAGE>

Instructions or the Warrants (collectively,  the "TRANSACTION  DOCUMENTS"),  (y)
have or result  in a  material  adverse  effect on the  results  of  operations,
assets,  prospects, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform  fully on a timely basis its  obligations  under any of the  Transaction
Documents (any of (x), (y) or (z), a "MATERIAL ADVERSE EFFECT").

                  (b) AUTHORIZATION;  ENFORCEMENT. The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the Company and no further  action is required by the  Company.  Each of
the  Transaction  Documents  has been duly  executed  by the Company  and,  when
delivered (or filed,  as the case may be) in  accordance  with the terms hereof,
will  constitute  the valid and binding  obligation  of the Company  enforceable
against the Company in  accordance  with its terms.  Neither the Company nor any
Subsidiary  is  in  violation  of  any  of  the  provisions  of  its  respective
certificate or articles of  incorporation,  by-laws or other  organizational  or
charter documents.

                  (c)  CAPITALIZATION.  The  number of  authorized,  issued  and
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(c). Except
as disclosed in SCHEDULE  2.1(c),  the Company owns all of the capital  stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights,  nor is any holder of the  securities  of the Company or any  Subsidiary
entitled  to  preemptive  or similar  rights  arising  out of any  agreement  or
understanding  with  the  Company  or any  Subsidiary  by  virtue  of any of the
Transaction Documents. Except as a result of the purchase and sale of the Shares
and the  Warrants  and except as  disclosed  in  SCHEDULE  2.1(c),  there are no
outstanding  options,   warrants,  script  rights  to  subscribe  to,  calls  or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations convertible into or exchangeable for, or giving any Person any right
to  subscribe  for or  acquire,  any  shares  of  Common  Stock,  or  contracts,
commitments,  understandings,  or  arrangements  by  which  the  Company  or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights  convertible or  exchangeable  into shares of Common Stock.
The issue and sale of the Shares,  Warrants or Underlying Shares (as hereinafter
defined)  will not obligate the Company to issue shares of Common Stock or other
securities to any Person other than the Purchaser and will not result in a right
of any holder of Company's  securities  to adjust the exercise or  conversion or
reset price under such securities.

                  (d)  ISSUANCE OF THE SHARES AND THE  WARRANTS.  The Shares and
the Warrants are duly  authorized  and,  when issued and paid for in  accordance
with  the  terms  hereof,  will be duly  and  validly  issued,  fully  paid  and
nonassessable,  free and clear of all  liens,  encumbrances  and rights of first
refusal of any kind (collectively,  "LIENS"). The Company has on the date hereof
and will,  at all times  while the  Shares  and the  Warrants  are  outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved

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for  issuance  to the  holders of the Shares and the  Warrants,  to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Certificate of Designation and the Warrants.  As of the date hereof, the Company
has reserved for issuance  the sum of  3,000,000  Warrant  Shares and  9,157,895
shares of Common Stock for  issuance  upon  conversion  of Shares and payment of
dividends  thereon in shares of Common Stock (the "INITIAL  MINIMUM").  All such
authorized  shares of Common  Stock shall be duly  reserved  for issuance to the
holders of the Shares and the Warrants. The shares of Common Stock issuable upon
conversion  of the Shares and upon  exercise of the  Warrants  are  collectively
referred to herein as the "UNDERLYING  SHARES." The Shares, the Warrants and the
Underlying Shares are collectively referred to herein as, the "SECURITIES." When
issued in accordance with the  Certificate of Designation and the Warrants,  the
Underlying  Shares  will be duly  authorized,  validly  issued,  fully  paid and
nonassessable, free and clear of all Liens.

                  (e) NO CONFLICTS.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  thereby do not and will not (i) conflict with or
violate any  provision  of the  Company's  or any  Subsidiary's  certificate  or
articles of  incorporation,  bylaws or other charter  documents (each as amended
through the date hereof),  or (ii) subject to obtaining  the Required  Approvals
(as defined  below),  conflict  with, or constitute a default (or an event which
with notice or lapse of time or both would become a default)  under,  or give to
others any rights of termination,  amendment, acceleration or cancellation (with
or without notice,  lapse of time or both) of, any agreement,  credit  facility,
debt or other  instrument  or other  understanding  to which the  Company or any
Subsidiary  is a party or by which any  property  or asset of the Company or any
Subsidiary  is bound or  affected,  or (iii)  result in a violation  of any law,
rule, regulation,  order, judgment,  injunction,  decree or other restriction of
any court or  governmental  authority  to which the Company or a  Subsidiary  is
subject  (including  federal and state securities laws and  regulations),  or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), as could not, individually
or in the aggregate,  have or result in a Material Adverse Effect.  The business
of the Company is not being  conducted  in  violation  of any law,  ordinance or
regulation  of  any  governmental   authority,   except  for  violations  which,
individually or in the aggregate, could not have or result in a Material Adverse
Effect.

                  (f) FILINGS,  CONSENTS AND APPROVALS.  Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or  registration  with,  any court or
other federal,  state, local or other governmental  authority or other Person in
connection  with the execution,  delivery and  performance by the Company of the
Transaction  Documents,  other  than  (i)  the  filing  of  the  Certificate  of
Designation  with the Secretary of State of Delaware,  (ii) the filings required
pursuant to Section  3.9,  (iii) the filing  with the  Securities  and  Exchange
Commission  (the   "COMMISSION")  of  a  registration   statement   meeting  the
requirements  set forth in the  Registration  Rights  Agreement and covering the
resale  of the  Underlying  Shares by the  Purchasers  (the  "UNDERLYING  SHARES
REGISTRATION STATEMENT"), (iv) applicable Blue Sky filings, and (v) in all other
cases where the failure to obtain such consent, waiver,  authorization or order,

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or to give such  notice or make such  filing or  registration  could not have or
result  in,  individually  or  in  the  aggregate,  a  Material  Adverse  Effect
(collectively, the "REQUIRED APPROVALS").

                  (g)  LITIGATION;   PROCEEDINGS.  There  is  no  action,  suit,
inquiry,  notice of violation,  proceeding or  investigation  pending or, to the
knowledge of the Company,  threatened against or affecting the Company or any of
its Subsidiaries or any of their respective  properties  before or by any court,
arbitrator,  governmental  or  administrative  agency  or  regulatory  authority
(federal, state, county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality,  validity or enforceability of any
of the  Transaction  Documents or the Securities or (ii) could, if there were an
unfavorable  decision,  individually  or in the  aggregate,  have or result in a
Material Adverse Effect.  Except as described in the SEC Documents,  (i) neither
the Company nor any Subsidiary,  nor any director or officer thereof,  is or has
been  the  subject  of any  Action  involving  (A) a claim  of  violation  of or
liability  under  federal or state  securities  laws or (B) a claim of breach of
fiduciary duty; (ii) the Company does not have pending before the Commission any
request  for  confidential  treatment  of  information  and the  Company  has no
knowledge  of any  expected  such  request  that  would  be  made  prior  to the
Effectiveness Date (as defined in the Registration Rights Agreement);  and (iii)
there  has not been,  and to the best of the  Company's  knowledge  there is not
pending or  contemplated,  any  investigation  by the  Commission  involving the
Company or any current or former director or officer of the Company.

                  (h) NO DEFAULT  OR  VIOLATION.  Neither  the  Company  nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived  which,  with  notice or lapse of time or both,  would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in  violation  of, any  indenture,  loan or credit  agreement or any other
agreement  or  instrument  to  which  it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court,  arbitrator
or  governmental  body,  or  (iii)  is in  violation  of any  statute,  rule  or
regulation of any governmental  authority,  in each case of clauses (i), (ii) or
(iii)  above,  except as could not  individually  or in the  aggregate,  have or
result in a Material Adverse Effect.

                  (i)   PRIVATE   OFFERING.   Assuming   the   accuracy  of  the
representations   and  warranties  of  the  Purchasers  set  forth  in  Sections
2.2(b)-(g),  the offer, issuance and sale of the Securities to the Purchasers as
contemplated  hereby  are  exempt  from  the  registration  requirements  of the
Securities Act. Neither the Company nor, to its knowledge,  any Person acting on
its behalf has taken or is  contemplating  taking any action which could subject
the  offering,   issuance  or  sale  of  the  Securities  to  the   registration
requirements of the Securities Act including soliciting any offer to buy or sell
the Securities by means of any form of general solicitation or advertising.

                  (j) SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed
all reports  required  to be filed by it under the  Securities  Exchange  Act of
1934, as amended (the "EXCHANGE  ACT"),  including  pursuant to Section 13(a) or
15(d)  thereof,  for the two years  preceding  the date hereof (or such  shorter
period as the Company was required by law to file such  material) (the foregoing

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materials  being  collectively  referred to herein as the "SEC  DOCUMENTS"  and,
together with the Schedules to this Agreement,  the "DISCLOSURE MATERIALS") on a
timely  basis or has  received a valid  extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such  extension.  As
of their respective  dates, the SEC Documents  complied in all material respects
with the  requirements  of the Securities Act and the Exchange Act and the rules
and regulations of the Commission  promulgated  thereunder,  and none of the SEC
Documents,  when filed,  contained  any untrue  statement of a material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading.  All material agreements to which the Company is
a party or to which the  property or assets of the Company are subject have been
filed as exhibits to the SEC  Documents as required  under the Exchange Act. The
financial  statements of the Company included in the SEC Documents comply in all
material  respects with  applicable  accounting  requirements  and the rules and
regulations of the Commission  with respect  thereto as in effect at the time of
filing.  Such  financial  statements  have  been  prepared  in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved  ("GAAP"),  except as may be  otherwise  specified in such
financial  statements or the notes  thereto,  and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial,  year-end audit  adjustments.  Since  September 30, 2003,  except as
specifically  disclosed  in the SEC  Documents,  (a)  there  has been no  event,
occurrence or  development  that has or that could result in a Material  Adverse
Effect,  (b) the  Company  has  not  incurred  any  liabilities  (contingent  or
otherwise)  other  than (x)  liabilities  incurred  in the  ordinary  course  of
business  consistent  with past practice and (y)  liabilities not required to be
reflected in the Company's  financial  statements  pursuant to GAAP or otherwise
required to be disclosed in filings  made with the  Commission,  (c) the Company
has not altered its method of accounting or the identity of its auditors and (d)
the Company has not  declared  or made any  payment or  distribution  of cash or
other  property to its  stockholders  or officers  or  directors  (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.

                  (k)  INVESTMENT  COMPANY.  The  Company is not,  and is not an
Affiliate (as defined in Rule 405 under the  Securities  Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (l) CERTAIN  FEES. No fees or  commissions  will be payable by
the Company to any broker,  financial advisor or consultant,  finder,  placement
agent,  investment  banker,  bank or other  similar  Person with  respect to the
transactions  contemplated  by this  Agreement.  The  Purchasers  shall  have no
obligation  with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions  contemplated by this Agreement.  The
Company  shall  indemnify  and hold harmless the  Purchasers,  their  employees,

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officers, directors, agents, and partners, and their respective Affiliates, from
and  against  all  claims,  losses,  damages,  costs  (including  the  costs  of
preparation  and attorney's  fees) and expenses  suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.

                  (m) FORM S-3 ELIGIBILITY.  The Company is eligible to register
securities for resale with the Commission  under Form S-3 promulgated  under the
Securities  Act.  The  "Public  Float"  of the  Common  Stock  is  approximately
150,000,000 shares on the date hereof.

                  (n)  SENIORITY.  Except for the Series D Preferred  Stock,  no
outstanding class of equity securities of the Company is senior to the Shares in
right of payment, whether upon liquidation or dissolution, or otherwise.

                  (o) LISTING AND MAINTENANCE REQUIREMENTS.  Except as set forth
in the SEC Documents,  the Company has not, in the two years  preceding the date
hereof  received  notice  (written  or oral) from the OTC,  any stock  exchange,
market or trading  facility on which the Common  Stock is or has been listed (or
on which it has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange, market or trading
facility.  The Company is, and has no reason to believe  that it will not in the
foreseeable  future  continue  to be, in  compliance  with all such  listing and
maintenance requirements.

                  (p) PATENTS AND TRADEMARKS.  The Company and its  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and
rights  which  are  necessary  or  material  for use in  connection  with  their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect  (collectively,  the  "INTELLECTUAL
PROPERTY RIGHTS"). To the best knowledge of the Company, neither the Company nor
any  Subsidiary  has received a written  notice that the  Intellectual  Property
Rights used by the Company or its  Subsidiaries  violates or infringes  upon the
rights of any  Person.  Except as  specified  in  SCHEDULE  2.1(p),  to the best
knowledge of the Company, all such Intellectual  Property Rights are enforceable
and  there  is no  existing  infringement  by  another  Person  of  any  of  the
Intellectual Property Rights.

                  (q) REGISTRATION  RIGHTS;  RIGHTS OF PARTICIPATION.  Except as
disclosed in Section 6(c) of the Registration Rights Agreement,  the Company has
not granted or agreed to grant to any Person any rights (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other governmental authority which have not been satisfied. No
Person,   has  any  right  of  first  refusal,   preemptive   right,   right  of
participation,   or  any  similar  right  to  participate  in  the  transactions
contemplated by the Transaction Documents.

                  (r)  REGULATORY  PERMITS.  The  Company  and its  Subsidiaries
possess all certificates,  authorizations  and permits issued by the appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses  as  described  in the SEC  Documents,  except  where the
failure to possess such permits  could not,  individually  or in the  aggregate,
have or result in a Material Adverse Effect  ("MATERIAL  PERMITS"),  and neither
the Company  nor any such  Subsidiary  has  received  any notice of  proceedings
relating to the revocation or modification of any Material Permit.

                                       7
<PAGE>

                  (s) TITLE.  The  Company  and the  Subsidiaries  have good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens,  except for Liens as do not materially  affect the value of such property
and do not interfere  with the use made and proposed to be made of such property
by the Company and its Subsidiaries. Any real property and facilities held under
lease  by the  Company  and its  Subsidiaries  are  held by  them  under  valid,
subsisting and enforceable  leases of which the Company and its Subsidiaries are
in compliance  and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.

                  (t) LABOR  RELATIONS.  No material labor problem exists or, to
the  knowledge of the Company,  is imminent with respect to any of the employees
of the Company.

                  (u) SHAREHOLDERS  RIGHTS PLAN. Neither the consummation of the
transactions  contemplated hereby nor the issuance of the Underlying Shares will
cause the  Purchasers to be deemed an  "Acquiring  Person" under any existing or
hereafter adopted shareholders rights plan or similar arrangement.

                  (v) DISCLOSURE.  The Company  confirms that neither it nor any
other  Person  acting on its behalf has provided  any of the  Purchasers  or its
agents or counsel with any  information  that  constitutes  or might  constitute
material non-public  information.  The Company understands and confirms that the
Purchasers  shall be  relying  on the  foregoing  representations  in  effecting
transactions  in  securities  of the  Company.  All  disclosure  provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement,  furnished by or on behalf of
the Company are true and  correct and do not contain any untrue  statement  of a
material fact or omit to state any material fact  necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made, not misleading.

         2.2  REPRESENTATIONS  AND WARRANTIES OF THE PURCHASERS.  Each Purchaser
hereby for itself and for no other  Purchaser  represents  and  warrants  to the
Company as follows:

                  (a) ORGANIZATION;  AUTHORITY. Such Purchaser is an entity duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its  organization  with the requisite  corporate or partnership
power  and  authority  to  enter  into  and  to  consummate   the   transactions
contemplated  by the  Transaction  Documents  and  otherwise  to  carry  out its
obligations  thereunder.  The  purchase  by  such  Purchaser  of the  Securities
hereunder has been duly  authorized by all necessary  action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly  executed  by such  Purchaser,  and when  delivered  by such  Purchaser  in
accordance with the terms hereof,  will constitute the valid and legally binding
obligation of such  Purchaser,  enforceable  against it in  accordance  with its
terms.

                                       8
<PAGE>

                  (b)  INVESTMENT  INTENT.   Such  Purchaser  is  acquiring  the
Securities as principal for its own account for investment purposes only and not
with a view to or for  distributing  or reselling  such  Securities  or any part
thereof,  without prejudice,  however, to such Purchaser's right, subject to the
provisions  of  this  Agreement,  the  Registration  Rights  Agreement  and  the
Warrants,  at all times to sell or otherwise  dispose of all or any part of such
Securities pursuant to an effective  registration statement under the Securities
Act or  under  an  exemption  from  such  registration  and in  compliance  with
applicable  federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time.  Such  Purchaser is acquiring  the  Securities  hereunder in the
ordinary  course of its business.  Such Purchaser does not have any agreement or
understanding,  directly  or  indirectly,  with any  Person  to  distribute  the
Securities;  notwithstanding the foregoing,  Purchasers Basso Equity Opportunity
Holding Fund Ltd.  (formerly AIG DKR Soundshore  Private  Investors Holding Fund
Ltd.) and Gerard  Caviston  have  agreed that 40% of the Series A and B Warrants
otherwise  issuable  to such  Purchasers  shall be  issued to and in the name of
Starboard Capital Markets, LLC.

                  (c) PURCHASER  STATUS.  At the time such Purchaser was offered
the Securities,  it was, and at the date hereof it is, and at each exercise date
under its respective Warrants,  it will be, an "ACCREDITED  INVESTOR" as defined
in Rule 501(a) under the Securities Act.

                  (d) EXPERIENCE OF SUCH PURCHASER. Such Purchaser, either alone
or together with its  representatives,  has such knowledge,  sophistication  and
experience in business and  financial  matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.

                  (e) ABILITY OF SUCH PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an  investment in the  Securities
and, at the present time, is able to afford a complete loss of such investment.

                  (f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it
has reviewed the Disclosure  Materials and has been afforded (i) the opportunity
to ask such  questions  as it has deemed  necessary  of, and to receive  answers
from,  representatives of the Company concerning the terms and conditions of the
offering  of the  Securities  and the  merits  and  risks  of  investing  in the
Securities;  (ii) access to  information  about the  Company  and the  Company's
financial condition, results of operations, business, properties, management and
prospects  sufficient  to enable it to evaluate  its  investment;  and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without  unreasonable effort or expense that is necessary to make an
informed  investment  decision with respect to the  investment and to verify the
accuracy  and  completeness  of the  information  contained  in  the  Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its  representatives or counsel shall modify,  amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the  Disclosure  Materials and the Company's  representations  and warranties
contained in the Transaction Documents.

                                       9
<PAGE>

                  (g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other  communication  regarding  the  Securities  published  in  any  newspaper,
magazine or similar media or broadcast over  television or radio or presented at
any seminar or any other general solicitation or general advertisement.

                  (h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without  registration  under
the Securities Act in a private  placement that is exempt from the  registration
provisions of the Securities Act and (ii) the  availability  of such  exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing  representations  and such Purchaser  hereby  consents to such
reliance.

                  The Company acknowledges and agrees that no Purchaser makes or
has made any  representations  or  warranties  with respect to the  transactions
contemplated hereby other than those specifically set forth in this Section 2.2.

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

         3.1  TRANSFER  RESTRICTIONS.  (a)  Securities  may only be  disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant  to an  available  exemption  from or in a  transaction  not
subject  to  the  registration  requirements  of  the  Securities  Act,  and  in
compliance with any applicable  federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company,  except as otherwise set forth herein,  the Company
may  require  the  transferor  thereof to  provide to the  Company an opinion of
counsel  selected by the  transferor,  the form and  substance of which  opinion
shall be  reasonably  satisfactory  to the  Company,  to the  effect  that  such
transfer does not require registration of such transferred  Securities under the
Securities  Act. Any such  transferee  shall agree in writing to be bound by the
terms of this  Agreement  and shall  have the rights of a  Purchaser  under this
Agreement and the Registration Rights Agreement.

                  (b) The  Purchasers  agree  to the  imprinting,  so long as is
required by this Section 3.1(b), of the following legend on the Securities:

                  NEITHER THESE  SECURITIES [NOR THE SECURITIES INTO WHICH THESE
         SECURITIES ARE  [CONVERTIBLE]  [EXERCISABLE]  HAVE BEEN REGISTERED WITH
         THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF
         ANY STATE IN RELIANCE  UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE
         SECURITIES  ACT OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
         ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
         REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR  PURSUANT  TO AN
         AVAILABLE  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT TO, THE
         REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
         APPLICABLE STATE SECURITIES LAWS.

                                       10
<PAGE>

                  The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent  Instructions to the Company's  transfer agent on
the day that the Underlying Shares Registration  Statement is declared effective
by the Commission.

         3.2  ACKNOWLEDGMENT  OF  DILUTION.  The Company  acknowledges  that the
issuance  of  the  Underlying  Shares  upon  (i)  conversion  of the  Shares  in
accordance with the terms of the  Certificate of Designation,  and (ii) exercise
of the Warrants in accordance  with their terms,  will result in dilution of the
outstanding  shares of Common Stock,  which  dilution may be  substantial  under
certain market conditions.  The Company further acknowledges that its obligation
to issue Underlying  Shares upon (x) conversion of the Shares in accordance with
the terms of the Certificate of Designation, and (y) exercise of the Warrants in
accordance  with their terms,  is  unconditional  and  absolute,  subject to the
limitations  set forth herein,  in the Certificate of Designation or pursuant to
the Warrants, regardless of the effect of any such dilution.

         3.3  FURNISHING  OF   INFORMATION.   As  long  as  the  Purchasers  own
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the Company  after the date hereof  pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports  pursuant to such sections,  it will
prepare and furnish to the Purchasers and make publicly  available in accordance
with Rule 144(c)  promulgated  under the Securities  Act such  information as is
required for the  Purchasers to sell the Securities  under Rule 144  promulgated
under the Securities Act. The Company  further  covenants that it will take such
further action as any holder of Securities may  reasonably  request,  all to the
extent  required  from time to time to  enable  such  Person to sell  Underlying
Shares  without  registration  under the Securities Act within the limitation of
the  exemptions  provided  by Rule 144  promulgated  under the  Securities  Act,
including causing its attorneys to render and deliver any legal opinion required
in  order  to  permit a  Purchaser  to  receive  Underlying  Shares  free of all
restrictive  legends and to subsequently  sell Underlying  Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice  having
a similar effect. Upon the request of any such Person, the Company shall deliver
to such  Person a  written  certification  of a duly  authorized  officer  as to
whether it has complied with such requirements.

         3.4 INTEGRATION.  The Company shall not, and shall use its best efforts
to ensure  that,  no  Affiliate of the Company  shall,  sell,  offer for sale or
solicit  offers to buy or  otherwise  negotiate  in respect of any  security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers.

                                       11
<PAGE>

         3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would be,
if a notice of  conversion or exercise (as the case may be) were to be delivered
on such date,  precluded  from  issuing (a) the number of  Underlying  Shares as
would then be issuable upon a conversion  in full of the Shares,  and (b) of the
number of  Underlying  Shares as would then be  issuable  upon  exercise  of the
Warrants  (the  "CURRENT  REQUIRED  MINIMUM"),   in  either  case,  due  to  the
unavailability  of a sufficient  number of  authorized  but unissued or reserved
shares of  Common  Stock,  then the  Board of  Directors  of the  Company  shall
promptly  prepare and mail to the  stockholders  of the Company proxy  materials
requesting  authorization  to amend the  Company's  certificate  or  articles of
incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least such number of shares as reasonably requested
by the Purchasers in order to provide for such number of authorized and unissued
shares of Common  Stock to  enable  the  Company  to comply  with its  issuance,
conversion,  exercise and reservation of shares obligations as set forth in this
Agreement,  the  Certificate of Designation and the Warrants (the sum of (x) the
number of shares of Common  Stock  then  outstanding  plus all  shares of Common
Stock  issuable  upon  exercise  of  all  outstanding   options,   warrants  and
convertible  instruments,  and (y) the  Current  Required  Minimum,  shall  be a
reasonable  number). In connection  therewith,  the Board of Directors shall (a)
adopt  proper  resolutions  authorizing  such  increase,  (b)  recommend  to and
otherwise use its best efforts to promptly and duly obtain stockholder  approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later  than the  earlier  to occur of the 60th day after  delivery  of the proxy
materials relating to such meeting and the 90th day after request by a holder of
Securities to issue the number of Underlying Shares in accordance with the terms
hereof)  and (c)  within  five  Business  Days  of  obtaining  such  stockholder
authorization,  file an  appropriate  amendment to the Company's  certificate or
articles of incorporation to evidence such increase.

         3.6  RESERVATION  AND LISTING OF UNDERLYING  SHARES.  (a) If, after the
date  hereof,  the  Company  shall list the Common  Stock on any of the New York
Stock  Exchange,  American  Stock  Exchange,  NASDAQ  National  Market or NASDAQ
SmallCap Market (each, a "SUBSEQUENT MARKET"), then the Company shall include in
such listing for the benefit of the Purchasers for issuance upon exercise of the
Warrants and  conversion  of the Shares a number of shares of Common Stock equal
to not less than the then Current Required Minimum.  If the number of Underlying
Shares  issuable upon  conversion  in full of the then  outstanding  Shares,  as
payment of dividends thereon,  and upon exercise of the then unexercised portion
of the Warrants  exceed the number of  Underlying  Shares  previously  listed on
account  thereof  with a  Subsequent  Market,  then the  Company  shall take the
necessary actions to immediately list a number of Underlying Shares as equals no
less than the then Current Required Minimum.

                  (b) The Company  shall  maintain a reserve of shares of Common
Stock for issuance  upon  conversion  of the Shares in full and upon exercise in
full of the Warrants in  accordance  with this  Agreement,  the  Certificate  of
Designation and the Warrants, respectively, in such amount as may be required to
fulfill its obligations in full under the Transaction  Documents,  which reserve
shall equal no less than the then Current Required Minimum.

                                       12
<PAGE>

         3.7 CONVERSION AND EXERCISE  OBLIGATIONS  AND  PROCEDURES.  The Company
shall honor  conversion  of the Shares and  exercise of the  Warrants  and shall
deliver  Underlying Shares in accordance with the respective  terms,  conditions
and time periods set forth in the Certificate of Designation  and Warrants.  The
Transfer Agent Instructions, Conversion Notice (as defined in the Certificate of
Designation) and Notice of Exercise under the Warrants set forth the totality of
the procedures  with respect to the conversion of the Shares and exercise of the
Warrants,  including  the form of legal  opinion,  if  necessary,  that shall be
rendered  to the  Company's  transfer  agent  and  such  other  information  and
instructions as may be reasonably  necessary to enable the Purchasers to convert
their Shares and exercise their Warrants as  contemplated  in the Certificate of
Designation and the Warrants (as applicable).

         3.8 CERTAIN SECURITIES LAWS DISCLOSURES;  PUBLICITY. The Company shall:
(i) on the  Closing  Date issue a press  release  acceptable  to the  Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the  transactions  contemplated  hereby within ten
Business Days after the Closing Date,  and (iii) timely file with the Commission
a Form D promulgated  under the Securities  Act. The Company shall, no less than
two Business Days prior to the filing of any disclosure required by clauses (ii)
and (iii) above,  provide a copy thereof to the Purchasers.  The Company and the
Purchasers  shall consult with each other in issuing any other press releases or
otherwise making public statements or filings and other  communications with the
Commission  or any  regulatory  agency or stock market or trading  facility with
respect to the  transactions  contemplated  hereby and neither party shall issue
any such press release or otherwise make any such public  statement,  filings or
other  communications  without the prior written consent of the other, except if
such  disclosure  is  required  by law  or  stock  market  or  trading  facility
regulation,  in which such case the disclosing  party shall promptly provide the
other  party  with  prior  notice  of such  public  statement,  filing  or other
communication.  Notwithstanding  the  foregoing,  the Company shall not publicly
disclose the names of the Purchasers,  or include the names of the Purchasers in
any filing with the Commission or any  regulatory  agency,  trading  facility or
stock market without the prior written consent of the Purchasers,  except to the
extent such disclosure is required by law or stock market regulations,  in which
case the  Company  shall  provide  the  Purchasers  with  prior  notice  of such
disclosure.

         3.9 USE OF PROCEEDS.  The Company  shall use the net proceeds  from the
sale of the Securities  hereunder for working  capital  purposes and not for the
satisfaction  of any portion of the Company's  debt (other than payment of trade
payables in the ordinary course of the Company's  business and prior practices),
to redeem any Company  equity or  equity-equivalent  securities or to settle any
outstanding litigation.

         3.10 TRANSFER OF  INTELLECTUAL  PROPERTY  RIGHTS.  Except in connection
with  the sale of all or  substantially  all of the  assets  of the  Company  or
licensing  arrangements  in the ordinary course of the Company's  business,  the
Company  shall not  transfer,  sell or  otherwise  dispose  of any  Intellectual
Property  Rights,  or allow any of the  Intellectual  Property  Rights to become
subject to any Liens,  or fail to renew such  Intellectual  Property  Rights (if
renewable  and it would  otherwise  lapse if not  renewed),  without  the  prior
written consent of the Purchasers.

                                       13
<PAGE>

         3.11  EXCLUSIVITY.  The Company  shall not issue and sell the Shares to
any Person other than to the Purchasers.

         3.12 SHAREHOLDER  RIGHTS PLAN. No claim will be made or enforced by the
Company or any other Person that any  Purchaser is an  "ACQUIRING  PERSON" under
any  shareholders  rights  plan or  similar  plan or  arrangement  in  effect or
hereafter  adopted  by the  Company,  or that any  Purchaser  could be deemed to
trigger the provisions of any such plan or  arrangement,  by virtue of receiving
Securities or shares of Common Stock under the Transaction Documents.

         3.13 TRADING  RESTRICTIONS.  At no time during the 15 days  immediately
prior to the date  hereof  has such  Purchaser  engaged in or  effected,  in any
manner  whatsoever,  directly  or  indirectly,  in any "Short  Sale" (as defined
herein.  Each  Purchaser  further  agrees that as long as such  Purchaser  holds
Shares, such Purchaser will not enter into any Short Sales. For purposes hereof,
a "SHORT SALE" by a Purchaser  shall mean a marked  "short sale" of Common Stock
by such Purchaser that is made at a time when there is no equivalent  offsetting
long  position  in the Common  Stock held by such  Purchaser.  For  purposes  of
determining  whether  there is an  equivalent  offsetting  long  position in the
Common Stock held by a Purchaser,  Underlying  Shares issuable upon exercises of
Warrants and upon delivered  Conversion Notices under the Shares shall be deemed
to be held long by such Purchaser.

                                   ARTICLE IV
                                  MISCELLANEOUS

         4.1  FEES  AND   EXPENSES.   Except  as  otherwise  set  forth  in  the
Registration Rights Agreement, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party  incident  to the  negotiation,  preparation,  execution,
delivery and performance of this Agreement.  The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Securities.

         4.2 ENTIRE AGREEMENT;  AMENDMENTS. The Transaction Documents,  together
with the Exhibits and  Schedules  thereto and the  Transfer  Agent  Instructions
contain  the entire  understanding  of the parties  with  respect to the subject
matter hereof and supersede all prior  agreements  and  understandings,  oral or
written,  with respect to such matters,  which the parties acknowledge have been
merged into such documents, exhibits and schedules.

         4.3 NOTICES.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone number specified in this Section prior to 6:30 p.m.  (Pacific Time) on
a Business  Day, (ii) the Business Day after the date of  transmission,  if such
notice or  communication  is delivered via facsimile at the facsimile  telephone
number  specified in this Agreement  later than 6:30 p.m.  (Pacific Time) on any
date and earlier than 11:59 p.m. (Pacific Time) on such date, (iii) the Business

                                       14
<PAGE>

Day following the date of mailing,  if sent by nationally  recognized  overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and  communications  shall be
as follows:

         If to the Company:       e.Digital Corporation
                                  13114 Evening Creek Drive South
                                  San Diego, California 92128
                                  Facsimile No.: (858) 486-3922
                                  Attn: Chief Executive Officer

         With copies to:          Higham, McConnell& Dunning LLP
                                  15 Enterprise, Suite 360
                                  Aliso Viejo, California 92656
                                  Facsimile No.: (949) 900-4401
                                  Attn: Curt C. Barwick, Esq.

         If to a Purchaser:       To the address set forth under such
                                  Purchaser's  name on the signature
                                  pages hereto.

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

         4.4 AMENDMENTS;  WAIVERS.  No provision of this Agreement may be waived
or amended except in a written  instrument  signed, in the case of an amendment,
by the Company and each of the  Purchasers  or, in the case of a waiver,  by the
party against whom  enforcement  of any such waiver is sought.  No waiver of any
default  with  respect  to any  provision,  condition  or  requirement  of  this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other  provision,  condition or requirement  hereof,  nor shall any delay or
omission of either  party to exercise any right  hereunder in any manner  impair
the exercise of any such right accruing to it thereafter.

         4.5  HEADINGS.  The headings  herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof.

         4.6  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without  the prior  written  consent of the  Purchasers.  Except as set forth in
Section  3.1(a),  the  Purchasers  may not assign this  Agreement  or any of the
rights or  obligations  hereunder  without  the  consent  of the  Company.  This
provision  shall not limit  any  Purchaser's  right to  transfer  securities  or
transfer or assign rights under the Registration Rights Agreement.

                                       15
<PAGE>

         4.7 NO  THIRD-PARTY  BENEFICIARIES.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

         4.8 GOVERNING LAW. All questions concerning the construction, validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by and
construed  and enforced in  accordance  with the  internal  laws of the State of
California,  without regard to the principles of conflicts of law thereof.  Each
party hereby irrevocably submits to the exclusive  jurisdiction of the state and
federal courts sitting in the City and County of San Diego, for the adjudication
of any dispute  hereunder  or in  connection  herewith  or with any  transaction
contemplated   hereby  or  discussed  herein  (including  with  respect  to  the
enforcement of the Transaction  Documents),  and hereby irrevocably  waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper. Each party hereby irrevocably waives personal service
of process and  consents  to process  being  served in any such suit,  action or
proceeding  by  mailing a copy  thereof  via  registered  or  certified  mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient  service of process and notice  thereof.  Nothing
contained  herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.

         4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained  herein shall  survive the Closing and the delivery and  conversion or
exercise  (as the case may be) of the Shares and of the Warrants for a period of
two years.

         4.10  EXECUTION.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

         4.11  SEVERABILITY.  In case any one or more of the  provisions of this
Agreement  shall be invalid or  unenforceable  in any respect,  the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be  affecting  or impaired  thereby and the parties  will  attempt to
agree  upon a valid  and  enforceable  provision  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

         4.12  REMEDIES.  In addition to being  entitled to exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company  will be entitled  to specific  performance  of each
other's  obligations  under the  Transaction  Documents.  The parties agree that
monetary  damages  may not be  adequate  compensation  for any loss  incurred by

                                       16
<PAGE>

reason of any breach of  obligations  described  in the  foregoing  sentence and
hereby  agree  to waive  in any  action  for  specific  performance  of any such
obligation the defense that a remedy at law would be adequate.

         4.13  INDEPENDENT  NATURE OF PURCHASERS'  OBLIGATIONS  AND RIGHTS.  The
obligations of each Purchaser under any Transaction  Document is several and not
joint with the  obligations  of any other  Purchaser  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers are in any way acting in concert with respect to such  obligations or
the transactions  contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently  protect and enforce its rights,  including without
limitation  the  rights  arising  out of  this  Agreement  or  out of the  other
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGES FOLLOW]

                                       17
<PAGE>

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Convertible  Preferred  Stock  Purchase  Agreement to be duly  executed by their
respective authorized signatories as of the date first indicated above.

                                    E.DIGITAL CORPORATION

                                    By:_____________________________________
                                        Name:
                                        Title:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGES OF PURCHASERS FOLLOW]

                                       18
<PAGE>

                                    [NAME OF PURCHASER]

                        By:_____________________________________
                           Name:
                           Title:

                        Purchase Price:           $[       ]

                        Number of Series A Warrants:         [       ]
                        Number of Series B Warrants:         [       ]

                        Address for Notice:

                        [NAME OF PURCHASER]
                        [ADDRESS OF PURCHASER]

                        With copies to:

                        [NAME OF COUNSEL FOR PURCHASER]
                        [ADDRESS OF COUNSEL FOR PURCHASER]

                                       19
<PAGE>

                 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

                                      AMONG

                              E.DIGITAL CORPORATION

                                       AND

                         THE INVESTORS SIGNATORY HERETO

                          DATED AS OF NOVEMBER 19, 2003

                                       20
<PAGE>

                           Convertible Preferred Stock
                               Purchase Agreement
                                 Schedule 2.1(c)

CAPITALIZATION TABLE

Outstanding as of November 17, 2003:
                                                                   Issued and
                                                  AUTHORIZED      OUTSTANDING

Common Stock                                     200,000,000      155,241,328

Preferred Stock
Series D                                           5,000,000          205,000

Warrants to purchase common stock                          -          896,189
   (see schedule 6(c) to Registration
   Rights Agreement)

Stock options on common stock                     14,000,000        4,839,166
  1994 ISO/NSO Plan

                                       21

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