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Unassociated Document

     

    Exhibit
      4.51.2

     

    SECOND
      AMENDMENT

    TO

    12%
      SUBORDINATED PROMISSORY NOTE

    

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

    

    R E C I T
 A L S

    

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

    

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

    

    C. Whereas,
      holders of at least fifty-one percent (51%) in the aggregate principal amount
      of
      the Notes outstanding may amend, modify and/or waive certain requirements and
      obligations of the Maker under the 12% Subordinated Promissory Notes and bind
      all holders with respect to such amendment, modification and waiver;

    

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

    

    E. Whereas,
      Maker desires to further amend, modify and/or waive certain requirements and
      obligations of the Maker under the 12% Subordinated Promissory Notes and Payee,
      consents to such modification as set forth herein.

    

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

    

    1.  Maturity
      Date.
      The
“Maturity Date” referenced in the first unnumbered paragraph of the Note, as
      amended, is hereby extended from December 31, 2005 to December 31,
      2006.

    

    2.  Aggregate
      Principal Amount.
      Maker
      is hereby authorized to issue an additional $500,000 in principal amount of
      Notes. In connection therewith, the aggregate principal amount of Notes
      referenced in the first unnumbered paragraph of the Note, as amended, is hereby
      increased from $1,000,000 to $1,500,000. . No increase in the number of Warrants
      is authorized by this Amendment.

    

    3.  Royalty
      for New Financing.
      Payee
      understands that Maker intends to offer purchasers of the additional $500,000
      in
      Notes (the “Additional Notes”) a royalty as consideration for the additional
      financing necessary for the development of its new MedeViewer product and that
      such royalty, in the aggregate, shall be equal to up to Twenty Dollars ($20.00)
      for each MedeViewer sold for a period of three years (the “Royalty”). Payee
      hereby consents to the payment of the aggregate Royalty to the holders of the
      Additional Notes pro rata. Payee understands that Payee will not receive the
      Royalty unless Payee is a purchaser of Additional Notes.

    

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

    

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

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

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

    

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

    

    [SIGNATURE
      PAGE FOLLOWS]

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    SIGNATURE
      PAGE 

    TO

    SECOND
      AMENDMENT

    TO

    12%
      SUBORDINATED PROMISSORY NOTE

    

    

    

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

            	 	 
	
              Senior
                Vice President and Secretary  

            	 	 

    

     

     

    
      
         

      

      
        3

        
          

        

      

      
         

        
        

      

    

    EXHIBIT
      A

    

    5    Conversion.

    

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

    

    5.2 Conversion
      Procedure.

    

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

    

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

    

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

    

    5.4 Conversion
      Price Adjustments.

    

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

    

    
      
         

      

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

    

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

    

    
      
         

      

      
        5Exhibit
      10.5

    

    CHANGE
      OF
      CONTROL AGREEMENT

    

    THIS
      AGREEMENT is made as of the 18th
      day of
      July, 2000, among QNB CORP. (“Corporation”), a Pennsylvania business corporation
      having a place of business at 10 North Third Street, Quakertown, Pennsylvania
      18951, THE QUAKERTOWN NATIONAL BANK (“Bank”) a national banking association
      having a place of business at 10 North Third Street, Quakertown, Pennsylvania
      18951, and ROBERT C. WERNER (“Executive”), an individual residing at 170
      Hawthorne Lane, Phoenixville, Pennsylvania 19460.

    

    WITNESSETH:

    

    WHEREAS,
      the Corporation is a registered bank holding company;

    

    WHEREAS,
      the Bank is a subsidiary of the Corporation;

    

    WHEREAS,
      Corporation and Bank desire to continue to retain Executive to serve in the
      capacity of Executive Vice President and Chief Operating Officer of Bank under
      the terms and conditions set forth herein;

    

    WHEREAS,
      Executive desires to continue to serve the Corporation and Bank in an executive
      capacity under the terms and conditions set forth herein.

    

    AGREEMENT:

    

    NOW,
      THEREFORE, the parties hereto, intending to be legally bound, agree as
      follows:

    

    1.
      EMPLOYMENT. Executive is employed by Corporation and Bank on an “at will” basis
      and there is no employment agreement between them. This Agreement is granted
      by
      Corporation and Bank in order to set forth terms and conditions between
      Corporation, Bank and Executive in the event of a Change in Control as defined
      herein.

    

    2.
      RIGHTS
      IN EVENT OF TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL. If
      Executive’s employment is terminated by Corporation or Bank other than for Cause
      (as defined below) on or before the three (3) year anniversary of the date
      of a
      Change in Control (as defined below), then Corporation or Bank shall pay to
      Executive, in lieu of any other severance benefits to which Executive may be
      entitled, an amount equal to the product of (a) the average annual aggregate
      compensation paid by Corporation and Bank to Executive and includible in the
      Executive’s gross income for federal income tax purposes during the five (5)
      calendar years preceding the taxable year in which the date of the termination
      occurs, multiplied by (b) 2, such payment to be made in a lump sum on or before
      the fifth day following the date of termination and shall be subject to
      applicable taxes and withholdings. However, if the lump sum payment under this
      paragraph 2, when added to all other amounts or benefits provided to or on
      behalf of the Executive in connection with his termination of employment, would
      result in the imposition of an excise tax under Section 4999 of the Internal
      Revenue Code of 1986, as amended (the “Code”), such payment shall be reduced to
      the extent necessary to avoid such excise tax imposition. Notwithstanding the
      foregoing or any other provision of this Agreement to the contrary, if any
      portion of the amount herein payable to the Executive is determined to be
      non-deductible pursuant to the regulations promulgated under Section 280G of
      the
      Code, the Corporation shall be required only to pay to Executive the amount
      determined to be deductible under Section 280G. The determination of any
      reduction in the lump sum payment under this paragraph 2 pursuant to the
      foregoing provisions shall be made by Corporation’s independent
      auditors.

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    3.
      TERMINATION OF EMPLOYMENT FOR CAUSE. For purposes of this Agreement, termination
      for “Cause” shall mean any of the following:

    

    (a)
      Executive’s conviction of or plea of guilty or nolo contendere to a felony, a
      crime of falsehood or a crime involving moral turpitude, or the actual
      incarceration of Executive for a period of twenty (20) consecutive days or
      more;

    

    (b)
      Executive’s willful or intentional failure to follow the good faith lawful
      instructions of the Board of Directors of Corporation or Bank with respect
      to
      its operations, after written notice from Corporation or Bank and a failure
      to
      cure such violation within twenty (20) days of said written notice;

    

    (c)
      Executive’s willful or intentional failure to substantially perform Executive’s
      duties to Corporation or Bank, other than a failure resulting from Executive’s
      incapacity because of physical or mental illness, after written notice from
      Corporation or Bank and a failure to cure such violation within twenty (20)
      days
      of said written notice;

    

    (d)
      dishonesty or negligence by the Executive in the performance of his
      duties;

    

    (e)
      Executive’s violation of any law, rule or regulation governing banks or bank
      officers or any final cease and desist order issued by a bank regulatory
      authority;

    

    (f)
      conduct on the part of the Executive as determined by an affirmative vote of
      seventy percent (70%) of the disinterested members of the Board of Directors
      of
      Corporation and Bank which brings public discredit to Corporation or Bank;
      or

    

    (g)
      Executive’s breach of fiduciary duty involving personal profit.

    

    4.
      CHANGE
      IN CONTROL DEFINED. As used in this Agreement, “Change in Control” shall mean
      the occurrence of any of the following:

    

    (a)(i)
      a
      merger, consolidation or division involving Corporation or Bank, (ii) a sale,
      exchange, transfer or other disposition of substantially all of the assets
      of
      Corporation or Bank, or (iii) a purchase by Corporation or Bank of substantially
      all of the assets of another entity, unless (y) such merger, consolidation,
      division, sale, exchange, transfer, purchase or disposition is approved in
      advance by seventy percent (70%) or more of the members of the Board of
      Directors of Corporation or Bank who are not interested in the transaction
      and
      (z) a majority of the members of the Board of Directors of the legal entity
      resulting from or existing after any such transaction and of the Board of
      Directors of such entity’s parent corporation, if any, are former members of the
      Board of Directors of Corporation or Bank; or

    

    (b)
      any
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
      Exchange Act of 1934 (the “Exchange Act”)), other than Corporation or Bank or
      any “person” who on the date hereof is a director or officer of Corporation or
      Bank is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the
      Exchange Act), directly or indirectly, of securities of Corporation or Bank
      representing twenty-five (25%) percent or more of the combined voting power
      of
      Corporation or Bank’s then outstanding securities, or

    

    (c)
      during any period of two (2) consecutive years during the term of Executive’s
      employment under this Agreement, individuals who at the beginning of such period
      constitute the Board of Directors of Corporation or Bank cease for any reason
      to
      constitute at least a majority thereof, unless the election of each director
      who
      was not a director at the beginning of such period has been approved in advance
      by directors representing at least two-thirds of the directors then in office
      who were directors at the beginning of the period; or

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    (d)
      any
      other change in control of Corporation and Bank similar in effect to any of
      the
      foregoing.

    

    5.
      DATE
      OF CHANGE IN CONTROL DEFINED. For purposes of this Agreement, the date of Change
      in Control shall mean:

    

    (a)
      the
      first date on which a single person and/or entity, or group of affiliated
      persons and/or entities, acquire the beneficial ownership of twenty-five (25%)
      or more of the Bank or Corporation’s voting securities, or

    

    (b)
      the
      date of the closing of an Agreement, transferring all or substantially all
      of
      the Bank or Corporation’s assets, or

    

    (c)
      the
      date on which a merger, consolidation or business combination is consummated,
      as
      applicable, or

    

    (d)
      the
      date on which individuals who formerly constituted a majority of the Board
      of
      Directors of the Bank or the Corporation under paragraph 4(b) above, cease
      to be
      a majority.

    

    6.
      NO
      EMPLOYMENT CONTRACT. This Agreement is not an employment contract. Nothing
      contained herein shall guarantee or assure Executive of continued employment
      by
      Corporation or Bank. Rather, Corporation’s and Bank’s obligations to Executive
      hereunder shall arise only if Executive continues to be employed by Corporation
      and Bank in his present or in a higher capacity and then only in the event
      the
      conditions described herein for payment to Executive have been met.

    

    7.
      WAIVER. No provision of this Agreement may be modified, waived or discharged
      unless such waiver, modification or discharge is agreed to in writing and signed
      by Executive and an executive officer specifically designated by the Boards
      of
      Directors of Corporation and Bank. No waiver by either party hereto at any
      time
      of any breach by the other party hereto of, or compliance with, any condition
      or
      provision of this Agreement to be performed by such other party shall be deemed
      a waiver of similar or dissimilar provisions or conditions at the same or at
      any
      prior or subsequent time.

    

    8.
      ATTORNEY’S FEES AND COSTS. If any action at law or in equity is necessary to
      enforce or interpret the terms of this Agreement, each party shall bear their
      own attorney’s fees, costs, and necessary disbursements.

    

    9.
      ENTIRE
      AGREEMENT. This Agreement supersedes any and all understandings and agreements,
      either oral or in writing, between the parties with respect to any severance
      that may become due as a result of or in connection with a Change in Control.
      This Agreement contains all the covenants and agreements between the parties
      with respect to any severance that may become due as a result of or in
      connection with a Change in Control.

    

    10.
      SUCCESSORS; BINDING AGREEMENT. This Agreement shall be binding upon and inure
      to
      the benefit of Corporation, Bank and Executive, and their respective successors,
      assigns, heirs and personal representatives.

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

      

    11.
      ARBITRATION. Corporation, Bank and Executive recognize that in the event a
      dispute should arise between them concerning the interpretation or
      implementation of this Agreement, lengthy and expensive litigation will not
      afford a practical resolution of the issues within a reasonable period of time.
      Consequently, each party agrees that all disputes, disagreements and questions
      of interpretation concerning this Agreement are to be submitted for resolution,
      in Philadelphia, Pennsylvania, to the American Arbitration Association (the
      “Association”) in accordance with the Association’s National Rules for the
      Resolution of Employment Disputes or other applicable rules then in effect
      (“Rules”). Corporation, Bank or Executive may initiate an arbitration proceeding
      at any time by giving notice to the other in accordance with the Rules.
      Corporation and Bank and Executive may, as a matter of right, mutually agree
      on
      the appointment of a particular arbitrator from the Association’s pool. The
      arbitrator shall not be bound by the rules of evidence and procedure of the
      courts of the Commonwealth of Pennsylvania but shall be bound by the substantive
      law applicable to this Agreement. The decision of the arbitrator, absent fraud,
      duress, incompetence or gross and obvious error of fact, shall be final and
      binding upon the parties and shall be enforceable in courts of proper
      jurisdiction. Following written notice of a request for arbitration,
      Corporation, Bank and Executive shall be entitled to an injunction restraining
      all further proceedings in any pending or subsequently filed litigation
      concerning this Agreement, except as otherwise provided herein.

    

    12.
      VALIDITY. The invalidity or unenforceability of any provision of this Agreement
      shall not affect the validity or enforceability of any other provision of this
      Agreement, which shall remain in full force and effect.

    

    13.
      APPLICABLE LAW. This Agreement shall be governed by and construed in accordance
      with the domestic, internal laws of the Commonwealth of Pennsylvania, without
      regard to its conflicts of laws principles.

    

    
      
        14.
          HEADINGS.
          The section headings of this Agreement are for convenience only and shall
          not
          control or affect the meaning or construction or limit the scope or intent
          of
          any of the provisions of this Agreement.

      

    

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the date first
      above written.

    

    
      	 	 	 
	
              ATTEST:

            	 	
              QNB
                CORP.

            
	 	 	 
	
              /s/
                Charles M. Meredith, III

            	 	
              /s/
                Thomas J. Bisko

            
	
              Charles
                M. Meredith, III, Secretary

            	 	
              Thomas
                J. Bisko, President

            
	 	 	 
	 	 	 
	
              ATTEST:

            	 	
              THE
                QUAKERTOWN NATIONAL BANK

            
	 	 	 
	
              /s/
                Charles M. Meredith, III

            	 	
              /s/
                Thomas J. Bisko

            
	
              Charles
                M. Meredith, III, Secretary

            	 	
              Thomas
                J. Bisko, President

            
	 	 	 
	 	 	 
	
              WITNESS:

            	 	
              EXECUTIVE:

            
	 	 	 
	
              /s/
                Ann B. Gaspar

            	 	
              /s/
                Robert C. Werner

            
	
              Ann
                B. Gaspar

            	 	
              Robert
                C. Werner, Executive

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