Document:

Execution Copy
                          REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this  "Agreement"),  dated as of January 2,
2007,  by and  between  e.Digital  Corporation,  a  Delaware  corporation,  (the
"Company"), and Fusion Capital Fund II, LLC (together with it permitted assigns,
the "Buyer").  Capitalized  terms used herein and not otherwise  defined  herein
shall  have the  respective  meanings  set forth in the  Common  Stock  Purchase
Agreement  by and between the  parties  hereto,  dated as of the date hereof (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Purchase Agreement").

                                    WHEREAS:

      A. The Company has agreed, upon the terms and subject to the conditions of
the  Purchase  Agreement,  to issue to the  Buyer (i) up to Eight  Million  Five
Hundred Thousand  Dollars  ($8,500,000) of the Company's common stock, par value
$0.001 per share (the "Common  Stock") (the  "Purchase  Shares"),  and (ii) such
number of shares of Common Stock as is required  pursuant to Section 4(e) of the
Purchase Agreement (the "Commitment Shares"); and

      B. To induce the Buyer to enter into the Purchase  Agreement,  the Company
has agreed to provide  certain  registration  rights under the Securities Act of
1933,  as  amended,  and the rules and  regulations  thereunder,  or any similar
successor  statute   (collectively,   the  "1933  Act"),  and  applicable  state
securities laws.

      NOW, THEREFORE,  in consideration of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby  acknowledged,  the Company and the Buyer hereby
agree as follows:

      1. DEFINITIONS.

            As used in this  Agreement,  the  following  terms  shall  have  the
following meanings:

            a. "Investor" means the Buyer, any transferee or assignee thereof to
whom a Buyer  assigns its rights under this  Agreement  and who agrees to become
bound by the provisions of this  Agreement in accordance  with Section 9 and any
transferee  or assignee  thereof to whom a  transferee  or assignee  assigns its
rights under this  Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

            b. "Person" means any person or entity including any corporation,  a
limited liability company,  an association,  a partnership,  an organization,  a
business,  an individual,  a governmental or political  subdivision thereof or a
governmental agency.

            c.  "Register,"   "registered,"  and   "registration"   refer  to  a
registration   effected  by  preparing  and  filing  one  or  more  registration
statements of the Company in  compliance  with the 1933 Act and pursuant to Rule
415 under the 1933 Act or any successor rule  providing for offering  securities
on a  continuous  basis  ("Rule  415"),  and  the  declaration  or  ordering  of
effectiveness of such registration  statement(s) by the United States Securities
and Exchange Commission (the "SEC").

<PAGE>

            d.  "Registrable  Securities"  means the Purchase  Shares which have
been, or which may from time to time be,  issued or issuable  upon  purchases of
the  Available  Amount  under  the  Purchase  Agreement  (without  regard to any
limitation or  restriction  on purchases)  the Signing Shares and the Commitment
Shares issued or issuable to the Investor and any shares of capital stock issued
or issuable with respect to the Purchase  Shares,  the  Commitment  Shares,  the
Signing Shares or the Purchase  Agreement as a result of any stock split,  stock
dividend,  recapitalization,  exchange or similar  event or  otherwise,  without
regard to any limitation on purchases under the Purchase Agreement.

            e. "Registration  Statement" means the registration statement of the
Company covering only the sale of the Registrable Securities.

      2. REGISTRATION.

            a.  Mandatory  Registration.  The  Company  shall  within  ten  (10)
Business Days from the date hereof file with the SEC the Registration Statement.
The Registration Statement shall register only the Registrable Securities and no
other  securities  of the Company.  The  Investor  and its counsel  shall have a
reasonable opportunity to review and comment upon such registration statement or
amendment to such registration statement and any related prospectus prior to its
filing with the SEC. Investor shall furnish all information reasonably requested
by the Company for inclusion therein.  The Company shall use its best efforts to
have the Registration  Statement or amendment  declared  effective by the SEC at
the earliest  possible date.  The Company shall use  reasonable  best efforts to
keep the Registration Statement effective pursuant to Rule 415 promulgated under
the 1933 Act and available for sales of all of the Registrable Securities at all
times until the earlier of (i) the date as of which the Investor may sell all of
the  Registrable   Securities  without  restriction   pursuant  to  Rule  144(k)
promulgated under the 1933 Act (or successor  thereto) or (ii) the date on which
(A) the Investor shall have sold all the Registrable Securities and no Available
Amount remains under the Purchase  Agreement (the  "Registration  Period").  The
Registration  Statement  (including any  amendments or  supplements  thereto and
prospectuses  contained  therein)  shall not contain any untrue  statement  of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.

            b. Rule 424 Prospectus. The Company shall, as required by applicable
securities  regulations,  from time to time file with the SEC,  pursuant to Rule
424 promulgated  under the 1933 Act, the prospectus and prospectus  supplements,
if any, to be used in connection with sales of the Registrable  Securities under
the Registration Statement. The Investor and its counsel shall have a reasonable
opportunity to review and comment upon such prospectus  prior to its filing with
the SEC. The Investor shall use its reasonable best efforts to comment upon such
prospectus  within one (1) Business Day from the date the Investor  receives the
final version of such prospectus.

            c. Sufficient Number of Shares  Registered.  In the event the number
of shares  available under the  Registration  Statement is insufficient to cover
all of the  Registrable  Securities,  the Company  shall amend the  Registration
Statement or file a new registration statement (a "New Registration Statement"),
so as to cover all of such Registrable Securities as soon as practicable, but in
any event not later than ten (10)  Business  Days after the  necessity  therefor
arises. The Company shall use it reasonable best efforts to cause such amendment
and/or New  Registration  Statement to become  effective as soon as  practicable
following the filing thereof.

                                       2
<PAGE>

      3. RELATED OBLIGATIONS.

      With respect to the  Registration  Statement and whenever any  Registrable
Securities  are to be registered  pursuant to Section 2(b)  including on any New
Registration  Statement,  the Company shall use its  reasonable  best efforts to
effect the  registration  of the  Registrable  Securities in accordance with the
intended method of disposition thereof and, pursuant thereto,  the Company shall
have the following obligations:

            a. The Company shall  prepare and file with the SEC such  amendments
(including  post-effective  amendments)  and  supplements  to  any  registration
statement  and  the  prospectus  used  in  connection  with  such   registration
statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under the 1933 Act, as may be  necessary to keep the  Registration  Statement or
any New  Registration  Statement  effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable  Securities of the Company covered
by the Registration  Statement or any New Registration Statement until such time
as all of such Registrable  Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof as set
forth in such registration statement.

            b. The Company  shall permit the Investor to review and comment upon
the Registration  Statement or any New Registration Statement and all amendments
and  supplements  thereto at least two (2)  Business  Days prior to their filing
with the SEC, and not file any document in a form to which  Investor  reasonably
objects.  The Investor shall use its reasonable best efforts to comment upon the
Registration  Statement or any New Registration  Statement and any amendments or
supplements  thereto  within two (2)  Business  Days from the date the  Investor
receives the final version  thereof.  The Company shall furnish to the Investor,
without  charge any  correspondence  from the SEC or the staff of the SEC to the
Company or its representatives relating to the Registration Statement or any New
Registration Statement.

            c. Upon request of the  Investor,  the Company  shall furnish to the
Investor,  (i)  promptly  after the same is prepared  and filed with the SEC, at
least one copy of such  registration  statement  and any  amendment(s)  thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits,  (ii) upon the  effectiveness of any registration
statement,  a copy of the prospectus included in such registration statement and
all  amendments and  supplements  thereto (or such other number of copies as the
Investor  may  reasonably  request)  and (iii) such other  documents,  including
copies of any  preliminary or final  prospectus,  as the Investor may reasonably
request  from  time  to time in  order  to  facilitate  the  disposition  of the
Registrable Securities owned by the Investor.

            d. The Company shall use reasonable best efforts to (i) register and
qualify the  Registrable  Securities  covered by a registration  statement under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as the  Investor  reasonably  requests,  (ii)  prepare  and file in those
jurisdictions,   such  amendments  (including  post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (x)  qualify to do business  in any  jurisdiction  where it would not
otherwise be required to qualify but for this Section 3(d),  (y) subject  itself
to general taxation in any such  jurisdiction,  or (z) file a general consent to
service of process in any such  jurisdiction.  The Company shall promptly notify
the Investor who holds  Registrable  Securities of the receipt by the Company of
any  notification  with  respect  to  the  suspension  of  the  registration  or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any  jurisdiction  in the United  States or its receipt of
actual  notice of the  initiation  or  threatening  of any  proceeding  for such
purpose.

                                       3
<PAGE>

            e. As promptly as practicable  after becoming aware of such event or
facts,  the Company shall notify the Investor in writing of the happening of any
event or existence of such facts as a result of which the prospectus included in
any registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made,  not  misleading,  and promptly  prepare a  supplement  or
amendment to such  registration  statement  to correct such untrue  statement or
omission, and deliver a copy of such supplement or amendment to the Investor (or
such other number of copies as the Investor may reasonably request). The Company
shall also promptly  notify the Investor in writing (i) when a prospectus or any
prospectus  supplement or  post-effective  amendment has been filed,  and when a
registration  statement or any  post-effective  amendment  has become  effective
(notification  of such  effectiveness  shall be  delivered  to the  Investor  by
facsimile on the same day of such  effectiveness and by overnight mail), (ii) of
any  request  by the SEC  for  amendments  or  supplements  to any  registration
statement  or  related  prospectus  or  related  information,  and  (iii) of the
Company's  reasonable   determination  that  a  post-effective  amendment  to  a
registration statement would be appropriate.

            f. The Company shall use its reasonable  best efforts to prevent the
issuance  of  any  stop  order  or  other  suspension  of  effectiveness  of any
registration   statement,   or  the  suspension  of  the  qualification  of  any
Registrable  Securities  for sale in any  jurisdiction  and, if such an order or
suspension  is issued,  to obtain the  withdrawal of such order or suspension at
the earliest  possible moment and to notify the Investor of the issuance of such
order  and the  resolution  thereof  or its  receipt  of  actual  notice  of the
initiation or threat of any proceeding for such purpose.

            g. The Company shall (i) cause all the Registrable  Securities to be
listed on each  securities  exchange  on which  securities  of the same class or
series  issued by the  Company are then  listed,  if any, if the listing of such
Registrable  Securities is then permitted  under the rules of such exchange,  or
(ii) secure  designation and quotation of all the Registrable  Securities on the
Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section.

            h. The Company shall  cooperate  with the Investor to facilitate the
timely  preparation  and delivery of  certificates  (not bearing any restrictive
legend)  representing  the Registrable  Securities to be offered pursuant to any
registration  statement and enable such certificates to be in such denominations
or amounts as the Investor may  reasonably  request and registered in such names
as the Investor may request.

            i. The  Company  shall at all  times  provide a  transfer  agent and
registrar with respect to its Common Stock.

            j. If reasonably  requested by the  Investor,  the Company shall (i)
immediately  incorporate in a prospectus supplement or post-effective  amendment
such information as the Investor believes should be included therein relating to
the  sale  and  distribution  of  Registrable  Securities,   including,  without
limitation,  information  with respect to the number of  Registrable  Securities
being sold,  the purchase  price being paid  therefor and any other terms of the
offering of the Registrable  Securities;  (ii) make all required filings of such
prospectus  supplement  or  post-effective  amendment as soon as notified of the
matters to be  incorporated  in such  prospectus  supplement  or  post-effective
amendment;   and  (iii)  supplement  or  make  amendments  to  any  registration
statement.

                                       4
<PAGE>

            k. The Company  shall use its  reasonable  best efforts to cause the
Registrable   Securities  covered  by  the  any  registration  statement  to  be
registered with or approved by such other  governmental  agencies or authorities
as  may  be  necessary  to  consummate  the  disposition  of  such   Registrable
Securities.

l. Within one (1) Business Day after any  registration  statement which includes
the  Registrable  Securities is ordered  effective by the SEC, the Company shall
deliver,  and shall  cause legal  counsel  for the  Company to  deliver,  to the
transfer  agent for such  Registrable  Securities  (with copies to the Investor)
confirmation that such registration statement has been declared effective by the
SEC in the form attached  hereto as Exhibit A.  Thereafter,  if requested by the
Buyer at any time, the Company shall require its counsel to deliver to the Buyer
a written  confirmation  whether or not the  effectiveness of such  registration
statement has lapsed at any time for any reason (including,  without limitation,
the issuance of a stop order) and whether or not the  registration  statement is
current  and  available  to the  Buyer  for  sale  of  all  of  the  Registrable
Securities.

            m. The Company shall take all other reasonable  actions necessary to
expedite and facilitate  disposition  by the Investor of Registrable  Securities
pursuant to any registration statement.

      4. OBLIGATIONS OF THE INVESTOR.

            a.  The  Company  shall  notify  the  Investor  in  writing  of  the
information the Company reasonably requires from the Investor in connection with
any registration statement hereunder.  The Investor shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such  documents in connection  with such  registration  as the
Company may reasonably request.

            b. The Investor  agrees to cooperate  with the Company as reasonably
requested by the Company in connection  with the  preparation  and filing of any
registration statement hereunder.

            c. The  Investor  agrees  that,  upon receipt of any notice from the
Company  of the  happening  of any  event  or  existence  of  facts  of the kind
described  in Section  3(f) or the first  sentence of 3(e),  the  Investor  will
immediately  discontinue  disposition of Registrable  Securities pursuant to any
registration   statement(s)  covering  such  Registrable  Securities  until  the
Investor's  receipt of the  copies of the  supplemented  or  amended  prospectus
contemplated  by Section  3(f) or the first  sentence  of 3(e).  Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to promptly
deliver shares of Common Stock without any restrictive legend in accordance with
the terms of the Purchase  Agreement in connection  with any sale of Registrable
Securities  with  respect to which an Investor  has entered  into a contract for
sale  prior to the  Investor's  receipt  of a notice  from  the  Company  of the
happening  of any  event of the kind  described  in  Section  3(f) or the  first
sentence of 3(e) and for which the Investor has not yet settled.

                                       5
<PAGE>

      5. EXPENSES OF REGISTRATION.

            All reasonable expenses,  other than sales or brokerage commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including,  without limitation, all registration,  listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company, shall be paid by the Company.

      6. INDEMNIFICATION.

            a. To the fullest  extent  permitted by law, the Company  will,  and
hereby does, indemnify,  hold harmless and defend the Investor,  each Person, if
any, who controls the Investor, the members, the directors,  officers, partners,
employees, agents,  representatives of the Investor and each Person, if any, who
controls  the  Investor  within the  meaning  of the 1933 Act or the  Securities
Exchange  Act of 1934,  as  amended  (the "1934  Act")  (each,  an  "Indemnified
Person"), against any losses, claims, damages,  liabilities,  judgments,  fines,
penalties,  charges,  costs,  attorneys'  fees,  amounts paid in  settlement  or
expenses, joint or several, (collectively,  "Claims") incurred in investigating,
preparing  or  defending  any  action,   claim,   suit,   inquiry,   proceeding,
investigation  or appeal  taken  from the  foregoing  by or before  any court or
governmental,  administrative  or  other  regulatory  agency,  body or the  SEC,
whether pending or threatened,  whether or not an indemnified party is or may be
a party thereto ("Indemnified Damages"), to which any of them may become subject
insofar  as such  Claims  (or  actions  or  proceedings,  whether  commenced  or
threatened,  in respect  thereof) arise out of or are based upon: (i) any untrue
statement or alleged  untrue  statement of a material  fact in the  Registration
Statement,  any  New  Registration  Statement  or any  post-effective  amendment
thereto  or in any  filing  made in  connection  with the  qualification  of the
offering  under the securities or other "blue sky" laws of any  jurisdiction  in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged  omission  to state a material  fact  required  to be stated  therein or
necessary  to make the  statements  therein  not  misleading,  (ii)  any  untrue
statement or alleged untrue  statement of a material fact contained in the final
prospectus  (as  amended or  supplemented,  if the Company  files any  amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including,  without  limitation,  any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable  Securities pursuant to the Registration Statement or
any New Registration  Statement or (iv) any material violation by the Company of
this  Agreement  (the matters in the  foregoing  clauses (i) through (iv) being,
collectively, "Violations"). The Company shall reimburse each Indemnified Person
promptly as such  expenses are  incurred and are due and payable,  for any legal
fees  or  other  reasonable   expenses  incurred  by  them  in  connection  with
investigating  or  defending  any such  Claim.  Notwithstanding  anything to the
contrary  contained  herein,  the  indemnification  agreement  contained in this
Section 6(a):  (i) shall not apply to a Claim by an  Indemnified  Person arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information  furnished in writing to the Company by such Indemnified Person
expressly  for  use in  connection  with  the  preparation  of the  Registration
Statement,  any New  Registration  Statement  or any such  amendment  thereof or
supplement  thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) or Section  3(e);  (ii) with respect to any  superceded
prospectus,  shall not inure to the  benefit  of any such  person  from whom the
person  asserting any such Claim purchased the  Registrable  Securities that are
the subject thereof (or to the benefit of any person controlling such person) if
the untrue  statement or omission of material fact  contained in the  superceded
prospectus  was  corrected  in  the  revised  prospectus,  as  then  amended  or
supplemented,  if such  revised  prospectus  was timely  made  available  by the
Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was
promptly advised in writing not to use the incorrect prospectus prior to the use
giving rise to a violation and such  Indemnified  Person,  notwithstanding  such
advice,  used it; (iii) shall not be available to the extent such Claim is based
on a  failure  of the  Investor  to  deliver  or to  cause to be  delivered  the
prospectus  made  available by the Company,  if such  prospectus was timely made
available  by the Company  pursuant to Section  3(c) or Section  3(e);  and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected  without the prior written consent of the Company,  which consent shall
not be  unreasonably  withheld.  Such  indemnity  shall remain in full force and
effect regardless of any  investigation  made by or on behalf of the Indemnified
Person and shall  survive the  transfer  of the  Registrable  Securities  by the
Investor pursuant to Section 9.

                                       6
<PAGE>

            b.  In  connection  with  the  Registration  Statement  or  any  New
Registration  Statement,  the  Investor  agrees  to  severally  and not  jointly
indemnify,  hold harmless and defend,  to the same extent and in the same manner
as is set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement or any New Registration Statement,
each Person, if any, who controls the Company within the meaning of the 1933 Act
or the 1934 Act  (collectively  and  together  with an  Indemnified  Person,  an
"Indemnified  Party"),  against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise,  insofar
as such  Claim  or  Indemnified  Damages  arise  out of or are  based  upon  any
Violation,  in each  case to the  extent,  and  only to the  extent,  that  such
Violation  occurs in reliance  upon and in conformity  with written  information
about the Investor set forth on Exhibit B attached  hereto and  furnished to the
Company by the Investor  expressly for use in connection with such  registration
statement;  and,  subject to Section 6(d), the Investor will reimburse any legal
or other expenses  reasonably  incurred by them in connection with investigating
or defending any such Claim;  provided,  however,  that the indemnity  agreement
contained in this Section 6(b) and the  agreement  with respect to  contribution
contained  in Section 7 shall not apply to  amounts  paid in  settlement  of any
Claim if such  settlement is effected  without the prior written  consent of the
Investor, which consent shall not be unreasonably withheld;  provided,  further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified  Damages as does not exceed the net proceeds to
the Investor as a result of the sale of Registrable  Securities pursuant to such
registration  statement.  Such  indemnity  shall remain in full force and effect
regardless of any  investigation  made by or on behalf of such Indemnified Party
and shall  survive the transfer of the  Registrable  Securities  by the Investor
pursuant to Section 9.

            c. Promptly  after receipt by an  Indemnified  Person or Indemnified
Party  under  this  Section  6 of notice of the  commencement  of any  action or
proceeding  (including any governmental action or proceeding) involving a Claim,
such  Indemnified  Person or  Indemnified  Party  shall,  if a Claim in  respect
thereof is to be made  against  any  indemnifying  party  under this  Section 6,
deliver to the indemnifying party a written notice of the commencement  thereof,
and the  indemnifying  party shall have the right to participate in, and, to the
extent the indemnifying  party so desires,  jointly with any other  indemnifying
party similarly  noticed,  to assume control of the defense thereof with counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying  party, if, in
the  reasonable  opinion of counsel  retained  by the  indemnifying  party,  the
representation  by such counsel of the Indemnified  Person or Indemnified  Party
and the  indemnifying  party would be  inappropriate  due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party  represented  by such counsel in such  proceeding.  The  Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection  with any  negotiation  or defense of any such action or claim by the
indemnifying  party and shall furnish to the indemnifying  party all information
reasonably  available  to the  Indemnified  Party or  Indemnified  Person  which
relates  to such  action  or  claim.  The  indemnifying  party  shall  keep  the
Indemnified  Party or  Indemnified  Person fully apprised at all times as to the

                                       7
<PAGE>

status of the defense or any settlement  negotiations  with respect thereto.  No
indemnifying  party shall be liable for any  settlement of any action,  claim or
proceeding  effected without its written consent,  provided,  however,  that the
indemnifying  party shall not  unreasonably  withhold,  delay or  condition  its
consent.  No  indemnifying  party shall,  without the consent of the Indemnified
Party or Indemnified Person,  consent to entry of any judgment or enter into any
settlement or other compromise  which does not include as an unconditional  term
thereof the giving by the  claimant or plaintiff  to such  Indemnified  Party or
Indemnified  Person of a release from all  liability in respect to such claim or
litigation.   Following   indemnification   as  provided  for   hereunder,   the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified  Person with  respect to all third  parties,  firms or  corporations
relating to the matter for which  indemnification  has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified  Person or Indemnified  Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.

            d. The  indemnification  required by this Section 6 shall be made by
periodic  payments of the amount thereof during the course of the  investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

            e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

      7. CONTRIBUTION.

            To the  extent  any  indemnification  by an  indemnifying  party  is
prohibited or limited by law, the indemnifying  party agrees to make the maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable  Securities guilty of fraudulent  misrepresentation
(within  the  meaning of Section  11(f) of the 1933 Act)  shall be  entitled  to
contribution  from any seller of  Registrable  Securities  who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds  received by
such seller from the sale of such Registrable Securities.

      8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.

            With a view to making available to the Investor the benefits of Rule
144  promulgated  under the 1933 Act or any other  similar rule or regulation of
the SEC that may at any time  permit  the  Investor  to sell  securities  of the
Company to the public without  registration ("Rule 144"), the Company agrees, at
the Company's sole expense, to:

            a. make and keep public  information  available,  as those terms are
understood and defined in Rule 144;

            b.  file  with the SEC in a timely  manner  all  reports  and  other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such  requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and

                                       8
<PAGE>

            c. furnish to the Investor so long as the Investor owns  Registrable
Securities,  promptly upon request,  (i) a written statement by the Company that
it has complied with the reporting and or disclosure provisions of Rule 144, the
1933 Act and the 1934 Act,  (ii) a copy of the most recent  annual or  quarterly
report of the  Company  and such other  reports  and  documents  so filed by the
Company,  and (iii) such other  information  as may be  reasonably  requested to
permit  the  Investor  to sell  such  securities  pursuant  to Rule 144  without
registration.

            d. take such  additional  action as is  requested by the Investor to
enable the  Investor to sell the  Registrable  Securities  pursuant to Rule 144,
including,  without  limitation,  delivering all such legal opinions,  consents,
certificates,  resolutions and  instructions to the Company's  Transfer Agent as
may be requested from time to time by the Investor and otherwise fully cooperate
with Investor and Investor's  broker to effect such sale of securities  pursuant
to Rule 144.

            The Company agrees that damages may be an inadequate  remedy for any
breach of the terms and  provisions of this Section 8 and that  Investor  shall,
whether or not it is pursuing  any  remedies  at law,  be entitled to  equitable
relief in the form of a preliminary or permanent injunctions,  without having to
post any bond or other  security,  upon any breach or  threatened  breach of any
such terms or provisions.

      9. ASSIGNMENT OF REGISTRATION RIGHTS.

            The  Company  shall  not  assign  this  Agreement  or any  rights or
obligations  hereunder  without  the  prior  written  consent  of the  Investor,
including  by merger or  consolidation.  The  Investor may not assign its rights
under this Agreement  without the written consent of the Company,  other than to
an  affiliate  of the  Investor  controlled  by  Steven  G.  Martin or Joshua B.
Scheinfeld.

      10. AMENDMENT OF REGISTRATION RIGHTS.

            Provisions  of this  Agreement  may be  amended  and the  observance
thereof may be waived (either  generally or in a particular  instance and either
retroactively  or  prospectively),  only with the written consent of the Company
and the Investor.

      11. MISCELLANEOUS.

            a. A Person  is  deemed  to be a holder  of  Registrable  Securities
whenever  such  Person  owns or is  deemed  to own of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or  more  Persons  with  respect  to the  same  Registrable
Securities,  the  Company  shall act upon the basis of  instructions,  notice or
election received from the registered owner of such Registrable Securities.

            b. Any notices,  consents,  waivers or other communications required
or  permitted to be given under the terms of this  Agreement  must be in writing
and will be deemed to have been  delivered:  (i) upon  receipt,  when  delivered
personally;  (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending  party);  or (iii) one (1) Business Day after  deposit with a nationally
recognized  overnight  delivery service,  in each case properly addressed to the
party to  receive  the  same.  The  addresses  and  facsimile  numbers  for such
communications shall be:

                                       9
<PAGE>

      If to the Company:
            e.Digital Corporation
            16770 West Bernardo Drive
            San Diego, California 92127
            Telephone:  858-304-3016
            Facsimile:  858-304-3023
            Attention:  Chief Financial Officer

      With a copy to:
            McConnell, Dunning & Barwick LLP
            15 Enterprise, Suite 360
            Aliso Viejo, California 92656
            Telephone:  949-900-4400
            Facsimile:  949-900-4401
            Attention:  Curt C. Barwick, Esq

      If to the Investor:
            Fusion Capital Fund II, LLC
            222 Merchandise Mart Plaza, Suite 9-112
            Chicago, IL 60654
            Telephone:  312-644-6644
            Facsimile:  312-644-6244
            Attention:  Steven G.  Martin

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party three (3)  Business  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date,  recipient  facsimile  number  and an  image  of the  first  page  of such
transmission  or (C)  provided by a  nationally  recognized  overnight  delivery
service, shall be rebuttable evidence of personal service,  receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

            c.  Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            d. The  corporate  laws of the State of  Delaware  shall  govern all
issues concerning the relative rights of the Company and its  stockholders.  All
other  questions   concerning  the  construction,   validity,   enforcement  and
interpretation  of this Agreement  shall be governed by the internal laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other  jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of  Illinois.  Each party  hereby  irrevocably  submits  to the  exclusive
jurisdiction  of the state and federal courts  sitting the City of Chicago,  for
the adjudication of any dispute hereunder or in connection  herewith or with any
transaction  contemplated  hereby or discussed  herein,  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 brought in an inconvenient  forum or that the
venue of 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 to such
party at the address for such 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.  If any  provision  of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or  unenforceability  shall not affect the  validity  or  enforceability  of the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability  of any  provision of this  Agreement in any other  jurisdiction.
EACH PARTY HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE,  AND AGREES NOT TO
REQUEST,  A JURY  TRIAL FOR THE  ADJUDICATION  OF ANY  DISPUTE  HEREUNDER  OR IN
CONNECTION  HEREWITH  OR  ARISING  OUT OF  THIS  AGREEMENT  OR  ANY  TRANSACTION
CONTEMPLATED HEREBY.

                                       10
<PAGE>

            e. This Agreement,  and the Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions,  promises, warranties or undertakings, other
than those set forth or referred to herein and therein.  This  Agreement and the
Purchase Agreement  supersede all prior agreements and understandings  among the
parties hereto with respect to the subject matter hereof and thereof.

            f. Subject to the  requirements  of Section 9, this Agreement  shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

            g. The headings in this  Agreement are for  convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall  constitute one and the
same agreement.  This Agreement,  once executed by a party,  may be delivered to
the other party hereto by  facsimile  transmission  of a copy of this  Agreement
bearing the signature of the party so delivering this Agreement.

            i.  Each  party  shall  do and  perform,  or  cause  to be done  and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j. The  language  used in this  Agreement  will be  deemed to be the
language  chosen by the parties to express  their mutual  intent and no rules of
strict construction will be applied against any party.

            k. This  Agreement is intended for the benefit of the parties hereto
and  their  respective  permitted  successors  and  assigns,  and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                                  * * * * * *

                                       11
<PAGE>

      IN WITNESS  WHEREOF,  the parties  have caused  this  Registration  Rights
Agreement to be duly executed as of day and year first above written.

                                    THE COMPANY:
                                    ------------

                                    e.Digital Corporation

                                    By: /s/Robert Putnam
                                        --------------------
                                    Name:  Robert Putnam
                                    Title: Senior Vice President

                                    BUYER:
                                    ------

                                    Fusion Capital Fund II, LLC
                                    By: Fusion Capital Partners, LLC
                                    By: Rockledge Capital Corporation

                                    By: /s/Josh Scheinfeld
                                        ----------------------
                                    Name:  Josh Scheinfeld
                                    Title: President

                                       12
<PAGE>

                                    EXHIBIT A
                                    ---------

                        TO REGISTRATION RIGHTS AGREEMENT
                        --------------------------------

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

_________, 2007

[TRANSFER AGENT]

-----------------

-----------------

Attention: ___________

RE: e.Digital Corporation

Ladies and Gentlemen:

       We are counsel to  e.Digital  Corporation,  a Delaware  corporation  (the
"Company"),  and have  represented  the Company in connection  with that certain
Common  Stock  Purchase  Agreement,  dated as of  ____________,  (the  "Purchase
Agreement"), entered into by and between the Company and Fusion Capital Fund II,
LLC (the "Buyer") pursuant to which the Company has agreed to issue to the Buyer
shares of the Company's  Common  Stock,  par value $0.001 per share (the "Common
Stock"),  in an  amount  up to  Eight  Million  Five  Hundred  Thousand  Dollars
($8,500,000.00),  in  accordance  with the terms of the Purchase  Agreement.  In
connection with the  transactions  contemplated by the Purchase  Agreement,  the
Company  has  registered  with the U.S.  Securities  & Exchange  Commission  the
following shares of Common Stock:

      (1)   _________ shares of Common Stock to be issued upon purchase from the
            Company by the Buyer from time to time (the "Purchase Shares.").

      (2)   4,166,666  Purchase Shares of Common Stock previously  issued to the
            Buyer (the "Initial Purchase Shares.").

      (3)   3,500,000 shares of Common Stock which have been issued to the Buyer
            as a commitment fee (the "Commitment Shares").

      (4)   200,000  additional shares of Common Stock which have been issued by
            the Company to the Buyer as an expense  reimbursement  (the "Signing
            Shares").

                                       11
<PAGE>

Pursuant  to the  Purchase  Agreement,  the  Company  also  has  entered  into a
Registration  Rights  Agreement,  dated  as  of  ______,  with  the  Buyer  (the
"Registration  Rights  Agreement")  pursuant to which the Company agreed,  among
other things, to register the Purchase Shares,  the Initial Purchase Shares, the
Signing Shares,  and the Commitment  Shares under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Purchase  Agreement  and the  Registration  Rights  Agreement,  on _______,  the
Company  filed  a  Registration   Statement   (File  No.   333-_________)   (the
"Registration  Statement")  with the  Securities  and Exchange  Commission  (the
"SEC") relating to the sale of the Purchase Shares, the Initial Purchase Shares,
the Signing Shares and the Commitment Shares.

       In connection with the foregoing, we advise you that: (1) a member of the
SEC's  staff has  advised  us by  telephone  that the SEC has  entered  an order
declaring the Registration  Statement effective under the 1933 Act at _____ P.M.
on __________,  2007, (2) we have no knowledge,  after  telephonic  inquiry of a
member of the SEC's staff,  that any stop order suspending its effectiveness has
been issued or that any  proceedings  for that  purpose are pending  before,  or
threatened by, the SEC, (3) the Commitment  Shares,  the Initial Purchase Shares
and the Signing Shares are available for sale under the 1933 Act pursuant to the
Registration  Statement and the restrictive legend on the Commitment Shares, the
Initial  Purchase  Shares and the  Signing  Shares  may be  removed  and (4) the
Purchase  Shares  are  available  for sale  under the 1933 Act  pursuant  to the
Registration Statement and may be issued without any restrictive legend.

                                    Very truly yours,

                                    [Company Counsel]

                                    By:____________________

CC:    Fusion Capital Fund II, LLC

<PAGE>

                                    EXHIBIT B

                        TO REGISTRATION RIGHTS AGREEMENT
                        --------------------------------

     Information About The Investor Furnished To The Company By The Investor
         Expressly For Use In Connection With The Registration Statement

As of the date of the Purchase  Agreement,  Fusion  Capital  beneficially  owned
200,000  shares of common stock of the  Company.  Steven G. Martin and Joshua B.
Scheinfeld, the principals of Fusion Capital, are deemed to be beneficial owners
of all of the shares of common stock owned by Fusion Capital. Messrs. Martin and
Scheinfeld have shared voting and investment power over the shares being offered
under the  prospectus  filed with the SEC in  connection  with the  transactions
contemplated  under the  Purchase  Agreement.  Fusion  Capital is not a licensed
broker dealer or an affiliate of a licensed broker dealer.FIRST
      AMENDMENT TO PURCHASE AND SALE AGREEMENT

    TRINITY
      BAY,
      REDFISH
      REEF,
      FISHERS
      REEF,
      NORTH
      POINT
      BOLIVAR
      FIELDS

    IN
      GALVESTON AND
      CHAMBERS
      COUNTIES,
      TEXAS

    
      
        

      

    

    

    
      THIS
        FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
        (the
“First Amendment”) is dated effective as of November 13, 2006, and is made by
        and between Masters
        Resources, LLC,
        and
Masters
        Oil & Gas, LLC,
        both
        Texas limited liability companies having their respective principal places
        of
        business at 9801 Westheimer, Suite 1070, Houston, Texas 77042 (collectively,
        “Masters”), and Tekoil
        & Gas Corporation,
        a
        Delaware corporation having its principal place of business at 5036 Dr. Phillips
        Blvd., Suite 232, Orlando, Florida 32819 (“Buyer”) (Masters and Buyer are
        sometimes called collectively the “parties” and individually
“party”).

    

    

    RECITALS

    

    On
      November __, 2006, the parties executed and delivered Purchase and Sale
      Agreement (the “Original Agreement”) covering the Assets. The parties now desire
      to amend the Original Agreement in certain respects. Accordingly, the parties
      agree as set out in this First Amendment. (Unless otherwise noted, defined
      terms
      used in this First Amendment shall have the meanings set out in the Original
      Agreement.)

    

    I. AMENDMENTS

    

    A.          
       Section
      2.1 of the Original Agreement is deleted in its entirety and the following
      is
      inserted in lieu thereof:

    

    2.1         
       Purchase
      Price

    

    The
      Purchase Price for the Assets will be Forty-Seven Million Five Hundred Thousand
      and No\100 Dollars ($47,500,000.00), plus
      500,000
      shares of common stock of Buyer, plus
      the
      reservation at Closing by Masters of the overriding royalty interests described
      herein.

    

    (A)       
       The
      monetary portion of the Purchase Price will be paid by Buyer as
      follows:

    

    
      	 	
              1.

            	
              Buyer
                has delivered Buyer’s check into an interest bearing account (the “Escrow
                Account”) at Amegy Bank National Association in the names of Masters and
                Buyer the sum of $1 million, as an earnest money deposit which is
                non-refundable, except as expressly set forth in this Agreement (the
                “Deposit”), which shall be distributed at the Closing or upon termination
                of this Agreement, as further set forth herein (all accrued interest
                shall
                be paid to the recipient of the Deposit, and to the extent that the
                Deposit is applied to the Purchase Price, the accrued interest shall
                be
                deemed to reduce the balance of the Purchase Price due at
                Closing);

            

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    

    
      	 	
              2.

            	
              At
                the Closing, Buyer will pay to Masters by wire transfer of the monetary
                balance of the Purchase Price, as the same may be adjusted under
                Sections
                2.1 (A), 2.2 and 2.3 of this Agreement, subject to any post-closing
                adjustments.

            

    

    

    Any
      provisions to the contrary contained in this Agreement to the contrary
      notwithstanding, all adjustments to the Purchase Price in accordance with this
      Agreement shall be made to the monetary portions of the Purchase
      Price.

    

    
      	 	
              (B)

            	
              At
                Closing, Buyer will deliver to Masters 500,000 shares of the common
                stock
                of Buyer, which shares shall be restricted securities (and legended
                as
                such) and covered by a separate, customary Subscription Agreement
                confirming that Masters is an “Accredited Investor” as that term is
                defined in Regulation D promulgated under the Securities Act of 1933
                (the
                “Securities Act”) and confirming, among other customary items, that prior
                to execution of this Amendment, Masters has reviewed all of the filings
                made by Buyer under the Securities Exchange Act of 1934 and is accepting
                such common stock with no intention to sell or otherwise transfer
                the same
                except pursuant to a separate Registration Rights Agreement;
                and

            

    

    

    
      	 	
              (C)

            	
              At
                Closing Masters shall reserve overriding royalty interests (collectively
                the “ORRI”) as follows:

            

    

    

    
      	 	
              (1)

            	
              an
                aggregate overriding royalty equal to 6% of 100% of the production
                from
                those of the Wells shown as (x) “proved undeveloped reserves” and (y)
                “proved non-producing reserves” in the reserve estimate (the “Reserve
                Report”), dated August 31, 2006, prepared by R. A. Lenser and Associates,
                Inc., addressed to Masters Resources, LLC, and (z) an overriding
                royalty
                equal to 6% of 100% of the production from any present or future
                well
                completed in and producing from any zone or formation not presently
                producing or capable of producing and not documented in the Reserve
                Report
                (collectively, the “Declining ORRI”);
                and

            

    

    

    
      	 	
              (2)

            	
              an
                aggregate overriding royalty equal to 3% of 100% of the production
                from
                those Wells shown as “proved developed producing” in the Reserve Report
                (the “Fixed ORRI”).

            

    

    

    The
      ORRI
      shall be proportionately reduced to the extent that the working interest of
      Masters in any lease burdened thereby to
      be
      conveyed to Buyer is
      less
      than 100% or the net revenue interest to which Masters is entitled on any lease
      to be conveyed to Buyer is less than 80%. As examples:

    

    
      	 	
              (a)

            	
              If
                the working interest of Masters in a lease described in (C) (1) is
                60%,
                not 100% (and the net revenue interest is at least 80% of the 100%
                working
                interest), then the ORRI in that lease shall be 60/100 of 6%, or
                3.6%.

            

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    
      	 	
              (b)

            	
              If
                the net revenue interest in the same lease is less than 80% of the
                100%
                working interest, then the ORRI shall be reduced proportionately,
                meaning
                that, if the net revenue interest is, say, 75%, then the ORRI shall
                be
                reduced by 75/80 x 6%, or 5.625%. If the working interest is less
                than
                100% and the net revenue interest is less than 80%, then the reduction
                of
                the overriding royalty shall be implemented for both the working
                interest
                and the net revenue interest.

            

    

    

    In
      addition, upon written notice by Buyer to the owner or owners of the ORRI that
      Buyer has paid aggregate payments of $20,000,000 by
      virtue
      of the ORRI and Buyer’s request for assignment thereof
      (subject
      to the right of Masters to audit the payments aggregating the sum of
      $20,000,000), the owners of the Declining ORRI shall convey to Buyer an
      undivided 2% of 100% overriding royalty out of the Declining ORRI so that the
      owner or owners of the Declining ORRI shall thereafter be reduced to an ORRI
      equal to an aggregate of 4% of 100% of the production from the leases and units
      sold to Buyer, and when the aggregate payments on the out of the ORRI equal
      $30,000,000 (but not $30 million in addition to the $20 million threshold for
      the initial reduction of the ORRI; simply an additional $10 million after $20
      million has been reached), upon written notice thereof to the owner or owners
      of
      each of the Fixed and the Declining ORRIs (and subject to the same right to
      audit in Masters), the owners of the Declining ORRI shall convey to Buyer out
      of
      the Declining ORRI an additional undivided 2% of 100% overriding royalty so
      that
      the owner or owners of the Declining ORRI shall thereafter be reduced to an
      aggregate 2% of 100% ORRI, which shall remain constant thereafter, and the
      owners of the Fixed ORRI shall convey to Buyer out of the Fixed ORRI an
      undivided 1% of 100% overriding royalty so that the owner or owners of the
      Fixed
      ORRI shall thereafter be reduced to an aggregate 2% of 100% ORRI, which shall
      remain constant thereafter. The owners of the ORRI shall be entitled, upon
      their
      written election, to be paid for their respective shares of production from
      the
      lands burdened by the ORRI directly by the purchaser of production. In addition,
      at the election of the owners of the ORRI, they shall be entitled to take the
      ORRI share of production in kind and to separately market the same; provided,
      however, to the extent that additional facilities are required for the owners
      of
      the ORRI to take their share of production in kind, the owners of the ORRI
      shall
      bear the cost and expense of installing such facilities.

    

    B.          
       With
      respect to Section 4.1 (A) of the Original Agreement, and solely to the extent
      that the Examination Period applies to any due diligence being performed or
      to
      be performed by the source of financing for Buyer (“Buyer’s
      Financier”),
      “December 1, 2006” is deleted and “January 24, 2007” is inserted in lieu
      thereof. The materials which are made available to Buyer’s Financier for this
      investigation are limited to those which have been available at the offices
      of
      Scotia Watrous (USA), Inc., together with the reserve estimate dated August
      31,
      2006, prepared by R. A. Lenser and Associates, Inc., addressed to Masters
      Resources, LLC, as supplemented by report dated September 1, 2006. Buyer,
      through its counsel, has timely delivered to Masters’ counsel letters containing
      notices of Title Defects, and Masters acknowledges receipt thereof.

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    C.           
       Section
      8.1 of the Original Agreement is deleted and the following is inserted in lieu
      thereof:

    

    
      	 	
              “8.1

            	
              Date,
                Time and Place of Closing

            

    

    

    Unless
      the parties agree otherwise in writing and subject to the provisions in this
      Agreement, the completion of the transaction contemplated by this Agreement
      (the
“Closing”) will be held on or before February 9, 2007, at 10:00 a.m. Central
      Standard Time (or such earlier date or time as the parties may agree). The
      Closing will be held at the offices of Masters as set forth in the opening
      paragraph of this Agreement. In the event that the Closing does not occur before
      the close of business at 5:00 p.m. on February 28, 2007, Masters shall have
      the
      right to terminate this Agreement and to retain the Deposit.”

    

    D.          
       In
      Section 9.3 of the Original Agreement, “December 31, 2006” is deleted and
“February 28, 2007” is inserted in lieu thereof.

    

    II. MISCELLANEOUS

    

    A.           
      To
      the
      extent any provision of the Original Contract conflicts with any provision
      of
      this First Amendment, the provisions of this First Amendment shall control
      and
      be used to determine the obligations of the Parties.

    

    B.          
       The
      parties ratify confirm and adopt the Original Contract as amended and
      supplemented by this First Amendment.

    
      
        
        

      

      
        4

        
          

        

      

       

    

    Signed:
      December 29, 2006.

     

    
      	
              MASTERS
                RESOURCES, LLC

            	 	 	
              TEKOIL
                & GAS CORPORATION

            
	 	 	 	 
	 	 	 	 
	By: /s/
              John W. Barton	 	 	By: /s/
              Mark S. Western
	
              
                

              

              John
                W. Barton, Managing Member

            	 	 	
              
                

              

              Mark
                Western, Chairman and CEO

            

    

     

    
      	
              
                MASTERS
                  OIL & GAS, LLC

              

            	 	 	 
	 	 	 	 
	 	 	 	 
	By:
/s/
              John W. Barton	 	 	
            
	
              
                

              

              
                John
                  W. Barton, Managing Member

              

            	 	 	
            

    

    
      
        
        

      

      
        5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]