Document:

EXHIBIT
      10.6.2

     

    THE
      SHARES ISSUABLE PURSUANT TO THIS AGREEMENT ARE SUBJECT TO THE PROVISIONS OF
      THE
      COMPANY’S 2005 EQUITY-BASED COMPENSATION PLAN AND THIS AGREEMENT IS ENTERED INTO
      PURSUANT THERETO. A COPY OF SUCH PLAN IS AVAILABLE UPON WRITTEN REQUEST TO
      THE
      COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

     

    E.DIGITAL
      CORPORATION

     

    2005
      EQUITY-BASED COMPENSATION PLAN

     

    NONSTATUTORY
      STOCK OPTION AGREEMENT

     

    __________________

    

    Re: Grant
      of Stock Option

     

    Dear
      Renee:

     

    The
      board
      of directors (the “Board”)
      of
      e.Digital Corporation (the “Company”)
      has
      adopted the Company’s 2005 Equity-Based Compensation Plan (the “Plan”)
      for
      certain employees and service providers of the Company and its Subsidiaries.
      A
      copy of the Plan is being furnished to you concurrently with the execution
      of
      this Nonstatutory Stock Option Agreement (the “Option
      Agreement”)
      and
      shall be deemed a part of this Option Agreement as if fully set forth herein.
      Unless the context otherwise requires, all terms defined in the Plan shall
      have
      the same meaning when used herein.

     

    1. The
      Grant. Subject to the conditions set forth below, the Company hereby grants
      to
      you, effective as of ______________
      (“Grant
      Date”),
      as a
      matter of separate inducement and not in lieu of any salary or other
      compensation for your services, the right and option to purchase (the
“Option”),
      in
      accordance with the terms and conditions set forth herein and in the Plan,
      an
      aggregate of ___________
      shares
      of Stock of the Company (the “Option
      Shares”),
      at
      the Exercise Price (as hereinafter defined). As used herein, the term
“Exercise
      Price”
shall
      mean a price equal to $________
      per
      share, subject to the adjustments and limitations set forth herein and in the
      Plan. In no event shall the exercise price exceed the Fair Market Value of
      a
      share of Stock as of the Grant Date. The Option granted hereunder is intended
      to
      constitute an Option which is not designed pursuant to section 422 of the
      Internal Revenue Code of 1986, as amended: however, you should consult with
      your
      tax advisor concerning the proper reporting of any federal or state tax
      liability that may arise as a result of the grant or exercise of the
      Option.

     

    2. Exercise.

     

    (a) For
      purposes of this Option Agreement, the Option Shares shall be deemed
“Nonvested
      Shares”
unless
      and until they have become “Vested
      Shares.”
The
      Option shall in all events terminate at the close of business on the
      _________ anniversary of the date of
      this
      Option Agreement. Subject to other terms and conditions set forth herein, the
      Option may be exercised in cumulative installments as follows:

    

    
      	
              On
                or After Each of the Following Vesting Dates

            	 	
              Cumulative
                Percentage of Shares as to Which Option is
                Exercisable

            	 
	
              Upon
                Grant Date

            	 	 	
              __

            	
              %

            
	
              First
                Anniversary of the Grant Date

            	 	 	
              __

            	
              %

            
	
              Second
                Anniversary of the Grant Date

            	 	 	
              ___

            	
              %

            

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    Option
      Shares shall constitute Vested Shares once they are exercisable.

     

    (b) Subject
      to the relevant provisions and limitations contained herein and in the Plan,
      you
      may exercise the Option to purchase all or a portion of the applicable number
      of
      Vested Shares at any time prior to the termination of the Option pursuant to
      this Option Agreement. In no event shall you be entitled to exercise the Option
      for any Nonvested Shares or for a fraction of a Vested Share.

     

    (c) Any
      exercise by you of the Option shall be in writing addressed to the Secretary
      of
      the Company at its principal place of business (a copy of the form of exercise
      to be used will be available upon written request to the Secretary), and shall
      be accompanied by a certified or bank check payable to the order of the Company
      in the full amount of the Exercise Price of the shares so purchased, or in
      such
      other manner as described in the Plan and approved by the Committee.

     

    The
      terms
      and provisions of the employment agreement, if any, between you and the Company
      or any Subsidiary (the “Employment
      Agreement”)
      that
      relate to or affect the Option are incorporated herein by reference.
      Notwithstanding the foregoing provisions of this Section 2, in the event of
      any
      conflict or inconsistency between the terms and conditions of this Section
      2 and
      the terms and conditions of the Employment Agreement, the terms and conditions
      of the Employment Agreement shall be controlling.

     

    3. Termination
      of Employment. Except as provided below in this Section 3 upon the termination
      of your employment with the Company or any Subsidiary, any and all Options
      heldby you that are not then exercisable will become null and void upon the
      date
      of such terminationand you may, until the earlier of (x) ninety (90) days from
      the date of such termination or (y) the expiration of the Option in accordance
      with its terms, exercise the Option with respect to all orany part of the Vested
      Shares which you were entitled to purchase immediately prior to such termination
      and, thereafter, the Option shall, to the extent not previously exercised,
      automatically terminate and become null and void, provided that:

     

    (a) in
      the
      case of termination of your employment with the Company or any Subsidiary due
      to
      death, your estate (or any Person who acquired the right to exercise such Option
      by bequest or inheritance or otherwise by reason of your death) may, until
      the
      earlier of (x) the date that is one (1) year after the date of death or (y)
      the
      expiration of the Option in accordance with its terms, exercise the Option
      with
      respect to all or any part of the Vested Shares to which the Option
      relates;

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) in
      the
      case of termination of your employment with the Company or any Subsidiary due
      to
      your Disability, as determined in the sole discretion of the Committee and
      as
      defined in Section 15, you or your legal representative may, until the earlier
      of (x) the one hundred and eightieth (180) day after the date your employment
      was terminated or (y) the expiration of the Option in accordance with its terms,
      exercise the Option with respect to all or any part of the Vested Shares to
      which the Option relates;

     

    (c) in
      the
      case of termination of your employment by the Company or any Subsidiary for
      any
      reason other than Cause, as determined in the sole discretion of the Committee
      and as defined in Section 15, within one (1) year of a Change in Control or
      in
      the case of your resignation from the Company or any Subsidiary for Good Reason,
      as determined in the sole discretion of the Committee and as defined in Section
      15, within one (1) year of a Change in Control, then any portion of the Option
      held by you as of the date of separation that is not yet exercisable but would,
      pursuant to Section 2(a), become exercisable over the twelve month period
      immediately following such termination, shall become exercisable, as of the
      date
      of separation, and any portion of the Option held by you as of the date of
      separation that is exercisable (either as a result of this sentence or
      otherwise) shall be exercisable for a period of the lesser of (x) the remainder
      of the term of the Option or (y) the date which is one (1) year after the
      termination of employment; and

     

    (d) if
      you
      are on leave of absence for any reason, the Company may, in its sole discretion,
      determine that you will be considered to still be in the employ of or providing
      services for the Company, provided that rights to the Option Shares will be
      limited to the extent to which those rights were earned or vested when the
      leave
      or absence began.

     

    Notwithstanding
      the foregoing provisions of this Section 3, in the event of any conflict
      or

    inconsistency
      between the terms and conditions of this Section 3 and the terms and conditions
      of

    the
      Employment Agreement, the terms and conditions of the Employment Agreement
      shall
      be

    controlling.

    

    4. Transferability.
      Any rights or interests herein will be assignable or transferable by you only
      as
      provided in Section 10(a) of the Plan and by will or the laws of descent and
      distribution.

     

    5. Withholding
      Taxes. The Committee may, in its discretion, require you to pay to the Company
      (or the Company’s Subsidiary if you are an employee of a Subsidiary of the
      Company), at the time of the exercise of an Option or thereafter, the amount
      that the Committee deems necessary to satisfy the Company’s or its Subsidiary’s
      current or future obligation to withhold federal, state or local income or
      other
      taxes that you incur by exercising an Option. In connection with the exercise
      of
      an Option requiring tax withholding, you may (a) direct the Company to withhold
      from the shares of Stock to be issued to you the number of shares necessary
      to
      satisfy the Company’s obligation to withhold taxes, that determination to be
      based on the shares’ Fair Market Value as of the date of exercise; (b) deliver
      to the Company sufficient shares of Stock (based upon the Fair Market Value
      as
      of the date of such delivery) to satisfy the Company’s tax withholding
      obligation, which tax withholding obligation is based on the shares’ Fair Market
      Value as of the later of the date of exercise or the date as of which the shares
      of Stock issued in connection with such exercise become includable in your
      income; or (c) deliver sufficient cash to the Company to satisfy its tax
      withholding obligations. If you elect to use such a Stock withholding feature
      you must make the election at the time and in the manner that the Committee
      prescribes. The Committee may, at its sole option, deny your request to satisfy
      withholding obligations through Stock instead of cash. In the event the
      Committee subsequently determines that the aggregate Fair Market Value (as
      determined above) of any shares of Stock withheld or delivered as payment of
      any
      tax withholding obligation is insufficient to discharge that tax withholding
      obligation, then you shall pay to the Company, immediately upon the Committee’s
      request, the amount of that deficiency in the form of payment requested by
      the
      Committee.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    6. Adjustments.
      The terms of an Option shall be subject to adjustment from time to time, in
      accordance with the following provisions:

     

    (a) If
      at any
      time, or from time to time, the Company shall subdivide as a whole (by
      reclassification, by a Stock split, by the issuance of a distribution on Stock
      payable in Stock or otherwise) the number of shares of Stock then outstanding
      into a greater number of shares of Stock, then (i) the number of shares of
      Stock
      (or other kind of securities) that may be acquired under the Option shall be
      increased proportionately and (ii) the price (including Exercise Price) for
      each
      share of Stock (or other kind of shares or securities) subject to the then
      outstanding Option shall be reduced proportionately, without changing the
      aggregate purchase price or value of the outstanding Option.

     

    (b) If
      at any
      time, or from time to time, the Company shall consolidate as a whole (by
      reclassification, reverse Stock split or otherwise) the number of shares of
      Stock then outstanding into a lesser number of shares of Stock, (i) the number
      of shares of Stock (or other kind of shares or securities) that may be acquired
      under the Option shall be decreased proportionately; and (ii) the price
      (including Exercise Price) for each share of Stock (or other kind of shares
      or
      securities) subject to the Option shall be increased proportionately, without
      changing the aggregate purchase price or value of the outstanding
      Option.

     

    (c) Whenever
      the number of shares of Stock subject to the Option and the price for each
      share
      of Stock subject to the Option are required to be adjusted as provided in this
      Section 6, the Committee shall promptly prepare a notice setting forth, in
      reasonable detail, the event requiring adjustment, the amount of the adjustment,
      the method by which such adjustment was calculated, and the change in price
      and
      the number of shares of Stock, other securities, cash, or property purchasable
      subject to the Option after giving effect to the adjustments. The Committee
      shall promptly give you such a notice.

     

    (d) Adjustments
      under this Section 6 shall be made by the Committee, and its determination
      as to
      what adjustments shall be made and the extent thereof shall be final, binding,
      and conclusive. No fractional interest shall be issued under the Plan on account
      of any such adjustments.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    7. Notice.
      All notices required or permitted under this Option Agreement must be in writing
      and personally delivered or sent by mail and shall be deemed to be delivered
      on
      the date on which it is actually received by the person to whom it is properly
      addressed. A notice shall be effective when actually received by the Company
      in
      writing and in conformance with this Option Agreement and the Plan. Until
      changed in accordance herewith, the Company and the optionee specify their
      respective addresses as set forth below:

     

    
      	 	
              Company:

            	
              e.Digital
                Corporation

            

    

    
      	 	 	
              13114
                Evening Cr. Dr. S.

            

    

    
      	 	 	
              San
                Diego, CA 92128

            

    

    
      	 	 	
              Attention:
                Robert Putnam

            

    

     

    
      	 	
              Optionee:

            	
              _______________

            

      	 	 	
              _____________________________________________

            

      	 	 	
              
                _____________________________________________

              

            

    

     

    8. Information
      Confidential. As partial consideration for the granting of this Option, you
      agree that you will keep confidential all information and knowledge that you
      have relating to the manner and amount of your participation in the Plan;
      provided, however, that such information may be disclosed as required by law
      and
      may be given in confidence to your spouse, tax and financial advisors, or a
      financial institution to the extent that such information is necessary to obtain
      a loan.

     

    9. Furnish
      Information. You agree to furnish to the Company all information requested
      by
      the Company to enable it to comply with any reporting or other requirement
      imposed upon the Company by or under any applicable statute or
      regulation.

     

    10. Company
      Records. Records of the Company or its Subsidiaries regarding your period of
      employment, termination of employment and the reason therefor, leaves of
      absence, re-employment, and other matters shall be conclusive for all purposes
      hereunder. 

     

    11. Successors.
      This Agreement shall be binding upon you, your legal representatives, heirs,
      legatees and distributees, and upon the Company, its successors and
      assigns.

     

    12. Headings.
      The titles and headings of paragraphs are included for convenience of reference
      only and are not to be considered in construction of the provisions
      hereof.

     

    13. Governing
      Law. All questions arising with respect to the provisions of this Agreement
      shall be determined by application of the laws of the State of Delaware except
      to the extent Delaware law is preempted by federal law. The obligation of the
      Company to sell and deliver Stock hereunder is subject to applicable laws and
      to
      the approval of any governmental authority required in connection with the
      authorization, issuance, sale, or delivery of such Stock.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    14. Word
      Usage. Words used in the masculine shall apply to the feminine where applicable,
      and wherever the context of this Agreement dictates, the plural shall be read
      as
      the singular and the singular as the plural.

     

    15. Miscellaneous.

     

    (a) This
      Option Agreement is subject to all the terms, conditions, limitations and
      restrictions contained in the Plan. In the event of any conflict or
      inconsistency between the terms hereof and the terms of the Plan, the terms
      of
      the Plan shall be controlling.

     

    (b) This
      Option Agreement is not a contract of employment and the terms of your
      employment shall not be affected by, or construed to be affected by, this Option
      Agreement, except to the extent specifically provided herein. Nothing herein
      shall impose, or be construed as imposing, any obligation (i) on the part of
      the
      Company or any Subsidiary to continue your employment, or (ii) on your part
      to
      remain in the employ of the Company or any Subsidiary.

     

    (c) This
      Option Agreement may be amended as provided in Section 10(c) of the
      Plan.

     

    (d) Definitions.
      

     

    (i) Cause
      shall
      have the meaning given such term in your Employment Agreement (if any) with
      the
      Company or a Subsidiary of the Company; provided, however, that if you do not
      have an Employment Agreement or such agreement does not define Cause, Cause
      shall mean, as determined by the Board or Committee in its sole discretion
      exercised in good faith, (A) your breach of any nondisclosure, noncompetition,
      or other agreement to which you and the Company are parties; (B) your commission
      of a felony or of a misdemeanor involving moral turpitude; (C) the participation
      by you in any fraud; (D) your dishonesty that is detrimental to the best
      interest of the Company; (E) the willful and continued failure by you to
      substantially perform your duties to the Company (other than any such failure
      resulting from your incapacity due to physical or mental illness) after written
      demand for substantial performance is delivered by the Company specifically
      identifying the manner in which the Company believes you have not substantially
      performed your duties; or (F) the willful engagement by you in misconduct which
      is materially injurious to the Company, monetarily or otherwise.

     

    (ii) Disability
      shall
      have the meaning given such term in your Employment Agreement (if any) with
      the
      Company or a Subsidiary of the Company; provided,
      however, that
      if
      you do not have an Employment Agreement or it does not define Disability,
      Disability shall mean, as determined by the Board or Committee in its sole
      discretion exercised in good faith, a physical or mental impairment of
      sufficient severity that either you are unable to continue performing the duties
      you performed before such impairment or your condition entitles you to
      disability benefits under any insurance or employee benefit plan of the Company
      or its subsidiaries and that impairment or condition is cited by the Company
      as
      the reason for termination of your employment.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (iii) Good
      Reason
      shall
      have the meaning given such term in your Employment Agreement (if any) with
      the
      Company or a Subsidiary of the Company; provided,
      however, that
      if
      you do not have an Employment Agreement or the Employment Agreement does not
      define Good Reason, Good Reason shall mean, as determined by the Board or
      Committee in its sole discretion exercised in good faith, the occurrence of
      one
      or more of the following events: (A) breach by the Company of any provision
      of
      you Employment Agreement where such breach continues for a period of ten (10)
      days after written notice thereof by you; (B) the Company gives notice to you
      pursuant to the provisions of your Employment Agreement that the Company does
      not wish to extend the Employment Agreement and you resign before the expiration
      of the Employment Agreement; (C) relocation of your regular work address by
      more
      than fifty miles without your consent; or (D) any material adverse change in
      your job responsibilities, duties, functions, status, offices, title,
      prerequisites or support staff. By way of example only and without limiting
      the
      applicability of the preceding clause, a material adverse change in your job
      responsibilities, functions and status would result from a demotion which
      significantly reduces your discretion and independent judgment within the
      Company or significantly reduces the number of employees subject to your
      authority.

     

    [Remainder
      of page intentionally left blank]

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Please
      indicate your acceptance of all the terms and conditions of the Option and
      the
      Plan by signing and returning a copy of this Option Agreement.

    
      	 	 	 
	 	
              e.Digital
                Corporation

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name: W.A.
              Blakeley
	 	
              Title: President

            

    

     

    ACCEPTED:

    

    __________________________________

    Signature
      of Optionee

    

    __________________________________

    Name
      of
      Optionee (Please Print)

    

    Date:
      _________________, ___________

     

    
      
         

      

      
        8EXHIBIT
      10.7.1

     

    e.Digital
      Corporation

    INDUCEMENT
      STOCK OPTION GRANT NOTICE

    

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

    

    
      	
              Optionee:
                

            	
              William
                Blakeley

            
	
              Grant
                No: 

            	
              S-01

            
	
              Date
                of Grant: 

            	
              11/14/2005

            
	
              Shares
                Subject to Option: 

            	
              1,000,000
                common shares

            
	
              Exercise
                Price Per Share: 

            	
              $.09

            
	
              Expiration
                Date: 

            	
              11/14/2010

            
	
              Intended
                to be Incentive Stock Option: 

            	
              Yes
                (Subject to limit)

            
	 	 
	
              VESTING
                SCHEDULE:

            	 
	
              Vesting
                Start Date

            	
              Vesting
                Schedule

            
	
              (First
                125,000 shares vest 2/14/2006)

            	
              Subject
                to continuing Service (as defined in the Stock Option Agreement)
                this
                option becomes exercisable with respect to the Shares Subject to
                Option in
                equal quarterly installments of 125,000 shares through the second
                anniversary of the date on which the option is granted. Accordingly,
                subject to continuing service 100% of the shares shall be vested
                on
                November 14, 2007.

            

    

     

    ADDITIONAL
      TERMS/ACKNOWLEDGMENTS: This
      grant is a part of a total grant of 1,500,000 shares by the Board as an
      inducement to your employment with the Company with the balance documented
      in a
      separate option agreement. The
      undersigned Optionee acknowledges receipt of, and represents that the Optionee
      has read, understands, accepts and agrees to the terms of this Grant Notice
      and
      the Stock Option Agreement. Optionee hereby accepts the Option subject to all
      of
      its terms and conditions and further acknowledges that as of the Date of Grant,
      this Grant Notice and the Stock Option Agreement set forth the entire
      understanding between Optionee and the Company regarding the acquisition of
      stock in the Company for the shares so indicated and supersede all prior oral
      and written agreements pertaining to this particular option.

    

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

      	 	 	 	 
	
              e.Digital
                Corporation:

            	 	 	
              Optionee:

            
	 	 	 	 
	
              /s/ROBERT
                PUTNAM

            	 	 	
              /s/
                WILLIAM BLAKELEY

            
	
              

              By:
                Robert
                Putnam

            	 	 	
              

              William
                Blakeley

            
	
              Senior
                Vice President

            	 	 	
            

    

     

    
      
         

      

      
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    e.Digital
      Corporation

    INDUCEMENT
      STOCK OPTION AGREEMENT

    

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

    

    The
      details of this Option are as follows:

    

    1.
      Definitions
      And Construction.

    

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

    

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

    

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

    

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

    

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

    

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

    

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

    

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

     

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

     

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

     

    
      
         

      

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

     

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

    (w)
      “Service”
      means

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

    

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

    

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

    

    3.
      Exercise
      Of The Option.

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

    5.1
      the
      Expiration Date indicated in the Grant Notice;

    

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

    

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

    

    6.
      Effect
      Of Termination Of Service.

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

    

    6.4
      Certain
      Definitions.

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

     

    
      
         

      

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

    

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

    

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

     

    
      
         

      

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

    

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

    

    
      
         

      

      
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