Document:

TRULITE,
      INC.

     

    NOTE
      and warrant

     

    PURCHASE
      AGREEMENT

     

    JUNE
      26, 2007

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE
      OF CONTENTS

     

    
      
        	 	 	 	 	 	Page
	
                1.

              	
                Purchase
                  and Sale of Units; Registration Rights.

              	 	
                1

              
	 	
                1.1.

              	 	
                Notes
                  and Warrants.

              	 	
                1

              
	 	
                1.2.

              	 	
                Closing

              	 	
                1

              
	 	
                1.3.

              	 	
                Company
                  Registration.

              	 	
                2

              
	 	
                1.4.

              	 	
                Information
                  from Investor

              	 	
                3

              
	 	
                1.5.

              	 	
                Expenses
                  of Registration

              	 	
                3

              
	 	
                1.6.

              	 	
                Indemnification

              	 	
                3

              
	 	 	 	 	 	 
	
                2.

              	
                Representations
                  and Warranties of the Company

              	 	
                4

              
	 	
                2.1.

              	 	
                Organization,
                  Good Standing and Qualification

              	 	
                4

              
	 	
                2.2.

              	 	
                Capitalization

              	 	
                4

              
	 	
                2.3.

              	 	
                Authorization

              	 	
                4

              
	 	
                2.4.

              	 	
                Valid
                  Issuance

              	 	
                5

              
	 	
                2.5.

              	 	
                Governmental
                  Consents

              	 	
                5

              
	 	
                2.6.

              	 	
                Offering

              	 	
                5

              
	 	
                2.7.

              	 	
                Litigation

              	 	
                5

              
	 	
                2.8.

              	 	
                Patents
                  and Trademarks

              	 	
                5

              
	 	
                2.9.

              	 	
                Agreements;
                  Action.

              	 	
                5

              
	 	
                2.10.

              	 	
                Environmental
                  and Safety Laws

              	 	
                6

              
	 	
                2.11.

              	 	
                Title
                  to Property and Assets

              	 	
                6

              
	 	
                2.12.

              	 	
                Insurance

              	 	
                6

              
	 	 	 	 	 	 
	
                3.

              	
                Representations
                  and Warranties of Investor

              	 	
                6

              
	 	
                3.1.

              	 	
                Authorization

              	 	
                6

              
	 	
                3.2.

              	 	
                Purchase
                  Entirely for Own Account

              	 	
                6

              
	 	
                3.3.

              	 	
                Disclosure
                  of Information

              	 	
                6

              
	 	
                3.4.

              	 	
                Investment
                  Experience

              	 	
                7

              
	 	
                3.5.

              	 	
                Accredited
                  Investor

              	 	
                7

              
	 	
                3.6.

              	 	
                Restricted
                  Securities

              	 	
                7

              
	 	
                3.7.

              	 	
                Further
                  Limitations on Disposition

              	 	
                7

              
	 	
                3.8.

              	 	
                Legends

              	 	
                8

              
	 	 	 	 	 	 
	
                4.

              	
                Conditions
                  of Investor’s Obligations at Closing

              	 	
                8

              
	 	
                4.1.

              	 	
                Representations
                  and Warranties

              	 	
                8

              
	 	
                4.2.

              	 	
                Performance

              	 	
                8

              
	 	 	 	 	 	 
	
                5.

              	
                Conditions
                  of the Company’s Obligations at Closing

              	 	
                8

              
	 	
                5.1.

              	 	
                Representations
                  and Warranties

              	 	
                8

              
	 	
                5.2.

              	 	
                Payment
                  of Consideration

              	 	
                8

              
	 	
                5.3.

              	 	
                Qualifications

              	 	
                8

              
	 	 	 	 	 	 

      

       

      
        
           

        

        
          i

          
            

          

        

        
           

        

      

       

      
        	
                6.

              	
                Miscellaneous.

              	 	
                9

              
	 	
                6.1.

              	 	
                Survival
                  of Warranties

              	 	
                9

              
	 	
                6.2.

              	 	
                Successors
                  and Assigns

              	 	
                9

              
	 	
                6.3.

              	 	
                Choice
                  of Law, Venue and Forum

              	 	
                9

              
	 	
                6.4.

              	 	
                Counterparts

              	 	
                9

              
	 	
                6.5.

              	 	
                Titles
                  and Subtitles

              	 	
                9

              
	 	
                6.6.

              	 	
                Notices

              	 	
                9

              
	 	
                6.7.

              	 	
                Finder’s
                  Fee

              	 	
                9

              
	 	
                6.8.

              	 	
                Expenses

              	 	
                10

              
	 	
                6.9.

              	 	
                Amendments
                  and Waivers

              	 	
                10

              
	 	
                6.10.

              	 	
                Severability

              	 	
                10

              
	 	
                6.11.

              	 	
                Entire
                  Agreement

              	 	
                10

              

      

       

      Exhibit
        “A”  
Form
        of
        Note

    

    Exhibit
      “B”  
Form
      of
      Warrant

     

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    TRULITE,
      INC.

     

    NOTE
      and warrant PURCHASE AGREEMENT

    
      
         

        This
          Note
          and Warrant Purchase Agreement (this “Agreement”)
          is
          made as of the 26th day of June, 2007, by and between Trulite, Inc., a
          Delaware
          corporation (the “Company”),
          and
          each of the other signatories to this Agreement (each individually, an
          “Investor”
and
          collectively the “Investors”).

         

        WHEREAS,
          the Company desires to sell to accredited investors Units (herein so called),
          at
          a price of $75,000 per Unit, each Unit to be comprised of (i) an unsecured
          convertible promissory note in the form of Exhibit
          A
          attached
          hereto in the original principal amount of $75,000 (individually a “Note”
and
          collectively, the “Notes”)
          and
          (ii) a Warrant in the form of Exhibit
          B
          attached
          hereto (individually a “Warrant”
and
          collectively, the “Warrants”)
          to
          purchase 100,000 shares of the Company’s common stock, $0.001 par value
          (“Common
          Stock”)
          at a
          price of $1.00 per share; and

         

        WHEREAS,
          each Investor subscribes to purchase the number of Units set forth opposite
          its
          name on the signature pages to this Agreement, subject to the terms and
          conditions of this Agreement.

         

        NOW,
          THEREFORE, the parties hereby agree as follows:

         

        1.  Purchase
          and Sale of Units;
          Registration Rights.

         

        1.1.  Notes
          and Warrants.

         

        (a)  On
          or
          prior to the Closing (as defined below), the Company shall have authorized
          (i) the sale of Units to each Investor, (ii) the issuance of shares of
          Common Stock upon conversion of the Notes (the “Note Shares”) and (iii) the
          issuance of the shares of Common Stock upon exercise by the Investors of
          the
          Warrants (the “Warrant Shares”).

         

        (b)  Subject
          to the terms and conditions of this Agreement, each Investor agrees to
          purchase
          at the Closing,
          and
          the
          Company agrees to sell and issue to Investor at the Closing, the number
          of Units
          set forth opposite its name on the signature pages to this Agreement at
          a price
          of $75,000 per Unit. 

         

        1.2.  Closing.
          The
          purchase and sale of the Units shall take place at the offices of 1401
          McKinney,
          Suite 900, Houston, Texas 77010 at 10 a.m. Central Time, on June ___, 2007,
          or at such other time and place as the Company and the Investors mutually
          agree
          upon orally or in writing (which time and place are designated as the
“Closing”).
          At
          the Closing, the Company shall deliver to each Investor, against payment
          of
          $75,000 per Unit by such Investor to the Company by check, wire transfer
          or any
          combination thereof, (i) a Note in the principal amount equal to $75,000
          multiplied by the number of Units such Investor is purchasing hereunder,
          and
          (ii) a Warrant to purchase a number of shares of Common Stock equal to
          100,000
          multiplied by the number of Units such Investor is purchasing
          hereunder. 

         

        
          
             

          

          
            1

            
              

            

          

          
             

          

        

        1.3.  Company
          Registration.

         

        (a)  Registration.
          If (but
          without any obligation to do so) on or before June 30, 2009, the Company
          proposes to register (including for this purpose a registration effected
          by the
          Company for stockholders other than Investor) any of its stock or other
          securities under the Securities Act of 1933, as amended (the “Act”)
          in
          connection with the public offering of such securities (other than a
          registration relating solely to the sale of securities of participants
          in a
          Company stock plan, a registration relating to a corporate reorganization
          or
          transaction under Rule 145 of the Act, a registration on any form that does
          not include substantially the same information as would be required to
          be
          included in a registration statement covering the sale of the Warrant Shares
          and
          Note Shares, or a registration in which the only Common Stock being registered
          is Common Stock issuable upon conversion of debt securities that are also
          being
          registered), the Company shall, at such time, promptly give each Investor
          written notice of such registration. Upon the written request of Investor
          given
          within twenty (20) days after mailing of such notice by the Company in
          accordance with Section 6.6, the Company shall, subject to the provisions
          of Section 1.3(c), use all commercially reasonable efforts to cause to be
          registered under the Act the resale of all of the Note Shares and Warrant
          Shares
          that Investor requests to be registered.

         

        (b)  Right
          to Terminate Registration.
          The
          Company shall have the right to terminate or withdraw any registration
          initiated
          by it under this Section 1.3 prior to the effectiveness of such
          registration whether or not Investor has elected to include Note Shares
          or
          Warrant Shares in such registration. The expenses of such withdrawn registration
          shall be borne by the Company in accordance with Section 1.5
          hereof.

         

        (c)  Underwriting
          Requirements.
          In
          connection with any offering involving an underwriting of shares of the
          Company’s capital stock, the Company shall not be required under this
          Section 1.3 to include any Investor’s securities in such underwriting
          unless such Investor accepts the terms of the underwriting as agreed upon
          between the Company and the underwriters selected by the Company (or by
          other
          persons entitled to select the underwriters) and enter into an underwriting
          agreement in customary form with such underwriters, and then only in such
          quantity as the underwriters determine in their sole discretion will not
          jeopardize the success of the offering by the Company. If the total amount
          of
          securities, including Note Shares and Warrant Shares, requested by stockholders
          to be included in such offering exceeds the amount of securities sold other
          than
          by the Company that the underwriters determine in their sole discretion
          is
          compatible with the success of the offering, then the Company shall be
          required
          to include in the offering only that number of such securities, including
          Note
          Shares and Warrant Shares, that the underwriters determine in their sole
          discretion will not jeopardize the success of the offering. Additionally
          in no
          event shall any Note Shares or Warrant Shares be included in such offering
          unless all other stockholders’ securities having prior registration rights,
          pursuant to the Common Stock and Warrant Purchase Agreements entered into
          by the
          Company in April 2006, have been included to the extent requested by the
          stockholders who are parties to such agreements. In the event that the
          underwriters determine that less than all of the Note Shares and Warrant
          Shares
          requested to be registered can be included in such offering, then the Note
          Shares and Warrant Shares that are included in such offering shall be
          apportioned pro rata among Investors based on the number of shares of Common
          Stock held by each Investor.

         

        
          
             

          

          
            2

            
              

            

          

          
             

          

        

        1.4.  Information
          from Investor.
          It
          shall be a condition precedent to the obligations of the Company to take
          any
          action pursuant to this Section 1 with respect to the registration of Note
          Shares or Warrant Shares of any selling Investor that such Investor shall
          furnish to the Company such information regarding itself, the Note Shares
          and
          Warrant Shares held by it, and the intended method of disposition of such
          Note
          Shares or Warrant Shares as shall be reasonably required to effect the
          registration of such Investor’s Note Shares or Warrant Shares.

         

        1.5.  Expenses
          of Registration.
          All
          expenses other than underwriting discounts and commissions incurred in
          connection with registrations, filings or qualifications pursuant to Section
          1.3, including (without limitation) all registration, filing and qualification
          fees, printers’ and accounting fees, and fees and disbursements of counsel for
          the Company shall be borne by the Company. 

         

        1.6.  Indemnification.
          To the
          extent permitted by law, each Investor on whose behalf Note Shares and
          Warrant
          Shares will be registered will indemnify and hold harmless the Company,
          each of
          its directors, each of its officers who has signed the registration statement,
          each person, if any, who controls the Company within the meaning of the
          Act,
          legal counsel and accountants for the Company, any underwriter, any other
          party
          selling securities in such registration statement and any controlling person
          of
          any such underwriter against any losses, claims, damages or liabilities
          (joint
          or several) to which any of the foregoing persons may become subject, under
          the
          Act, the Securities Exchange Act of 1934, as amended (the “1934
          Act”),
          any
          state securities laws or any rule or regulation promulgated under the Act,
          the
          1934 Act or any state securities laws, insofar as such losses, claims,
          damages
          or liabilities (or actions in respect thereto) arise out of or are based
          upon
          any Violation (defined below), in each case to the extent (and only to
          the
          extent) that such Violation occurs in reliance upon and in conformity with
          written information furnished by Investor expressly for use in connection
          with
          such registration; and each Investor on whose behalf Note Shares and Warrant
          Shares will be registered will reimburse any person intended to be indemnified
          pursuant to this subsection l.6 for any legal or other expenses reasonably
          incurred by such person in connection with investigating or defending any
          such
          loss, claim, damage, liability or action as such expenses are incurred;
          provided, however, that the indemnity agreement contained in this
          subsection 1.6 shall not apply to amounts paid in settlement of any such
          loss, claim, damage, liability or action if such settlement is effected
          without
          the consent of Investor (which consent shall not be unreasonably withheld),
          and
          provided that in no event shall any indemnity under this subsection 1.6
          exceed the gross proceeds from the offering received by such Investor.
          For
          purposes of this section 1.6, “Violation”
shall
          mean any of the following statements, omissions or violations (i) any
          untrue statement or alleged untrue statement of a material fact contained
          in
          such registration statement, including any preliminary prospectus or final
          prospectus contained therein or any amendments or supplements thereto,
          (ii) the omission or alleged omission to state in such registration
          statement a material fact required to be stated therein, or necessary to
          make
          the statements therein not misleading, or (iii) any violation or alleged
          violation by the Company of the Act, the 1934 Act, any state securities
          laws or
          any rule or regulation promulgated under the Act, the 1934 Act or any state
          securities laws.

         

        
          
             

          

          
            3

            
              

            

          

          
             

          

        

        2.  Representations
          and Warranties of the Company.
          The
          Company hereby represents and warrants to each Investor the
          following:

         

        2.1.  Organization,
          Good Standing and Qualification.
          The
          Company is a corporation duly organized, validly existing and in good standing
          under the laws of the State of Delaware and has all requisite corporate
          power
          and authority to carry on its business as now conducted and as proposed
          to be
          conducted. The Company is duly qualified to transact business and is in
          good
          standing in each jurisdiction in which the failure to so qualify would
          have a
          material adverse effect on its business or properties.

         

        2.2.  Capitalization.
          The
          authorized capital of the Company consists of:

         

        (a)  50,000,000
          shares of Common Stock of which 11,785,591 shares are issued and
          outstanding.

         

        (b)  The
          outstanding shares of Common Stock are all duly and validly authorized
          and
          issued, fully paid and nonassessable, and were issued in accordance with
          the
          registration or qualification provisions of the Act and any relevant state
          securities laws, or pursuant to valid exemptions therefrom.

         

        (c)  Except
          for (i) currently outstanding options to purchase 2,344,864 shares of Common
          Stock granted to employees and other service providers pursuant to the
          Company’s
          Second Amended and Restated Stock Option Plan (the “Option
          Plan”),
          (ii) outstanding warrants to purchase an aggregate of 1,400,000 shares of
          Common Stock, and (iii) agreements with three holders of unsecured promissory
          notes issued by the Company to convert principal and accrued interest on
          those
          promissory notes into Common Stock in the event certain conditions are
          met,
          there are not outstanding any options, warrants, rights (including conversion
          or
          preemptive rights) or agreements for the purchase or acquisition from the
          Company of any shares of its capital stock. In addition to the aforementioned
          options, the Company has reserved an additional 2,655,036 shares of its
          Common
          Stock for purchase upon exercise of options to be granted in the future
          under
          the Option Plan. The Company is not a party or subject to any agreement
          or
          understanding, and, to the best of the Company’s knowledge, there is no
          agreement or understanding between any persons and/or entities, which affects
          or
          relates to the voting or giving of written consents with respect to any
          security
          or by a director of the Company.

         

        2.3.  Authorization.
          All
          corporate action on the part of the Company, its officers, directors and
          stockholders necessary for the authorization, execution and delivery of
          this
          Agreement, the performance of all obligations of the Company hereunder
          and
          thereunder, and the authorization, issuance (or reservation for issuance),
          sale
          and delivery of the Notes and Warrants being sold hereunder, the issuance
          of the
          Note Shares on conversion of the Notes and the issuance of the Warrant
          Shares
          upon exercise of the Warrants has been taken or will be taken prior to
          the
          Closing, and this Agreement, the Notes and the Warrants constitute valid
          and
          legally binding obligations of the Company, enforceable in accordance with
          their
          respective terms, except (i) as limited by applicable bankruptcy,
          insolvency, reorganization, moratorium, and other laws of general application
          affecting enforcement of creditors’ rights generally, and (ii) as limited
          by laws relating to the availability of specific performance, injunctive
          relief,
          or other equitable remedies.

         

        
          
             

          

          
            4

            
              

            

          

          
             

          

        

        2.4.  Valid
          Issuance.
          The
          Note Shares and Warrant Shares have been duly and validly reserved for
          issuance
          and upon conversion of the Notes or upon exercise of the Warrants, as the
          case
          may be, in accordance with their terms will be duly and validly issued,
          fully
          paid, and nonassessable and will be free of restrictions on transfer other
          than
          restrictions on transfer under this Agreement and under applicable state
          and
          federal securities laws.

         

        2.5.  Governmental
          Consents.
          No
          consent, approval, order or authorization of, or registration, qualification,
          designation, declaration or filing with, any federal, state or local
          governmental authority on the part of the Company is required in connection
          with
          the consummation of the transactions contemplated by this
          Agreement.

         

        2.6.  Offering.
          Subject
          in part to the truth and accuracy of Investor’s representations set forth in
          Section 3 of this Agreement, the offer, sale and issuance of the Notes
          and
          Warrants as contemplated by this Agreement is exempt from the registration
          requirements of any applicable state and federal securities laws, and neither
          the Company nor any authorized agent acting on its behalf will take any
          action
          hereafter that would cause the loss of such exemption.

         

        2.7.  Litigation.
          There
          is no action, suit, proceeding or investigation pending or, to the Company’s
          knowledge, currently threatened against the Company that questions the
          validity
          of this Agreement, or the right of the Company to enter into this Agreement,
          or
          to consummate the transactions contemplated hereby, or that might result,
          either
          individually or in the aggregate, in any material adverse changes in the
          assets,
          condition, affairs or prospects of the Company, financially or otherwise,
          or any
          change in the current equity ownership of the Company. The Company is not
          a
          party or subject to the provisions of any order, writ, injunction, judgment
          or
          decree of any court or government agency or instrumentality. There is no
          action,
          suit, proceeding or investigation by the Company currently pending or that
          the
          Company intends to initiate.

         

        2.8.  Patents
          and Trademarks.
          To the
          best of its knowledge (but without having conducted any special investigation
          or
          patent or trademark search), the Company has sufficient title and ownership
          or
          licenses to all patents, trademarks, service marks, trade names, copyrights,
          trade secrets, information, proprietary rights and processes necessary
          for its
          business as now conducted without any conflict with or infringement of
          the
          rights of others, except for such items as have yet to be conceived or
          developed
          or that are expected to be available for licensing on reasonable terms
          from
          third parties. The Company has not received any communications alleging
          that the
          Company has violated or, by conducting its business as proposed, would
          violate
          any of the patents, trademarks, service marks, trade names, copyrights
          or trade
          secrets or other proprietary rights of any other person or entity. 

         

        2.9.  Agreements;
          Action.

         

        (a)  Except
          for agreements explicitly contemplated hereby and employment agreements
          existing
          as of the date hereof, there are no agreements, understandings or proposed
          transactions between the Company and any of its officers, directors, affiliates,
          or any affiliate thereof. 

         

        
          
             

          

          
            5

            
              

            

          

          
             

          

        

        (b)  The
          Company is not a party to and is not bound by any contract, agreement or
          instrument, or subject to any restriction under its Certificate of
          Incorporation, as amended or Amended and Restated Bylaws that adversely
          affects
          its business as now conducted, its properties or its financial
          condition.

         

        2.10.  Environmental
          and Safety Laws.
          To its
          knowledge, the Company is not in violation of any applicable statute, law
          or
          regulation relating to the environment or occupational health and safety,
          and to
          its knowledge, no material expenditures are or will be required in order
          to
          comply with any such existing statute, law or regulation.

         

        2.11.  Title
          to Property and Assets.
          The
          Company owns its property and assets free and clear of all mortgages, liens,
          loans and encumbrances, except such encumbrances and liens that arise in
          the
          ordinary course of business and do not materially impair the Company’s ownership
          or use of such property or assets. With respect to the property and assets
          it
          leases, the Company is in compliance with such leases and, to the best
          of its
          knowledge, holds a valid leasehold interest free of any liens, claims or
          encumbrances.

         

        2.12.  Insurance.
          The
          Company has in full force and effect fire and casualty insurance policies,
          with
          extended coverage, sufficient in amount (subject to reasonable deductibles)
          to
          allow it to replace any of its properties that might be damaged or
          destroyed. 

         

        3.  Representations
          and Warranties of Investor.
          Each Investor
          hereby represents and warrants with respect to itself that:

         

        3.1.  Authorization.
          Such
          Investor has full power and authority to enter into this Agreement and
          such
          Agreement constitutes its valid and legally binding obligation, enforceable
          in
          accordance with its terms except (i) as limited by applicable bankruptcy,
          insolvency, reorganization, moratorium, and other laws of general application
          affecting enforcement of creditors’ rights generally, and (ii) as limited
          by laws relating to the availability of specific performance, injunctive
          relief,
          or other equitable remedies.

         

        3.2.  Purchase
          Entirely for Own Account.
          This
          Agreement is made with Investor in reliance upon such Investor’s representation
          to the Company, which by Investor’s execution of this Agreement Investor hereby
          confirms, that the Notes and Warrants to be received by Investor, the Note
          Shares issuable on conversion of the Notes and the Warrant Shares issuable
          upon
          exercise of such Warrants (collectively, the “Securities”)
          will
          be acquired for investment for Investor’s own account, not as a nominee or
          agent, and not with a view to the resale or distribution of any part thereof,
          and that Investor has no present intention of selling, granting any
          participation in, or otherwise distributing the same. By executing this
          Agreement, such Investor further represents that such Investor does not
          have any
          contract, undertaking, agreement or arrangement with any person to sell,
          transfer or grant participations to such person or to any third person,
          with
          respect to any of the Securities.

         

        3.3.  Disclosure
          of Information.
          Such
          Investor has read the Company’s Annual Report on Form 10-KSB for the year ended
          December 31, 2006 and the amendment thereto, Proxy Statement related to
          its
          Annual Meeting of Stockholders held May 23, 2007, Quarterly Report on Form
          10-QSB for the quarter ended March 31, 2007 and Current Reports on Form
          8-K
          filed with the Securities and Exchange Commission (“SEC”) on May 22, 2007 and
          June 5, 2007, respectively. Investor believes it has received all the
          information it considers necessary or appropriate for deciding whether
          to
          purchase the Units. Investor further represents that it has had an opportunity
          to ask questions and receive answers from the Company regarding the terms
          and
          conditions of the offering of the Units and the business, properties, prospects
          and financial condition of the Company. The foregoing, however, does not
          limit
          or modify the representations and warranties of the Company in Section 2 of
          this Agreement or the right of any Investor to rely thereon.

         

        
          
             

          

          
            6

            
              

            

          

          
             

          

        

        3.4.  Investment
          Experience.
          Such
          Investor is an investor in securities of companies in the development stage
          and
          acknowledges that it is able to fend for itself, can bear the economic
          risk of
          its investment, has such knowledge and experience in financial or business
          matters that it is capable of evaluating the merits and risks of the investment
          in the Units and recognizes that it may realize a loss of its entire investment
          in the Units. If other than an individual, such Investor also represents
          it has
          not been organized for the purpose of acquiring the Units.

         

        3.5.  Accredited
          Investor.
          Such
          Investor is an “accredited investor” within the meaning of SEC Rule 501 of
          Regulation D, as presently in effect.

         

        3.6.  Restricted
          Securities.
          Such
          Investor understands that the Securities it is purchasing are characterized
          as
“restricted securities” under the federal securities laws inasmuch as they are
          being acquired from the Company in a transaction not involving a public
          offering
          and that under such laws and applicable regulations such securities may
          be
          resold without registration under the Act, only in certain limited
          circumstances. In this connection, such Investor represents that it is
          familiar
          with SEC Rule 144, as presently in effect, and understands the resale
          limitations imposed thereby and by the Act.

         

        3.7.  Further
          Limitations on Disposition.
          Without
          in any way limiting the representations set forth above, such Investor
          further
          agrees not to make any disposition of all or any portion of the Securities,
          unless and until:

         

        (a)  (i) such
          Investor shall have notified the Company of the proposed disposition and
          shall
          have furnished the Company with a detailed statement of the circumstances
          surrounding the proposed disposition, and (ii) if reasonably requested by
          the Company, Investor shall have furnished the Company with an opinion
          of
          counsel, reasonably satisfactory to the Company that such disposition will
          not
          require registration of such shares under the Act.

         

        (b)  Notwithstanding
          the provisions of Paragraphs (a) above, no such opinion of counsel shall
          be
          necessary for a transfer by Investor that is a partnership to a partner
          of such
          partnership or a retired partner of such partnership who retires after
          the date
          hereof, or to the estate of any such partner or retired partner or the
          transfer
          by gift, will or intestate succession of any partner to his or her spouse
          or to
          the siblings, lineal descendants or ancestors of such partner or his or
          her
          spouse, if the transferee agrees in writing to be subject to the terms
          hereof to
          the same extent as if he or she were the Investor hereunder.

         

        
          
             

          

          
            7

            
              

            

          

          
             

          

        

        3.8.  Legends.
          It is
          understood that the certificates evidencing the Securities may bear one
          or all
          of the following legends:

         

        “THESE
          SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
          IN THE
          ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
          UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
          SUCH
          REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH
          ACT.”

         

        4.  Conditions
          of Investor’s
          Obligations at Closing.
          The
          obligations of each
          Investor under subsection 1.1(b) of this Agreement are subject to the
          fulfillment on or before the Closing of each of the following conditions,
          unless
          otherwise waived by such Investor:

         

        4.1.  Representations
          and Warranties.
          The
          representations and warranties of the Company contained in Section 2 shall
          be true on and as of the Closing with the same effect as though such
          representations and warranties had been made on and as of the date of such
          Closing.

         

        4.2.  Performance.
          The
          Company shall have performed and complied with all agreements, obligations
          and
          conditions contained in this Agreement that are required to be performed
          or
          complied with by it on or before the Closing.

         

        4.5 Proceedings
          and Documents.
          All
          corporate and other proceedings in connection with the transactions contemplated
          at the Closing and all documents incident thereto shall be reasonably
          satisfactory in form and substance to Investor, and they shall have received
          all
          such counterpart original and certified or other copies of such documents
          as
          they may reasonably request.

         

        5.  Conditions
          of the Company’s
          Obligations at Closing.
          The
          obligations of the Company to each Investor under this Agreement are subject
          to
          the fulfillment on or before the Closing of each of the following conditions
          by
          that Investor:

         

        5.1.  Representations
          and Warranties.
          The
          representations and warranties of such Investor contained in Section 3
          shall be true on and as of the Closing with the same effect as though such
          representations and warranties had been made on and as of the
          Closing.

         

        5.2.  Payment
          of Consideration.
          Such
          Investor shall have delivered the Consideration referenced in
          Section 1.2.

         

        5.3.  Qualifications.
          All
          authorizations, approvals, or permits, if any, of any governmental authority
          or
          regulatory body of the United States or of any state that are required
          in
          connection with the lawful issuance and sale of the Securities pursuant
          to this
          Agreement shall be duly obtained and effective as of the Closing.

         

        
          
             

          

          
            8

            
              

            

          

          
             

          

        

        6.  Miscellaneous.

         

        6.1.  Survival
          of Warranties.
          The
          warranties, representations and covenants of the Company and Investor contained
          in or made pursuant to this Agreement shall survive the execution and delivery
          of this Agreement and the Closing and shall in no way be affected by any
          investigation of the subject matter thereof made by or on behalf of the
          Investor
          or the Company.

         

        6.2.  Successors
          and Assigns.
          Except
          as otherwise provided herein, the terms and conditions of this Agreement
          shall
          inure to the benefit of and be binding upon the respective successors and
          assigns of the parties (including transferees of any Securities). Nothing
          in
          this Agreement, express or implied, is intended to confer upon any party
          other
          than the parties hereto or their respective successors and assigns any
          rights,
          remedies, obligations, or liabilities under or by reason of this Agreement,
          except as expressly provided in this Agreement.

         

        6.3.  Choice
          of Law, Venue and Forum.
          This
          Agreement, the entire relationship of the parties hereto, and any litigation
          between the parties (whether grounded in contract, tort, statute, law or
          equity)
          shall be governed by, construed in accordance with, and interpreted pursuant
          to
          the laws of the State of Texas, without giving effect to its choice of
          laws
          principles. Exclusive venue for any litigation between the parties hereto
          shall
          be in Harris County, Texas, and shall be brought in the State District
          Courts of
          Harris County, Texas, or in the United States District Court for the Southern
          District of Texas, Houston Division. The parties hereto waive any challenge
          to
          personal jurisdiction or venue (including without limitation a challenge
          based
          on inconvenience) in Harris County, Texas, and specifically consent to
          the
          jurisdiction of the State District Courts of Harris County and the United
          States
          District Court for the Southern District of Texas, Houston
          Division.

         

        6.4.  Counterparts.
          This
          Agreement may be executed in two or more counterparts, each of which shall
          be
          deemed an original, but all of which together shall constitute one and
          the same
          instrument.

         

        6.5.  Titles
          and Subtitles.
          The
          titles and subtitles used in this Agreement are used for convenience only
          and
          are not to be considered in construing or interpreting this
          Agreement.

         

        6.6.  Notices.
          Unless
          otherwise provided, any notice required or permitted under this Agreement
          shall
          be given in writing and shall be deemed effectively given upon personal
          delivery
          to the party to be notified or upon deposit with the United States Post
          Office,
          by registered or certified mail, postage prepaid and addressed to the party
          to
          be notified at the address indicated for such party on the signature page
          hereof, or at such other address as such party may designate by ten (10)
          days’
advance written notice to the other parties.

         

        6.7.  Finder’s
          Fee.
          Each
          Investor agrees to indemnify and to hold harmless the Company from any
          liability
          for any commission or compensation in the nature of a finders’ fee (and the
          costs and expenses of defending against such liability or asserted liability)
          for which Investor or any of its officers, partners, employees, or
          representatives is responsible. The Company agrees to indemnify and hold
          harmless each Investor from any liability for any commission or compensation
          in
          the nature of a finders’ fee (and the costs and expenses of defending against
          such liability or asserted liability) for which the Company or any of its
          officers, employees or representatives is responsible.

         

        
          
             

          

          
            9

            
              

            

          

          
             

          

        

        6.8.  Expenses.
          Irrespective of whether the Closing is effected, the Company shall pay
          all costs
          and expenses that it incurs with respect to the negotiation, execution,
          delivery
          and performance of this Agreement. 

         

        6.9.  Amendments
          and Waivers.
          Any
          term of this Agreement may be amended and the observance of any term of
          this
          Agreement may be waived (either generally or in a particular instance and
          either
          retroactively or prospectively), only with the written consent of the Company
          and Investors who purchase two-thirds (2⁄3) of the Units purchased and sold
          pursuant to the terms of this Agreement. Any amendment or waiver effected
          in
          accordance with this paragraph shall be binding upon each holder of any
          securities purchased under this Agreement at the time outstanding (including
          Note Shares and Warrant Shares), each future holder of all such securities,
          and
          the Company.

         

        6.10.  Severability.
          If one
          or more provisions of this Agreement are held to be unenforceable under
          applicable law, such provision shall be excluded from this Agreement and
          the
          balance of the Agreement shall be interpreted as if such provision were
          so
          excluded and shall be enforceable in accordance with its terms.

         

        6.11.  Entire
          Agreement.
          This
          Agreement and the documents referred to herein constitute the entire agreement
          among the parties and no party shall be liable or bound to any other party
          in
          any manner by any warranties, representations, or covenants except as
          specifically set forth herein or therein.

         

        [Signature
          Page Follows]

         

        

         

         

         

        
          
             

          

          
            10

            
              

            

          

          
             

          

        

         

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

         

        
          	 	 	 
	 	
                  COMPANY:

                  

                  Trulite,
                    Inc.

                  (a
                    Delaware corporation)

                
	 
 	 
 	 
 
	 	By:  	/s/ John
                  Berger
	 	
                  
John
                  Berger, Chairman of the Board of Directors
	 	
                  Address: 1401
                    McKinney, Suite 900

                                   
                    Houston, Texas 77010

                

        

          	 	 	 
	 	INVESTORS:
	 
 	 
 	 
 
	No.
                  of
                  Units Subscribed for: 3.33	By:  	/s/ John
                  E.
                  Ligums, Jr.
	 	
                  
John
                  E. Ligums, Jr.
	 	
                  Address:
                    3030 Post
                    Oak Blvd., No. 610

                                   
                    Houston, Texas 77056

                

           

          
            	 	 
	 	THE
                    BONNYBROOK
                    TRUST
	 	 	 
	 	 
	 

	No.
                    of
                    Units Subscribed for: 3.33 	By:  	/s/ J.
                    Robert
                    Casey
	 	
                    
J.
                    Robert Casey, Trustee
	 	
                    Address:
                      c/o The
                      Beacon Companies

                                     
                      50 Federal Street

                                     
                      Boston, Massachusetts 02110

                  

          

        

        

         

         

        
          
             

          

          
            
              Signature
                Page

            

            
              

            

          

          
             

          

        

        EXHIBIT
          “A”

        

        FORM
          OF NOTE

        

        

        [See
          Attached]

        

        

        
          
             

          

          
            A-1

            
              

            

          

          
             

          

        

        EXHIBIT
          “B”

        

        FORM
          OF WARRANT

        

        

        [See
          Attached]

        

        

        
          
             

          

          
            B-1EXHIBIT
      10.6.1

     

    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

     

    INCENTIVE
      STOCK OPTION AGREEMENT

    _______________

    

    Re: Grant
      of Stock Option

     

    Dear
      Fred:

     

    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 Incentive 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 designed pursuant to section 422 of the Internal
      Revenue Code of 1986. 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

            
	 	 	 
	 	 	 
	 	 	 

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    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) Notwithstanding
      any other provision of this Agreement as of the business day immediately
      preceding a Change in Control you shall become entitled to exercise the Option
      with respect to all the Option Shares.

     

    (d) 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).

     

    (e) Payment
      of the Exercise Price may be made, at your election, (i) in cash, by certified
      or official bank check or by wire transfer of immediately available funds,
      (ii)
      by delivery to the Company of a number of shares of Stock having a fair market
      value as of the date of exercise equal to the Exercise Price, or (iii) by net
      issue exercise, pursuant to which the Company will issue to you a number of
      Option Shares as to which the Option is exercised, less a number of shares
      with
      a fair market value as of the date of exercise, as determined in good faith
      by
      the Committee, equal to the Exercise Price.

     

    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. 

     

    (a) .
      In the
      event that you shall cease to be employed by the Company or any Subsidiary
      or
      parent thereof on a full-time basis for any reason other than as a result of
      your death or “disability” (within the meaning of section 22(e)(3) of the Code),
      the Option may only be exercised within one
      month
      after
      the date on which you ceased to be so employed, and only to the same extent
      that
      you were entitled to exercise the Option on the date on which you ceased to
      be
      so employed and had not previously done so.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) In
      the
      event that you shall cease to be employed by the Company or any Subsidiary
      or
      parent thereof on a full-time basis by reason of “disability” (within the
      meaning of section 22(e)(3) of the Code), the Option may only be exercised
      within one year after the date you ceased to be so employed, and only to the
      same extent that you were entitled to exercise the Option on the date on which
      you ceased to be so employed by reason of such disability and had not previously
      done so.

     

    (c) In
      the
      event that you shall die while employed by the Company or any Subsidiary or
      parent thereof (or within a period of one month after ceasing to be employed
      by
      the Company or any Subsidiary or parent thereof for any reason other than a
      “disability” (within the meaning of section 22(e)(3) of the Code) or within a
      period of one year after ceasing to be employed by the Company or any Subsidiary
      or parent thereof by reason of such “disability”), the Option may only be
      exercised within one year after your death. In such event, the Option may be
      exercised during such one-year period by the executor or administrator of your
      estate or by any person who shall have acquired the Option through bequest
      or
      inheritance, but only to the same extent that you were entitled to exercise
      the
      Option immediately prior to the time of your death and you had not previously
      done so.

     

    (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.
      The Option may not be transferred by your (other than by will or the laws of
      descent and distribution) and may be exercised during your lifetime only by
      you.

     

    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.

     

    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:

            	
              _________________

            

      	 	 	__________________________________

      	 	 	__________________________________

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    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. Non-Competition;
      Non-Solicitation.

     

    (a) During
      your employment by the Company, you will have access to and become acquainted
      with Confidential Information of the Company (“Confidential
      Information”
      includes, but is not limited to, sales materials, technical information,
      records, processes and compilations of information, specifications and
      information concerning customers or vendors, customer lists, and information
      regarding methods of doing business, but it shall not include information that
      is generally known to other persons or entities who can obtain economic value
      from its disclosure or use. You agree and acknowledge that the Confidential
      Information has been developed or acquired by the Company through the
      expenditure of substantial time, effort and money, and that it provides the
      Company with an advantage over competitors who do not know or use such
      Confidential Information.). Accordingly, in consideration for having access
      to
      such Confidential Information (and in order to protect its value to the
      Company), and in consideration for your participation in the Plan, you agree
      that during the Term of Non-Competition (as defined below) or the Term of
      Non-Solicitation (as defined below), you will not directly or indirectly
      disclose or use for any reason whatsoever any Confidential Information obtained
      by reason of employment with the Company or any predecessor, except as required
      to conduct the business of the Company. The Term of Non-Competition (herein
      so
      called) and the Term of Non-Solicitation (herein so called) shall be for a
      term
      beginning on the date hereof and continuing until the one year anniversary
      of
      the date of termination.

     

    (b) You
      acknowledge and agree that the nature of the Confidential Information to which
      you will have access during your employment by the Company would make it
      difficult, if not impossible, for you to perform in a similar capacity for
      a
      Competing Business (as defined below) without disclosing or utilizing the
      Confidential Information. You acknowledge and agree that the Company’s business
      is conducted throughout the country in a highly-competitive market. Accordingly,
      you agree that you will not (other than for the benefit of the Company pursuant
      to this Agreement) directly or indirectly, individually or as an officer,
      director, employee, shareholder, consultant, contractor, partner, joint
      venturer, agent, equity owner or in any capacity whatsoever (i) during the
      term
      of Non-Competition, engage in the business of providing management and
      administrative services to any competitors or in any other business activity
      that the Company is conducting, or is intending to conduct, on your date of
      termination (a “Competing
      Business”),
      or
      (ii) during the Term of Non-Solicitation, (A) hire, attempt to hire, or contact
      or solicit with respect to hiring any employee of the Company, or (B) solicit,
      divert or take away any customers or customer leads (as of your date of
      termination) of the Company. 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (c) During
      the term of Non-Competition, you will not use your access to, knowledge of,
      or
      application of Confidential Information to perform any duty for any Competing
      Business; it being understood and agreed to that this Section 9(c) shall be
      in
      addition to and not be construed as a limitation upon the covenants in Section
      9(b) hereof.

     

    (d) You
      acknowledge that the geographic boundaries, scope of prohibited activities,
      and
      time duration of the preceding paragraphs are reasonable in nature and are
      no
      broader than are necessary to maintain the confidentiality and the goodwill
      of
      the Company and the confidentiality of its Confidential Information and to
      protect the other legitimate business interests of the Company.

     

    (e) If
      any
      court determines that any portion of this Section 9 is invalid or unenforceable,
      the remainder of this Section 9 shall not thereby be affected and shall be
      given
      full effect without regard to the invalid provisions. If any court construes
      any
      of the provisions of this Section 9, or any part thereof, to be unreasonable
      because of the duration or scope of such provision, such court shall have the
      power to reduce the duration or scope of such provision and to enforce such
      provision as so reduced.

     

    (f) As
      used
      in this Section 9, “Company”
shall
      include the Company and any of its affiliates.

     

    10. Arbitration.
      The Company and you agree to the resolution by binding arbitration of all
      claims, demands, causes of action, disputes, controversies or other matters
      in
      question (“claims”),
      whether or not arising out of this Option Agreement or your employment (or
      its
      termination), whether sounding in contract, tort or otherwise and whether
      provided by statute or common law, that the Company may have against you or
      that
      you may have against the Company or its parents, Subsidiaries and affiliates,
      and each of the foregoing entities’ respective officers, directors, employees or
      agents in their capacity as such or otherwise; except that this agreement to
      arbitrate shall not limit the Company’s right to seek equitable relief,
      including injunctive relief and specific performance, and damages in a court
      of
      competent jurisdiction for an alleged breach of Sections 8 and 9 of this Option
      Agreement. Claims covered by this agreement to arbitrate also include claims
      by
      you for breach of this Option Agreement, wrongful termination, discrimination
      (based on age, race, sex, disability, national origin, religion or any other
      factor) and retaliation. In the event of any such action by you against the
      Company, it is expressly agreed that the only damages to which you shall be
      entitled are lost compensation and benefits. The Company and you agree that
      any
      arbitration shall be in accordance with the Federal Arbitration Act
      (“FAA”)
      and,
      to the extent an issue is not addressed by the FAA, with the then-current
      National Rules for the Resolution of Employment Disputes of the American
      Arbitration Association (“AAA”)
      or
      such other rules of the AAA as applicable to the claims being arbitrated. If
      a
      party refuses to honor its obligations under this agreement to arbitrate, the
      other party may compel arbitration in either federal or state court. The
      arbitrator shall apply the substantive law of the State of Delaware (excluding
      Delaware’s choice-of-law principles that might call for the application of some
      other state’s law), or federal law, or both as applicable to the claims
      asserted. The arbitrator shall have exclusive authority to resolve any dispute
      relating to the interpretation, applicability, enforceability or formation
      of
      this agreement to arbitrate, including any claim that all or part of this Option
      Agreement is void or voidable and any claim that an issue is not subject to
      arbitration. The parties agree that venue for arbitration will be in Dallas,
      Texas, and that any arbitration commenced in any other venue will be transferred
      to Dallas, Texas upon the written request of any party to this Option Agreement.
      In the event that an arbitration is actually conducted pursuant to this Section
      10, the party in whose favor the arbitrator renders the award shall be entitled
      to have and recover from the other party all costs and expenses incurred,
      including reasonable attorneys’ fees, expert witness fees, and costs actually
      incurred. Any and all of the arbitrator’s orders, decisions and awards may be
      enforceable in, and judgment upon any award rendered by the arbitrator may
      be
      confirmed and entered by, any federal or state court having jurisdiction. All
      proceedings conducted pursuant to this agreement to arbitrate, including any
      order, decision or award of the arbitrator, shall be kept confidential by all
      parties. YOU
      ACKNOWLEDGE THAT, BY SIGNING THIS OPTION AGREEMENT, YOU ARE WAIVING ANY RIGHT
      THAT YOU MAY HAVE TO A JURY TRIAL OR A COURT TRIAL OF ANY EMPLOYMENT-RELATED
      CLAIM ALLEGED BY YOU.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    11. 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.

     

    12. 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. 

     

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

     

    14. 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.

     

    15. 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.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    16. 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.

     

    17. 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) You
      represent and warrant that you understand the Federal, state and local income
      tax consequences of the granting of the Option to you, the acquisition of rights
      to exercise the Option with respect to any Option Shares, the exercise of the
      Option and purchase of Option Shares, and the subsequent sale or other
      disposition of any Option Shares.

     

    [Remainder
      of page intentionally left blank]

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    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:
      _________________, ___________

    

    
      
         

      

      
        9

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