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Who has time/excpertise to translate all this?





8. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 8.

(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company’s independent certified public accountants that regularly examine the financial statements of the Company (an “Appraiser”). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. As an alternative to the foregoing adjustment to the Exercise Price, at the request of the Holder delivered before the 90th day after such record date, the Company will deliver to such Holder, within five trading days after such request (or, if later, on the effective date of such distribution), the Distributed Property that such Holder would have been entitled to receive in respect of the Warrant Shares for which this Warrant could have been exercised immediately prior to such record date.


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(c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. In addition, at the Holder’s request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is affected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five trading days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. As used in this Warrant, “Change of Control” means the occurrence of any of (i) an acquisition after the date hereof by any Person or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of more than one-third of the voting rights or equity interests in the Company, (ii) a replacement of more than one-half of the members of the Company’s board of directors that is not approved by those individuals who are member of the board of directors on the date hereof in one or a series of related transactions, (iii) a merger or consolidation of the Company or any subsidiary or a sale of more than one-third of the assets of the Company in one or a series of related transactions, unless following such transactions or series of transactions, the holders of the Company’s securities prior to the first such transaction continue to hold at least two-thirds of the voting rights and equity interests in of the surviving entity or acquirer of such assets, or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii).

(d) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. Notwithstanding the foregoing, no adjustment will be made under this Section 8 in respect of any grant of options or warrants, or the issuance of additional securities, under any duly authorized Company stock option, restricted stock plan or stock purchase plan.


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(e) Calculations. All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 8, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.

(g) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction, at least 20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. Until the exercise of this Warrant or any portion of this Warrant, the Holder shall not have nor exercise any rights by virtue hereof as a stockholder of the Company (including without limitation the right to notification of stockholder meetings or the right to receive any notice or other communication concerning the business and affairs of the Company other than as provided in this Section 8(g)).

(h) Payment of Exercise Price. The Holder shall pay the Exercise Price by delivery of immediately available funds.

9. Limitation on Exercise. Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates under Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The restrictions set forth in this Section 9 shall not apply in determining the consideration and the number of shares or other securities, and other property to which Holder may be entitled upon any adjustment or event contemplated in Section 8 of this Warrant.


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10. No Fractional Shares. No fractional shares of Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares which would, otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported on the American Stock Exchange on the date of exercise.

11. Exchange Act Filings. The Holder agrees and acknowledges that it shall have sole responsibility for making any applicable filings with the U.S. Securities and Exchange Commission pursuant to Sections 13 and 16 of the Securities Exchange Act of 1934, as amended, as a result of its acquisition of this Warrant and the Warrant Shares and any future retention or transfer thereof.

12. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (Pacific Time) on a trading day, (ii) the next trading day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a trading day or later than 5:30 p.m. (Pacific Time) on any trading day, (iii) the trading day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to e.Digital Corporation, 16770 West Bernardo Drive, San Diego, CA 92127, Facsimile No.: (858) 304-3023, Attn: President, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section.

13. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.


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14. Redemption.

(a) Optional Redemption. The registered Holder shall have the option to require cash redemption effective June 30, 2009 should sufficient shares of Common Stock not be authorized and reserved for full exercise of the Warrant by such date. The Company shall provide the registered Holder with notice no later than ten (10) days following the occurrence of either (i) corporate action to reserve sufficient shares of Common Stock such that this redemption feature shall no longer be effective or (ii) failure to authorize and reserve sufficient Warrant Shares by June 30, 2009 and a computation of the redemption value and the registered Holder’s right to redeem in accordance with the provisions of Section 14 (b). Such notice also shall specify the time and place of redemption and shall be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Holder receives the notice

(b) Redemption Price. The cash redemption price shall be the greater of (i) $0.01 per unexercised Warrant Share, or (ii) the five day average closing price immediately preceding June 30, 2009 multiplied by the number of Warrant Shares that could be obtained upon exercise in accordance with Section 3(b). The demand for cash redemption shall be made by the Holder on an all or none basis within thirty (30) days of the receipt of the notice specified in Section 14 (a) in writing and the redemption price shall be paid on or before August 31, 2009 if so redeemed. The Holder shall surrender the Warrant for cancellation at redemption.

(c) Consequences of Failure to Redeem. Should Holder fail to redeem after receipt of the notice specified in Section 14 (a) indicating that the conditions for redemption have been triggered, then the Warrant shall only be exercisable thereafter should sufficient shares otherwise be authorized and reserved for such purpose and the value of the Warrant may thereafter be nil as it may be unexercisable into Common Stock even though there may be an intrinsic value to such Warrant.

15. Miscellaneous.

(a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns.


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(b) All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrants (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City and County of San Diego. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City and County of San Diego for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Warrant), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto (including its affiliates, agents, officers, directors and employees) hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

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

(d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.
e.DIGITAL CORPORATION



By: /s/ ROBERT PUTNAM
Name: ROBERT PUTNAM
Title: SECRETARY
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FORM OF NOTICE OF EXERCISE
To e.Digital Corporation:

In accordance with the Warrant enclosed with this Form of Notice of Exercise, the undersigned hereby irrevocably:

(i) elects to purchase _____________ shares of common stock (“Common Stock”), $0.001 par value per share, of e.Digital Corporation and encloses herewith $________ in cash, certified or official bank check or checks, which sum represents the aggregate Exercise Price (as defined in the Warrant) for the number of shares of Common Stock to which this Notice of Exercise relates, together with any applicable taxes payable by the undersigned pursuant to the Warrant, or

(ii) requests the Company to issue to the undersigned _____________ shares of Common Stock of e.Digital Corporation, pursuant to the terms of Section 3(b) of the attached Warrant on a net issuance basis.

By its delivery of this Form of Notice of Exercise, the Holder represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 9 of this Warrant to which this notice relates.

The undersigned requests that certificates for the shares of Common Stock issuable upon this exercise be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER

(Please print name and address)


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Warrant Shares Exercise Log

Date
Number of Warrant Shares Available to be Exercised
Number of Warrant Shares Exercised
Number of Warrant Shares Remaining to be Exercised
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FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of e.Digital Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of e.Digital Corporation with full power of substitution in the premises.

Dated: _______________, ____

(Signature must conform in all respects to name of holder as specified on the face of the Warrant)
Address of Transferee
In the presence of:
__________________________

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EX-99.4

EXHIBIT 99.4

CERTIFICATE OF DESIGNATION

OF PREFERENCES, RIGHTS AND LIMITATIONS

OF

SERIES AA PREFERRED STOCK
OF

E.DIGITAL CORPORATION,

a Delaware Corporation
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE

The undersigned, WILLIAM BLAKELEY and ROBERT PUTNAM, do hereby certify that:

1. They are the President and Secretary, respectively, of E.DIGITAL CORPORATION, a Delaware corporation (the “Corporation”).

2. The Corporation is authorized to issue five million (5,000,000) shares of preferred stock.

3. The following resolutions were duly adopted by the Board of Directors:

WHEREAS, the Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of five million (5,000,000) shares, $.001 par value, issuable from time to time in one or more series;

WHEREAS, the Board of Directors of the Corporation is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and

WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to established a series of authorized preferred stock having a par value of $.001 per share, which series shall be designated as “Series AA Preferred Stock” and to fix the rights, preferences, restrictions and other matters relating to the such series of preferred stock as follows:

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby established a series of authorized preferred stock having a par value of $.001 per share, which series shall consist of one hundred thousand (100,000) shares and be designated as “Series AA Preferred Stock,” and does hereby fix and determine the rights, references, restrictions and other matters relating to such series of preferred stock as follows:

1. Designation. The series of preferred stock shall consist of one hundred thousand (100,000) shares designated and known as “Series AA Preferred Stock” (hereinafter referred to as “Series AA Preferred Stock”). The Corporation may issue fractional shares of Series AA Preferred Stock. The Series AA Preferred Stock shall have an initial issue price of Ten Dollars ($10.00) per share (the “Original Issue Price”). The date on which any shares of Series AA Preferred Stock are first issued is referred to herein as the “Original Issue Date.”



2. Voting Rights.

(a) Voting. With respect to each matter submitted to a vote of stockholders of the Corporation, each holder of Series AA Preferred Stock shall be entitled to cast that number of votes which is equivalent to the number of shares of Series AA Preferred Stock owned by such holder times one hundred (100). If a holder is entitled to cast a vote with respect to a fractional share of Common Stock, such fractional share shall be rounded up to the next whole number. The Corporation shall not, without the affirmative vote or written consent of the holders of at least a majority of the outstanding Series AA Preferred Stock (i) authorize or create any additional class or series of stock ranking prior to or on a parity with the Series AA Preferred Stock as to dividends or the distribution of assets upon liquidation, or (ii) change any of the rights, privileges or preferences of the Series AA Preferred Stock.

(b) Class Vote. Except as otherwise required by law or by this Section 2, holders of Common Stock and Series AA Preferred Stock shall vote as a single class on all matters submitted to the stockholders.

3. Dividends. The holders of Series AA Preferred Stock shall be entitled to receive, out of any funds legally available therefor and the Corporation shall pay, dividends at the fixed rate of five percent (5%) per annum, payable in quarterly installments on the 1st day of September, December, March and June of each year. Such dividends shall accrue from the date of issuance of the shares of Series AA Preferred Stock and shall be deemed to accrue from day to day whether or not earned and declared. Such dividends shall be payable before any dividends shall be paid, declared or set apart for any other class of stock, and shall be cumulative so that if for any dividend period such dividends are not paid or declared and set apart therefor, the deficiency shall be paid, in whole or in part (without interest), on the next succeeding dividend payment date on which the Corporation has any funds legally available therefor. Until any delinquency has been fully paid or declared and set apart for payment, no distribution, by dividend or otherwise, shall be paid on, declared or set apart for any other class of stock of the Corporation and no shares of any other class of stock shall be acquired, directly or indirectly, by redemption or otherwise, except for the repurchase by the Corporation of shares of Common Stock for an amount not in excess of the original sale price thereof pursuant to employee stock purchase agreements. Notwithstanding the foregoing, the Corporation, in its sole and absolute discretion, may pay such dividends through the issuance of (i) fully paid and non-assessable shares of Common Stock determined by dividing the accrued but unpaid dividend by the average closing bid price for the Common Stock for the 10 trading days immediately preceding the applicable dividend payment date or (ii) if available, fully paid and non-assessable shares of Series AA Preferred Stock determined by dividing the accrued but unpaid dividend by the Original Issue Price.

4. Rights on Liquidation. On any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series AA Preferred Stock shall receive, out of assets legally available therefor, an amount equal to $10.00 per share, plus all accrued but unpaid dividends thereon (whether or not such dividends have been declared) to the date fixed for payment of such distributive amount, before any amount shall be paid to the holders of any other class of stock. In the event that the assets of the Corporation available for distribution to the holders of the Series AA Preferred Stock are insufficient to permit full payment to the holders of such shares as herein provided, then such assets shall be distributed ratably among the outstanding shares of Series AA Preferred Stock. In the event that the Corporation has additional assets available for distribution after payment to the holders of the Series AA Preferred Stock as herein provided, such assets shall be distributed to holders of Common Stock.

5. Conversion.

(a) Optional Conversion of the Series AA Preferred Stock. At the election of each holder and upon compliance with the provisions of subparagraph (d) below as to surrender thereof, each share of Series AA Preferred Stock may be converted into that number of fully paid and non-assessable shares of Common Stock of the Corporation (the “Conversion Stock”), determined by dividing $10.00 per share plus a sum equal to all accrued but unpaid dividends by $0.10 (the “Conversion Price”). The conversion price shall be subject to adjustment as hereinafter provided. The ability to convert also shall be subject to the requirement that the aggregate conversion price of each individual conversion (the “Aggregate Conversion Price”) shall equal or exceed $25,000 (the “Conversion Minimum”).

(b) Automatic Conversion. Each remaining outstanding share of Series AA Preferred Stock shall be automatically converted into shares of Common Stock on June 30, 2010 in accordance with the provisions of subparagraph (a) hereof. Pursuant to this subparagraph (b), on the Conversion Date (as defined below), all outstanding shares of Series AA Preferred Stock shall be converted into that number of shares of Common Stock as determined in accordance with subparagraph (a) hereof as if the conversion of such number of shares of Series AA Preferred Stock were made by the holders thereof in accordance therewith without any further action on the part of such holders.


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(c) Conversion at Option of Corporation. If for any ten (10) consecutive trading days the Market Price of the Corporation’s Common Stock is at least twenty-five cents ($0.25) per share (as adjusted for stock splits, reorganizations, dividends, recapitalizations and the like), then at any time within ten (10) business days after the end of such ten (10) trading day period, the Corporation shall have the right to require the conversion of all outstanding shares of Series AA Preferred Stock into shares of Common Stock in accordance with the provisions of subparagraph (a) hereof. Pursuant to this subparagraph (c), on the Conversion Date (as defined below), all outstanding shares of Series AA Preferred Stock shall be converted into that number of shares of Common Stock as determined in accordance with subparagraph (a) hereof as if the conversion of such number of shares of Series AA Preferred Stock were made by the holders thereof in accordance therewith without any further action on the part of such holders.

(d) Delivery of Stock Certificates. The holder of any shares of Series AA Preferred Stock may exercise the optional conversion right pursuant to subparagraph (a) above by delivering to the Corporation or its duly authorized transfer agent during regular business hours at the office of the Corporation the certificate or certificates for the shares of Series AA Preferred Stock to be converted, duly endorsed or assigned either in blank or to the Corporation (if required by it), accompanied by written notice (the “Conversion Notice”) stating that such holder elects to convert such shares of Series AA Preferred Stock and shall provide a certificate to the Corporation or its duly authorized transfer agent as to the date of such conversion. Upon the occurrence of an automatic conversion pursuant to subparagraph (b) above or conversion at the option of the Corporation pursuant to subparagraph (c) above, the Corporation shall deliver notice to each holder of Series AA Preferred Stock and the holder of any shares of Series AA Preferred Stock shall deliver to the Corporation at the office of the Corporation the certificate or certificates for all shares of Series AA Preferred Stock then held by such holder, duly endorsed or assigned either in blank or to the Corporation (if requested by it). Conversion shall be deemed to have been effected (i) in the case of an optional conversion pursuant to subparagraph (a), on the date when the aforesaid delivery of the Conversion Notice is made if such day is a business day and otherwise on the business day following the date of the aforesaid delivery, (ii) in the case of an automatic conversion pursuant to subparagraph (b) on June 30, 2010, or (iii) in the case of conversion at the option of the Corporation pursuant to subparagraph (c), upon the date of the notice, and in each case such date is referred to herein as the “Conversion Date.” As promptly as practicable thereafter, the Corporation, through its transfer agent, if any, shall issue and deliver to or upon the written order of such holder, to the place designated by such holder, a certificate or certificates for the number of full shares of Common Stock to which such holder is entitled and a check or cash in respect of any fractional interest in a share of Common Stock, as provided below; provided, however, that in the case of a conversion in connection with liquidation, no such certificates need be issued. The person in whose name the certificate or certificates for Common Stock are to be issued shall be deemed to have become the stockholder of record in respect of such Common Stock on the applicable Conversion Date unless the transfer books of the Corporation are closed on that date, in which event such holder shall be deemed to have become the stockholder of record in respect of such Common Stock on the next succeeding date on which the transfer books are open, but the Conversion Price shall be that in effect on the Conversion Date. Upon conversion of only a portion of the number of shares covered by a stock certificate representing shares of Series AA Preferred Stock surrendered for conversion, the Corporation shall issue and deliver to or upon the written order of the holder of the stock certificate so surrendered for conversion, at the expense of the Corporation, a new stock certificate covering the number of shares of Series AA Preferred Stock representing the unconverted portion of the certificate so surrendered. Any transfer taxes applicable to the above-described transactions shall be paid by such transferee. The Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of Common Stock or the reissuance of the Preferred Stock in a name other than that in which the shares of Series AA Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid.

(e) No Fractional Shares of Common Stock. No fractional shares of Common Stock shall be issued upon conversion of shares of Series AA Preferred Stock and in lieu thereof, the Corporation shall pay to the holder of such fractional share interest cash in respect of such fractional interest in an amount equal to the Market Price on the Conversion Date multiplied by such fractional interest. The holders of fractional interests shall not be entitled to any rights as stockholders of the Corporation in respect of such fractional interests. In determining the number of shares of Common Stock and the payment, if any, in lieu of fractional shares that a holder of Series AA Preferred Stock shall receive, the total number of shares of Series AA Preferred Stock surrendered for conversion by such holder shall be aggregated.


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(f) Changes in Common Stock. If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation, or the sale, transfer or other disposition of all or substantially all of its assets to another corporation for cash or stock of such other corporation, shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition, lawful and adequate provision shall be made whereby each holder of Series AA Preferred Stock shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the shares of the Common Stock of the Corporation immediately theretofore issuable upon conversion of the Series AA Preferred Stock, such shares of stock, securities or properties as may be issuable or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore issuable upon conversion of the Series AA Preferred Stock had such reorganization, reclassification, consolidation, merger, sale, transfer or other disposition not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of each holder of Series AA Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or properties thereafter deliverable upon the exercise thereof. The Corporation shall not effect any such consolidation, merger, sale, transfer or other disposition, unless prior to or simultaneously with the consummation thereof the successor corporation (if other than the Corporation) resulting from such consolidation or merger or the corporation purchasing or otherwise acquiring such properties shall assume, by written instrument executed and mailed or delivered to the holders of Series AA Preferred Stock at the last address of such holders appearing on the books of the Corporation, the obligation to deliver to such holders such shares of stock, securities or properties as, in accordance with the foregoing provisions, such holders may be entitled to acquire. The above provisions of this subparagraph shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales, transfers, or other dispositions.
(g) Stock to be Reserved. The Corporation will use its reasonable best efforts to obtain an increase in its authorized Common Stock such that thereafter it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon the conversion of Series AA Preferred Stock as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding Series AA Preferred Stock. The Corporation covenants that all shares of Common Stock which shall be so issuable shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, free from preemptive or similar rights on the part of the holders of any shares of capital stock or securities of the Corporation, and free from all liens and charges with respect to the issue thereof; and without limiting the generality of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value, if any, per share of the Common Stock is at all times equal to or less than the then effective Conversion Price. The Corporation will take all such action as may be necessary to assure that such shares of Common Stock may be so issued without violation by the Corporation of any applicable law or regulation or agreement, or of any requirements of any domestic securities exchange upon which the Common Stock may be listed. Without limiting the foregoing, the Corporation will take all such action as may be necessary to assure that, upon conversion of any of the Series AA Preferred Stock, an amount equal to the lesser of (i) the par value of each share of Common Stock outstanding immediately prior to such conversion, or (ii) the Conversion Price shall be credited to the Corporation’s stated capital account for each share of Common Stock issued upon such conversion, and that, if clause (i) above is applicable, the balance of the Conversion Price of Series AA Preferred Stock converted shall be credited to the Corporation’s capital surplus account.

(h) Closing of Books. The Corporation will at no time close its transfer books against the transfer of any Series AA Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any Series AA Preferred Stock in any manner which interferes with the timely conversion of such Series AA Preferred Stock.

(j) Taxes. The Corporation shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of shares of capital stock of the Corporation upon conversion of any shares of Series AA Preferred Stock. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of Common Stock or the reissuance of the Series AA Preferred Stock in a name other than that in which the shares of Series AA Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid.

(k) Exclusion of Other Rights. Except as may otherwise be required by law, the shares of Series AA Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this Certificate of Designations and in the Certificate of Incorporation.


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(l) Limitation on Issuance of Conversion Shares; Redemption. Notwithstanding anything herein to the contrary, a holder of Series AA Preferred Stock may not convert shares of Series AA Preferred Stock to the extent such conversion would result in the holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules thereunder) in excess of 4.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of the shares of Series AA Preferred Stock held by such holder after application of this Section. The holder shall have the sole authority and obligation to determine whether the restriction contained in this Section applies and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which shares of Series AA Preferred Stock are convertible shall be in the sole discretion of the holder. The provisions of this Section shall not apply to conversions specified in Section 5(b) or 5(c). The provisions of this Section may be waived by a holder (but only as to itself and not to any other holder) upon not less than ninety (90) days prior notice to the Corporation. Other Holders shall be unaffected by any such waiver.

6. Redemption.

(a) Optional Redemption. The holders of the Series AA Preferred Stock shall have the option to require cash redemption effective June 30, 2009 should sufficient shares of Common Stock not be authorized and reserved for conversion of all shares of Series AA Preferred Stock by such date. The Corporation shall provide each holder of Series AA Preferred Stock with notice no later than ten (10) days following the occurrence of either (i) corporate action to reserve sufficient shares of Common Stock such that this redemption feature shall no longer be effective or (ii) failure to authorize and reserve sufficient shares by June 30, 2009 and a computation of the redemption value and such holder’s right to redeem in accordance with the provisions of subparagraph (b) hereof. Such notice also shall specify the time and place of redemption and shall be given by certified mail to the holders of record of Series AA Preferred Stock at their respective addresses as the same shall appear on the stock books of the Corporation, but no failure to mail such notice or defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to the holder to whom the Corporation has failed to mail such notice or except as to the holder whose notice was defective. Any notice which was mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice

(b) Redemption Price. The cash redemption price shall be the greater of (i) $20.00 per share of Series AA Preferred Stock plus a sum equal to all accrued but unpaid dividends thereon to the date fixed for redemption, or (ii) the five day average closing price immediately preceding June 30, 2009 multiplied by the number of shares of Common Stock that could be obtained on conversion in accordance with Section 5(a). The demand for cash redemption shall be made by each holder of Series AA Preferred Stock on an all or none basis within thirty (30) days of the receipt of the notice specified in subparagraph (a) hereof in writing and the redemption price shall be paid on or before August 31, 2009 if so redeemed. The holder of the Series AA Preferred Stock shall surrender the certificates for the shares of Series AA Preferred Stock for cancellation at redemption.

(c) Consequences of Failure to Redeem. Should a holder of Series AA Preferred Stock fail to redeem after receipt of the notice specified in subparagraph (a) hereof indicating that the conditions for redemption have been triggered, then the Series AA Preferred Stock shall only be convertible thereafter should sufficient shares otherwise be authorized and reserved for such purpose and the value of the Series AA Preferred Stock shall thereafter be limited to its liquidation value.


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RESOLVED, FURTHER, that the President or any Vice-President, and the Secretary or any Assistant Secretary, of the Corporation be and they hereby are authorized and directed to prepare and file a Certificate of Designation of Preferences, rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.

IN WITNESS WHEREOF, the undersigned have executed this Certificate this 26th day of June, 2008.

/s/ WILLIAM BLAKELEY
WILLIAM BLAKELEY, President
/s/ ROBERT PUTNAM
ROBERT PUTNAM, Secretary

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EX-99.5

EXHIBIT 99.5

SHAREHOLDER ALERT

E.DIGITAL CORPORATION
RECEIVES $750,000 IN SERIES AA FINANCING

Announces Shareholders Meeting Date

(SAN DIEGO, CA, July 1, 2008) - e.Digital Corporation (OTC: EDIG), a leading technology innovator of dedicated portable entertainment systems and patented flash memory-related technology today announced it sold $750,000 of Series AA Convertible Preferred shares and warrants to selected accredited investors including the Company’s senior vice president, Robert Putnam.

The Company expects to use the proceeds from this financing to continue development of the next generation of its proprietary eVU™ entertainment system, fund intellectual property (IP) consulting to continue supporting the Company’s legal representatives in enforcing its Flash-R™ patent portfolio, for note and vendor payments, and general working capital.

The common stock and warrants to purchase common stock have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States without a registration statement or exemption from registration. The Company is not filing a registration statement on the securities. The Company's Form 8-K, being filed today with the Securities and Exchange Commission, provides a description of this transaction.

e.Digital also announced today that it has scheduled its meeting of shareholders for Wednesday, September 17, 2008. Details regarding the record date, meeting time and location, and business items to be transacted are expected to be available this month. The Company also expects to release further information on its eVU business and IP monetization efforts.

About e.Digital Corporation: e.Digital is a leading innovator of dedicated portable inflight entertainment systems. More than 30 airlines have made dedicated portable systems powered by e.Digital technology their inflight entertainment choice. e.Digital also owns and is pursuing the monetization of its Flash-R™ portfolio of flash memory-related patents. e.Digital was the first company to employ and patent important aspects of the use of removable flash memory in portable recording devices. For more information about e.Digital and eVU, please visit: www.edigital.com.

Safe Harbor statement under the Private Securities Litigation Reform of 1995: All statements made in this document, other than statements of historical fact, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. You should not place undue reliance on these statements. We base these statements on particular assumptions that we have made in light of our industry experience, the stage of product and market development, expected future developments and other factors that we believe are appropriate under the circumstances. These forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the businesses of the Company and the industries and markets in which the Company operates. Actual outcomes and results may differ materially from what is expressed or implied by the forward-looking statements. More information about potential factors that could affect the Company can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed with the Securities and Exchange Commission (“SEC”). e.Digital Corporation disclaims any intent or obligation to update these or any forward-looking statements, except as otherwise specifically stated by it.

CONTACT: e.Digital Corporation: Robert Putnam, (858) 304-3016 ext. 205, rputnam@edigital.com
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