This Employment Agreement is entered into on this 19th day of May, 1999 by and between e.Digital
Corporation ("Employer") ("Company") and Alfred H. Falk ("Employee").
1. Position and Title:
Employee's position and title shall be President and CEO.
Employee shall report to the Company's Board of Directors.
Employee shall be responsible for all day-to-day activities of the business and shall assume management
responsibility for all functions and individuals who are part of the Company's operations.
Employee shall be a member of the Board of Directors for the Company and shall participate in all Board related
Employee's base compensation shall be $155,000 per year. In addition, a guaranteed bonus of 35% of the base
salary at the end of calendar year 1999. During subsequent years, Employee is eligible for a bonus to 25% of the
base salary conditioned on Employee meeting certain objectives established by the Board of Directors. Future
increases in base compensation shall be at the determination of the Board of Directors, based on performance.
3. Stock Options:
In the event of any corporate occurrence affecting stock options, the options of Employee will be treated
equivalently with those of any senior officers of the Company. In the event a Change of Control (51% or more)
occurs, all issued stock options shall become immediately vested.
4. Termination and Change of Control:
In the event termination occurs for reasons other than: (1) cause or (2) Employee's voluntary termination, six
months severance shall be provided:
including base compensation; health and medical benefits; and outplacement services.
For purposes of this agreement, "cause" shall be defined as contemplated by
Section 2924 of the California Labor Code.
In the event a Change of Control occurs and within twelve (12) months of that event:
Employee is involuntarily terminated
Employee terminates his employment with the Company for Good Reaso