Exhibit 4.41
THE SECURITIES TO WHICH THIS AGREEMENT RELATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS ("BLUE SKY LAWS"), AND MAY NOT BE OFFERED OR SOLD WITHOUT REGISTRATION UNDER THE SECURITIES ACT, AND AS REQUIRED BY BLUE SKY LAWS IN EFFECT AS TO SUCH TRANSFER, UNLESS AN EXEMPTION FROM SUCH REGISTRATION UNDER STATE AND FEDERAL LAW IS AVAILABLE.
C O N V E R S I O N A G R E E M E N T
E.DIGITAL CORPORATION
E.DIGITAL CORPORATION
13114 Evening Creek Drive South
San Diego, California 92128 ___________________, 2002
(Must be dated)
Attention:
Mr. Fred Falk, Chief Executive Officer $____________________________
(Amount of Notes Converted)
Gentlemen:
1. CONVERSION. I, the undersigned individual or entity ("NOTEHOLDER"), hereby irrevocably converts as of the above date the above stated dollar amount of __% Promissory Notes due __________, 200_ (individually a "NOTE" and collectively, the "NOTES") of E.DIGITAL CORPORATION, a Delaware corporation ("COMPANY") into ___________ shares of Series D Preferred Stock, $.001 par value (the "SERIES D PREFERRED STOCK"). This Conversion is made in accordance with and is subject to (i) the terms of this Conversion Agreement and (ii) the Company's Certificate of Incorporation and Bylaws, each as amended to date.
2. ACCEPTANCE OF CONVERSION. This Conversion Agreement does not constitute an offer by the Company to sell any shares of Series D Preferred Stock to me, nor a solicitation of any offer from me to buy any shares of Series D Preferred Stock, and shall be deemed accepted by the Company only when countersigned by an executive officer of the Company. The Company may reject this Conversion, in whole or in part, for any reason in its sole discretion. I understand the Company has agreed to accept or reject this Conversion within 15 days of receipt by the Company of this duly executed Conversion Agreement together with the original Note. After such 15 days, if not accepted by the Company, I may revoke this Conversion Agreement by notice in writing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to each Noteholder as of the date of this Conversion Agreement as follows:
(A) 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. The Company has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Conversion Agreement and to issue and sell the Securities, as hereinafter defined, and to carry out the provisions of this Conversion Agreement and to carry on its business as presently conducted and as presently proposed to be conducted. The Company is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on the Company or its business. 1
(B) SUBSIDIARIES. The Company operates through its wholly-owned subsidiary, e.Digital Corporation (a California corporation) and has no ownership in other companies. The Company is not a participant in any joint venture, partnership or similar arrangement.
(C) CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the Company consists of 200,000,000 shares of Common Stock, par value $.001 per share ("COMMON STOCK"), and 5,000,000 shares of preferred stock, par value $.001 per share ("PREFERRED STOCK"). As of December 23, 2002 the Company had no shares of preferred stock outstanding. As of December 23, 2002, the Company had 141,951,795 shares of Common Stock outstanding. An additional 7,098,663 shares of Common Stock are reserved for future issuance under the Company's stock option grants and pursuant to certain convertible securities, options and warrants. Accordingly, the Company has either outstanding or reserved an aggregate of 149,050,458 of the 200,000,000 authorized shares of Common Stock.
All issued and outstanding shares of the Company's Common Stock (a) have been duly authorized and validly issued, and (b) are fully paid and nonassessable. When issued in compliance with the provisions of this Conversion Agreement, the Series D Preferred Stock and the Conversion Shares, as hereinafter defined, will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Series D Preferred Stock and the Conversion Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed.
(D) RESERVATION OF SHARES. The Conversion Shares issuable upon conversion of the Series D Preferred Stock have been duly authorized and reserved for future issuance.
(E) AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization of this Conversion Agreement, the performance of all obligations of the Company hereunder and thereunder at the Closing or Closings and the authorization, sale, issuance and delivery of the Securities pursuant hereto and the Conversion Shares on conversion of the Series D Preferred Stock has been taken or will be taken prior to the Closing. The Conversion Agreement when executed and delivered, will be valid and binding obligations of the Company enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights; and (b) general principles of equity that restrict the availability of equitable remedies. The sale of the Series D Preferred Stock and the subsequent conversion thereof are not and will not be subject to any preemptive rights or rights of first refusal that have not been properly waived or complied with.
(F) SEC REPORTS AND FILINGS. The Company has delivered to Noteholder a complete and accurate copy (excluding copies of exhibits) of its Annual Report on Form 10-KSB for the fiscal year ended March 31, 2002, the latest Quarterly Report on Form 10-Q for the period ended September 30, 2002 and definitive proxy statement filed by the Company on September 22, 2002 (the "SEC DOCUMENTS"). The SEC Documents (i) complied with the requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT") or the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), as the case may be, at and as of the times they were filed (or, if amended or superseded by a filing prior to the date of this Conversion Agreement, then on the date of such filing) in all material respects and (ii) did not at and as of the time they were filed (or, if amended or superseded by a filing prior to the date of this Conversion Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(G) CHANGES. Since the date of the last of the SEC Documents, there has been no material adverse change in the business, operations or financial condition of the Company.
(H) TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and marketable title to its properties and assets, including the properties and assets reflected in the most recent balance sheet included in the SEC Documents, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those resulting from taxes which have not yet become delinquent, (b) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of the Company, and (c) those that have otherwise arisen in the ordinary course of business. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by the Company are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used.
