"On March 23, 2007 e.Digital Corporation (the "Company") entered into an agreement for legal services and contingent fee arrangement ("Agreement") with Duane Morris LLP."

"DuaneMorris also has agreed to advance certain costs and expenses including travelexpenses, court costs and expert fees. The Company has agreed to pay DuaneMorris a fee equal to 40% of any license or litigation recovery related toPatent Enforcement Matters, after recovery of expenses, and 50% of recovery ifappeal is necessary. The Company may seek alternate representation if DuaneMorris is unable or unwilling to represent specific litigation and any related recovery is excluded from the contingent fee arrangement."

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