Exhibit 10.36

Approved by the Compensation Committee 1/27/04   Scientific Learning Corporation
2004 Management Incentive Plan   Purpose  

To provide significant cash awards to participants for the achievement and
over-achievement of Scientific Learning’s collective financial goals, as well as
each participant’s individual goals and overall performance in adding value for
shareholders, customers and employees.

  Participants  

All members of the Leadership Team, director-level employees and selected
manager-level employees. The total number of participants at January 2003 is
approximately 23 persons. The regional sales directors (K-12 and private sector)
who are included in sales incentive compensation plans are excluded from this
Plan.

  Target Incentive Awards  

Intended to deliver market average incentive compensation at 100% achievement of
goals. Awards increase for overachievement.

 

Title   Target Award
(% of Base Salary Awarded at 100%
Achievement of Goals)   Max Award
(Max % of Base Salary Awarded
on Overachievement)  

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CEO   50%    100%   VP, Sales K-12   50%    100%   CFO   40%    80%   Chief Ed.
Officer, Other VPs   30%    60%   Directors   20%    30%   Managers   10%    15%
 

GOALS

All participants in the Plan will have shared Company financial goals and
individual goals closely related to the individual’s own area of responsibility.

  Shared Goals  

Shared goals for the 2004 Plan are:

Hurdle Level (Minimum
for Payment of Bonus)   Target Level (100%
Goal Achievement)   Max. Overachievement
Level    

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  Operating income $  2.4 million   $  3.4 million   $  5.0 million   Booked
sales $  37 million   $  40 million   $  43 million  

  Individual Goals
Individual goal performance under the 2004 Plan is based on both the following.

    • Achievement of agreed-upon individual goals closely related to the
individual’s area of responsibility. These goals will be agreed in writing
between the participant and his/her manager.     • Contribution to adding value
for shareholders, customers and employees.     Hurdle level for individual goals
is 80%. Maximum overachievement level is 200%.

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Approved by the Compensation Committee 1/27/04   Weighting of Shared Goals and
Individual Performance

        Goal   % of Target Award
Allocated to Goal  

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  Operating income   30%    Booked sales   40%   Individual performance   30%  
 

*For managers and directors, the CEO has discretion to allocate the bonus
opportunity differently among the various goals to reflect the priorities and
responsibilities of that particular person.

  Hurdles and Scaling   The bonus payout starts for each goal when the specified
hurdle level for that goal is achieved. At the hurdle level, 50% of that goal’s
portion of the target award is earned. At 100% of the goal, then 100% of that
goal’s target award is earned. Between the hurdle level and 100% achievement of
the goal, the portion of the award earned is scaled ratably.   Overachievement  

• Officers can double their bonus through overachievement and directors and
managers can increase their bonus by 50% through overachievement.

• The overachievement potential is divided among the goals in the same
percentage as the bonus for achievement.

• The maximum overachievement award is paid at the maximum overachievement
levels specified above.

• Between 100% achievement and the maximum bonus overachievement level, each
goal’s portion of the award is scaled ratably.

  Illustration   The attached chart illustrates, for particular positions, the
percentage of base salary payable for each goal, at the hurdle, 100% and maximum
overachievement levels.   Timing  

Awards will be paid in the first quarter of 2005, following the completion of
the 2004 audit. Plan participants must be employed at Scientific Learning in a
position that is eligible for an award under this Plan when the awards are paid
in order to receive an award. Participants hired during 2004 will be eligible
for a pro-rated award (unless otherwise agreed to, in writing, when the
participant is hired).

  Compensation Committee Discretion  

The Compensation Committee has discretion to pay awards to reflect achievement
even if specific goals are not met, and to interpret the terms of the Plan.

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Approved by the Compensation Committee 1/27/04  
% of Base Salary Available as MIP Award at Specified Levels of Achievement of
Goals
 

   
 % of Base Salary Available as Bonus
     

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Operating Income

Booked Sales

Individual Goals

Total
     

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      At Hurdle     100%     Max Over     At Hurdle     100%     Max Over     At
Hurdle     100%     Max Over     At Hurdle     100%     Max Over      

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             CEO   7.5 %   15 %   30 %   10 %   20 %   40 %   7.5 %   15 %   30
%   25 %   50 %   100 %       VP Sales K-12            CFO   5.25 %   10.5 %  
21 %   7 %   14 %   28 %   5.25 %   10.5 %   21 %   17.5 %   35 %   70 %  Chief
Ed Officer,   4.5 %   9 %   18 %   6 %   12 %   24 %   4.5 %   9 %   18 %   15 %
  30 %   60 %            other VPs         Directors*   3 %   6 %   9 %   4 %  
8 %   12 %   3 %   6 %   9 %   10 %   20 %   30 %         Managers*   1.5 %   3
%   4.5 %   2 %   4 %   6 %   1.5 %   3 %   4.5 %   5 %   10 %   15 %

* Subject to adjustment by the CEO, as described above.

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