No.
____
 
 THIS
WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF (THE
 "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
 AMENDED
(THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT
BE
 SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT TO SEC RULE 144
OR
 UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND
THE
 SECURITIES
LAWS OF ANY STATE COVERING SUCH SECURITIES OR THE COMPANY RECEIVES
AN
 OPINION
OF COUNSEL FOR THE HOLDER OF THE SECURITIES REASONABLY SATISFACTORY
TO
 THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS
 EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
1933
 ACT AND
APPLICABLE STATE SECURITIES LAWS.
 
 SCOLR,
INC.
 
 COMMON
STOCK WARRANT
 
 ISSUE
DATE: September 30,
2002                    750,000
shares of common stock
 
 
 THIS
IS TO CERTIFY THAT FOR GOOD AND VALUABLE CONSIDERATION, Clyde Berg,
 an
individual residing in the State of California, whose principal place
of
 residence
is 10050 Bandley Dr., Cupertino, CA 95014 (the "Holder"), is
entitled
 to
subscribe for and purchase from SCOLR, Inc. (the "Company"), Seven
Hundred
 Fifty
Thousand (750,000) shares of the Company's common stock (the
"Warrant
 Shares")
at an exercise price, subject to adjustment as set forth below, of
 $0.50 per
share (the "Exercise Price"). This Warrant is issued in connection
 with that
certain Promissory Note dated as of the date hereof (the "Note"),
 purchased
by the Holder from the Company in the principal amount set forth on
 the Note.
The Holder is subject to certain restrictions, and is entitled to
 certain
rights and privileges, set forth in the Note.
 
 ARTICLE
1.     EXERCISE OF WARRANT.
 
 1.01.
EXERCISE OF WARRANT. This Warrant will expire (the "Expiration
 Date"),
upon the earliest of (i) ten (10) years from the Issue Date (as
defined
 in
Section 5.01(b) hereof), and (ii) a "Change of Control" (as defined
in
 Section
5.01(a) hereof). The Holder may exercise this Warrant, in whole or
in
 part, at
any time or from time to time, commencing on the earliest to occur
of
 June 30,
2003 or immediately prior to a Change of Control (the "Commencement
 Date"),
and continuing thereafter until the Expiration Date.
 
 1.02.
METHOD OF EXERCISE.
 
 (a)
At any time on or after the Commencement Date, the Holder
 shall
exercise this Warrant, in whole or in part, at any time or from time
to
 time, at
or prior to the
 
 
 
 1
  
 
 Expiration
Date, by surrendering it at the offices of the Company at the
address
 designated
for notice purposes under Section 5.03 below, together with either
 (i) a
duly executed and completed subscription in substantially the form of
the
 Subscription
Notice attached hereto as Exhibit A, and a check payable to the
 Company
in the amount equal to the aggregate Exercise Price, for the number
of
 Warrant
Shares being purchased, or (ii) a duly executed and completed
Conversion
 Notice in
the form attached hereto as Exhibit B. Upon exercise through a
 conversion
(subject to Section 3.03 and without payment by the Holder of the
 Exercise
Price), the Holder shall be entitled to receive that number of
Warrant
 Shares
equal to the quotient obtained by dividing ((A-B) x C) by A, where:
 
 A
= The Fair Market Value of one (1) Warrant Share on the
 date
of exercise of the Warrant;
 
 B
= The per share Exercise Price; and
 
 C
= The total number of Warrant Shares subject to purchase
 upon
exercise of the Warrant.
 
 If the
above calculation results in a number less than one (1), then no
Warrant
 Shares
shall be issuable or issued pursuant to a conversion.
 
 (b)
For purposes of the foregoing, the term "Fair Market Value"
 of a
Warrant Share shall mean:
 
 (i)
The average of the closing bid and asked prices of the
 Company's
common stock quoted in the Over-The-Counter Market Summary, the
last
 reported
sale price quoted on the Nasdaq National Market or on any exchange
on
 which the
common stock is listed, whichever is applicable, as published in
the
 Western
Edition of the Wall Street Journal for the ten (10) trading days
prior
 to the
date of determination of Fair Market Value; or
 
 (ii)
In the event of an exercise in connection with a
 Change of
Control, the Fair Market Value shall be the value received per
share
 of common
stock by all holders of common stock in such transaction as
determined
 by the
Board of Directors of the Company; or
 
 (iii)
In any other instance, the Fair Market Value shall
 be as
determined in good faith by the Board of Directors of the Company.
 
 (c)
Surrendered Warrants shall be canceled by or on behalf of the
 Company.
In the event of a partial exercise, the Company will forthwith
issue
 and
deliver to the Holder a new Warrant of like tenor for the number of
Warrant
 Shares
represented by the Warrant after giving effect to the partial exercise
as
 set forth
above.
 
 1.03.
SHARES ISSUED UPON EXERCISE OF WARRANT. As soon as practicable
 after the
Warrant has been so exercised, and in any event within twenty (20)
 days
thereafter, the Company shall issue and deliver, in such name or names
as
 Holder
may direct, a certificate or certificates for the number of Warrant
 Shares to
which such Holder is entitled. All Warrant Shares shall be
 
 
 
 2
  
 
 duly
authorized, validly issued, fully paid and nonassessable. The Company
shall
 pay all
documentary stamp taxes attributable to the initial issuance of the
 Warrant
Shares, but shall not be required to pay any tax imposed in
connection
 with any
transfer involved in the issue of the Warrant Shares in a name
other
 than that
of the Holder. Irrespective of the date of issue of certificates
for
 the
Warrant Shares, the Holder shall be deemed to have become the holder
of
 record of
the Warrant Shares represented thereby on the date on which the
 Warrant
is exercised and payment of the Exercise Price is received by the
 Company
as provided in Section 1.02.
 
 ARTICLE
2.     TRANSFER OF THE WARRANT.
 
 Subject
to Section 4.11 hereof, this Warrant may be transferred in whole
 or in
part, including to any "affiliate" of the Holder, as such term is
defined
 in Rule
144 of the Securities Act of 1933, as amended (the "Securities Act"),
by
 presentation
of the Warrant to the Company with written instructions for
 transfer;
provided however, that Holder agrees not to transfer the Warrant or
 the
Warrant Shares in any manner that would result in a violation of
the
 registration
provisions of the Securities Act or any applicable state securities
 laws, and
the Company shall not be required to take any action hereunder that
 would
result in a violation of such provisions. On presentation for
transfer,
 the
Company will execute and deliver a new Warrant in the name of the
 transferee.
 
 ARTICLE
3.     PROVISIONS FOR PROTECTION OF THE
HOLDER.
 
 3.01.
LOST, STOLEN OR MUTILATED WARRANT. If this Warrant is lost,
 stolen,
mutilated or destroyed, the Company will, on such reasonable terms
with
 respect
to indemnity or otherwise as it may in its discretion impose, issue
a
 new
warrant of like denomination, tenor and date as this Warrant. Any such
new
 warrant
shall constitute an original contractual obligation of the Company,
and
 the lost,
stolen, mutilated or destroyed, as applicable, Warrant shall be
null
 and
void.
 
 3.02.
HOLDER NOT SHAREHOLDER. This Warrant does not confer upon the
 Holder,
as such, any rights or liabilities whatsoever as a shareholder of
the
 Company,
whether such rights or liabilities are asserted by the Company or
by
 its
creditors.
 
 3.03.  COMPLIANCE
WITH SECURITIES LAWS.
 
 (a)
Neither this Warrant nor the Warrant Shares have been
 registered
under the Securities Act or any state securities laws. This Warrant
 has been
acquired for investment purposes and not with a view to distribution
or
 resale
and may not be pledged, hypothecated, sold or otherwise transferred
 without
an effective registration statement for such Warrant under the
 Securities
Act or any applicable state securities laws or an opinion of
counsel
 or other
evidence reasonably satisfactory to the Company that registration
is
 not
required thereunder. Certificates representing the Warrant Shares shall
bear
 a legend
substantially in the following form:
 
 THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE
 SECURITIES
LAWS OF ANY STATE, AND
 
 
 
 3
  
 
 MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT
 TO
SEC RULE 144 OR UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
 UNDER
THE 1933 ACT AND THE SECURITIES LAWS OF ANY STATE COVERING SUCH
 SECURITIES
OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER
 OF
THE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT
 SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
 REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND
 APPLICABLE
STATE SECURITIES LAWS.
 
 (b)
The Holder represents and warrants to the Company as
 follows:
 
 (i)
This Warrant and the Warrant Shares issuable
 upon
exercise thereof are being acquired for the Holder's own account,
for
 investment
and not with a view to, or for resale in connection with, any
 distribution
or public offering thereof within the meaning of the Securities
 Act. Upon
exercise of this Warrant, the Holder shall, if so requested by the
 Company,
confirm in writing, in a form satisfactory to the Company, that the
 securities
issuable upon exercise of this Warrant are being acquired for
 investment
and not with a view toward distribution or resale.
 
 (ii)
The Holder understands that the Warrant and
 the
Warrant Shares have not been registered under the Securities Act by
reason
 of their
issuance in a transaction exempt from the registration and
prospectus
 delivery
requirements of the Securities Act pursuant to Section 4(2) or
Section
 4(6)
thereof, and that they must be held by the Holder indefinitely, and
that
 the
Holder must therefore bear the economic risk of such investment
 indefinitely,
unless a subsequent disposition thereof is registered under the
 Securities
Act or is exempted from such registration. The Holder understands
 that the
Company is under no obligation to register any of the securities
sold
 hereunder.
 
 (iii)
The Holder is an "accredited investor" within
 the
meaning of Regulation D promulgated under the Securities Act.
 
 3.04.
ADJUSTMENT FOR STOCK DIVIDENDS, SPLITS, ETC. If at any time after
 the Issue
Date of this Warrant the number of shares into which this Warrant
is
 exercisable
is increased by a stock dividend or other distribution thereon
 payable
or by a subdivision, split-up or reclassification thereof, then
 immediately
after the record date fixed for the determination of holders of
such
 stock
entitled to receive such stock dividend or the effective date of
such
 subdivision,
split-up or reclassification, as the case may be, the Exercise
 Price
shall be reduced and the number of Warrant Shares issuable hereunder
shall
 be
increased, in each case appropriately so that the Holder shall be entitled
to
 receive
the number of Warrant Shares thereof that it would have owned
 immediately
following such action had this Warrant been exercised in full for
 cash
immediately prior thereto.
 
 3.05.
ADJUSTMENT FOR COMBINATION OF WARRANT SHARES. If at any time after
 the Issue
Date of this Warrant the number of Warrant Shares into which this
 Warrant
is exercisable is
 
 
 
 4
  
 
 decreased
by a combination or reclassification of such shares, then,
immediately
 after the
effective date of such combination or reclassification, the number
of
 Warrant
Shares shall be decreased appropriately and the Exercise Price
shall
 increase
proportionately, as applicable, so that the Holder shall be entitled
to
 receive
the number of Warrant Shares which it would have owned immediately
 following
such action had this Warrant been exercised immediately prior
thereto.
 
 3.06.
ADJUSTMENT FOR CAPITAL REORGANIZATION OR RECLASSIFICATION. If the
 Company's
common stock is changed into the same or a different number of
shares
 of any
class or classes of stock, whether by capital reorganization,
 reclassification
or otherwise (other than a subdivision or combination of shares
 or stock
dividend provided for above), then in each such event, the Holder
shall
 have the
right thereafter to exercise this Warrant into the kind and amount
of
 shares of
stock and other securities and property that would have been
 receivable
upon such reorganization, reclassification or other change in
respect
 of the
number of such shares into which this Warrant could have been
exercised
 in full
for cash immediately prior to such reorganization, reclassification
or
 change,
all subject to further adjustment as provided herein.
 
 3.07.
ADJUSTMENT FOR MERGER OR CONSOLIDATION. If at any time while the
 Warrant
remains outstanding, any capital reorganization or reclassification
of
 the
Company, or any consolidation or merger of the Company with another
 corporation
occurs in which the Company is the continuing or surviving
 corporation,
the Holder shall have the right upon the exercise of this Warrant
 to
receive the kind and amount of shares or other securities and
property
 receivable
by a holder of shares of common stock upon such reorganization,
 reclassification,
consolidation, or merger in exchange for the number of shares
 that
might have been purchased upon exercise of such Warrant, immediately
prior
 to such
reorganization, reclassification, consolidation or merger.
 
 3.08.
ANTI-DILUTION ADJUSTMENTS.
 
 (a)
FULL RATCHET ANTI-DILUTION. Upon the occurrence of any
 issuance
or sale of any Additional Stock (as defined below) without
 consideration
or for a consideration per share less than the Exercise Price then
 in
effect, as of the close of business on the date of such issuance or sale,
the
 Exercise
Price shall be adjusted to equal the price paid per share for such
 Additional
Stock.
 
 (b)
DEFINITION OF "ADDITIONAL STOCK". For purposes of this
 Section
3.08, "Additional Stock" shall mean any shares of common stock
issued
 other
than:
 
 (1)
common stock issued pursuant to a transaction
 described
in Sections 3.04 -- 3.07 hereof;
 
 (2)
common stock issuable or issued to employees,
 consultants
or directors of the Company directly or pursuant to a stock option
 plan or
restricted stock plan approved by the Company's Board of Directors;
 
 
 
 5
  
 
 (3)
capital stock, or warrants or options to purchase
 capital
stock, issued to financial institutions or lessors in connection
with
 commercial
credit arrangements, equipment financings or similar transactions;
 
 (4)
capital stock issuable upon exercise or conversion of
 options,
warrants, capital stock or other convertible securities outstanding
or
 which the
Company is obligated to issue as of the date hereof; and
 
 (5)
capital stock, or warrants or options to purchase
 capital
stock, issued in connection with bona fide acquisitions, mergers,
joint
 venture
agreements, distribution agreements, other strategic alliances, or
 similar
transactions, the terms of which are approved by the Company's Board
of
 Directors.
 
 (c)
NO FRACTIONAL ADJUSTMENTS. No adjustment of the Exercise
 Price
shall be made in an amount less than one cent per share, provided that
any
 adjustments
which are not required to be made by reason of this sentence shall
 be
carried forward and shall be either taken into account in any
subsequent
 adjustment
made prior to three (3) years from the date of the event giving
rise
 to the
adjustment being carried forward, or shall be made at the end of
three
 (3) years
from the date of the event giving rise to the adjustment being
carried
 forward.
 
 (d)
DETERMINATION OF CONSIDERATION. In the case of the issuance
 of common
stock for cash, the consideration shall be deemed to be the amount
of
 cash paid
therefor before deducting any reasonable discounts, commissions or
 other
expenses allowed, paid or incurred by the Company for any underwriting
or
 otherwise
in connection with the issuance and sale thereof. In the case of
the
 issuance
of common stock for a consideration in whole or in part other than
 cash, the
consideration other than cash shall be deemed to be the fair value
 thereof
as determined by the Company's Board of Directors irrespective of
any
 accounting
treatment.
 
 3.09.
NOTICE TO HOLDER OF CERTAIN EVENTS. In the event the Company shall
 propose
to take any action of the type described in Sections 3.04, 3.05,
3.06,
 3.07,
3.08 or a Change of Control, the Company shall give notice to the
Holder,
 which
notice shall specify the record date, if any, with respect to any
such
 action
and the approximate date on which such action is to take place. In
the
 case of
any action which would require the fixing of a record date, such
notice
 shall be
given at least ten (10) days prior to the date so fixed, and in case
of
 all other
action, such notice shall be given at least fifteen (15) days prior
to
 the
taking of such proposed action. Failure to give such notice, or any
defect
 therein,
shall not affect the legality or validity of any such action.
 
 3.10.
NO IMPAIRMENT. The Company will not, by amendment of its
 Certificate
of Incorporation or through any reorganization, transfer of assets,
 issuance
or sale of securities or otherwise, avoid or seek to avoid the
 observance
or performance of any of the terms of this Article 3 or the other
 provisions
of this Warrant and will at all times in good faith assist in the
 carrying
out of all provisions hereof and in the taking of all actions as may
be
 necessary
in order to protect the rights of the Holder hereunder against
 impairment.
 
 ARTICLE
4.     REGISTRATION RIGHTS.
 
 
 
 6
  
 
 The
Company covenants and agrees as follows:
 
 4.01.
DEFINITIONS. For purposes of this Article 4:
 
 (a)
The term "FORM S-3" means such form under the Securities Act
 as in
effect on the date hereof or any registration form under the
Securities
 Act
subsequently adopted by the SEC that permits inclusion or incorporation
of
 substantial
information by reference to other documents filed by the Company
 with the
SEC.
 
 (b)
The term "HOLDER" means any person owning or having the right
 to
acquire Registrable Securities or any assignee thereof to whom
registration
 rights
under this Warrant are assigned in accordance with Section 4.11
hereof.
 
 (c)
The term "EXCHANGE ACT" means the Securities Exchange Act of
 1934, as
amended.
 
 (d)
The term "REGISTER," "REGISTERED" and "REGISTRATION" refer to
 a
registration effected by preparing and filing a registration statement
or
 similar
document in compliance with the Securities Act, and the declaration
or
 ordering
of effectiveness of such registration statement or document.
 
 (e)
The term "REGISTRABLE SECURITIES" means (i) the Warrant
 Shares,
and (ii) any common stock of the Company issued as a dividend or
other
 distribution
with respect to, or in exchange for, or in replacement of, the
 shares
referenced in (i) above; provided, however, that the foregoing
definition
 shall
exclude in all cases any Registrable Securities sold by a person in
a
 transaction
in which his, her or its rights under this Warrant are not
assigned.
 In
addition, Warrant Shares or other securities shall only be treated
as
 Registrable
Securities if and so long as they have not been (A) sold to or
 through a
broker or dealer or underwriter in a public distribution or a
public
 securities
transaction, including sales made pursuant to Rule 144 promulgated
 under the
Securities Act or (B) sold in a transaction exempt from the
 registration
and prospectus delivery requirements of the Securities Act under
 Section
4(1) thereof so that all transfer restrictions, and restrictive
legends
 with
respect thereto, if any, are removed upon the consummation of such
sale.
 The
number of shares of "Registrable Securities" outstanding shall be the sum
of
 the
number of shares of common stock outstanding that are Registrable
Securities
 plus the
number of shares of common stock issuable pursuant to then
exercisable
 or
convertible securities that are Registrable Securities.
 
 (f)
The term "SEC" shall mean the Securities and Exchange
 Commission.
 
 
 
 7
  
 
 4.02
REQUEST FOR REGISTRATION.
 
 (a)
Subject to the conditions of this Section 4.02, if the
 Company
shall receive at any time after two (2) years after the date of
this
 Warrant a
written request from the Holder that the Company file a
registration
 statement
under the Securities Act covering the registration of Registrable
 Securities
with an anticipated aggregate offering price of at least $1,000,000
 net of
underwriter discounts and commissions, then the Company shall, subject
to
 the
limitations of this Section 4.02, use all reasonable efforts to file,
within
 forty-five
days, a registration statement under the Securities Act covering
the
 Registrable
Securities that the Holder requests to be registered, and to use
 reasonable
efforts to cause such registration statement to become effective
 within
one hundred twenty days of the Holder's request for registration.
 
 (b)
If the Holder intends to distribute the Registrable
 Securities
covered by the Holder's request by means of an underwriting, the
 Holder
shall so advise the Company as a part of the request made pursuant
to
 this
Section 4.02.
 
 (c)
The Company shall not be required to effect a registration
 pursuant
to this Section 4.02:
 
 (1)
in any particular jurisdiction in which the Company
 would be
required to execute a general consent to service of process in
 effecting
such registration, unless the Company is already subject to service
in
 such
jurisdiction and except as may be required under the Securities
Act;
 
 (2)
after the Company has effected one (1) registration
 pursuant
to this Section 4.02, and such registrations have been declared or
 ordered
effective;
 
 (3)
during the period starting with the date sixty days
 prior to
the Company's good faith estimate of the date of the filing of, and
 ending on
a date one hundred eighty days following the effective date of, a
 Company-initiated
registration subject to Section 4.03 below, provided that the
 Company
is actively employing in good faith all reasonable efforts to cause
such
 registration
statement to become effective;
 
 (4)
if the Holder proposes to dispose of Registrable
 Securities
that may be registered on Form S-3 pursuant to Section 4.04 hereof;
 or
 
 (5)
if the Company shall furnish to the Holder requesting
 a
registration statement pursuant to this Section 1.2, a certificate signed
by
 the
Company's Chief Executive Officer or Chairman of the Board stating that
in
 the good
faith judgment of the Board of Directors of the Company, it would
be
 seriously
detrimental to the Company and its stockholders for such
registration
 statement
to be effected at such time, in which event the Company shall have
the
 right to
defer such filing for a period of not more than one hundred twenty
days
 after
receipt of the request of the Holder, provided that such right to delay
a
 request
shall be exercised by the Company not more than once in any
twelve-month
 period.
 
 1.3
COMPANY REGISTRATION.
 
 
 
 8
  
 
 (a)
If the Company proposes to register (including for this
 purpose a
registration initiated by the Company for shareholders other than
the
 Holder)
any of its stock or other securities under the Securities Act in
 connection
with the public offering for cash of such securities (other than a
 registration
relating solely to the sale of securities to participants in a
 Company
stock plan, a registration relating to a corporate reorganization
or
 other
transaction under Rule 145 of the Securities Act, a registration on
any
 form that
does not include substantially the same information as would be
 required
to be included in a registration statement covering the sale of the
 Registrable
Securities, or a registration in which the only common stock being
 registered
is common stock issuable upon conversion of debt securities that
are
 also
being registered), the Company shall, at such time, promptly give
the
 Holder
written notice of such registration. Upon the written request of
the
 Holder
given within twenty days after mailing of such notice by the Company,
the
 Company
shall use all reasonable efforts to cause to be registered under
the
 Securities
Act all of the Registrable Securities that the Holder has requested
 to be
registered.
 
 (b)
RIGHT TO TERMINATE REGISTRATION. The Company shall have the
 right to
terminate or withdraw any registration initiated by it under this
 Section
4.03 prior to the effectiveness of such registration whether or not
the
 Holder
has elected to include securities in such registration. The expenses
of
 such
withdrawn registration shall be borne by the Company in accordance
with
 Section
4.07 hereof.
 
 (c)
UNDERWRITING REQUIREMENTS. In connection with any offering
 involving
an underwriting of shares of the Company's capital stock, the
Company
 shall not
be required under this Section 4.03 to include any of the Holder's
 securities
in such underwriting unless the Holder accepts the terms of the
 underwriting
as agreed upon between the Company and the underwriters selected by
 it (or by
other persons entitled to select the underwriters) and enters into
an
 underwriting
agreement in customary form with an underwriter or underwriters
 selected
by the Company, and then only in such quantity as the underwriters
 determine
in their sole discretion will not jeopardize the success of the
 offering
by the Company. If the total amount of securities, including
 Registrable
Securities, requested by shareholders to be included in such
 offering
exceeds the amount of securities sold other than by the Company
that
 the
underwriters determine in their sole discretion is compatible with
the
 success
of the offering, then the Company shall be required to include in
the
 offering
only that number of such securities, including Registrable
Securities,
 that the
underwriters determine in their sole discretion will not jeopardize
the
 success
of the offering.
 
 4.04
FORM S-3 REGISTRATION. In case the Company shall receive from the
 Holder a
written request that the Company effect a registration on Form S-3
and
 any
related qualification or compliance with respect to all or a part of
the
 Registrable
Securities owned by the Holder, the Company shall use all
reasonable
 efforts
to effect, within forty-five days of the initial request for
 registration
pursuant to Section 4.04, such registration and all such
 qualifications
and compliances as may be so requested and as would permit or
 facilitate
the sale and distribution of all or such portion of the Holder's
 Registrable
Securities as are specified in such request; provided, however,
that
 the
Company shall not be obligated to effect any such registration,
 qualification
or compliance, pursuant to this Section 4.04:
 
 
 
 9
  
 
 (1)
if Form S-3 is not available for use by the Company
 with
respect to such offering by the Holder;
 
 (2)
if the Holder, together with the holders of any other
 securities
of the Company entitled to inclusion in such registration, propose
to
 sell
Registrable Securities and such other securities (if any) at an
aggregate
 price to
the public (net of any underwriters' discounts or commissions) of
less
 than
$500,000;
 
 (3)
if the Company shall furnish to the Holder a
 certificate
signed by the Chief Executive Officer or Chairman of the Board of
 the
Company stating that in the good faith judgment of the Board of Directors
of
 the
Company, it would be seriously detrimental to the Company and its
 shareholders
for such Form S-3 Registration to be effected at such time, in
 which
event the Company shall have the right to defer the filing of the Form
S-3
 registration
statement for a period of not more than one hundred twenty days
 after
receipt of the request of the Holder under this Section 4.04;
provided,
 however,
that the Company shall not utilize this right more than once in any
 twelve
month period;
 
 (4)
if the Company has already effected one (1)
 registration
on Form S-3 for the Holder pursuant to this Section 4.04; or
 
 (5)
in any particular jurisdiction in which the Company
 would be
required to qualify to do business or to execute a general consent
to
 service
of process in effecting such registration, qualification or
compliance.
 
 4.05.
OBLIGATIONS OF THE COMPANY. Whenever required under this Article 4
 to effect
the registration of any Registrable Securities, the Company shall,
as
 expeditiously
as reasonably possible:
 
 (a)
prepare and file with the SEC a registration statement with
 respect
to such Registrable Securities and use all reasonable efforts to
cause
 such
registration statement to become effective, and, upon the request of
the
 Holder,
keep such registration statement effective for a period of up to
one
 hundred
twenty days or, if earlier, until the distribution contemplated in
the
 Registration
Statement has been completed;
 
 (b)
prepare and file with the SEC such amendments and supplements
 to such
registration statement and the prospectus used in connection with
such
 registration
statement as may be necessary to comply with the provisions of the
 Securities
Act with respect to the disposition of all securities covered by
such
 registration
statement;
 
 (c)
furnish to the Holder such numbers of copies of a prospectus,
 including
a preliminary prospectus, in conformity with the requirements of
the
 Securities
Act, and such other documents as the Holder may reasonably request
in
 order to
facilitate the disposition of Registrable Securities owned by the
 Holder;
 
 
 
 10
  
 
 (d)
use reasonable efforts to register and qualify the securities
 covered
by such registration statement under such other securities or Blue
Sky
 laws of
such jurisdictions as shall be reasonably requested by the Holder,
 provided
that the Company shall not be required in connection therewith or as
a
 condition
thereto to qualify to do business or to file a general consent to
 service
of process in any such states or jurisdictions;
 
 (e)
in the event of any underwritten public offering, enter into
 and
perform its obligations under an underwriting agreement, in usual
and
 customary
form, with the managing underwriter of such offering;
 
 (f)
notify the Holder at any time when a prospectus relating
 thereto
is required to be delivered under the Securities Act or the happening
of
 any event
as a result of which the prospectus included in such registration
 statement,
as then in effect, includes an untrue statement of a material fact
or
 omits to
state a material fact required to be stated therein or necessary to
 make the
statements therein not misleading in the light of the circumstances
 then
existing;
 
 (g)
cause all such Registrable Securities registered pursuant to
 this
Warrant to be listed on each securities exchange on which similar
 securities
issued by the Company are then listed;
 
 (h)
provide a transfer agent and registrar for all Registrable
 Securities
registered pursuant to this Warrant and a CUSIP number for all such
 Registrable
Securities, in each case not later than the effective date of such
 registration;
and
 
 (i)
use its best efforts to furnish, at the request of the
 Holder,
on the date that such Registrable Securities are delivered to the
 underwriters
for sale in connection with a registration pursuant to this Article
 4, if
such securities are being sold through underwriters, or, if such
 securities
are not being sold through underwriters, on the date that the
 registration
statement with respect to such securities becomes effective, (1) an
 opinion,
dated such date, of the counsel representing the Company for the
 purposes
of such registration, in form and substance as is customarily given
to
 underwriters
in an underwritten public offering, addressed to the underwriters,
 if any,
and to the Holder and (2) a letter dated such date, from the
independent
 certified
public accountants of the Company, in form and substance as is
 customarily
given by independent certified public accountants to underwriters
in
 an
underwritten public offering, addressed to the underwriters, if any, and
to
 the
Holder.
 
 4.06
INFORMATION FROM HOLDER. It shall be a condition precedent to the
 obligations
of the Company to take any action pursuant to this Article 4 with
 respect
to the Registrable Securities of the Holder that the Holder shall
 furnish
to the Company such information regarding the Holder, the
Registrable
 Securities
held by the Holder, and the intended method of disposition of such
 securities
as shall be required to effect the registration of the Holder's
 Registrable
Securities.
 
 
 
 11
  
 
 4.07
EXPENSES OF REGISTRATION. All expenses other than underwriting
 discounts
and commissions incurred in connection with registrations, filings
or
 qualifications
pursuant to Sections 4.02, 4.03 and 4.04, including (without
 limitation)
all registration, filing and qualification fees, printer's and
 accounting
fees, fees and disbursements of counsel for the Company and fees
and
 disbursements
of one counsel for the Holder (subject to a maximum limit of
 $15,000
for registrations pursuant to Sections 4.02 and 4.03 and $10,000
for
 registrations
pursuant to Section 4.04, shall be borne by the Company.
 Notwithstanding
the foregoing, the Company shall not be required to pay for any
 expenses
of any registration proceeding begun pursuant to Section 4.04 if
the
 registration
request is subsequently withdrawn at the request of the Holder (in
 which
case the Holder shall bear all such expenses).
 
 4.08
DELAY OF REGISTRATION. The Holder shall not have any right to
 obtain or
seek an injunction restraining or otherwise delaying any such
 registration
as the result of any controversy that might arise with respect to
 the
interpretation or implementation of this Article 4.
 
 4.09
INDEMNIFICATION. In the event any Registrable Securities are
 included
in a registration statement under this Article 4:
 
 (a)
To the extent permitted by law, the Company will indemnify
 and hold
harmless the Holder, legal counsel and accountants for the Holder,
any
 underwriter
(as defined in the Securities Act) for the Holder and each person,
 if any,
who controls the underwriter within the meaning of the Securities Act
or
 the
Exchange Act, against any losses, claims, damages or liabilities (joint
or
 several)
to which they may become subject under the Securities Act, the
Exchange
 Act or
any state securities laws, insofar as such losses, claims, damages,
or
 liabilities
(or actions in respect thereof) arise out of or are based upon any
 of the
following statements, omissions or violations (collectively a
 "VIOLATION"):
(i) any untrue statement or alleged untrue statement of a material
 fact
contained in such registration statement, including any final
prospectus
 contained
therein or any amendments or supplements thereto, (ii) the omission
or
 alleged
omission to state therein a material fact required to be stated
therein,
 or
necessary to make the statements therein not misleading, or (iii)
any
 violation
or alleged violation by the Company of the Securities Act, the
 Exchange
Act, any state securities laws or any rule or regulation
promulgated
 under the
Securities Act, the Exchange Act or any state securities laws; and
the
 Company
will reimburse the Holder, underwriter or controlling person for
any
 legal or
other expenses reasonably incurred by any of them in connection
with
 investigating
or defending any such loss, claim, damage, liability or action;
 provided,
however, that the indemnity agreement contained in this Section
 4.09(a)
shall not apply to amounts paid in settlement of any such loss,
claim,
 damage,
liability or action if such settlement is effected without the
consent
 of the
Company (which consent shall not be unreasonably withheld), nor shall
the
 Company
be liable in any such case for any such loss, claim, damage,
liability
 or action
to the extent that it arises out of or is based upon a Violation
that
 occurs in
reliance upon and in conformity with written information furnished
 expressly
for use in connection with such registration by the Holder,
 underwriter
or controlling person.
 
 (b)
To the extent permitted by law, the Holder will severally but
 not
jointly indemnify and hold harmless the Company, each of its directors,
each
 of its
officers who has signed the registration statement, each person, if
any,
 who
controls the Company within the
 
 
 
 12
  
 
 meaning
of the Securities Act, legal counsel and accountants for the
Company,
 any
underwriter, any other shareholder selling securities in such
registration
 statement
and any controlling person of any such underwriter or other
 shareholder,
against any losses, claims, damages or liabilities to which any of
 the
foregoing persons may become subject, under the Securities Act, the
Exchange
 Act or
any state securities laws, insofar as such losses, claims, damages
or
 liabilities
(or actions in respect thereto) arise out of or are based upon any
 Violation,
in each case to the extent (and only to the extent) that such
 Violation
occurs in reliance upon and in conformity with written information
 furnished
by the Holder expressly for use in connection with such
registration;
 and the
Holder will reimburse any person intended to be indemnified pursuant
to
 this
Section 4.09(b), for any legal or other expenses reasonably incurred
by
 such
person in connection with investigating or defending any such loss,
claim,
 damage,
liability or action; provided, however, that the indemnity
agreement
 contained
in this Section 4.09(b) shall not apply to amounts paid in
settlement
 of any
such loss, claim, damage, liability or action if such settlement is
 effected
without the consent of the Holder (which consent shall not be
 unreasonably
withheld), provided that in no event shall any indemnity under this
 Section
4.09(b) exceed the net proceeds from the offering received by the
 Holder.
 
 (c)
Promptly after receipt by an indemnified party under this
 Section
4.09 of notice of the commencement of any action (including any
 governmental
action), such indemnified party will, if a claim in respect thereof
 is to be
made against any indemnifying party under this Section 4.09, deliver
to
 the
indemnifying party a written notice of the commencement thereof and
the
 indemnifying
party shall have the right to participate in, and, to the extent
 the
indemnifying party so desires, jointly with any other indemnifying
party
 similarly
noticed, to assume the defense thereof with counsel mutually
 satisfactory
to the parties; provided, however, that an indemnified party
 (together
with all other indemnified parties that may be represented without
 conflict
by one counsel) shall have the right to retain one separate
counsel,
 with the
fees and expenses to be paid by the indemnifying party, if
 representation
of such indemnified party by the counsel retained by the
 indemnifying
party would be inappropriate due to actual or potential differing
 interests
between such indemnified party and any other party represented by
such
 counsel
in such proceeding. The failure to deliver written notice to the
 indemnifying
party within a reasonable time of the commencement of any such
 action,
if prejudicial to its ability to defend such action, shall relieve
such
 indemnifying
party of any liability to the indemnified party under this Section
 4.09, but
the omission so to deliver written notice to the indemnifying party
 will not
relieve it of any liability that it may have to any indemnified
party
 otherwise
than under this Section 4.09.
 
 (d)
If the indemnification provided for in this Section 4.09 is
 held by a
court of competent jurisdiction to be unavailable to an indemnified
 party
with respect to any loss, liability, claim, damage or expense referred
to
 herein,
then the indemnifying party, in lieu of indemnifying such
indemnified
 party
hereunder, shall contribute to the amount paid or payable by such
 indemnified
party as a result of such loss, liability, claim, damage or expense
 in such
proportion as is appropriate to reflect the relative fault of the
 indemnifying
party on the one hand and of the indemnified party on the other in
 connection
with the statements or omissions that resulted in such loss,
 liability,
claim, damage or expense, as well as any other relevant equitable
 considerations;
provided, however, that the Holder will not be obligated to
 contribute
more than the net proceeds received by the Holder from such
offering.
 The
relative fault of the
 
 
 
 13
  
 
 indemnifying
party and of the indemnified party shall be determined by reference
 to, among
other things, whether the untrue or alleged untrue statement of a
 material
fact or the omission to state a material fact relates to
information
 supplied
by the indemnifying party or by the indemnified party and the
parties'
 relative
intent, knowledge, access to information, and opportunity to correct
or
 prevent
such statement or omission.
 
 (e)
Notwithstanding the foregoing, to the extent that the
 provisions
on indemnification and contribution contained in the underwriting
 agreement
entered into in connection with an underwritten public offering are
in
 conflict
with the foregoing provisions, the provisions in the underwriting
 agreement
shall control.
 
 (f)
The obligations of the Company and the Holder under this
 Section
4.09 shall survive the completion of any offering of Registrable
 Securities
in a registration statement under this Article 4, and otherwise.
 
 4.10.
REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
 making
available to the Holder the benefits of Rule 144 promulgated under
the
 Securities
Act and any other rule or regulation of the SEC that may at any
time
 permit
the Holder to sell securities of the Company to the public without
 registration
or pursuant to a registration on Form S-3, the Company agrees to:
 
 (a)
make and keep public information available, as those terms
 are
understood and defined in SEC Rule 144, at all times;
 
 (b)
file with the SEC in a timely manner all reports and other
 documents
required of the Company under the Securities Act and the Exchange
Act;
 and
 
 (c)
furnish to the Holder, forthwith upon request (i) a written
 statement
by the Company that it has complied with the reporting requirements
of
 SEC Rule
144 (at any time after ninety days after the effective date of the
 first
registration statement filed by the Company), the Securities Act and
the
 Exchange
Act (at any time after it has become subject to such reporting
 requirements),
or that it qualifies as a registrant whose securities may be
 resold
pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy
of
 the most
recent annual or quarterly report of the Company and such other
reports
 and
documents so filed by the Company, and (iii) such other information as
may
 be
reasonably requested in availing the Holder of any rule or regulation of
the
 SEC that
permits the selling of any such securities without registration or
 pursuant
to such form.
 
 
 
 14
 
 
 4.11.
ASSIGNMENT OF REGISTRATION RIGHTS. Subject to Article 2, the
 rights to
cause the Company to register Registrable Securities pursuant to
this
 Article 4
may be assigned (but only with all related obligations) by the
Holder
 to a
transferee or assignee of such securities that after such assignment
or
 transfer,
holds all of the shares of Registrable Securities originally issued
to
 the
Holder (subject to appropriate adjustment for stock splits, stock
dividends,
 combinations
and other recapitalizations), provided: (a) the Company is, within
 a
reasonable time after such transfer, furnished with written notice of the
name
 and
address of such transferee or assignee and the securities with respect
to
 which
such registration rights are being assigned; (b) such transferee or
 assignee
agrees in writing to be bound by and subject to the terms and
 conditions
of this Warrant, including without limitation the provisions of
 Section
4.12 below; and (c) such assignment shall be effective only if
 immediately
following such transfer the further disposition of such securities
 by the
transferee or assignee is restricted under the Securities Act.
 
 4.12
TERMINATION OF REGISTRATION RIGHTS. The Holder shall not be
 entitled
to exercise any right provided for in this Article 4 after such time
at
 which all
Registrable Securities held by the Holder (and any affiliate of the
 Holder
with whom such Holder must aggregate its sales under Rule 144) can
be
 sold in
any three (3)-month period without registration in compliance with
Rule
 144 of
the Securities Act.
 
 ARTICLE
5.     MISCELLANEOUS PROVISIONS.
 
 5.01.
DEFINITIONS. As used herein, the following terms shall have the
 meanings
ascribed below:
 
 (a)
"Change of Control" means any of the following events: (i)
 consummation
of any merger or consolidation of the Company in which the Company
 is not
the continuing or surviving corporation, or pursuant to which shares
of
 the
Company's common stock are converted into cash, securities, or
other
 property,
if following such merger or consolidation the holders of the
Company's
 outstanding
voting securities immediately prior to such merger or consolidation
 own less
than 50% of the outstanding voting securities of the surviving
 corporation;
or (ii) a change in ownership of the Company's capital stock as a
 result of
which the owners of the Company's outstanding capital stock
 immediately
prior to the change own less than 50% of the Company's outstanding
 capital
stock following such change.
 
 (b)
"Issue Date" means September 30, 2002.
 
 5.02.
GOVERNING LAW; VENUE. This Warrant shall be governed by and
 construed
in accordance with the laws of the State of Washington, and venue
for
 any
action taken in connection herewith or related hereto shall
exclusively
 reside in
King County, Washington.
 
 5.03.
NOTICES. All notices and other communications required or
 permitted
hereunder shall be in writing and shall be deemed effectively given
 upon
personal delivery; upon confirmed transmission by telecopy or telex;
or
 three (3)
business days after deposit with the United States Post Office, by
 first-class
mail, postage prepaid, or otherwise delivered by hand or by
 messenger,
addressed (a) if to the Company, at 8340 154th Avenue NE, Redmond,
 Washington
98052, to the attention of the President, or at such other address
as
 the
Company shall have furnished to the
 
 
 
 15
  
 
 Holder,
and (b) if to the Holder at the last address shown on the books of
the
 Company
or its transfer agent maintained for the registry and transfer of
the
 Warrant.
 
 5.04.
SUCCESSORS. All covenants and provisions of this Warrant by or for
 the
benefit of the Company shall bind and inure to the benefit of its
respective
 successors
and assigns.
 
 5.05.
BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be
 construed
to give to any person or corporation other than the Company and the
 Holder
any legal or equitable right, remedy or claim under this Warrant.
This
 Warrant
shall be for the sole and exclusive benefit of the Company and the
 Holder.
 
 5.06.
WAIVER AND AMENDMENT. Any provision of this Warrant may be
 amended,
waived or modified upon the written consent of the Company and
Holder.
 
 
 
 16
  
 
 This
Warrant has been executed and delivered as of the date first above
written.
 
 SCOLR,
INC.
 
 
 By   /s/    David
T. Howard
 ------------------------------
 David
T. Howard
 Print
Name
 Its
President & CEO
 
 
 
 AGREED
AND ACKNOWLEDGED:
 
 
 /s/      Clyde
Berg
 -----------------------------------
 CLYDE
BERG
 
 
 
 17
  
 
 SECURITY
AGREEMENT
 
 This
Security Agreement, dated as of September 30, 2002, is being
 entered
into by SCOLR, Inc., a Delaware corporation (the "Company") for the
 benefit
of Clyde Berg, an individual residing in the State of California,
whose
 principal
address is 10050 Bandley Drive, Cupertino, California 95014 (the
 "Lender").
 
 RECITALS
 
 WHEREAS,
the Lender has agreed to loan the Company funds in
 consideration
of that certain Promissory Note, dated as of the date hereof,
 executed
by the Company for the benefit of the Lender (the "Promissory
Note");
 and
 
 WHEREAS,
the Company has previously granted a security interest in some
 or all of
the Collateral (as defined below) to Access Business Finance LLC
(the
 "Access
Security Interest"), pursuant to that certain Loan and Security
 Agreement
dated April 30, 2002, by and between the Company and Access
Business
 Finance
LLC.
 
 NOW,
THEREFORE, in consideration of the foregoing recitals and the
 mutual
covenants and agreements set forth below, and for other good and
valuable
 consideration,
the parties hereto agree as follows:
 
 AGREEMENT
 
 1. GRANT
OF COLLATERAL. As security for the payment and performance of (i)
the
 obligations
to pay principal of, interest on and all other obligations under
the
 Promissory
Note and (ii) all obligations of the Company under this Agreement
 (all of
the foregoing in the preceding clauses (i) and (ii), collectively,
the
 "Secured
Obligations"), the Company hereby grants a security interest in
favor
 of the
Lender and the other holders from time to time of the Secured
Obligations
 in all of
the Company's right, title and interest in and to (but none of its
 obligations
or liabilities with respect to) the items and types of property
 described
below in this Section 1, whether now owned or hereafter acquired
and
 whether
mentioned once or more than once in the following description:
 
 Accounts,
contract rights, leases, documents, instruments, inventory,
 equipment,
all other goods, intellectual property rights (including, but
 not
limited to: patents, copyrights, trademarks, tradenames, and domain
 names),
goodwill, all other general intangibles, stock or other
 evidences
of ownership, all other investment property, chattel paper,
 instruments,
leases, cash, cash equivalents, deposit accounts,
 letter-of-credit
rights, books, records, insurance proceeds, dividends,
 all
other property, assets and items of value, all supporting
 obligations,
and all proceeds and products of any and all of the
 foregoing
(all of the above being included in the term "Collateral"). As
 used
in this Agreement, the following terms shall have the respective
 meanings
given such terms in the Uniform Commercial Code as adopted in
 the
State of Washington as of the date hereof: accounts, documents,
 instruments,
inventory, equipment, goods, general
 
  
 
 intangibles,
investment property, chattel paper, instruments, deposit
 accounts,
letter-of-credit rights, supporting obligations and proceeds.
 
 2. NO
VIOLATION. Notwithstanding anything contained in this Agreement to
the
 contrary,
no security interest shall be granted in any item of Collateral to
the
 extent
that the terms of any agreement, including without limitation the
 documents
and instruments governing the Access Security Interest, or the
 provisions
of any law applicable thereto would prohibit the grant of such
 security
interest or to the extent that the grant of such security interest
 would
create a default under any such agreement or a violation of any such
law
 (other
than to the extent that any such term or provision would be
rendered
 ineffective
pursuant to Section 9-406, Section 9-407 or 9-408 of the Uniform
 Commercial
Code).
 
 3.
PERFECTION OF COLLATERAL. Upon the Lender's reasonable request from time
to
 time, the
Company will execute and deliver, and file and record in the proper
 filing
and recording places, all such instruments, and take all such other
 action as
the Lender deems reasonably necessary for perfecting or otherwise
 confirming
to the Lender his security interest in the Collateral. The Company
 hereby
authorizes the Lender to file or record Uniform Commercial Code
financing
 statements
in all jurisdictions and with all filing offices as the Lender may
 deem
necessary or advisable to perfect the security interest guaranteed to
the
 Lender
hereunder. Such financing statements may describe the Collateral in
the
 same
manner as described herein or may contain an indication or description
of
 the
Collateral that describes the Collateral as "all assets" or "all
personal
 property".
 
 4.
INSURANCE. The Company shall at all times maintain comprehensive
casualty
 insurance
on the physical Collateral against such risks, in such amounts,
with
 such
deductibles, and with such insurance companies as is typical in the
 industry
in which the Company is engaged. All such policies shall name the
 Lender as
a loss payee and provide that no such policy may be cancelled or
 materially
amended without providing at least 10 days prior written notice to
 the
Lender of the impending cancellation or amendment. All insurance
proceeds
 shall be
applied by the Company, if no Event of Default then exists, to
either
 the
repair or replacement of the damaged or destroyed Collateral (if such
repair
 or
replacement is practicable) or the payment of the Secured
Obligations,
 provided,
that, if an Event of Default exists, the Lender shall have the
right
 to direct
whether the insurance proceeds are applied to such repair or
 replacement
or to such payment.
 
 5.
GENERAL. The Company hereby acknowledges that the Lender is relying on
this
 Agreement
in making the loans evidenced by the Promissory Note. This
Agreement
 shall
bind and inure to the benefit of the parties hereto and their
respective
 successors
and assigns but no assignment shall release the Company of its
 obligations
hereunder. Notices shall be furnished in writing to each party at
 its
address appearing below or as it may otherwise direct in a writing
actually
 received
by the other party. The invalidity or unenforceability of any
provision
 hereof
shall not affect the validity or enforceability of any other
provision
 hereof,
and any invalid or unenforceable provision shall be modified so as to
be
 enforceable
to the maximum extent of its validity or enforceability. The
 headings
in this Agreement are for convenience of reference only and shall
not
 limit,
alter or otherwise affect the meaning hereof. This Agreement
constitutes
 the
entire understanding of the parties with respect to the subject
matter
 hereof
and supersedes all prior and current understandings and agreements,
 whether
written or oral. This Agreement shall
 
 
 
 2
  
 
 be
governed by and construed in accordance with the laws (other than
the
 conflict
of laws rules) of the State of Washington, except as may be required
by
 the
Uniform Commercial Code of other jurisdictions with respect to
matters
 involving
the perfection of the Lender's lien on the Collateral.
 
 Each
of the undersigned has caused this Agreement to be executed and
 delivered
as of the date first written above.
 
 
 SCOLR,
INC.
 
 
 By:     /s/
David T. Howard
 -------------------------------------
 Name:  David
T. Howard
 Title:
President and Chief Executive Officer
 
 Address:  8340
154th Avenue NE
 Redmond,
Washington 98052
 
 
 Acknowledged
and Agreed to:
 
 
 CLYDE
BERG
 
 
 /s/
Clyde Berg
 ------------------------------------------
 
 Address:  10050
Bandley Drive
 Cupertino,
California 95014
 
 
 
 3