Prepared by MerrillDirect





Exhibit 10.20


LOAN
AGREEMENT


          THIS
LOAN AGREEMENT (this “Agreement”), dated as of April 11,
2001, is executed by Sheryle J. Bolton (“Borrower”), and SCIENTIFIC
LEARNING CORPORATION, a Delaware corporation (the “Company”).  All capitalized terms that are not otherwise
defined herein shall have the meaning set forth in the Security Agreement.


RECITALS


          WHEREAS, the Board
of Directors of the Company has authorized the Company to loan up to $1,400,000
(the “Loan Cap”) to Borrower, which loan will not be used to buy or carry
public company stock (the “Loan”);


          WHEREAS, the
parties wish to execute this Agreement to confirm the Company’s commitment to
extend such Loan and to attach the form of agreements to be used in executing
the Loan and extending a security interest to the Company as collateral for the
Loan;


          NOW,
THEREFORE, in consideration of the promises made herein and for other
good and valuable consideration, Borrower and the Company hereby agree as
follows:


          1.       Loan.  Subject to the provisions of this Agreement,
the Company agrees, at any time prior to April 15, 2001, to make the Loan to
Borrower pursuant to a secured promissory note substantially in the form of Exhibit A
(the “Note”) and the pledge agreement substantially in the form of Exhibit B
(the “Security Agreement”) within five (5) business days of a written request
from Borrower.  Borrower may request
that the amount of the Loan be less than the Loan Cap.  Unless agreed to in writing by the Company,
after authorization by the Compensation Committee of the Board of Directors,
the Loan Cap shall not be increased.


          2.       Conditions to the
Company’s Loan.  The Company’s obligation to make the Loan described in Section 1
is contingent upon the following:


                    (a)      the Company’s obtaining a
satisfactory
bank loan to finance the full amount of the Loan, which bank loan is expected
to be guaranteed by Warburg Pincus . or its affiliates;


                    (b)      the delivery by Borrower of an
executed
copy of the Note, the Security Agreement, three undated stock powers with
respect to the certificates representing the Pledged Shares executed in blank
by Borrower substantially in the form attached as an Exhibit to the Security
Agreement, one or more UCC-1 financing statements substantially in the form
attached as an Exhibit to the Security Agreement and such other documents as
the Company shall reasonably request to perfect its security interest in the
Collateral;





                    (c)      Borrower shall not have commenced a
voluntary proceeding seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of Borrower’s property nor shall Borrower consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against Borrower nor shall
Borrower make a general assignment for the benefit of creditors or generally
fail to pay Borrower’s debts as they become due or shall take any action to
authorize any of the foregoing;


                    (d)      an involuntary proceeding
shall not have
been commenced against Borrower seeking liquidation, reorganization or other
relief with respect to Borrower or Borrower’s debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for Borrower or a substantial part of his property;


                    (e)      Borrower’s employment
by or association
with the Company is terminated for “cause” (as defined in the form of Note
attached hereto as Exhibit A); and


                    (f)      Borrower is employed by, or
provides
consulting services to, another company or business that provides
neuroscience-based educational technology products.


          3.       Miscellaneous


                    (a)      Governing Law.  This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the internal laws of the State of California,
without reference to principles of conflicts of laws.


                    (b)      Counterparts.  
This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


                    (c)      Entire Agreement.
 This Agreement and the exhibits hereto
constitute the entire agreement between the parties relating to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.


                    (d)      Severability Of
Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


                    (e)      Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (a) if to Borrower, addressed to Borrower’s
residence address on the records of the Company or at such other address as
Borrower shall have specified to the Company in writing; and (b) if to the
Company, addressed to it at its executive office address or at such other
address as the Company shall have specified to Borrower in writing.


                    (f)      Benefit.  The
Company may assign all or part of its rights under this Agreement to any other
party.  Borrower may not assign its
rights or obligations hereunder without the Company’s express written
consent.  Borrower, the Company and
their permitted successors and assigns shall be bound by this Agreement.  They shall be the only persons entitled to
its benefits.





                    (g)      Expenses. 
Each party to this Agreement and the exhibits shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions and agreements.


                    (h)      Amendments.
 
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived, only with the written consent of the Company
and Borrower.


                    (i)       Termination.
 
This Agreement, and all obligations hereunder, shall terminate and be of
no force and effect, after April 15, 2001.


 


[THE REST OF
THIS PAGE INTENTIONALLY LEFT BLANK]





          IN WITNESS WHEREOF, the parties hereto have executed this
Loan Agreement as of the date first above written.


	 	BORROWER:
	 	 	 
	 	 	 
	 	Signature:	/s/
  Sheryle J. Bolton



	 	 	 
	 	 
	 	Printed
  Name: Sheryle J. Bolton
	 	 
	 	 
	 	THE COMPANY:
	 	 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 	 
	 	 	 
	 	By:	/s/
  Carleton Holstrom



	 	 	Carleton
  Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors
				



 


[SIGNATURE
PAGE TO LOAN AGREEMENT]





 


SECURED PROMISSORY NOTE


 


	$1,400,000.00	April 11, 2001
	 	Oakland,
  California



 


          FOR VALUE RECEIVED, Sheryle J.
Bolton (“Borrower”), an employee of
Scientific Learning Corporation, a Delaware corporation (“Company,) hereby
unconditionally promises to pay to the order of Company, in lawful money of the
United States of America and in immediately available funds, the principal sum
of One Million Four Hundred Thousand Dollars ($1,400,000.00) (the “Loan”) together with accrued
and unpaid interest thereon, due and payable on the dates and in the manner set
forth below.


          It is the intent of the parties that the
purpose of this Note is not for consumer, family or household purposes.


          This Secured Promissory Note is the Note
referred to in and is executed and delivered in connection with that certain
Pledge Agreement dated as of even date herewith and executed and delivered by
Borrower in favor of Company (as the same may from time to time be amended,
modified or supplemented or restated (the “Security Agreement”).  Additional rights of Company are set forth
in the Security Agreement.  All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to them in the Security Agreement.


          1.       Principal Repayment.  The
outstanding principal amount of the Loan shall be due and payable on December
31, 2005 (the “Termination Date”).


          2.       Interest Rate.       Borrower further promises to pay interest on the
outstanding principal
amount hereof from the date hereof until payment in full, which interest shall
be compounded annually and payable at the rate of Four and 94/100 percent
(4.94%) per annum or the maximum rate permissible by law (which under the laws
of the State of California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less.  Interest shall be due and payable on the
Termination Date and shall be calculated on the basis of a 365 day year for the
actual number of days elapsed.


          Any principal repayment or interest payment
on the Loan hereunder not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest at Six and 94/100 percent
(6.94%) per annum.


          3.        Manner of Payment. Both principal and interest are payable in
immediately available funds in lawful money of the United States of America to
the Company at the principal office of Company unless another place of payment
shall be specified in writing by Company.





 


          4.       Application of Payments. 
Payment on this Note shall be applied first to accrued interest, if any,
and thereafter to the outstanding principal balance hereof.  Borrower may at any time pay the full amount
or any portion of this Note without notice or payment of any penalty, premium
or fee.  Any such prepayment shall be
accompanied by payment of any and all accrued and unpaid interest on the amount
prepaid. All payments made on account of the principal of or interest on this
Note shall be recorded in the books and records of the Company; provided, however, that the failure of
the Company to make any notation or any error therein shall not in any manner
affect the obligation of Borrower to repay this Note in accordance with the
terms hereof.  Borrower agrees that any
document submitted by the Company purporting to show the outstanding principal
amount of this Note and all accrued and unpaid interest hereon shall be
conclusive in the absence of manifest error.


          5.       Secured Note.  The
full amount of this Note is secured by the collateral identified and described
as security therefor in the Security Agreement. Borrower shall not, directly or
indirectly, create, permit or suffer to exist, and shall defend the collateral
against and take such other action as is necessary to remove, any lien on or in
the collateral, or in any portion thereof, except as permitted pursuant to the
Security Agreement.  To the extent
Borrower is unable to satisfy this Note when due with the collateral described
in the Security Agreement, the Company may hold Borrower personally liable for
this Note or assert any claim against Borrower for the payment of this Note.


          6.       Default. 
Each of
the following events shall be an “Event of Default” hereunder:


                    (a)      Borrower shall fail to pay when due the
Obligations or any part thereof and such failure shall have continued for at
least five business days thereafter;


                    (b)      Any representation or warranty made or deemed
made
by Borrower in the Security Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with the Security
Agreement, the Loan or this Note shall be false, misleading or erroneous in any
material respect when made or deemed to have been made;


                    (c)      Borrower shall fail to perform, observe or comply
with any covenant, agreement or term contained in the Security Agreement and
such failure shall continue for a period of ten business days after the earlier
of (i) notice thereof being given by the Company to Borrower or (ii) such
default otherwise becoming known to Borrower;


                    (d)      Borrower shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for him or a
substantial part of his property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against him or shall make a general assignment
for the benefit of creditors or shall generally fail to pay his debts as they
become due or shall take any action to authorize any of the foregoing;





 


                    (e)      an involuntary proceeding shall be commenced against
Borrower seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for Borrower or a
substantial part of his property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of 60 days;


                    (f)      the Security Agreement or this Note shall
cease to be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Borrower, or Borrower shall deny any further liability or obligation under the
Security Agreement or this Note;


                    (g)      Borrower’s employment by or association with
the Company is terminated for “cause” (as defined below);


                    (h)      Borrower is employed by, or provides
consulting services to, another company or business that provides
neuroscience-based educational technology products; or


                    (i)       Borrower shall breach any representation or
covenant under the Security Agreement.


          Upon the occurrence of an Event of Default
hereunder, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Company, and, in the case of an Event of
Default pursuant to (d), (e) or (f)
above, automatically, be immediately due, payable and collectible by Company
pursuant to applicable law. 
Notwithstanding the foregoing, if an Event of Default has occurred under (g) or (h)
above (together, the “Employment
Defaults”), Borrower shall have 90 days after such event to pay
all unpaid principal, accrued interest and other amounts owing hereunder.   Company shall have all rights and may
exercise any remedies available to it under law, successively or
concurrently.  Borrower expressly
acknowledges and agrees that the Company shall have the right to offset any
obligations of Borrower hereunder against salaries, bonuses or other amounts
that may be payable to Borrower by the Company.


          “Cause” shall be defined to include the
following, as determined in good faith by the Board of Directors in its sole
discretion: (i) material breach of the Company’s policies, (ii) material breach
of the Security Agreement or this Note, (iii) neglect or abandonment of
assigned duties, (iv) the commission of any act of fraud, embezzlement or
dishonesty against the Company, (v) conviction of any felony or any crime of
moral turpitude or dishonesty, (vi) intentional damage to the Company’s
property, (vii) any material breach of a proprietary information and inventions
agreement with the Company or unauthorized use or disclosure of confidential
information or trade secrets of the Company, or (viii) conduct by Borrower
which demonstrates unfitness to serve.


          Waiver. Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred, including, without limitation,
reasonable attorneys’ fees, costs and other expenses.


          The
right to plead any and all statutes of limitations as a defense to any demands
hereunder is hereby waived to the full extent permitted by law.







          7.       Governing
Law.  This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of laws
of any other jurisdiction.


          8.       Expenses. 
Borrower agrees to pay all reasonable costs and expenses, including,
without limitation, reasonable attorneys’ fees and costs of court, incurred by
Company or any other holder of this Note in collecting or enforcing payment of
this Note in accordance with its terms.


          9.       Amendment. This Note may not be changed, amended or
modified except in a writing executed by Borrower and the holder hereof.


          10.     Complete Agreement. This Note and the Security Agreement
represent the final agreement between Borrower and Company with respect to the
matters referred to herein and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreement of Borrower and Company.  There are no oral agreements between
Borrower and Company with respect to the matters referred to herein.


          11.     Successors and Assigns.  The
provisions of this Note shall inure to the benefit of and be binding on any
successor to Borrower and shall extend to any holder hereof. Borrower shall
not, without the prior written consent of holder, assign any of its rights or
obligations hereunder.


          IN WITNESS WHEREOF, this Note has been executed as of the date
first written above.


BORROWER:


	Signature:	/s/ Sheryle J. Bolton



	 
	Printed Name: Sheryle J. Bolton



 





PLEDGE
AGREEMENT


          THIS
PLEDGE AGREEMENT (this “Agreement”), dated as of April 11,
2001 is executed by Sheryle J. Bolton (“Borrower”), an individual residing in
Oakland, California, and SCIENTIFIC LEARNING
CORPORATION, a Delaware corporation (the “Company”).


          WHEREAS, the
Company has loaned $1,400,000 to Borrower which loan will not be used to buy or
carry public company stock;


          WHEREAS, such loan
(the “Loan”) is evidenced by a Secured Promissory Note, dated the date hereof,
executed by Borrower and made payable to the order of the Company (together
with all renewals, extensions and replacements thereof, the “Note”); and


          WHEREAS, the
Company was unwilling to make the Loan to Borrower unless Borrower entered into
this Agreement to secure the payment and performance of the Note by Borrower.


          NOW,
THEREFORE, Borrower and the Company hereby agree as follows:


          Section
1.    Definitions.  For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings:


          “Code” means the Uniform Commercial Code
in effect in the State of California.



          “Collateral” means (a) the Pledged Shares
and the certificates representing the Pledged Shares, and all dividends, cash
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares, (b) all dividends, distributions and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares and (c) all proceeds of any of the foregoing
(whether such proceeds arise before or after the commencement of a case under
the bankruptcy laws by or against Borrower as debtor).



          “Event of Default” means any one or more
of the following events:



          (a)      Borrower shall fail to pay when due the
Obligations or any part thereof and such failure shall have continued for at
least five business days;



          (b)      any representation or warranty made or deemed
made by Borrower in this Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with this Agreement,
the Loan or the Note shall be false, misleading or erroneous in any material
respect when made or deemed to have been made;



          (c)      Borrower shall fail to perform, observe or
comply with any covenant, agreement or term contained in this Agreement and
such failure shall continue for a period of five business days after the
earlier of (i) notice thereof being given by the Company to Borrower or (ii)
such default otherwise becoming known to Borrower;






          (d)      Borrower shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for him or a
substantial part of his property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against him or shall make a general assignment
for the benefit of creditors or shall generally fail to pay his debts as they
become due or shall take any action to authorize any of the foregoing;



          (e)      an involuntary proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of his property, and such involuntary proceeding shall
remain undismissed and unstayed for a period of 60 days;



          (f)      this Agreement or the Note shall cease to be
in full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, or
Borrower shall deny any further liability or obligation under this Agreement or
the Note; or



          (g)      ninety (90) days after any Employment Default
(as defined in the Note), if any amount then remains outstanding under the
Note.



          “Lien” means any lien, mortgage, security
interest, tax lien, pledge, assessment, encumbrance, lease, adverse claim,
levy, charge or retained interest pursuant to a conditional sale or title
retention contract, or any other interest in property designed to secure the
repayment of debt or any other obligation, whether arising by agreement,
operation of law or otherwise, or any contract to give any of the foregoing.



          “Loan” has the meaning specified in the
second recital hereof.



          “Note” has the meaning specified in the
second recital hereof.



          “Obligations” means all obligations of
Borrower to the Company under or in connection with the Note, regardless of how
created, arising or evidenced and whether direct or indirect, primary or
secondary, absolute or contingent, joint or several or now or hereafter
existing or due or to become due, and all interest accruing thereon, and all
attorneys’ fees and other expenses incurred in the enforcement or collection
thereof.



          “Person” means any natural person,
partnership, corporation, business trust, association, company, limited
liability company, joint venture, governmental authority or any other form of
business or legal entity.






          “Pledged Shares” means a total of 260,785
shares of Common Stock of the Company registered in the name of Borrower, which
are represented by stock certificates numbers SCIL 890, SCIL 876, SCIL 985, SCI
2022, SCI 2084 and SCI 2085.  Notwithstanding
the foregoing, “Pledged Shares” shall not include any shares of Common Stock of
the Company which have been released from this Agreement pursuant to Section
10.



          “Securities Act” means the Securities Act
of 1933, as amended.



          Unless the
context otherwise requires, terms defined in the Code shall have the same
meanings when used in this Agreement.


          Section
2.    Pledge.


          (a)      As security for the prompt and complete
payment and performance when due of all of the Obligations, Borrower hereby
pledges, hypothecates, assigns and grants to the Company a continuing security
interest of first priority in all of the Collateral.


          (b)      On the date hereof, Borrower shall deliver to
the Company three undated stock powers with respect to the certificates
representing the Pledged Shares duly executed in blank, substantially in the
form of Exhibit A attached hereto, one or more UCC-1 financing
statements, substantially in the form of Exhibit B attached hereto, and
such other documents as the Company shall reasonably request to perfect its
security interest in the Collateral.


          As further
described in this Agreement, nothing in this Agreement, the Note or any other
agreement shall limit the Company’s right to hold Borrower personally liable
for the Note or assert any claim against Borrower for the payment of the Note.


          Section
3.    Stock Dividends, etc.  If,
while this Agreement is in effect, Borrower shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital, or issued in connection
with any reorganization), option or rights (in connection with Borrower’s
ownership of the Collateral, whether as an addition to, in substitution of or in
exchange for any Pledged Shares or any other Collateral), Borrower agrees to
accept the same as the Company’s agent and to hold the same in trust on behalf
of and for the benefit of the Company, subject to the terms of this Agreement,
as additional Collateral.


          Section
4.    Cash Dividends; Voting Rights;
Dissolution.


          (a)      Unless an Event of Default shall have
occurred and be continuing, Borrower shall be entitled, except as provided in
Sections 3 and 5, to receive all dividends and distributions in respect of the
Collateral, to vote the Collateral and to give consents, waivers and
ratifications in respect of the Collateral; provided,
however, that no vote shall be cast or consent, waiver or
ratification given or action taken which would have a material adverse effect
on the value or marketability of the Collateral or be inconsistent with or
violate the provisions of this Agreement and, provided
further, that any sums paid upon or in respect of the Collateral
upon the liquidation or dissolution of the issuer thereof shall be paid over to
the Company to be held by it as additional Collateral for the Obligations
subject to the term hereof.





          (b)      Borrower hereby appoints the Company, with
full power of substitution, effective upon the occurrence of any Event of Default,  as Borrower’s proxy and attorney-in-fact to
vote, give consents and approvals, call meetings and exercise any other rights
with respect to the Pledged Shares or any other Collateral.  This proxy and power-of-attorney shall be in
full force and effect upon the occurrence of any Event of Default until the
termination of this Agreement and is irrevocable and exclusive and shall not be
terminated or otherwise affected by any action or inaction of Borrower or by
operation of law, by death or disability of Borrower or by the occurrence of
any other event.  Except as set forth in
paragraph (a) above, Borrower shall have no right to vote, give consents or
approvals or exercise any other right with respect to the Pledged Shares or any
other Collateral.


          Section
5.    Rights of the Company.


          (a)      The Company shall have the right to deliver
any stop-order instructions to the Company’s transfer agent in order to prevent
Borrower from making any transfers or pledges of the Pledged Shares in
violation of this Agreement.  The
Company shall also have the right to remove any such stop-order instructions at
any time.


          (b)      Subject to the Company’s obligations under
secured transactions law if the Company has taken possession of the Collateral,
the Company shall not be liable for failure to collect or realize upon the
Obligations secured hereby or any collateral security or guarantee therefor, or
any put thereof, or for any delay in so doing, nor shall the Company be under
any obligation to take any action whatsoever with regard thereto.


          (c)      If an Event of Default has occurred and is
continuing, the Company shall notify Borrower in writing requesting immediate
delivery by Borrower to the Company of any and all certificates comprising a
part of the Collateral.  If Borrower
delivers such certificate(s), the Company may transfer or register or have
registered in the name of the Company or the Company’s nominee any and all
shares comprising a part of the Collateral, and the Company or its nominee may
thereafter exercise all voting and corporate rights at any meeting of the
Company’s shareholders and any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any
shares comprising a part of the Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, at its
discretion, any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Company or upon
the exercise by Borrower or the Company of any right, privilege or option
pertaining to the Collateral, and, in connection therewith, to deposit and
deliver any and all of the Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for property actually
received by it. If Borrower fails to deliver such certificates within three (3)
business days of receipt of the Company’s notice, Borrower agrees that the
Company may complete one or more stock powers in order to transfer to the
Company (or such other individual or entity as the Company determines) the
number of shares necessary to satisfy the Obligations and the Company shall
have such rights described in this Section 5. 
The Company shall have no duty to exercise any of the aforesaid rights,
privileges or options, and the Company shall not be responsible for any failure
to do so or delay in so doing.





 



          Section
6.    Remedies.


          (a)      In the event that an Event of Default shall
have occurred and be continuing, the Company may (i) by notice to Borrower,
declare the Note, or any portion thereof, to be immediately due and payable,
and the same shall thereupon become immediately due and payable, without any
other notice and without demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower to the extent permitted by law and/or (ii) without demand of
performance or other demand, advertisement or notice of any kind to or upon
Borrower or any other Person (all and each of which demands, advertisements
and/or notices are hereby expressly waived to the extent permitted by law),
exercise in respect of the Collateral, in addition to the other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Code (whether or not the Code
applies to the affected Collateral), including collecting, receiving,
appropriating and realizing upon the Collateral, or any part thereof, and/or
may forthwith sell, assign, give an option or options to purchase, contract to
sell or otherwise dispose of and deliver the Collateral, or any part thereof,
in one or more parcels at public or private sale or sales, at any exchange,
broker’s board or at any of the Company’s offices or elsewhere upon such terms
and conditions as it may, in its absolute discretion, deem advisable and at
such prices as it may, in its absolute discretion, deem best, for cash or on
credit or for future delivery without the assumption of any credit risk, free
of any right or equity of redemption in Borrower, which right or equity is
hereby expressly waived and released to the extent permitted by law, upon any
such sale or sales, public or private, to purchase the whole or any part of the
Collateral so sold; provided, however,
that Borrower shall not be credited with the net proceeds of any credit sale or
future delivery until cash proceeds are actually received by the Company.


          (b)      Borrower agrees that, to the extent notice of
sale shall be required by law, at least 10 days’ notice to Borrower of the time
and place of any public sale or of the time after which a private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters.


          (c)      In case the Company shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Company then and in every such case Borrower and the Company
shall be restored to their respective former positions and rights hereunder
with respect to the Collateral and all rights, remedies and powers of the
Company shall continue as if no such proceeding had been instituted.


          (d)      All rights and remedies of the Company
expressed herein are in addition to all other rights and remedies possessed by
the Company under the Note, at law or in equity.





 



          Section
7.    Sale of Collateral.


          (a)      If at any time when the Company shall
determine to exercise its right to sell all or any part of the Collateral
pursuant to Section 6 hereof, such Collateral or the part thereof to be sold
shall not, for any reason whatsoever, be effectively registered under the
Securities Act, the Company may, in its sole and absolute discretion, sell such
Collateral or part thereof by private sale in such manner and under such
circumstances as the Company may deem necessary or advisable in order that such
sale may legally be effected without such registration. Without limiting the
generality of the foregoing, in any such event the Company, in its sole and
absolute discretion, (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Collateral or part thereof shall have been filed under the Securities Act,
(ii) may approach and negotiate with a single possible purchaser to effect such
sale and (iii) may restrict such sale to a purchaser who will represent and
agree that such purchaser is purchasing for its own account, for investment,
and not with a view to the distribution or sale of such Collateral or part
thereof.  In the event of any such sale,
the Company shall incur no responsibility or liability for selling all or any
part of the Collateral at a price which the Company, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration as aforesaid.  Borrower agrees that the Company need not
sell the Collateral in a public offering even though it may yield a higher
price than the actual method of sale.


          (b)      Borrower agrees that a sale of any Collateral
is a public sale pursuant to Section 9-504(3) of the Uniform Commercial Code if
(i) an offer to sell such Collateral has been advertised for at least one day
in each of two consecutive weeks in any newspaper of general circulation in the
San Francisco financial community and such sale is made more than 10 days after
the first such advertisement or (ii) such Collateral is offered to at least
five bona fide offerees who the
Company reasonably believes may be interested in that type of investment.  This shall not constitute an admission that
any such offer is a public offering under securities laws or that any other
method of sale is not a public sale.


          Section
8.    Application of Proceeds.  Any proceeds of disposition of any Collateral
shall be applied:


          first, to
the Company’s expenses in enforcing its rights and remedies, including
reasonable attorney’s fees and expenses,


          second, to
the satisfaction of the Obligations, in the order and manner provided in the
Note,


          third, to
the payment of any other amount required by law, and


          fourth, to
Borrower.


          Borrower
shall remain liable for any deficiency in the Obligations.





 


          Section
9.    Possession of Collateral.  For
convenience purposes only, and not to extend any rights to Borrower thereby,
Borrower shall be entitled to hold the Collateral in trust subject to the
provisions of this Agreement, except as from time to time the Collateral may be
required for recordation or for the purpose of enforcing or realizing upon any
right or value represented thereby.  As
further described below in Section 12, Borrower’s possession of the Collateral
does not give Borrower the right to transfer the Collateral or take any other
action that would restrict or nullify the Company’s rights to hold a perfected
security interest in the Collateral.  In
order to handle the administrative task of transferring ownership of the
Collateral from Borrower should an Event of Default occur and Borrower fail to
provide the Company with the certificates representing the Collateral, Borrower
shall deliver to the Company three undated stock powers with respect to the
certificates representing the Pledged Shares duly executed in blank,
substantially in the form of Exhibit A attached hereto.


          Section
10.  Release of Collateral.


          (a)      If the Aggregate Market Value on any date
exceeds the Borrowing Base on such date, then Borrower shall be entitled to
obtain a release of Pledged Shares from this Agreement and the security
interest created hereby so long as, immediately after giving effect to such
release, the Aggregate Market Value is not less than the Borrowing Base.  As used herein, (i) “Aggregate Market Value”
means, as of any date, the aggregate fair market value of the Pledged Shares on
such date, as determined by the Per Share Market Value on such date, (ii) “Per
Share Market Value” means, as of any date, the closing price per share of
Common Stock of the Company as reported in the Wall Street Journal for the last
trading day immediately preceding such date and (iii) “Borrowing Base” means,
as of any date, 120% of the principal balance of the Note outstanding on such
date.


          (b)      In the event that the Aggregate Market Value
is less than the Borrowing Base, then Borrower shall have no obligation to
pledge additional shares of Common Stock of the Company.


          (c)      At the request of Borrower, the Company shall
promptly execute and deliver to Borrower all such certificates and other
instruments, including the filing of any amended UCC-1 financing statements, as
shall be necessary or appropriate in order to effectuate any release to which
Borrower has become entitled under this Section 10.


          (d)      If Borrower wishes to sell Pledged Shares
that Borrower is not entitled to have released under this Section 10 for the
purpose of using the proceeds to pay obligations under the Note, the Company
and Borrower shall cooperate to facilitate the prompt execution of such sales
and delivery to the Company of the proceeds thereof as payment under the Note.


          Section
11.  Representations and Warranties of
Borrower.  Borrower hereby represents and warrants to
the Company as follows:


          (a)      Borrower has the legal capacity necessary or
advisable to enter into and perform this Agreement.


          (b)      Borrower has duly executed and delivered this
Agreement.





 


          (c)      Borrower’s execution, delivery and
performance of this Agreement, and the enforcement by the Company of any of its
rights hereunder, do not and will not breach or constitute a default, give rise
to any right of acceleration or termination or result in or require the
creation of any Lien under any agreement or instrument to which Borrower is a
party or by which Borrower or any of Borrower’s property is bound.


          (d)      This Agreement is a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms.


          (e)      This Agreement creates in favor of the
Company a legal, valid and binding security interest, enforceable in accordance
with its terms, in all the Collateral.


          (f)      The Company has a first priority security
interest in the Pledged Shares.  No
action by the Company is required to perfect a first priority security interest
in favor of the Company in all Collateral.


          Section
12.  Certain Covenants of Borrower.  Borrower covenants and agrees with the
Company that until the Obligations are paid and performed in full:


          (a)      Borrower
shall promptly notify the Company of the occurrence or existence of any Event
of Default or the occurrence or existence of any condition or event that, with
the giving of notice or lapse of time or both, would be an Event of Default.


          (b)      Borrower shall maintain the Collateral
free from any Lien adverse to the Company.


          (c)      Borrower shall keep accurate records with
respect to the Collateral. If requested by the Company, Borrower shall permit
the Company and its agents and representatives to examine and make copies or
abstracts of such records. If requested by the Company, Borrower shall prepare
and deliver to the Company a statement accurately identifying or describing any
or all Collateral.


          (d)      Borrower agrees to take any action
(including the execution, delivery, recording, filing, rerecording and refiling
of any financing statements, continuation statements or other documents) that
the Company may reasonably request to (i) perfect, continue, maintain, preserve
and protect the security interest purported to be created hereby as a first
priority security interest in all the Collateral, (ii) enable the Company to
exercise and enforce its rights and remedies or (iii) otherwise effect the
purposes of this Agreement.  If the
Company believes that it needs to obtain injunctive relief  in order to perfect its security interest in
the Collateral, Borrower agrees to consent to such injunctive relief without
delay or challenge.


          (e)      Borrower shall not permit or suffer to
exist any Lien on any Collateral, or part thereof, except for the security
interest created hereby.


          (f)      Borrower shall not transfer, pledge or
otherwise assign the Pledged Shares and agrees that its right to retain
possession of the collateral pursuant to Section 9 is for convenience only and
Borrower shall not take any action that would restrict or nullify the Company’s
rights hereunder.


          

(g)      Borrower
shall not use any proceeds from the Loan to buy or carry public company stock.



          Section 13.  No
Waiver; Modifications in Writing.  No failure or delay on the part
of the Company in exercising any right, power or remedy hereunder shall operate
as a waiver hereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. 
The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company at law or in equity or
otherwise.  No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement nor
consent to any departure by Borrower shall be effective unless the same shall
be in writing and signed by or on behalf of the Company. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement and any consent to any departure by Borrower
from the terms of any provision of this Agreement shall be effective only in
the specific instance and for the specific purpose for which made or
given.  Except where notice is
specifically required by this Agreement or the Note, no notice to or demand on
Borrower in any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances.


          Section 14.  Security
Agreement as Financing Statement. The Company is authorized to file this Agreement or a photocopy hereof
as a financing statement with respect to any one or more items comprising the
Collateral.


          Section 15.  Counterparts. 
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one such
counterpart.


          Section 16.  Security
Interest Absolute.  All rights of the Company and security
interests hereunder, and all obligations of Borrower hereunder, shall be absolute
and unconditional irrespective of:


          (a)      any lack of validity or enforceability of
the Note or any other agreements or instruments relating thereto;


          (b)      any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the Note;


          (c)      any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or


          (d)      any other circumstance which might
otherwise constitute a defense available to, or a discharge of, Borrower or a
third party pledgor.


          Section 17.  Governing Law.  THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW.





 


          Section
18.  Severability Of Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


          Section
19.  Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (a) if to Borrower, addressed to Borrower’s
residence address on the records of the Company or at such other address as
Borrower shall have specified to the Company in writing; and (b) if to the
Company, addressed to it at its executive office address or at such other
address as the Company shall have specified to Borrower in writing.


          Section
20.  Submission to Jurisdiction.  BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CALIFORNIA
OVER ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHT UNDER
THIS AGREEMENT OR THE NOTE OR (B) ARISING FROM OR RELATING TO ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND THE NOTE,
AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL
COURT. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
BORROWER AT BORROWER’S ADDRESS FOR NOTICES PURSUANT TO SECTION 19, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO BORROWER AT BORROWER’S ADDRESS PROVIDED
IN SECTION 19, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS.
BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT HE MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM OR VENUE TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. BORROWER AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
SECTION 20 SHALL AFFECT THE RIGHT OF ANY OTHER PERSON TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITED BY APPLICABLE LAW, OR THE RIGHT OF ANY OTHER PERSON
TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR THE PROPERTY OF BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.





 


          Section
21.  Final Agreement of the Parties.  THE NOTE AND THIS AGREEMENT REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS REFERRED TO
THEREIN AND HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS
REFERRED TO HEREIN OR IN THE NOTE.


          Section
22.  Headings, etc. The headings, captions and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.  In
this Agreement, unless a clear contrary intention appears, (i) the words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Section or other
subdivision and (ii) reference to any Section means such Section of this
Agreement.


          Section
23.  Waiver of Protest and Bond.  In the event the Company seeks to take
possession of any or all of the Collateral by injunctive relief or other
judicial process, Borrower hereby irrevocably waives protest any bonds and any
surety or security relating thereto that may be required by applicable law as
an incident to such possession, and waives any demand for possession prior to
the commencement of any such suit or action.


          Section
24.  Benefit.  The
Company may assign all or part of its rights under this Agreement to any holder
of an Obligation. Borrower, the Company and their permitted successors and
assigns shall be bound by this Agreement. They shall be the only Persons
entitled to its benefits.


 


[THE
REST OF THIS PAGE INTENTIONALLY LEFT BLANK]


 










          IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.




	BORROWER:



	Signature:	/s/
  Sheryle J. Bolton



	 	


	Printed
  Name: Sheryle J. Bolton


	THE COMPANY:
	 
	SCIENTIFIC LEARNING CORPORATION
	 
	By:	/s/
  Carleton A. Holstrom



	 	Carleton
  A. Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors
			







 


[SIGNATURE
PAGE TO PLEDGE AGREEMENT]


 










EXHIBIT A


ASSIGNMENT SEPARATE FROM CERTIFICATE


          FOR
VALUE RECEIVED, ______________________ hereby sells,
assigns and transfers unto ______________________, ______________________
(_______) shares of the Common Stock of Scientific Learning Corporation (the “Company”) standing in the
undersigned’s name on the books of the Company represented by Certificate
No.(s) ______________________ herewith and do hereby irrevocably constitute and
appoint the Company’s transfer agent to transfer the said stock on the books of
the Company with full power of substitution in the premises.


Dated:  __________




	Signature
  of Borrower: _____________________________


	Name
  of Borrower: ________________________________


	 
	If Applicable:


	Additional
  Signature:________________________________


	Name
  of Signatory:_________________________________


	 














EXHIBIT B


UCC-1 FINANCING STATEMENT


	 	THIS
  SPACE FOR USE OF FILING OFFICER



 


 


 


FINANCING STATEMENT — FOLLOW INSTRUCTIONS CAREFULLY

This Financing
Statement is presented for filing pursuant to the Uniform Commercial Code

and will remain effective, with certain exceptions, for 5 years from date of
filing.


	A. NAME & TEL. # OF CONTACT AT FILER (optional)	B. FILING OFFICE ACCT. # (optional)	 
	C.
  RETURN COPY TO:  (Name and Mailing
  Address)


              Diana
  R. Sanchez
              Cooley
  Godward LLP
              3000
  El Camino  Real
              Palo
  Alto, CA  94306


	








	 
	D. OPTIONAL DESIGNATION (if applicable): :
  LESSOR/LESSEE  :
  CONSIGNOR/CONSIGNEE  :
  NON-UCC FILING	 
	1. DEBTOR’S EXACT FULL LEGAL NAME - insert only
  one debtor name (1a or 1b)
	           OR	1a. ENTITY’S NAME
	 	 
	 	1b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	1c. MAILING ADDRESS	CITY	STATE	COUNTRY	POSTAL CODE
	 	 	 	 	 
	1d. S.S. OR TAX I.D.#	OPTIONAL
ADD’NL INFO RE
ENTITY DEBTOR	1e. TYPE OF ENTITY	1f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	1g. ENTITY’S ORGANIZATION I.D.#, if any
                      
                    o NONE
	 
	2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME -
  insert only one debtor name (2a or 2b)
	OR	2a. ENTITY’s name
	 	 
	 	2b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	2c. MAILING ADDRESS	CITY	STATE	COUNTRY	POSTAL CODE
	 	 	 	 	 
	2d. S.S. OR TAX I.D.#	OPTIONAL
ADD’NL INFO RE
ENTITY DEBTOR	2e. TYPE OF ENTITY	2f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	2g. ENTITY’S ORGANIZATION I.D.#, if any
                    
                      o NONE
	 
	3. SECURED PARTY’S (ORIGINAL S/P or ITS TOTAL
  ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or
  3b)
	OR	3a.
  ENTITY’S NAME
                                   
     SCIENTIFIC LEARNING CORPORATION
	 	3b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	3c.
  MAILING ADDRESS
          1995
  University Avenue, Suite 400	CITY
Berkeley	STATE
CA	COUNTRY
USA	POSTAL
  CODE
94704
	 
	4.  This FINANCING STATEMENT covers the
  following types or items of property:

All right, title and interest of Debtor in, to and under
  the personal property set forth on EXHIBIT A
  attached hereto and incorporated herein by reference.


	 	 
	5.CHECK o
    BOX
    
(if applicable)	This
  FINANCING STATEMENT is signed by the Secured Party instead of the Debtor to
  perfect a security interest (a) in collateral already subject to a security
  interest in another jurisdiction when it was brought into this state, or when
  the debtor’s location was changed to this state, or (b) in accordance with
  other statutory provisions [additional data may be required]	 	 	7.
  If filed in Florida (check one)
o Documentary            o
 Documentary
stamp tax paid                tax not applicable
	 
	6. REQUIRED SIGNATURE(S)	8. :
  This FINANCING STATEMENT is to be filed [for record]
(or recorded) in the REAL ESTATE
  RECORDS
Attach Addendum     [if applicable]
	 
	By:                           
                                  Title:	9. Check to REQUEST SEARCH CERTIFICATE(S) on
  debtor(s)
[ADDITIONAL FEE]
(optional)     o All Debtors    o
 Debtor 1    o Debtor 2
	 
	(1) FILING OFFICER COPY — NATIONAL FINANCING STATEMENT (FORM UCC1)
  (TRANS.) (REV. 12/18/95)
														











Exhibit A

to


UCC-1 Financing Statement


between


SCIENTIFIC LEARNING
CORPORATION, as Secured Party


and


______________________________, as Debtor











1.                 Borrower hereby pledges, hypothecates,
assigns and grants to the Secured Party a continuing security interest of first
priority in all of the Collateral.



2.       For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings:



          “Code” means the Uniform Commercial Code
in effect in the State of California.



          “Collateral” means (a) the Pledged Shares
and the certificates representing the Pledged Shares, and all dividends, cash
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares, (b) all dividends, distributions and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares and (c) all proceeds of any of the
foregoing (whether such proceeds arise before or after the commencement of a
case under the bankruptcy laws by or against Borrower as debtor).



           “Pledged Shares” means ________________ shares of Common Stock of
the Company registered in the name of Borrower represented by stock certificate
number(s) __________________________.



 





 


Exhibit


LOAN
AGREEMENT


          THIS
LOAN AGREEMENT (this “Agreement”), dated as of April 11,
2001, is executed by Frank M. Mattson (“Borrower”), and SCIENTIFIC
LEARNING CORPORATION, a Delaware corporation (the “Company”).  All capitalized terms that are not otherwise
defined herein shall have the meaning set forth in the Security Agreement.


RECITALS


          WHEREAS, the Board
of Directors of the Company has authorized the Company to loan up to $275,000
(the “Loan Cap”) to Borrower, which loan will not be used to buy or carry
public company stock (the “Loan”);


          WHEREAS, the
parties wish to execute this Agreement to confirm the Company’s commitment to
extend such Loan and to attach the form of agreements to be used in executing
the Loan and extending a security interest to the Company as collateral for the
Loan;


          NOW,
THEREFORE, in consideration of the promises made herein and for other
good and valuable consideration, Borrower and the Company hereby agree as
follows:


          1.       Loan.  Subject to the provisions of this Agreement,
the Company agrees, at any time prior to April 15, 2001, to make the Loan to
Borrower pursuant to a secured promissory note substantially in the form of Exhibit A
(the “Note”) and the pledge agreement substantially in the form of Exhibit B
(the “Security Agreement”) within five (5) business days of a written request
from Borrower.  Borrower may request
that the amount of the Loan be less than the Loan Cap.  Unless agreed to in writing by the Company,
after authorization by the Compensation Committee of the Board of Directors,
the Loan Cap shall not be increased.


          2.       Conditions to the
Company’s Loan.  The Company’s obligation to make the Loan described in Section 1
is contingent upon the following:


                    (a)      the Company’s obtaining a
satisfactory
bank loan to finance the full amount of the Loan, which bank loan is expected
to be guaranteed by Warburg Pincus . or its affiliates;


                    (b)      the delivery by Borrower of an
executed
copy of the Note, the Security Agreement, three undated stock powers with
respect to the certificates representing the Pledged Shares executed in blank
by Borrower substantially in the form attached as an Exhibit to the Security
Agreement, one or more UCC-1 financing statements substantially in the form
attached as an Exhibit to the Security Agreement and such other documents as
the Company shall reasonably request to perfect its security interest in the
Collateral;


                    (c)      Borrower shall not have
commenced a
voluntary proceeding seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of Borrower’s property nor shall Borrower consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against Borrower nor shall
Borrower make a general assignment for the benefit of creditors or generally
fail to pay Borrower’s debts as they become due or shall take any action to
authorize any of the foregoing;





                    (d)      an involuntary proceeding shall not have
been commenced against Borrower seeking liquidation, reorganization or other
relief with respect to Borrower or Borrower’s debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for Borrower or a substantial part of his property;


                    (e)      Borrower’s employment by or
association
with the Company is terminated for “cause” (as defined in the form of Note
attached hereto as Exhibit A); and


                    (f)      Borrower is employed by, or
provides
consulting services to, another company or business that provides
neuroscience-based educational technology products.


          3.       Miscellaneous


                    (a)      Governing Law.  This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the internal laws of the State of California,
without reference to principles of conflicts of laws.


                    (b)      Counterparts.  
This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


                    (c)      Entire Agreement.
 This Agreement and the exhibits hereto
constitute the entire agreement between the parties relating to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.


                    (d)      Severability Of
Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


                    (e)      Notices.  All
written communications provided for hereunder shall be sent by first class mail
or nationwide overnight delivery service (with charges prepaid) and (a) if to
Borrower, addressed to Borrower’s residence address on the records of the
Company or at such other address as Borrower shall have specified to the Company
in writing; and (b) if to the Company, addressed to it at its executive office
address or at such other address as the Company shall have specified to
Borrower in writing.


                    (f)      Benefit.  The
Company may assign all or part of its rights under this Agreement to any other
party.  Borrower may not assign its
rights or obligations hereunder without the Company’s express written
consent.  Borrower, the Company and
their permitted successors and assigns shall be bound by this Agreement.  They shall be the only persons entitled to
its benefits.





                    (g)      Expenses. 
Each party to this Agreement and the exhibits shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions and agreements.


                    (h)      Amendments.
 
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived, only with the written consent of the Company
and Borrower.


                    (i)       Termination.
 
This Agreement, and all obligations hereunder, shall terminate and be of
no force and effect, after April 15, 2001.


 


[THE REST OF
THIS PAGE INTENTIONALLY LEFT BLANK]





          IN WITNESS WHEREOF, the parties hereto have executed this
Loan Agreement as of the date first above written.


	 	BORROWER:
	 	 	 
	 	 	 
	 	Signature:	/s/ Frank M. Mattson



	 	 	 
	 	 
	 	Printed Name: Frank M. Mattson
	 	 
	 	 
	 	THE COMPANY:
	 	 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 	 
	 	 	 
	 	By:	/s/ Carleton Holstrom



	 	 	Carleton Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors
				



 


[SIGNATURE
PAGE TO LOAN AGREEMENT]





SECURED PROMISSORY NOTE


 


	$236,000.00	April 11, 2001
	 	Oakland,
  California



 


          FOR VALUE RECEIVED, Frank M.
Mattson (“Borrower”), an employee of
Scientific Learning Corporation, a Delaware corporation (“Company,)
hereby unconditionally promises to pay to the order of Company, in lawful money
of the United States of America and in immediately available funds, the
principal sum of Two Hundred Thirty-Six Thousand Dollars ($236,000.00) (the “Loan”) together with accrued
and unpaid interest thereon, due and payable on the dates and in the manner set
forth below.


          It is the intent of the parties that the
purpose of this Note is not for consumer, family or household purposes.


          This Secured Promissory Note is the Note
referred to in and is executed and delivered in connection with that certain
Pledge Agreement dated as of even date herewith and executed and delivered by
Borrower in favor of Company (as the same may from time to time be amended,
modified or supplemented or restated (the “Security Agreement”).  Additional rights of Company are set forth
in the Security Agreement.  All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to them in the Security Agreement.


          1.       Principal Repayment.  The
outstanding principal amount of the Loan shall be due and payable on December
31, 2005 (the “Termination Date”).


          2.       Interest Rate.       Borrower further promises to pay interest on the
outstanding principal
amount hereof from the date hereof until payment in full, which interest shall
be compounded annually and payable at the rate of Four and 94/100 (4.94%) per
annum or the maximum rate permissible by law (which under the laws of the State
of California shall be deemed to be the laws relating to permissible rates of
interest on commercial loans), whichever is less.  Interest shall be due and payable on the Termination Date and
shall be calculated on the basis of a 365 day year for the actual number of
days elapsed.


          Any principal repayment or interest payment
on the Loan hereunder not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest at Six and 94/100 percent
(6.94%) per annum.


          3.        Manner of Payment. Both principal and interest are payable in
immediately available funds in lawful money of the United States of America to
the Company at the principal office of Company unless another place of payment
shall be specified in writing by Company.





 


          4.       Application of Payments. 
Payment on this Note shall be applied first to accrued interest, if any,
and thereafter to the outstanding principal balance hereof.  Borrower may at any time pay the full amount
or any portion of this Note without notice or payment of any penalty, premium
or fee.  Any such prepayment shall be
accompanied by payment of any and all accrued and unpaid interest on the amount
prepaid. All payments made on account of the principal of or interest on this
Note shall be recorded in the books and records of the Company; provided, however, that the failure of the
Company to make any notation or any error therein shall not in any manner
affect the obligation of Borrower to repay this Note in accordance with the
terms hereof.  Borrower agrees that any
document submitted by the Company purporting to show the outstanding principal
amount of this Note and all accrued and unpaid interest hereon shall be
conclusive in the absence of manifest error.


          5.       Secured Note.  The
full amount of this Note is secured by the collateral identified and described
as security therefor in the Security Agreement. Borrower shall not, directly or
indirectly, create, permit or suffer to exist, and shall defend the collateral
against and take such other action as is necessary to remove, any lien on or in
the collateral, or in any portion thereof, except as permitted pursuant to the
Security Agreement.  To the extent
Borrower is unable to satisfy this Note when due with the collateral described
in the Security Agreement, the Company may hold Borrower personally liable for
this Note or assert any claim against Borrower for the payment of this Note.


          6.       Default.  Each
of the following events shall be an “Event of Default” hereunder:


                    (a)      Borrower shall fail to pay when due the
Obligations or any part thereof and such failure shall have continued for at
least five business days thereafter;


                    (b)      Any representation or warranty made or deemed
made
by Borrower in the Security Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with the Security
Agreement, the Loan or this Note shall be false, misleading or erroneous in any
material respect when made or deemed to have been made;


                    (c)      Borrower shall fail to perform, observe or comply
with any covenant, agreement or term contained in the Security Agreement and
such failure shall continue for a period of ten business days after the earlier
of (i) notice thereof being given by the Company to Borrower or (ii) such
default otherwise becoming known to Borrower;


                    (d)      Borrower shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for him or a
substantial part of his property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against him or shall make a general assignment for
the benefit of creditors or shall generally fail to pay his debts as they
become due or shall take any action to authorize any of the foregoing;





 


                    (e)      an involuntary proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of his property, and such involuntary proceeding shall
remain undismissed and unstayed for a period of 60 days;


                    (f)      the Security Agreement or this Note shall
cease to be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Borrower, or Borrower shall deny any further liability or obligation under the
Security Agreement or this Note;


                    (g)      Borrower’s employment by or association with
the Company is terminated for “cause” (as defined below);


                    (h)      Borrower is employed by, or provides
consulting services to, another company or business that provides
neuroscience-based educational technology products; or


                    (i)       Borrower shall breach any representation or
covenant under the Security Agreement.


          Upon the occurrence of an Event of Default
hereunder, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Company, and, in the case of an Event of
Default pursuant to (d), (e) or (f)
above, automatically, be immediately due, payable and collectible by Company
pursuant to applicable law. 
Notwithstanding the foregoing, if an Event of Default has occurred under
(g) or (h) above (together, the “Employment Defaults”), Borrower shall have
90 days after such event to pay all unpaid principal, accrued interest and
other amounts owing hereunder.   Company
shall have all rights and may exercise any remedies available to it under law,
successively or concurrently.  Borrower
expressly acknowledges and agrees that the Company shall have the right to
offset any obligations of Borrower hereunder against salaries, bonuses or other
amounts that may be payable to Borrower by the Company.


          “Cause” shall be defined to include the
following, as determined in good faith by the Board of Directors in its sole
discretion: (i) material breach of the Company’s policies, (ii) material breach
of the Security Agreement or this Note, (iii) neglect or abandonment of
assigned duties, (iv) the commission of any act of fraud, embezzlement or
dishonesty against the Company, (v) conviction of any felony or any crime of
moral turpitude or dishonesty, (vi) intentional damage to the Company’s
property, (vii) any material breach of a proprietary information and inventions
agreement with the Company or unauthorized use or disclosure of confidential
information or trade secrets of the Company, or (viii) conduct by Borrower
which demonstrates unfitness to serve.


          Waiver. Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred, including, without limitation,
reasonable attorneys’ fees, costs and other expenses.


          The
right to plead any and all statutes of limitations as a defense to any demands
hereunder is hereby waived to the full extent permitted by law.





 


          7.       Governing Law.  This
Note shall be governed by, and construed and enforced in accordance with, the
laws of the State of California, excluding conflict of laws principles that
would cause the application of laws of any other jurisdiction.


          8.       Expenses. 
Borrower agrees to pay all reasonable costs and expenses, including,
without limitation, reasonable attorneys’ fees and costs of court, incurred by
Company or any other holder of this Note in collecting or enforcing payment of
this Note in accordance with its terms.


          9.       Amendment. This Note may not be changed, amended or
modified except in a writing executed by Borrower and the holder hereof.


          10.     Complete Agreement. This Note and the Security Agreement
represent the final agreement between Borrower and Company with respect to the
matters referred to herein and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreement of Borrower and Company.  There are no oral agreements between
Borrower and Company with respect to the matters referred to herein.


          11.     Successors and Assigns.  The
provisions of this Note shall inure to the benefit of and be binding on any
successor to Borrower and shall extend to any holder hereof. Borrower shall
not, without the prior written consent of holder, assign any of its rights or
obligations hereunder.


          IN WITNESS WHEREOF, this Note has been executed as of the date
first written above.


BORROWER:


	Signature:	/s/ Frank M. Mattson



	 
	Printed Name: Frank M.
  Mattson



 





PLEDGE AGREEMENT


             THIS PLEDGE AGREEMENT (this
“Agreement”), dated as of April 11, 2001 is executed by Frank M. Mattson
(“Borrower”), an individual residing in San Francisco, California, and SCIENTIFIC LEARNING CORPORATION, a Delaware
corporation (the “Company”).


             WHEREAS,
the Company has loaned $236,000 to Borrower which loan will not be used to buy
or carry public company stock;


             WHEREAS,
such loan (the “Loan”) is evidenced by a Secured Promissory Note, dated the
date hereof, executed by Borrower and made payable to the order of the Company
(together with all renewals, extensions and replacements thereof, the “Note”);
and


             WHEREAS,
the Company was unwilling to make the Loan to Borrower unless Borrower entered
into this Agreement to secure the payment and performance of the Note by
Borrower.


             NOW, THEREFORE,
Borrower and the Company hereby agree as follows:


             Section 1.         Definitions.  For purposes of this Agreement, except as otherwise

expressly provided or unless the context otherwise requires, the following
terms shall have the following respective meanings:


             “Code” means the Uniform Commercial
Code in effect in the State of California.



             “Collateral” means (a) the Pledged
Shares and the certificates representing the Pledged Shares, and all dividends,
cash instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares, (b) all dividends, distributions and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares and (c) all proceeds of any of
the foregoing (whether such proceeds arise before or after the commencement of
a case under the bankruptcy laws by or against Borrower as debtor).



             “Event of Default” means any one or
more of the following events:



             (a)         Borrower shall fail to pay when due the Obligations
or any part thereof and such failure shall have continued for at least five
business days;



             (b)         any representation or warranty made or deemed made
by Borrower in this Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with this Agreement,
the Loan or the Note shall be false, misleading or erroneous in any material
respect when made or deemed to have been made;



             (c)         Borrower shall fail to perform, observe or comply
with any covenant, agreement or term contained in this Agreement and such
failure shall continue for a period of five business days after the earlier of
(i) notice thereof being given by the Company to Borrower or (ii) such default
otherwise becoming known to Borrower;






             (d)         Borrower shall commence a voluntary proceeding seeking liquidation,
reorganization or other relief with respect to Borrower or Borrower’s debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official for him or a substantial part of his property or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against him or shall make a general assignment for the benefit of creditors or
shall generally fail to pay his debts as they become due or shall take any
action to authorize any of the foregoing;



             (e)         an involuntary proceeding shall be commenced against
Borrower seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for Borrower or a
substantial part of his property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of 60 days;



             (f)         this Agreement or the Note shall cease to be in full
force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, or
Borrower shall deny any further liability or obligation under this Agreement or
the Note; or



             (g)        ninety (90) days after any Employment Default (as
defined in the Note), if any amount then remains outstanding under the Note.



             “Lien” means any lien, mortgage,
security interest, tax lien, pledge, assessment, encumbrance, lease, adverse
claim, levy, charge or retained interest pursuant to a conditional sale or
title retention contract, or any other interest in property designed to secure
the repayment of debt or any other obligation, whether arising by agreement,
operation of law or otherwise, or any contract to give any of the foregoing.



             “Loan” has the meaning specified in
the second recital hereof.



             “Note” has the meaning specified in
the second recital hereof.



             “Obligations” means all obligations
of Borrower to the Company under or in connection with the Note, regardless of
how created, arising or evidenced and whether direct or indirect, primary or
secondary, absolute or contingent, joint or several or now or hereafter
existing or due or to become due, and all interest accruing thereon, and all
attorneys’ fees and other expenses incurred in the enforcement or collection
thereof.



             “Person” means any natural person,
partnership, corporation, business trust, association, company, limited
liability company, joint venture, governmental authority or any other form of
business or legal entity.






             “Pledged Shares” means a
total of 52,591 shares of Common Stock of the Company registered in the name of
Borrower, 24,926 of which are represented by stock certificate number SCI 1973
and 27,665 of which are presently held in street name and  are in the process of being certificated.  Notwithstanding the foregoing, “Pledged Shares”
shall not include any shares of Common Stock of the Company which have been
released from this Agreement pursuant to Section 10.



             “Securities Act” means the
Securities Act of 1933, as amended.



             Unless the context otherwise
requires, terms defined in the Code shall have the same meanings when used in
this Agreement.


             Section 2.         Pledge.


                           (a)         
As security for the prompt and complete payment and
performance when due of all of the Obligations, Borrower hereby pledges,
hypothecates, assigns and grants to the Company a continuing security interest
of first priority in all of the Collateral.


                           (b)         
On the date hereof, Borrower shall deliver to the
Company three undated stock powers with respect to the certificates
representing the Pledged Shares duly executed in blank, substantially in the
form of Exhibit A attached hereto, one or more UCC-1 financing
statements, substantially in the form of Exhibit B attached hereto, and
such other documents as the Company shall reasonably request to perfect its
security interest in the Collateral.


             As further described in this
Agreement, nothing in this Agreement, the Note or any other agreement shall
limit the Company’s right to hold Borrower personally liable for the Note or
assert any claim against Borrower for the payment of the Note.


             Section 3.         Stock
Dividends, etc.  If, while this Agreement is in
effect, Borrower shall become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital, or issued in connection with any
reorganization), option or rights (in connection with Borrower’s ownership of
the Collateral, whether as an addition to, in substitution of or in exchange
for any Pledged Shares or any other Collateral), Borrower agrees to accept the
same as the Company’s agent and to hold the same in trust on behalf of and for
the benefit of the Company, subject to the terms of this Agreement, as
additional Collateral.





             Section 4.         Cash
Dividends; Voting Rights; Dissolution.


                           (a)         
Unless an Event of Default shall have occurred and
be continuing, Borrower shall be entitled, except as provided in Sections 3 and
5, to receive all dividends and distributions in respect of the Collateral, to
vote the Collateral and to give consents, waivers and ratifications in respect
of the Collateral; provided, however,
that no vote shall be cast or consent, waiver or ratification given or action
taken which would have a material adverse effect on the value or marketability
of the Collateral or be inconsistent with or violate the provisions of this
Agreement and, provided further,
that any sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of the issuer thereof shall be paid over to the Company to be held
by it as additional Collateral for the Obligations subject to the term hereof.


                           (b)         
Borrower hereby appoints the Company, with full
power of substitution, effective upon the occurrence of any Event of
Default,  as Borrower’s proxy and
attorney-in-fact to vote, give consents and approvals, call meetings and
exercise any other rights with respect to the Pledged Shares or any other
Collateral.  This proxy and
power-of-attorney shall be in full force and effect upon the occurrence of any
Event of Default until the termination of this Agreement and is irrevocable and
exclusive and shall not be terminated or otherwise affected by any action or
inaction of Borrower or by operation of law, by death or disability of Borrower
or by the occurrence of any other event. 
Except as set forth in paragraph (a) above, Borrower shall have no right
to vote, give consents or approvals or exercise any other right with respect to
the Pledged Shares or any other Collateral.


             Section 5.         Rights
of the Company.


                           (a)         
The Company shall have the right to deliver any
stop-order instructions to the Company’s transfer agent in order to prevent
Borrower from making any transfers or pledges of the Pledged Shares in
violation of this Agreement.  The
Company shall also have the right to remove any such stop-order instructions at
any time.


                           (b)         
Subject to the Company’s obligations under secured
transactions law if the Company has taken possession of the Collateral, the
Company shall not be liable for failure to collect or realize upon the
Obligations secured hereby or any collateral security or guarantee therefor, or
any put thereof, or for any delay in so doing, nor shall the Company be under
any obligation to take any action whatsoever with regard thereto.


                           (c)         
If an Event of Default has occurred and is
continuing, the Company shall notify Borrower in writing requesting immediate
delivery by Borrower to the Company of any and all certificates comprising a
part of the Collateral.  If Borrower
delivers such certificate(s), the Company may transfer or register or have
registered in the name of the Company or the Company’s nominee any and all
shares comprising a part of the Collateral, and the Company or its nominee may
thereafter exercise all voting and corporate rights at any meeting of the
Company’s shareholders and any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any
shares comprising a part of the Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, at its
discretion, any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Company or upon
the exercise by Borrower or the Company of any right, privilege or option
pertaining to the Collateral, and, in connection therewith, to deposit and
deliver any and all of the Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for property actually
received by it. If Borrower fails to deliver such certificates within three (3)
business days of receipt of the Company’s notice, Borrower agrees that the
Company may complete one or more stock powers in order to transfer to the
Company (or such other individual or entity as the Company determines) the
number of shares necessary to satisfy the Obligations and the Company shall
have such rights described in this Section 5. 
The Company shall have no duty to exercise any of the aforesaid rights,
privileges or options, and the Company shall not be responsible for any failure
to do so or delay in so doing.





 



             Section 6.         Remedies.


                           (a)         
In the event that an Event of Default shall have
occurred and be continuing, the Company may (i) by notice to Borrower, declare
the Note, or any portion thereof, to be immediately due and payable, and the
same shall thereupon become immediately due and payable, without any other
notice and without demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower to the extent permitted by law and/or (ii) without demand of
performance or other demand, advertisement or notice of any kind to or upon
Borrower or any other Person (all and each of which demands, advertisements
and/or notices are hereby expressly waived to the extent permitted by law),
exercise in respect of the Collateral, in addition to the other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Code (whether or not the Code applies
to the affected Collateral), including collecting, receiving, appropriating and
realizing upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase, contract to sell or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange, broker’s board or
at any of the Company’s offices or elsewhere upon such terms and conditions as
it may, in its absolute discretion, deem advisable and at such prices as it
may, in its absolute discretion, deem best, for cash or on credit or for future
delivery without the assumption of any credit risk, free of any right or equity
of redemption in Borrower, which right or equity is hereby expressly waived and
released to the extent permitted by law, upon any such sale or sales, public or
private, to purchase the whole or any part of the Collateral so sold; provided, however, that Borrower shall not
be credited with the net proceeds of any credit sale or future delivery until
cash proceeds are actually received by the Company.


                           (b)         
Borrower agrees that, to the extent notice of sale
shall be required by law, at least 10 days’ notice to Borrower of the time and
place of any public sale or of the time after which a private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters.


                           (c)         
In case the Company shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Company then and in every such case Borrower and the Company
shall be restored to their respective former positions and rights hereunder
with respect to the Collateral and all rights, remedies and powers of the
Company shall continue as if no such proceeding had been instituted.


                           (d)         
All rights and remedies of the Company expressed
herein are in addition to all other rights and remedies possessed by the
Company under the Note, at law or in equity.





 



             Section 7.         Sale
of Collateral.


                           (a)         
If at any time when the Company shall determine to
exercise its right to sell all or any part of the Collateral pursuant to
Section 6 hereof, such Collateral or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act, the
Company may, in its sole and absolute discretion, sell such Collateral or part
thereof by private sale in such manner and under such circumstances as the
Company may deem necessary or advisable in order that such sale may legally be
effected without such registration. Without limiting the generality of the
foregoing, in any such event the Company, in its sole and absolute discretion,
(i) may proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Collateral or part
thereof shall have been filed under the Securities Act, (ii) may approach and
negotiate with a single possible purchaser to effect such sale and (iii) may
restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a view
to the distribution or sale of such Collateral or part thereof.  In the event of any such sale, the Company
shall incur no responsibility or liability for selling all or any part of the
Collateral at a price which the Company, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale
were deferred until after registration as aforesaid.  Borrower agrees that the Company need not sell the Collateral in
a public offering even though it may yield a higher price than the actual
method of sale.


                           (b)         
Borrower agrees that a sale of any Collateral is a
public sale pursuant to Section 9-504(3) of the Uniform Commercial Code if (i)
an offer to sell such Collateral has been advertised for at least one day in
each of two consecutive weeks in any newspaper of general circulation in the
San Francisco financial community and such sale is made more than 10 days after
the first such advertisement or (ii) such Collateral is offered to at least
five bona fide offerees who the
Company reasonably believes may be interested in that type of investment.  This shall not constitute an admission that
any such offer is a public offering under securities laws or that any other
method of sale is not a public sale.


             Section 8.         Application
of Proceeds.  Any proceeds of disposition of
any Collateral shall be applied:


             first, to the Company’s expenses in
enforcing its rights and remedies, including reasonable attorney’s fees and
expenses,


             second, to the satisfaction of the
Obligations, in the order and manner provided in the Note,


             third, to the payment of any other
amount required by law, and


             fourth, to Borrower.


             Borrower shall remain liable for
any deficiency in the Obligations.





             Section 9.         Possession
of Collateral.  For convenience purposes only,
and not to extend any rights to Borrower thereby, Borrower shall be entitled to
hold the Collateral in trust subject to the provisions of this Agreement,
except as from time to time the Collateral may be required for recordation or
for the purpose of enforcing or realizing upon any right or value represented
thereby.  As further described below in
Section 12, Borrower’s possession of the Collateral does not give Borrower the
right to transfer the Collateral or take any other action that would restrict
or nullify the Company’s rights to hold a perfected security interest in the
Collateral.  In order to handle the
administrative task of transferring ownership of the Collateral from Borrower
should an Event of Default occur and Borrower fail to provide the Company with
the certificates representing the Collateral, Borrower shall deliver to the
Company three undated stock powers with respect to the certificates representing
the Pledged Shares duly executed in blank, substantially in the form of Exhibit
A attached hereto.


             Section 10.      Release
of Collateral.


                           (a)         
If the Aggregate Market Value on any date exceeds
the Borrowing Base on such date, then Borrower shall be entitled to obtain a
release of Pledged Shares from this Agreement and the security interest created
hereby so long as, immediately after giving effect to such release, the
Aggregate Market Value is not less than the Borrowing Base.  As used herein, (i) “Aggregate Market Value”
means, as of any date, the aggregate fair market value of the Pledged Shares on
such date, as determined by the Per Share Market Value on such date, (ii) “Per
Share Market Value” means, as of any date, the closing price per share of Common
Stock of the Company as reported in the Wall Street Journal for the last
trading day immediately preceding such date and (iii) “Borrowing Base” means,
as of any date, 120% of the principal balance of the Note outstanding on such
date.


                           (b)         
In the event that the Aggregate Market Value is less
than the Borrowing Base, then Borrower shall have no obligation to pledge
additional shares of Common Stock of the Company.


                           (c)         
At the request of Borrower, the Company shall
promptly execute and deliver to Borrower all such certificates and other
instruments, including the filing of any amended UCC-1 financing statements, as
shall be necessary or appropriate in order to effectuate any release to which
Borrower has become entitled under this Section 10.


                           (d)         
If Borrower wishes to sell Pledged Shares that
Borrower is not entitled to have released under this Section 10 for the purpose
of using the proceeds to pay obligations under the Note, the Company and
Borrower shall cooperate to facilitate the prompt execution of such sales and
delivery to the Company of the proceeds thereof as payment under the Note.


             Section 11.      Representations
and Warranties of Borrower.  Borrower hereby represents and
warrants to the Company as follows:


                           (a)         
Borrower has the legal capacity necessary or
advisable to enter into and perform this Agreement.


                           (b)         
Borrower has duly executed and delivered this
Agreement.







                           (c)         
Borrower’s execution, delivery and performance of
this Agreement, and the enforcement by the Company of any of its rights hereunder,
do not and will not breach or constitute a default, give rise to any right of
acceleration or termination or result in or require the creation of any Lien
under any agreement or instrument to which Borrower is a party or by which
Borrower or any of Borrower’s property is bound.


                           (d)         
This Agreement is a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its
terms.


                           (e)         
This Agreement creates in favor of the Company a
legal, valid and binding security interest, enforceable in accordance with its
terms, in all the Collateral.


                           (f)         
The Company has a first priority security interest
in the Pledged Shares.  No action by the
Company is required to perfect a first priority security interest in favor of
the Company in all Collateral.


             Section 12.      Certain
Covenants of Borrower.  Borrower covenants and agrees
with the Company that until the Obligations are paid and performed in full:


                           (a)         
Borrower shall promptly notify the Company of the
occurrence or existence of any Event of Default or the occurrence or existence
of any condition or event that, with the giving of notice or lapse of time or
both, would be an Event of Default.


                           (b)         
Borrower shall maintain the Collateral free from any
Lien adverse to the Company.


                           (c)         
Borrower shall keep accurate records with respect to
the Collateral. If requested by the Company, Borrower shall permit the Company
and its agents and representatives to examine and make copies or abstracts of
such records. If requested by the Company, Borrower shall prepare and deliver
to the Company a statement accurately identifying or describing any or all
Collateral.


                           (d)         
Borrower agrees to take any action (including the
execution, delivery, recording, filing, rerecording and refiling of any financing
statements, continuation statements or other documents) that the Company may
reasonably request to (i) perfect, continue, maintain, preserve and protect the
security interest purported to be created hereby as a first priority security
interest in all the Collateral, (ii) enable the Company to exercise and enforce
its rights and remedies or (iii) otherwise effect the purposes of this
Agreement.  If the Company believes that
it needs to obtain injunctive relief  in
order to perfect its security interest in the Collateral, Borrower agrees to
consent to such injunctive relief without delay or challenge.


                           (e)         
Borrower shall not permit or suffer to exist any
Lien on any Collateral, or part thereof, except for the security interest
created hereby.


                           (f)         
Borrower shall not transfer, pledge or otherwise
assign the Pledged Shares and agrees that its right to retain possession of the
collateral pursuant to Section 9 is for convenience only and Borrower shall not
take any action that would restrict or nullify the Company’s rights hereunder.


                           (g)        
Borrower shall not use any proceeds from the Loan to
buy or carry public company stock.





             Section 13.      No
Waiver; Modifications in Writing.  No failure
or delay on the part of the Company in exercising any right, power or remedy
hereunder shall operate as a waiver hereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company at law or in equity or otherwise. 
No amendment, modification, supplement, termination or waiver of or to
any provision of this Agreement nor consent to any departure by Borrower shall
be effective unless the same shall be in writing and signed by or on behalf of
the Company. Any amendment, modification or supplement of or to any provision
of this Agreement, any waiver of any provision of this Agreement and any consent
to any departure by Borrower from the terms of any provision of this Agreement
shall be effective only in the specific instance and for the specific purpose
for which made or given.  Except where
notice is specifically required by this Agreement or the Note, no notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.


             Section 14.      Security
Agreement as Financing Statement. The Company is authorized to file this Agreement or
a photocopy hereof as a financing statement with respect to any one or more
items comprising the Collateral.


             Section 15.      Counterparts.  This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.


             Section 16.      Security
Interest Absolute.  All rights of the Company and
security interests hereunder, and all obligations of Borrower hereunder, shall
be absolute and unconditional irrespective of:


                           (a)         
any lack of validity or enforceability of the Note
or any other agreements or instruments relating thereto;


                           (b)         
any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Note;


                           (c)         
any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or


                           (d)         
any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Borrower or a third party
pledgor.





             Section 17.      Governing
Law.  THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE
TO PRINCIPLES OF CONFLICTS OF LAW.


             Section 18.      Severability
Of Provisions.  Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.


             Section 19.      Notices.
All written
communications provided for hereunder shall be sent by first class mail or
nationwide overnight delivery service (with charges prepaid) and (a) if to
Borrower, addressed to Borrower’s residence address on the records of the
Company or at such other address as Borrower shall have specified to the
Company in writing; and (b) if to the Company, addressed to it at its executive
office address or at such other address as the Company shall have specified to
Borrower in writing.


             Section 20.      Submission
to Jurisdiction.  BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN CALIFORNIA OVER ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY
RIGHT UNDER THIS AGREEMENT OR THE NOTE OR (B) ARISING FROM OR RELATING TO
ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND THE
NOTE, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL
COURT. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
BORROWER AT BORROWER’S ADDRESS FOR NOTICES PURSUANT TO SECTION 19, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO BORROWER AT BORROWER’S ADDRESS
PROVIDED IN SECTION 19, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT HE MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM OR VENUE TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. BORROWER AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
SECTION 20 SHALL AFFECT THE RIGHT OF ANY OTHER PERSON TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITED BY APPLICABLE LAW, OR THE RIGHT OF ANY OTHER PERSON
TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR THE PROPERTY OF BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.





             Section 21.      Final
Agreement of the Parties.  THE NOTE AND THIS AGREEMENT
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS
REFERRED TO THEREIN AND HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS
REFERRED TO HEREIN OR IN THE NOTE.


             Section 22.      Headings,
etc. The headings, captions and arrangements used in this Agreement are for
convenience only and shall not affect the interpretation of this
Agreement.  In this Agreement, unless a
clear contrary intention appears, (i) the words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Section or other subdivision and (ii) reference
to any Section means such Section of this Agreement.


             Section 23.      Waiver
of Protest and Bond.  In the event the Company seeks
to take possession of any or all of the Collateral by injunctive relief or
other judicial process, Borrower hereby irrevocably waives protest any bonds
and any surety or security relating thereto that may be required by applicable
law as an incident to such possession, and waives any demand for possession
prior to the commencement of any such suit or action.


             Section 24.      Benefit.
 The Company may assign all or part of its
rights under this Agreement to any holder of an Obligation. Borrower, the
Company and their permitted successors and assigns shall be bound by this
Agreement. They shall be the only Persons entitled to its benefits.


 


[THE
REST OF THIS PAGE INTENTIONALLY LEFT BLANK]










             IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first above
written.


	 	BORROWER:  
	 	Signature:  /s/ Frank M. Mattson 
	 	 
	 	Printed Name: Frank M. Mattson  
	 	THE COMPANY: 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 
	 	By: 
  /s/ Carleton A. Holstrom
	 	Carleton A. Holstrom, on behalf of the

  Compensation Committee of the Board of Directors
	 
			



 











EXHIBIT
A


ASSIGNMENT SEPARATE FROM
CERTIFICATE


             FOR VALUE RECEIVED,
______________________ hereby sells, assigns and transfers unto ______________________, ______________________ (_______) shares of the
Common Stock of Scientific Learning Corporation (the “Company”) standing in the undersigned’s name on the
books of the Company represented by Certificate No.(s) ______________________ herewith
and do hereby irrevocably constitute and appoint the Company’s transfer agent
to transfer the said stock on the books of the Company with full power of
substitution in the premises.


Dated:  __________


	 	Signature of Borrower:    ____________________________
	 	 
	 	Name of Borrower:
  ________________________________
	 	 
	 	 
	 	If Applicable:
	 	 
	 	Additional
  Signature:________________________________
	 	 
	 	Name of Signatory:   ________________________________
	 	 



 











EXHIBIT
B


UCC-1 FINANCING STATEMENT


	 	THIS SPACE FOR USE OF
  FILING OFFICER



 


 


 


FINANCING
STATEMENT — FOLLOW INSTRUCTIONS CAREFULLY

This Financing Statement is presented for filing pursuant to the Uniform
Commercial Code

and will remain effective, with certain exceptions, for 5 years from date of
filing.


	A. NAME & TEL. # OF CONTACT AT FILER
  (optional)	B. FILING OFFICE ACCT. # (optional)	 
	C. RETURN COPY TO:  (Name and Mailing Address) Diana
  R. Sanchez

  Cooley Godward LLP

  3000 El Camino  Real

  Palo Alto, CA  94306  	  



 	 
	D. OPTIONAL DESIGNATION (if applicable): :
  LESSOR/LESSEE  :
  CONSIGNOR/CONSIGNEE  :
  NON-UCC FILING	 
	1. DEBTOR’S EXACT FULL LEGAL NAME - insert
  only one debtor name (1a or 1b)
	       OR	1a. ENTITY’S NAME
	 	1b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	1c. MAILING ADDRESS 	CITY	STATE	COUNTRY	POSTAL CODE
	1d. S.S. OR TAX I.D.#	OPTIONAL

  ADD’NL INFO RE

  ENTITY DEBTOR	1e. TYPE OF ENTITY	1f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	1g. ENTITY’S ORGANIZATION I.D.#, if any
                         
                    
  o NONE
	2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME -
  insert only one debtor name (2a or 2b)
	OR	2a. ENTITY’s name 
	 	2b. INDIVIDUAL’S LAST NAME 	FIRST NAME	MIDDLE NAME	SUFFIX
	2c. MAILING ADDRESS 	CITY	STATE	COUNTRY	POSTAL CODE
	2d. S.S. OR TAX I.D.#	OPTIONAL

  ADD’NL INFO RE

  ENTITY DEBTOR	2e. TYPE OF ENTITY	2f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	2g. ENTITY’S ORGANIZATION I.D.#, if any
       o NONE
	3. SECURED PARTY’S (ORIGINAL S/P or ITS TOTAL
  ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or
  3b)
	OR	3a.
  ENTITY’S NAME
                                      
  SCIENTIFIC LEARNING CORPORATION
	 	3b. INDIVIDUAL’S LAST NAME 	FIRST NAME	MIDDLE NAME	SUFFIX
	3c.
  MAILING ADDRESS
                    1995
  University Avenue, Suite 400	CITY
Berkeley	STATE
CA	COUNTRY
USA	POSTAL
  CODE
94704
	4.  This FINANCING STATEMENT covers the
  following types or items of property:


All right, title and interest of Debtor
  in, to and under the personal property set forth on EXHIBIT A
  attached hereto and incorporated herein by reference.




	5.	CHECK o

  BOX	This FINANCING STATEMENT is signed by
  the Secured Party instead of the Debtor to perfect a security interest (a) in
  collateral already subject to a security interest in another jurisdiction
  when it was brought into this state, or when the debtor’s (if applicable)
  location was changed to this state, or (b) in accordance with other statutory
  provisions [additional data may be required]	7. If filed in Florida (check one)
	o Documentary   stamp tax paid	o Documentary

  tax not applicable
	6. REQUIRED SIGNATURE(S)	8. :
  This FINANCING STATEMENT is to be filed [for record] (or recorded) in the
  REAL ESTATE RECORDS

  Attach Addendum     [if applicable]
	By:                                 
                                          
                  Title:	9. Check to REQUEST SEARCH CERTIFICATE(S) on
  debtor(s)

  [ADDITIONAL FEE]

  (optional)                  o All Debtors    o Debtor 1    o Debtor 2
	(1) FILING OFFICER COPY — NATIONAL FINANCING STATEMENT (FORM UCC1)
  (TRANS.) (REV. 12/18/95)
														



 










Exhibit
A

to


UCC-1
Financing Statement


between


SCIENTIFIC LEARNING CORPORATION, as
Secured Party


and


______________________________,
as Debtor











1.                       Borrower hereby pledges, hypothecates, assigns and
grants to the Secured Party a continuing security interest of first priority in
all of the Collateral.



2.          For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following
terms shall have the following respective meanings:



             “Code” means the Uniform Commercial
Code in effect in the State of California.



             “Collateral” means (a) the Pledged
Shares and the certificates representing the Pledged Shares, and all dividends,
cash instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares, (b) all dividends, distributions and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares and (c) all proceeds of any of
the foregoing (whether such proceeds arise before or after the commencement of
a case under the bankruptcy laws by or against Borrower as debtor).



              “Pledged Shares” means ________________ shares of Common Stock of
the Company registered in the name of Borrower represented by stock certificate
number(s) __________________________.



 





LOAN
AGREEMENT


          THIS
LOAN AGREEMENT (this “Agreement”), dated as of April 11,
2001, is executed by Steven L. Miller (“Borrower”), and SCIENTIFIC
LEARNING CORPORATION, a Delaware corporation (the “Company”).  All capitalized terms that are not otherwise
defined herein shall have the meaning set forth in the Security Agreement.


RECITALS


          WHEREAS, the Board
of Directors of the Company has authorized the Company to loan up to $
1,450,000 (the “Loan Cap”) to Borrower, which loan will not be used to buy or
carry public company stock (the “Loan”);


          WHEREAS, the
parties wish to execute this Agreement to confirm the Company’s commitment to
extend such Loan and to attach the form of agreements to be used in executing
the Loan and extending a security interest to the Company as collateral for the
Loan;


          NOW,
THEREFORE, in consideration of the promises made herein and for other
good and valuable consideration, Borrower and the Company hereby agree as
follows:


          1.       Loan.  Subject to the provisions of this Agreement,
the Company agrees, at any time prior to April 15, 2001, to make the Loan to
Borrower pursuant to a secured promissory note substantially in the form of Exhibit A
(the “Note”) and the pledge agreement substantially in the form of Exhibit B
(the “Security Agreement”) within five (5) business days of a written request
from Borrower.  Borrower may request
that the amount of the Loan be less than the Loan Cap.  Unless agreed to in writing by the Company,
after authorization by the Compensation Committee of the Board of Directors,
the Loan Cap shall not be increased.


          2.       Conditions to the
Company’s Loan.  The Company’s obligation to make the Loan described in Section 1
is contingent upon the following:


                    (a)      the Company’s obtaining a
satisfactory
bank loan to finance the full amount of the Loan, which bank loan is expected
to be guaranteed by Warburg Pincus . or its affiliates;


                    (b)      the delivery by Borrower of an
executed
copy of the Note, the Security Agreement, three undated stock powers with
respect to the certificates representing the Pledged Shares executed in blank
by Borrower substantially in the form attached as an Exhibit to the Security
Agreement, one or more UCC-1 financing statements substantially in the form
attached as an Exhibit to the Security Agreement and such other documents as
the Company shall reasonably request to perfect its security interest in the
Collateral;


                    (c)      Borrower shall not have
commenced a
voluntary proceeding seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of Borrower’s property nor shall Borrower consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against Borrower nor shall
Borrower make a general assignment for the benefit of creditors or generally
fail to pay Borrower’s debts as they become due or shall take any action to
authorize any of the foregoing;





                    (d)      an involuntary proceeding shall not have
been commenced against Borrower seeking liquidation, reorganization or other
relief with respect to Borrower or Borrower’s debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of his property;


                    (e)      Borrower’s employment
by or association with
the Company is terminated for “cause” (as defined in the form of Note attached
hereto as Exhibit
A); and


                    (f)      Borrower is employed by, or
provides
consulting services to, another company or business that provides
neuroscience-based educational technology products.


          3.       Miscellaneous


                    (a)      Governing Law.  This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the internal laws of the State of California,
without reference to principles of conflicts of laws.


                    (b)      Counterparts.  
This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


                    (c)      Entire Agreement.
 This Agreement and the exhibits hereto
constitute the entire agreement between the parties relating to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.


                    (d)      Severability Of
Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


                    (e)      Notices.  All
written communications provided for hereunder shall be sent by first class mail
or nationwide overnight delivery service (with charges prepaid) and (a) if to
Borrower, addressed to Borrower’s residence address on the records of the
Company or at such other address as Borrower shall have specified to the
Company in writing; and (b) if to the Company, addressed to it at its executive
office address or at such other address as the Company shall have specified to
Borrower in writing.


                    (f)      Benefit.  The
Company may assign all or part of its rights under this Agreement to any other
party.  Borrower may not assign its
rights or obligations hereunder without the Company’s express written
consent.  Borrower, the Company and
their permitted successors and assigns shall be bound by this Agreement.  They shall be the only persons entitled to
its benefits.





                    (g)      Expenses. 
Each party to this Agreement and the exhibits shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions and agreements.


                    (h)      Amendments.
 
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived, only with the written consent of the Company
and Borrower.


                    (i)       Termination.
 
This Agreement, and all obligations hereunder, shall terminate and be of
no force and effect, after April 15, 2001.


 


[THE REST OF
THIS PAGE INTENTIONALLY LEFT BLANK]





          IN WITNESS WHEREOF, the parties hereto have executed this
Loan Agreement as of the date first above written.




	 	BORROWER:
	 	 	 
	 	 	 
	 	Signature:	/s/ Steven L.
  Miller



	 	 	 
	 	 
	 	Printed Name: Steven L.
  Miller
	 	 
	 	 
	 	THE COMPANY:
	 	 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 	 
	 	 	 
	 	By:	/s/ Carleton Holstrom



	 	 	Carleton Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors
				






 


[SIGNATURE PAGE TO LOAN AGREEMENT]

EXHIBIT A


FORM OF PROMISSORY NOTE





EXHIBIT B


FORM OF SECURITY AGREEMENT





SECURED PROMISSORY NOTE


 




	$1,450,000.00	April 11, 2001
	 	Oakland,
  California






 


          FOR VALUE RECEIVED, Steven L.
Miller (“Borrower”),
an employee of Scientific Learning Corporation, a Delaware corporation (“Company,) hereby unconditionally promises to
pay to the order of Company, in lawful money of the United States of America
and in immediately available funds, the principal sum of One Million Four
Hundred Fifty Thousand Dollars ($1,450,000.00) (the “Loan”) together with accrued and unpaid
interest thereon, due and payable on the dates and in the manner set forth
below.


          It is the intent of the parties that the purpose of
this Note is not for consumer, family or household purposes.


          This Secured Promissory Note is the Note referred to
in and is executed and delivered in connection with that certain Pledge
Agreement dated as of even date herewith and executed and delivered by Borrower
in favor of Company (as the same may from time to time be amended, modified or
supplemented or restated (the “Security Agreement”). 
Additional rights of Company are set forth in the Security
Agreement.  All capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
given to them in the Security Agreement.


          1.       Principal
Repayment.  The outstanding principal amount of the Loan
shall be due and payable on December 31, 2005 (the “Termination Date”).


          2.       Interest
Rate.  Borrower further promises to pay interest on the outstanding principal
amount hereof from the date hereof until payment in full, which interest shall
be compounded annually and payable at the rate of Four and 94/100 percent
(4.94%) per annum or the maximum rate permissible by law (which under the laws
of the State of California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less.  Interest shall be due and payable on the
Termination Date and shall be calculated on the basis of a 365 day year for the
actual number of days elapsed.


          Any principal repayment or interest payment
on the Loan hereunder not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest at Six and 94/100 percent
(6.94%) per annum.


          3.        Manner
of Payment.  Both principal and interest are payable in
immediately available funds in lawful money of the United States of America to
the Company at the principal office of Company unless another place of payment
shall be specified in writing by Company.





          4.       Application
of Payments.  Payment on this Note shall be applied first
to accrued interest, if any, and thereafter to the outstanding principal
balance hereof.  Borrower may at any
time pay the full amount or any portion of this Note without notice or payment
of any penalty, premium or fee.  Any
such prepayment shall be accompanied by payment of any and all accrued and
unpaid interest on the amount prepaid. All payments made on account of the
principal of or interest on this Note shall be recorded in the books and
records of the Company; provided,
however, that the failure of the
Company to make any notation or any error therein shall not in any manner
affect the obligation of Borrower to repay this Note in accordance with the
terms hereof.  Borrower agrees that any
document submitted by the Company purporting to show the outstanding principal
amount of this Note and all accrued and unpaid interest hereon shall be
conclusive in the absence of manifest error.


          5.       Secured
Note.  The full amount of this Note is secured by
the collateral identified and described as security therefor in the Security
Agreement. Borrower shall not, directly or indirectly, create, permit or suffer
to exist, and shall defend the collateral against and take such other action as
is necessary to remove, any lien on or in the collateral, or in any portion
thereof, except as permitted pursuant to the Security Agreement.  To the extent Borrower is unable to satisfy
this Note when due with the collateral described in the Security Agreement, the
Company may hold Borrower personally liable for this Note or assert any claim
against Borrower for the payment of this Note.


          6.       Default.  Each
of the following events shall be an “Event of Default” hereunder:


          (a)      Borrower shall fail to pay when due the
Obligations or any part thereof and such failure shall have continued for at
least five business days thereafter;


          (b)      Any representation or warranty made or deemed made
by Borrower in the Security Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with the Security
Agreement, the Loan or this Note shall be false, misleading or erroneous in any
material respect when made or deemed to have been made;


          (c)      Borrower shall fail to perform, observe or comply
with any covenant, agreement or term contained in the Security Agreement and
such failure shall continue for a period of ten business days after the earlier
of (i) notice thereof being given by the Company to Borrower or (ii) such
default otherwise becoming known to Borrower;


          (d)      Borrower shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for him or a substantial part
of his property or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against him or shall make a general assignment for the
benefit of creditors or shall generally fail to pay his debts as they become
due or shall take any action to authorize any of the foregoing;


          (e)      an involuntary proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under





any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower or a substantial part of his
property, and such involuntary proceeding shall remain undismissed and unstayed
for a period of 60 days;


          (f)      the Security Agreement or this Note shall
cease to be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Borrower, or Borrower shall deny any further liability or obligation under the
Security Agreement or this Note;


          (g)      Borrower’s employment by or association with
the Company is terminated for “cause” (as defined below);


          (h)      Borrower is employed by, or provides
consulting services to, another company or business that provides
neuroscience-based educational technology products; or


          (i)       Borrower shall breach any representation or
covenant under the Security Agreement.


          Upon the occurrence of an Event of Default
hereunder, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Company, and, in the case of an Event of
Default pursuant to (d), (e) or (f)
above, automatically, be immediately due, payable and collectible by Company
pursuant to applicable law. 
Notwithstanding the foregoing, if an Event of Default has occurred under
(g) or (h) above (together, the “Employment Defaults”), Borrower shall have 90
days after such event to pay all unpaid principal, accrued interest and other
amounts owing hereunder.  Company shall
have all rights and may exercise any remedies available to it under law,
successively or concurrently.  Borrower
expressly acknowledges and agrees that the Company shall have the right to
offset any obligations of Borrower hereunder against salaries, bonuses or other
amounts that may be payable to Borrower by the Company.


          “Cause” shall be defined to include the
following, as determined in good faith by the Board of Directors in its sole
discretion: (i) material breach of the Company’s policies, (ii) material breach
of the Security Agreement or this Note, (iii) neglect or abandonment of assigned
duties, (iv) the commission of any act of fraud, embezzlement or dishonesty
against the Company, (v) conviction of any felony or any crime of moral
turpitude or dishonesty, (vi) intentional damage to the Company’s property,
(vii) any material breach of a proprietary information and inventions agreement
with the Company or unauthorized use or disclosure of confidential information
or trade secrets of the Company, or (viii) conduct by Borrower which
demonstrates unfitness to serve.


          Waiver. Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including, without limitation, reasonable attorneys’
fees, costs and other expenses.


          The
right to plead any and all statutes of limitations as a defense to any demands
hereunder is hereby waived to the full extent permitted by law.





          7.       Governing
Law.  This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of laws
of any other jurisdiction.


          8.       Expenses. 
Borrower agrees to pay all reasonable costs and expenses, including,
without limitation, reasonable attorneys’ fees and costs of court, incurred by
Company or any other holder of this Note in collecting or enforcing payment of
this Note in accordance with its terms.


          9.       Amendment. This Note may not be changed, amended or
modified except in a writing executed by Borrower and the holder hereof.


          10.     Complete
Agreement. This Note and the
Security Agreement represent the final agreement between Borrower and Company
with respect to the matters referred to herein and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreement of Borrower and
Company.  There are no oral agreements
between Borrower and Company with respect to the matters referred to herein.


          11.     Successors
and Assigns.  The provisions of this Note shall inure to
the benefit of and be binding on any successor to Borrower and shall extend to
any holder hereof. Borrower shall not, without the prior written consent of
holder, assign any of its rights or obligations hereunder.


          IN WITNESS WHEREOF, this Note has been executed as of the date
first written above.


 


 


BORROWER:


	Signature:	/s/ Steven L. Miller



	Printed Name: Steven L.
  Miller



 





PLEDGE AGREEMENT


             THIS PLEDGE AGREEMENT (this
“Agreement”), dated as of April 11, 2001 is executed by Steven L. Miller
(“Borrower”), an individual residing in Pacifica, California, and SCIENTIFIC LEARNING CORPORATION, a Delaware
corporation (the “Company”).


             WHEREAS,
the Company has loaned $1,450,000 to Borrower which loan will not be used to
buy or carry public company stock;


             WHEREAS,
such loan (the “Loan”) is evidenced by a Secured Promissory Note, dated the
date hereof, executed by Borrower and made payable to the order of the Company
(together with all renewals, extensions and replacements thereof, the “Note”);
and


             WHEREAS,
the Company was unwilling to make the Loan to Borrower unless Borrower entered
into this Agreement to secure the payment and performance of the Note by
Borrower.


             NOW, THEREFORE,
Borrower and the Company hereby agree as follows:


             Section 1.         Definitions.  For purposes of this Agreement, except as otherwise

expressly provided or unless the context otherwise requires, the following
terms shall have the following respective meanings:


                           Code” means the
Uniform Commercial Code in effect in the State of California.



                           “Collateral” means
(a) the Pledged Shares and the certificates representing the Pledged Shares,
and all dividends, cash instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares, (b) all dividends, distributions and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares and (c) all
proceeds of any of the foregoing (whether such proceeds arise before or after
the commencement of a case under the bankruptcy laws by or against Borrower as
debtor).



                           “Event of Default”
means any one or more of the following events:



             (a)         Borrower shall fail to pay when due the Obligations
or any part thereof and such failure shall have continued for at least five
business days;



             (b)         any representation or warranty made or deemed made
by Borrower in this Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with this Agreement,
the Loan or the Note shall be false, misleading or erroneous in any material
respect when made or deemed to have been made;



             (c)         Borrower shall fail to perform, observe or comply
with any covenant, agreement or term contained in this Agreement and such
failure shall continue for a period of five business days after the earlier of
(i) notice thereof being given by the Company to Borrower or (ii) such default
otherwise becoming known to Borrower;






 



             (d)         Borrower shall commence a voluntary proceeding seeking
liquidation, reorganization or other relief with respect to Borrower or
Borrower’s debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for him or a substantial part
of his property or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against him or shall make a general assignment for the
benefit of creditors or shall generally fail to pay his debts as they become
due or shall take any action to authorize any of the foregoing;



             (e)         an involuntary proceeding shall be commenced against
Borrower seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for Borrower or a
substantial part of his property, and such involuntary proceeding shall remain
undismissed and unstayed for a period of 60 days;



             (f)         this Agreement or the Note shall cease to be in full
force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, or
Borrower shall deny any further liability or obligation under this Agreement or
the Note; or



             (g)        ninety (90) days after any Employment Default (as
defined in the Note), if any amount then remains outstanding under the Note.



                           “Lien” means any
lien, mortgage, security interest, tax lien, pledge, assessment, encumbrance,
lease, adverse claim, levy, charge or retained interest pursuant to a
conditional sale or title retention contract, or any other interest in property
designed to secure the repayment of debt or any other obligation, whether
arising by agreement, operation of law or otherwise, or any contract to give
any of the foregoing.



                           “Loan” has the
meaning specified in the second recital hereof.



                           “Note” has the
meaning specified in the second recital hereof.



                           “Obligations” means
all obligations of Borrower to the Company under or in connection with the
Note, regardless of how created, arising or evidenced and whether direct or
indirect, primary or secondary, absolute or contingent, joint or several or now
or hereafter existing or due or to become due, and all interest accruing
thereon, and all attorneys’ fees and other expenses incurred in the enforcement
or collection thereof.



                           “Person” means any
natural person, partnership, corporation, business trust, association, company,
limited liability company, joint venture, governmental authority or any other
form of business or legal entity.



                           “Pledged Shares”
means 323,120 shares of Common Stock of the Company registered in the name of
Borrower represented by stock certificates numbers SCIL 1960 and SCIL
1980.  Notwithstanding the foregoing,
“Pledged Shares” shall not include any shares of Common Stock of the Company
which have been released from this Agreement pursuant to Section 10.






 



             “Securities
Act” means the Securities Act of 1933, as amended.


             Unless the context otherwise
requires, terms defined in the Code shall have the same meanings when used in
this Agreement.


             Section 2.         Pledge.


             (a)         As security for the prompt and complete payment and
performance when due of all of the Obligations, Borrower hereby pledges,
hypothecates, assigns and grants to the Company a continuing security interest
of first priority in all of the Collateral.


             (b)         On the date hereof, Borrower shall deliver to the
Company three undated stock powers with respect to the certificates
representing the Pledged Shares duly executed in blank, substantially in the
form of Exhibit A attached hereto, one or more UCC-1 financing
statements, substantially in the form of Exhibit B attached hereto, and
such other documents as the Company shall reasonably request to perfect its
security interest in the Collateral.


             As further described in this
Agreement, nothing in this Agreement, the Note or any other agreement shall
limit the Company’s right to hold Borrower personally liable for the Note or
assert any claim against Borrower for the payment of the Note.


             Section 3.         Stock
Dividends, etc.  If, while this Agreement is in
effect, Borrower shall become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital, or issued in connection with any
reorganization), option or rights (in connection with Borrower’s ownership of
the Collateral, whether as an addition to, in substitution of or in exchange
for any Pledged Shares or any other Collateral), Borrower agrees to accept the
same as the Company’s agent and to hold the same in trust on behalf of and for
the benefit of the Company, subject to the terms of this Agreement, as
additional Collateral.


             Section 4.         Cash
Dividends; Voting Rights; Dissolution.


             (a)         Unless an Event of Default shall have occurred and
be continuing, Borrower shall be entitled, except as provided in Sections 3 and
5, to receive all dividends and distributions in respect of the Collateral, to
vote the Collateral and to give consents, waivers and ratifications in respect
of the Collateral; provided, however,
that no vote shall be cast or consent, waiver or ratification given or action
taken which would have a material adverse effect on the value or marketability
of the Collateral or be inconsistent with or violate the provisions of this
Agreement and, provided further,
that any sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of the issuer thereof shall be paid over to the Company to be held
by it as additional Collateral for the Obligations subject to the term hereof.





 


             (b)         Borrower hereby appoints the Company, with full
power of substitution, effective upon the occurrence of any Event of
Default,  as Borrower’s proxy and
attorney-in-fact to vote, give consents and approvals, call meetings and
exercise any other rights with respect to the Pledged Shares or any other
Collateral.  This proxy and
power-of-attorney shall be in full force and effect upon the occurrence of any
Event of Default until the termination of this Agreement and is irrevocable and
exclusive and shall not be terminated or otherwise affected by any action or
inaction of Borrower or by operation of law, by death or disability of Borrower
or by the occurrence of any other event. 
Except as set forth in paragraph (a) above, Borrower shall have no right
to vote, give consents or approvals or exercise any other right with respect to
the Pledged Shares or any other Collateral.


             Section 5.         Rights
of the Company.


             (a)         The Company shall have the right to deliver any
stop-order instructions to the Company’s transfer agent in order to prevent
Borrower from making any transfers or pledges of the Pledged Shares in
violation of this Agreement.  The
Company shall also have the right to remove any such stop-order instructions at
any time.


             (b)         Subject to the Company’s obligations under secured
transactions law if the Company has taken possession of the Collateral, the
Company shall not be liable for failure to collect or realize upon the
Obligations secured hereby or any collateral security or guarantee therefor, or
any put thereof, or for any delay in so doing, nor shall the Company be under
any obligation to take any action whatsoever with regard thereto.


             (c)         If an Event of Default has occurred and is
continuing, the Company shall notify Borrower in writing requesting immediate
delivery by Borrower to the Company of any and all certificates comprising a
part of the Collateral.  If Borrower
delivers such certificate(s), the Company may transfer or register or have registered
in the name of the Company or the Company’s nominee any and all shares
comprising a part of the Collateral, and the Company or its nominee may
thereafter exercise all voting and corporate rights at any meeting of the
Company’s shareholders and any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any
shares comprising a part of the Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, at its
discretion, any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Company or upon
the exercise by Borrower or the Company of any right, privilege or option
pertaining to the Collateral, and, in connection therewith, to deposit and
deliver any and all of the Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for property actually
received by it. If Borrower fails to deliver such certificates within three (3)
business days of receipt of the Company’s notice, Borrower agrees that the
Company may complete one or more stock powers in order to transfer to the
Company (or such other individual or entity as the Company determines) the
number of shares necessary to satisfy the Obligations and the Company shall
have such rights described in this Section 5. 
The Company shall have no duty to exercise any of the aforesaid rights,
privileges or options, and the Company shall not be responsible for any failure
to do so or delay in so doing.





 



             Section 6.         Remedies.


             (a)         In the event that an Event of Default shall have
occurred and be continuing, the Company may (i) by notice to Borrower, declare
the Note, or any portion thereof, to be immediately due and payable, and the
same shall thereupon become immediately due and payable, without any other
notice and without demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, notice of intent to demand, protest or other
formalities of any kind, all of which are hereby expressly waived by Borrower
to the extent permitted by law and/or (ii) without demand of performance or
other demand, advertisement or notice of any kind to or upon Borrower or any
other Person (all and each of which demands, advertisements and/or notices are
hereby expressly waived to the extent permitted by law), exercise in respect of
the Collateral, in addition to the other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party on default under the Code (whether or not the Code applies to the
affected Collateral), including collecting, receiving, appropriating and
realizing upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase, contract to sell or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange, broker’s board or
at any of the Company’s offices or elsewhere upon such terms and conditions as
it may, in its absolute discretion, deem advisable and at such prices as it
may, in its absolute discretion, deem best, for cash or on credit or for future
delivery without the assumption of any credit risk, free of any right or equity
of redemption in Borrower, which right or equity is hereby expressly waived and
released to the extent permitted by law, upon any such sale or sales, public or
private, to purchase the whole or any part of the Collateral so sold; provided, however, that Borrower shall not
be credited with the net proceeds of any credit sale or future delivery until
cash proceeds are actually received by the Company.


             (b)         Borrower agrees that, to the extent notice of sale
shall be required by law, at least 10 days’ notice to Borrower of the time and
place of any public sale or of the time after which a private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters.


             (c)         In case the Company shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Company then and in every such case Borrower and the Company
shall be restored to their respective former positions and rights hereunder
with respect to the Collateral and all rights, remedies and powers of the
Company shall continue as if no such proceeding had been instituted.


             (d)         All rights and remedies of the Company expressed
herein are in addition to all other rights and remedies possessed by the
Company under the Note, at law or in equity.





 



             Section 7.         Sale
of Collateral.


             (a)         If at any time when the Company shall determine to
exercise its right to sell all or any part of the Collateral pursuant to
Section 6 hereof, such Collateral or the part thereof to be sold shall not, for
any reason whatsoever, be effectively registered under the Securities Act, the
Company may, in its sole and absolute discretion, sell such Collateral or part
thereof by private sale in such manner and under such circumstances as the
Company may deem necessary or advisable in order that such sale may legally be
effected without such registration. Without limiting the generality of the
foregoing, in any such event the Company, in its sole and absolute discretion,
(i) may proceed to make such private sale notwithstanding that a
registration statement for the purpose of registering such Collateral or part
thereof shall have been filed under the Securities Act, (ii) may approach and
negotiate with a single possible purchaser to effect such sale and (iii) may
restrict such sale to a purchaser who will represent and agree that such
purchaser is purchasing for its own account, for investment, and not with a
view to the distribution or sale of such Collateral or part thereof.  In the event of any such sale, the Company
shall incur no responsibility or liability for selling all or any part of the
Collateral at a price which the Company, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale
were deferred until after registration as aforesaid.  Borrower agrees that the Company need not sell the Collateral in
a public offering even though it may yield a higher price than the actual
method of sale.


             (b)         Borrower agrees that a sale of any Collateral is a
public sale pursuant to Section 9–504(3) of the Uniform Commercial Code
if (i) an offer to sell such Collateral has been advertised for at least one
day in each of two consecutive weeks in any newspaper of general circulation in
the San Francisco financial community and such sale is made more than 10 days
after the first such advertisement or (ii) such Collateral is offered to at
least five bona fide offerees who
the Company reasonably believes may be interested in that type of
investment.  This shall not constitute
an admission that any such offer is a public offering under securities laws or
that any other method of sale is not a public sale.


             Section 8.         Application
of Proceeds.  Any proceeds of disposition of any Collateral shall
be applied:


             first, to the Company’s expenses in
enforcing its rights and remedies, including reasonable attorney’s fees and
expenses,


             second, to the satisfaction of the
Obligations, in the order and manner provided in the Note,


             third, to the payment of any other
amount required by law, and


             fourth, to Borrower.


             Borrower shall remain liable for
any deficiency in the Obligations.





 


             Section 9.         Possession
of Collateral.  For convenience purposes only, and not to extend any
rights to Borrower thereby, Borrower shall be entitled to hold the Collateral
in trust subject to the provisions of this Agreement, except as from time to
time the Collateral may be required for recordation or for the purpose of
enforcing or realizing upon any right or value represented thereby.  As further described below in Section 12,
Borrower’s possession of the Collateral does not give Borrower the right to
transfer the Collateral or take any other action that would restrict or nullify
the Company’s rights to hold a perfected security interest in the
Collateral.  In order to handle the
administrative task of transferring ownership of the Collateral from Borrower
should an Event of Default occur and Borrower fail to provide the Company with
the certificates representing the Collateral, Borrower shall deliver to the
Company three undated stock powers with respect to the certificates
representing the Pledged Shares duly executed in blank, substantially in the
form of Exhibit A attached hereto.


             Section 10.      Release
of Collateral.


             (a)         If the Aggregate Market Value on any date exceeds
the Borrowing Base on such date, then Borrower shall be entitled to obtain a
release of Pledged Shares from this Agreement and the security interest created
hereby so long as, immediately after giving effect to such release, the
Aggregate Market Value is not less than the Borrowing Base.  As used herein, (i) “Aggregate Market Value”
means, as of any date, the aggregate fair market value of the Pledged Shares on
such date, as determined by the Per Share Market Value on such date, (ii) “Per
Share Market Value” means, as of any date, the closing price per share of
Common Stock of the Company as reported in the Wall Street Journal for the last
trading day immediately preceding such date and (iii) “Borrowing Base” means,
as of any date, 120% of the principal balance of the Note outstanding on such
date.


             (b)         In the event that the Aggregate Market Value is less
than the Borrowing Base, then Borrower shall have no obligation to pledge
additional shares of Common Stock of the Company.


             (c)         At the request of Borrower, the Company shall
promptly execute and deliver to Borrower all such certificates and other
instruments, including the filing of any amended UCC-1 financing statements, as
shall be necessary or appropriate in order to effectuate any release to which
Borrower has become entitled under this Section 10.


             (d)         If Borrower wishes to sell Pledged Shares that
Borrower is not entitled to have released under this Section 10 for the purpose
of using the proceeds to pay obligations under the Note, the Company and
Borrower shall cooperate to facilitate the prompt execution of such sales and
delivery to the Company of the proceeds thereof as payment under the Note.


             Section 11.      Representations
and Warranties of Borrower.  Borrower
hereby represents and warrants to the Company as follows:


             (a)         Borrower has the legal capacity necessary or
advisable to enter into and perform this Agreement.


             (b)         Borrower has duly executed and delivered this
Agreement.





 


             (c)         Borrower’s execution, delivery and performance of
this Agreement, and the enforcement by the Company of any of its rights
hereunder, do not and will not breach or constitute a default, give rise to any
right of acceleration or termination or result in or require the creation of
any Lien under any agreement or instrument to which Borrower is a party or by
which Borrower or any of Borrower’s property is bound.


             (d)         This Agreement is a legal, valid and binding obligation
of Borrower, enforceable against Borrower in accordance with its terms.


             (e)         This Agreement creates in favor of the Company a
legal, valid and binding security interest, enforceable in accordance with its
terms, in all the Collateral.


             (f)         The Company has a first priority security interest
in the Pledged Shares.  No action by the
Company is required to perfect a first priority security interest in favor of
the Company in all Collateral.


             Section 12.      Certain
Covenants of Borrower.  Borrower covenants and agrees
with the Company that until the Obligations are paid and performed in full:


             (a)         Borrower shall promptly notify the Company of the
occurrence or existence of any Event of Default or the occurrence or existence
of any condition or event that, with the giving of notice or lapse of time or
both, would be an Event of Default.


             (b)         Borrower shall maintain the Collateral free from any
Lien adverse to the Company.


             (c)         Borrower shall keep accurate records with respect to
the Collateral. If requested by the Company, Borrower shall permit the Company
and its agents and representatives to examine and make copies or abstracts of
such records. If requested by the Company, Borrower shall prepare and deliver
to the Company a statement accurately identifying or describing any or all
Collateral.


             (d)         Borrower agrees to take any action (including the
execution, delivery, recording, filing, rerecording and refiling of any
financing statements, continuation statements or other documents) that the
Company may reasonably request to (i) perfect, continue, maintain, preserve and
protect the security interest purported to be created hereby as a first
priority security interest in all the Collateral, (ii) enable the Company to
exercise and enforce its rights and remedies or (iii) otherwise effect the
purposes of this Agreement.  If the
Company believes that it needs to obtain injunctive relief  in order to perfect its security interest in
the Collateral, Borrower agrees to consent to such injunctive relief without
delay or challenge.


             (e)         Borrower shall not permit or suffer to exist any
Lien on any Collateral, or part thereof, except for the security interest
created hereby.


             (f)         Borrower shall not transfer, pledge or otherwise
assign the Pledged Shares and agrees that its right to retain possession of the
collateral pursuant to Section 9 is for convenience only and Borrower shall not
take any action that would restrict or nullify the Company’s rights hereunder.





 


             (g)        Borrower shall not use any proceeds from the Loan to
buy or carry public company stock.


             Section 13.      No
Waiver; Modifications in Writing.  No failure or delay on the part of the Company in
exercising any right, power or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.  The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company at law or in equity or
otherwise.  No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement nor
consent to any departure by Borrower shall be effective unless the same shall
be in writing and signed by or on behalf of the Company. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement and any consent to any departure by Borrower
from the terms of any provision of this Agreement shall be effective only in
the specific instance and for the specific purpose for which made or
given.  Except where notice is
specifically required by this Agreement or the Note, no notice to or demand on
Borrower in any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances.


             Section 14.      Security
Agreement as Financing Statement. The Company is authorized to file this Agreement or
a photocopy hereof as a financing statement with respect to any one or more
items comprising the Collateral.


             Section 15.      Counterparts.  This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.


             Section 16.      Security
Interest Absolute.  All rights of the Company and
security interests hereunder, and all obligations of Borrower hereunder, shall
be absolute and unconditional irrespective of:


             (a)         any lack of validity or enforceability of the Note
or any other agreements or instruments relating thereto;


             (b)         any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Note;


             (c)         any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or


             (d)         any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Borrower or a third party
pledgor.


             Section 17.      Governing
Law.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS
OF LAW.





 


             Section 18.      Severability
Of Provisions.  Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.


             Section 19.      Notices. All written communications provided for hereunder
shall be sent by first class mail or nationwide overnight delivery service
(with charges prepaid) and (a) if to Borrower, addressed to Borrower’s
residence address on the records of the Company or at such other address as Borrower
shall have specified to the Company in writing; and (b) if to the Company,
addressed to it at its executive office address or at such other address as the
Company shall have specified to Borrower in writing.


             Section 20.      Submission
to Jurisdiction.  BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
IN CALIFORNIA OVER ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY
RIGHT UNDER THIS AGREEMENT OR THE NOTE OR (B) ARISING FROM OR RELATING TO
ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND THE
NOTE, AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL
COURT. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
BORROWER AT BORROWER’S ADDRESS FOR NOTICES PURSUANT TO SECTION 19, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO BORROWER AT BORROWER’S ADDRESS
PROVIDED IN SECTION 19, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT HE MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM OR VENUE TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. BORROWER AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
SECTION 20 SHALL AFFECT THE RIGHT OF ANY OTHER PERSON TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITED BY APPLICABLE LAW, OR THE RIGHT OF ANY OTHER PERSON
TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR THE PROPERTY OF BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.


             Section 21.      Final
Agreement of the Parties.  THE NOTE AND THIS AGREEMENT REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS REFERRED TO THEREIN
AND HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS REFERRED TO HEREIN
OR IN THE NOTE.





 


             Section 22.      Headings,
etc. The headings, captions and arrangements used in this Agreement are for
convenience only and shall not affect the interpretation of this
Agreement.  In this Agreement, unless a
clear contrary intention appears, (i) the words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a
whole and not to any particular Section or other subdivision and (ii) reference
to any Section means such Section of this Agreement.


             Section 23.      Waiver
of Protest and Bond.  In the event the Company seeks to
take possession of any or all of the Collateral by injunctive relief or other
judicial process, Borrower hereby irrevocably waives protest any bonds and any
surety or security relating thereto that may be required by applicable law as
an incident to such possession, and waives any demand for possession prior to
the commencement of any such suit or action.


             Section 24.      Benefit.  The Company may assign all or part of its rights
under this Agreement to any holder of an Obligation. Borrower, the Company and
their permitted successors and assigns shall be bound by this Agreement. They
shall be the only Persons entitled to its benefits.


 


[THE
REST OF THIS PAGE INTENTIONALLY LEFT BLANK]





 


             IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first above
written.


	 	BORROWER:
	 	 
	 	Signature:  /s/ Steven L. Miller


	 	 
	 	Printed Name: Steven L. Miller
	 	 
	 	THE COMPANY:
	 	 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 
	 	By: /s/ Carleton A. Holstrom


	 	Carleton A. Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors



 


[SIGNATURE
PAGE TO PLEDGE AGREEMENT]





EXHIBIT
A


ASSIGNMENT SEPARATE FROM
CERTIFICATE


             For Value Received,
___________ hereby sells, assigns and transfers unto ___________, ___________ (____) shares of the Common Stock of
Scientific Learning Corporation (the
“Company”) standing in the undersigned’s name on the books of the Company
represented by Certificate No.(s) ___________ herewith and do hereby
irrevocably constitute and appoint the Company’s transfer agent to transfer the
said stock on the books of the Company with full power of substitution in the
premises.


Dated:  _____


	 	Signature of
  Borrower:__________________
	 	 
	 	Name of Borrower: ____________________
	 	 
	 	If Applicable:
	 	 
	 	Additional
  Signature:___________________
	 	 
	 	Name of Signatory: ____________________



 






 


EXHIBIT
B


UCC-1 FINANCING STATEMENT


	 	 	THIS
  SPACE FOR USE OF FILING OFFICER



 


 


FINANCING STATEMENT — FOLLOW INSTRUCTIONS CAREFULLY

This Financing
Statement is presented for filing pursuant to the Uniform Commercial Code

and will remain effective, with certain exceptions, for 5 years from date of
filing.


	A. NAME & TEL. # OF CONTACT AT FILER
  (optional)	B. FILING OFFICE ACCT. # (optional)	 
	C.
  RETURN COPY TO:  (Name and Mailing
  Address)


              Diana
  R. Sanchez
              Cooley
  Godward LLP
              3000
  El Camino  Real
              Palo
  Alto, CA  94306


	








	 
	D. OPTIONAL DESIGNATION (if applicable): :
  LESSOR/LESSEE  :
  CONSIGNOR/CONSIGNEE  :
  NON-UCC FILING	 
	1. DEBTOR’S EXACT FULL LEGAL NAME - insert only
  one debtor name (1a or 1b)
	           OR	1a. ENTITY’S NAME
	 	 
	 	1b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	1c. MAILING ADDRESS	CITY	STATE	COUNTRY	POSTAL CODE
	 	 	 	 	 
	1d. S.S. OR TAX I.D.#	OPTIONAL
ADD’NL INFO RE
ENTITY DEBTOR	1e. TYPE OF ENTITY	1f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	1g. ENTITY’S ORGANIZATION I.D.#, if any
                      
                    o NONE
	 
	2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME -
  insert only one debtor name (2a or 2b)
	OR	2a. ENTITY’s name
	 	 
	 	2b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	2c. MAILING ADDRESS	CITY	STATE	COUNTRY	POSTAL CODE
	 	 	 	 	 
	2d. S.S. OR TAX I.D.#	OPTIONAL
ADD’NL INFO RE
ENTITY DEBTOR	2e. TYPE OF ENTITY	2f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	2g. ENTITY’S ORGANIZATION I.D.#, if any
                    
                      o NONE
	 
	3. SECURED PARTY’S (ORIGINAL S/P or ITS TOTAL
  ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or
  3b)
	OR	3a.
  ENTITY’S NAME
                                   
     SCIENTIFIC LEARNING CORPORATION
	 	3b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	3c.
  MAILING ADDRESS
          1995
  University Avenue, Suite 400	CITY
Berkeley	STATE
CA	COUNTRY
USA	POSTAL
  CODE
94704
	 
	4.  This FINANCING STATEMENT covers the
  following types or items of property:

All right, title and interest of Debtor in, to and under
  the personal property set forth on Exhibit A
  attached hereto and incorporated herein by reference.


	 	 
	5.CHECK o
    BOX
    (if applicable)	This
  FINANCING STATEMENT is signed by the Secured Party instead of the Debtor to
  perfect a security interest (a) in
collateral already subject to a security
  interest in another jurisdiction when it was brought into this state, or when
  the debtor’s

  location was changed to this state, or (b) in accordance with other statutory
  provisions [additional data may be required]	 	 	7.
  If filed in Florida (check one)
o Documentary            o
 Documentary
stamp tax paid                tax not applicable
	 
	6. REQUIRED SIGNATURE(S)	8. :
  This FINANCING STATEMENT is to be filed [for record]
(or recorded) in the REAL ESTATE
  RECORDS
Attach Addendum                                  
         
  [if applicable]
	 
	By:                           
                                  Title:	9. Check to REQUEST SEARCH CERTIFICATE(S) on
  debtor(s)
[ADDITIONAL FEE]
(optional)                 o All
Debtors    o Debtor 1    o Debtor 2
	 
	(1) FILING OFFICER COPY — NATIONAL FINANCING STATEMENT (FORM UCC1)
  (TRANS.) (REV. 12/18/95)
															











Exhibit
A

to


UCC-1
Financing Statement


between


SCIENTIFIC LEARNING CORPORATION, as
Secured Party


and


______________________________,
as Debtor


 


1.                       Borrower hereby pledges, hypothecates, assigns and
grants to the Secured Party a continuing security interest of first priority in
all of the Collateral.



2.          For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following
terms shall have the following respective meanings:



             “Code” means the Uniform Commercial
Code in effect in the State of California.



             “Collateral” means (a) the Pledged
Shares and the certificates representing the Pledged Shares, and all dividends,
cash instruments and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the Pledged Shares,
(b) all dividends, distributions and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares and (c) all proceeds of any of the foregoing (whether
such proceeds arise before or after the commencement of a case under the
bankruptcy laws by or against Borrower as debtor).



              “Pledged Shares” means                   
  
shares of Common Stock of the Company registered in the name of Borrower
represented by stock certificate number(s) __________________________.



 





LOAN
AGREEMENT


          THIS
LOAN AGREEMENT (this “Agreement”), dated as of April 11,
2001, is executed by James A. Mills
(“Borrower”), and SCIENTIFIC LEARNING
CORPORATION, a Delaware corporation (the “Company”).  All capitalized terms that are not otherwise
defined herein shall have the meaning set forth in the Security Agreement.


RECITALS


          WHEREAS, the Board
of Directors of the Company has authorized the Company to loan up to $30,000
(the “Loan Cap”) to Borrower, which loan will not be used to buy or carry
public company stock (the “Loan”);


          WHEREAS, the
parties wish to execute this Agreement to confirm the Company’s commitment to
extend such Loan and to attach the form of agreements to be used in executing
the Loan and extending a security interest to the Company as collateral for the
Loan;


          NOW,
THEREFORE, in consideration of the promises made herein and for other
good and valuable consideration, Borrower and the Company hereby agree as
follows:


          1.       Loan.  Subject to the provisions of this Agreement,
the Company agrees, at any time prior to April 15, 2001, to make the Loan to
Borrower pursuant to a secured promissory note substantially in the form of Exhibit A
(the “Note”) and the pledge agreement substantially in the form of Exhibit B
(the “Security Agreement”) within five (5) business days of a written request
from Borrower.  Borrower may request
that the amount of the Loan be less than the Loan Cap.  Unless agreed to in writing by the Company,
after authorization by the Compensation Committee of the Board of Directors,
the Loan Cap shall not be increased.


          2.       Conditions to the
Company’s Loan.  The Company’s obligation to make the Loan described in Section 1
is contingent upon the following:


                    (a)      the Company’s obtaining a
satisfactory
bank loan to finance the full amount of the Loan, which bank loan is expected
to be guaranteed by Warburg Pincus . or its affiliates;


                    (b)      the delivery by Borrower of an
executed
copy of the Note, the Security Agreement, three undated stock powers with
respect to the certificates representing the Pledged Shares executed in blank
by Borrower substantially in the form attached as an Exhibit to the Security Agreement,
one or more UCC-1 financing statements substantially in the form attached as an
Exhibit to the Security Agreement and such other documents as the Company shall
reasonably request to perfect its security interest in the Collateral;


                    (c)      Borrower shall not have
commenced a
voluntary proceeding seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of Borrower’s property nor shall Borrower consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against Borrower nor shall
Borrower make a general assignment for the benefit of creditors or generally
fail to pay Borrower’s debts as they become due or shall take any action to
authorize any of the foregoing;





                    (d)      an involuntary proceeding shall not have
been commenced against Borrower seeking liquidation, reorganization or other
relief with respect to Borrower or Borrower’s debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official for Borrower or a substantial part of his property;


                    (e)      Borrower’s employment
by or association
with the Company is terminated for “cause” (as defined in the form of Note
attached hereto as Exhibit A); and


                    (f)      Borrower is employed by, or
provides
consulting services to, another company or business that provides
neuroscience-based educational technology products.


          3.       Miscellaneous


                    (a)      Governing Law.  This
Agreement shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the internal laws of the State of California,
without reference to principles of conflicts of laws.


                    (b)      Counterparts.  
This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.


                    (c)      Entire Agreement.
 This Agreement and the exhibits hereto
constitute the entire agreement between the parties relating to the subject
matter hereof and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein.


                    (d)      Severability Of
Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


                    (e)      Notices.  All
written communications provided for hereunder shall be sent by first class mail
or nationwide overnight delivery service (with charges prepaid) and (a) if to
Borrower, addressed to Borrower’s residence address on the records of the
Company or at such other address as Borrower shall have specified to the
Company in writing; and (b) if to the Company, addressed to it at its executive
office address or at such other address as the Company shall have specified to
Borrower in writing.


                    (f)      Benefit.  The
Company may assign all or part of its rights under this Agreement to any other
party.  Borrower may not assign its
rights or obligations hereunder without the Company’s express written
consent.  Borrower, the Company and
their permitted successors and assigns shall be bound by this Agreement.  They shall be the only persons entitled to
its benefits.





                    (g)      Expenses. 
Each party to this Agreement and the exhibits shall bear its own
expenses and legal fees incurred by it with respect to this Agreement and all
related transactions and agreements.


                    (h)      Amendments.
 
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived, only with the written consent of the Company
and Borrower.


                    (i)       Termination.
 
This Agreement, and all obligations hereunder, shall terminate and be of
no force and effect, after April 15, 2001.


 


[THE REST OF
THIS PAGE INTENTIONALLY LEFT BLANK]





          IN
WITNESS WHEREOF, the parties hereto have executed this
Loan Agreement as of the date first above written.


	 	BORROWER:
	 	 	 
	 	 	 
	 	Signature:	/s/ James A.
  Mills



	 	 	 
	 	 
	 	Printed Name: James A.
  Mills
	 	 
	 	 
	 	THE COMPANY:
	 	 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 	 
	 	 	 
	 	By:	/s/ Carleton Holstrom



	 	 	Carleton Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors
				



 


[SIGNATURE PAGE TO LOAN AGREEMENT]





EXHIBIT
A


FORM OF PROMISSORY NOTE





EXHIBIT B


FORM OF SECURITY AGREEMENT


 





SECURED PROMISSORY NOTE


 


	$28,383.00	April 11, 2001
	 	Oakland,
  California



 


          FOR VALUE RECEIVED, James A.
Mills  (“Borrower”),
an employee of Scientific Learning Corporation, a Delaware corporation  (“Company,) hereby
unconditionally promises to pay to the order of Company, in lawful money of the
United States of America and in immediately available funds, the principal sum
of Twenty-Eight Thousand Three Hundred Eighty-Three Dollars ($28,383.00) (the  “Loan”) together with accrued and unpaid interest
thereon, due and payable on the dates and in the manner set forth below.


          It is the intent of the parties that the
purpose of this Note is not for consumer, family or household purposes.


          This Secured Promissory Note is the Note
referred to in and is executed and delivered in connection with that certain
Pledge Agreement dated as of even date herewith and executed and delivered by
Borrower in favor of Company (as the same may from time to time be amended,
modified or supplemented or restated (the  “Security Agreement ”).  Additional rights of Company are set forth
in the Security Agreement.  All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to them in the Security Agreement.


          1.       Principal Repayment.  The
outstanding principal amount of the Loan shall be due and payable on December
31, 2005 (the “Termination Date”).


          2.       Interest Rate.       Borrower further promises to pay interest on the
outstanding principal
amount hereof from the date hereof until payment in full, which interest shall
be compounded annually and payable at the rate of Four and 94/100 percent
(4.94%) per annum or the maximum rate permissible by law (which under the laws
of the State of California shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less.  Interest shall be due and payable on the
Termination Date and shall be calculated on the basis of a 365 day year for the
actual number of days elapsed.


          Any principal repayment or interest payment
on the Loan hereunder not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest at Six and 94/100 percent
(6.94%) per annum.


          3.        Manner of Payment. Both principal and interest are payable in
immediately available funds in lawful money of the United States of America to
the Company at the principal office of Company unless another place of payment
shall be specified in writing by Company.





 


          4.       Application of Payments. 
Payment on this Note shall be applied first to accrued interest, if any,
and thereafter to the outstanding principal balance hereof.  Borrower may at any time pay the full amount
or any portion of this Note without notice or payment of any penalty, premium
or fee.  Any such prepayment shall be
accompanied by payment of any and all accrued and unpaid interest on the amount
prepaid. All payments made on account of the principal of or interest on this
Note shall be recorded in the books and records of the Company; provided, however, that the failure of the
Company to make any notation or any error therein shall not in any manner
affect the obligation of Borrower to repay this Note in accordance with the
terms hereof.  Borrower agrees that any
document submitted by the Company purporting to show the outstanding principal
amount of this Note and all accrued and unpaid interest hereon shall be
conclusive in the absence of manifest error.


          5.       Secured Note.  The
full amount of this Note is secured by the collateral identified and described
as security therefor in the Security Agreement. Borrower shall not, directly or
indirectly, create, permit or suffer to exist, and shall defend the collateral
against and take such other action as is necessary to remove, any lien on or in
the collateral, or in any portion thereof, except as permitted pursuant to the
Security Agreement.  To the extent
Borrower is unable to satisfy this Note when due with the collateral described
in the Security Agreement, the Company may hold Borrower personally liable for
this Note or assert any claim against Borrower for the payment of this Note.


          6.       Default.  Each
of the following events shall be an “Event of Default” hereunder:


                    (a)      Borrower shall fail to pay when due the
Obligations or any part thereof and such failure shall have continued for at
least five business days thereafter;


                    (b)      Any representation or warranty made or deemed
made
by Borrower in the Security Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with the Security
Agreement, the Loan or this Note shall be false, misleading or erroneous in any
material respect when made or deemed to have been made;


                    (c)      Borrower shall fail to perform, observe or comply
with any covenant, agreement or term contained in the Security Agreement and
such failure shall continue for a period of ten business days after the earlier
of (i) notice thereof being given by the Company to Borrower or (ii) such
default otherwise becoming known to Borrower;


                    (d)      Borrower shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for him or a
substantial part of his property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against him or shall make a general assignment
for the benefit of creditors or shall generally fail to pay his debts as they
become due or shall take any action to authorize any of the foregoing;


                    (e)      an involuntary proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of his property, and such involuntary proceeding shall
remain undismissed and unstayed for a period of 60 days;





                    (f)      the Security Agreement or this Note shall
cease to be in full force and effect or shall be declared null and void or the
validity or enforceability thereof shall be contested or challenged by
Borrower, or Borrower shall deny any further liability or obligation under the
Security Agreement or this Note;


                    (g)      Borrower’s employment by or association with
the Company is terminated for “cause” (as defined below);


                    (h)      Borrower is employed by, or provides
consulting services to, another company or business that provides
neuroscience-based educational technology products; or


                    (i)       Borrower shall breach any representation or
covenant under the Security Agreement.


          Upon the occurrence of an Event of Default
hereunder, all unpaid principal, accrued interest and other amounts owing
hereunder shall, at the option of Company, and, in the case of an Event of
Default pursuant to (d), (e) or (f)
above, automatically, be immediately due, payable and collectible by Company
pursuant to applicable law. 
Notwithstanding the foregoing, if an Event of Default has occurred under
(g) or (h) above (together, the “Employment Defaults”), Borrower shall have
90 days after such event to pay all unpaid principal, accrued interest and
other amounts owing hereunder.   Company
shall have all rights and may exercise any remedies available to it under law,
successively or concurrently.  Borrower
expressly acknowledges and agrees that the Company shall have the right to
offset any obligations of Borrower hereunder against salaries, bonuses or other
amounts that may be payable to Borrower by the Company.


          “Cause” shall be defined to include the
following, as determined in good faith by the Board of Directors in its sole
discretion: (i) material breach of the Company’s policies, (ii) material breach
of the Security Agreement or this Note, (iii) neglect or abandonment of
assigned duties, (iv) the commission of any act of fraud, embezzlement or
dishonesty against the Company, (v) conviction of any felony or any crime of
moral turpitude or dishonesty, (vi) intentional damage to the Company’s
property, (vii) any material breach of a proprietary information and inventions
agreement with the Company or unauthorized use or disclosure of confidential
information or trade secrets of the Company, or (viii) conduct by Borrower
which demonstrates unfitness to serve.


          Waiver. Borrower waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note, and
shall pay all costs of collection when incurred, including, without limitation,
reasonable attorneys’ fees, costs and other expenses.


          The
right to plead any and all statutes of limitations as a defense to any demands
hereunder is hereby waived to the full extent permitted by law.





          7.       Governing
Law.  This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of California,
excluding conflict of laws principles that would cause the application of laws
of any other jurisdiction.


          8.       Expenses. 
Borrower agrees to pay all reasonable costs and expenses, including,
without limitation, reasonable attorneys’ fees and costs of court, incurred by
Company or any other holder of this Note in collecting or enforcing payment of
this Note in accordance with its terms.


          9.       Amendment. This Note may not be changed, amended or
modified except in a writing executed by Borrower and the holder hereof.


          10.     Complete Agreement. This Note and the Security Agreement
represent the final agreement between Borrower and Company with respect to the
matters referred to herein and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreement of Borrower and Company.  There are no oral agreements between
Borrower and Company with respect to the matters referred to herein.


          11.     Successors and Assigns.  The
provisions of this Note shall inure to the benefit of and be binding on any
successor to Borrower and shall extend to any holder hereof. Borrower shall
not, without the prior written consent of holder, assign any of its rights or
obligations hereunder.


          IN WITNESS WHEREOF, this Note has been executed as of the date
first written above.


BORROWER:


	Signature:	/s/ James A.
  Mills



	 
	Printed Name: James A.
  Mills



 





PLEDGE
AGREEMENT


          THIS
PLEDGE AGREEMENT (this “Agreement”), dated as of April 11,
2001 is executed by James A. Mills(“Borrower”), an
individual residing in Walnut Creek, California, and SCIENTIFIC
LEARNING CORPORATION, a Delaware corporation (the “Company”).


          WHEREAS, the
Company has loaned $28,383.00 to Borrower which loan will not be used to buy or
carry public company stock;


          WHEREAS, such loan
(the “Loan”) is evidenced by a Secured Promissory Note, dated the date hereof,
executed by Borrower and made payable to the order of the Company (together
with all renewals, extensions and replacements thereof, the “Note”); and


          WHEREAS, the
Company was unwilling to make the Loan to Borrower unless Borrower entered into
this Agreement to secure the payment and performance of the Note by Borrower.


          NOW,
THEREFORE, Borrower and the Company hereby agree as follows:


          Section
1.    Definitions.  For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings:


                    “Code” means
the Uniform Commercial Code in effect in the State of California.



                    “Collateral”
means (a) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Shares, (b) all dividends, distributions and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of the Pledged Shares and (c) all
proceeds of any of the foregoing (whether such proceeds arise before or after
the commencement of a case under the bankruptcy laws by or against Borrower as
debtor).



                    “Event of
Default” means any one or more of the following events:



          (a)      Borrower shall fail to pay when due the
Obligations or any part thereof and such failure shall have continued for at
least five business days;



          (b)      any representation or warranty made or deemed
made by Borrower in this Agreement or in any certificate, report, notice or
financial statement furnished at any time in connection with this Agreement,
the Loan or the Note shall be false, misleading or erroneous in any material
respect when made or deemed to have been made;



          (c)      Borrower shall fail to perform, observe or
comply with any covenant, agreement or term contained in this Agreement and
such failure shall continue for a period of five business days after the
earlier of (i) notice thereof being given by the Company to Borrower or (ii)
such default otherwise becoming known to Borrower;






          (d)      Borrower shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
Borrower or Borrower’s debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official for him or a
substantial part of his property or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against him or shall make a general assignment
for the benefit of creditors or shall generally fail to pay his debts as they
become due or shall take any action to authorize any of the foregoing;



          (e)      an involuntary proceeding shall be commenced
against Borrower seeking liquidation, reorganization or other relief with
respect to Borrower or Borrower’s debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official for Borrower
or a substantial part of his property, and such involuntary proceeding shall
remain undismissed and unstayed for a period of 60 days;



          (f)      this Agreement or the Note shall cease to be
in full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower, or
Borrower shall deny any further liability or obligation under this Agreement or
the Note; or



          (g)      ninety (90) days after any Employment Default
(as defined in the Note), if any amount then remains outstanding under the
Note.



                    “Lien” means
any lien, mortgage, security interest, tax lien, pledge, assessment,
encumbrance, lease, adverse claim, levy, charge or retained interest pursuant
to a conditional sale or title retention contract, or any other interest in
property designed to secure the repayment of debt or any other obligation,
whether arising by agreement, operation of law or otherwise, or any contract to
give any of the foregoing.



                    “Loan” has
the meaning specified in the second recital hereof.



                    “Note” has
the meaning specified in the second recital hereof.



                    “Obligations”
means all obligations of Borrower to the Company under or in connection with
the Note, regardless of how created, arising or evidenced and whether direct or
indirect, primary or secondary, absolute or contingent, joint or several or now
or hereafter existing or due or to become due, and all interest accruing
thereon, and all attorneys’ fees and other expenses incurred in the enforcement
or collection thereof.



                    “Person”
means any natural person, partnership, corporation, business trust,
association, company, limited liability company, joint venture, governmental
authority or any other form of business or legal entity.



                    “Pledged
Shares” means 6,325 shares of Common Stock of the Company registered in the name
of Borrower represented by stock certificate number SCI 2065.  Notwithstanding the foregoing, “Pledged
Shares” shall not include any shares of 






Common
Stock of the Company which have been released from this Agreement pursuant to
Section 10.



                             “Securities Act” means the Securities Act of
1933, as amended.


                              Unless the
context otherwise requires, terms defined in the Code shall have the same
meanings when used in this Agreement.


          Section
2.    Pledge.


          (a)      As security for the prompt and complete
payment and performance when due of all of the Obligations, Borrower hereby
pledges, hypothecates, assigns and grants to the Company a continuing security
interest of first priority in all of the Collateral.


          (b)      On the date hereof, Borrower shall deliver to
the Company three undated stock powers with respect to the certificates
representing the Pledged Shares duly executed in blank, substantially in the
form of Exhibit A attached hereto, one or more UCC-1 financing
statements, substantially in the form of Exhibit B attached hereto, and
such other documents as the Company shall reasonably request to perfect its
security interest in the Collateral.


          As further
described in this Agreement, nothing in this Agreement, the Note or any other
agreement shall limit the Company’s right to hold Borrower personally liable
for the Note or assert any claim against Borrower for the payment of the Note.


          Section
3.    Stock Dividends, etc.  If, while this Agreement is in effect,
Borrower shall become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital, or issued in connection with any
reorganization), option or rights (in connection with Borrower’s ownership of
the Collateral, whether as an addition to, in substitution of or in exchange
for any Pledged Shares or any other Collateral), Borrower agrees to accept the
same as the Company’s agent and to hold the same in trust on behalf of and for
the benefit of the Company, subject to the terms of this Agreement, as
additional Collateral.


          Section
4.    Cash Dividends; Voting Rights;
Dissolution.


          (a)      Unless an Event of Default shall have
occurred and be continuing, Borrower shall be entitled, except as provided in
Sections 3 and 5, to receive all dividends and distributions in respect of the
Collateral, to vote the Collateral and to give consents, waivers and
ratifications in respect of the Collateral; provided,
however, that no vote shall be
cast or consent, waiver or ratification given or action taken which would have
a material adverse effect on the value or marketability of the Collateral or be
inconsistent with or violate the provisions of this Agreement and, provided further,
that any sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of the issuer thereof shall be paid over to the Company to be held
by it as additional Collateral for the Obligations subject to the term hereof.


          (b)      Borrower hereby appoints the Company, with
full power of substitution, effective upon the occurrence of any Event of
Default,  as Borrower’s proxy and
attorney-in-fact





to vote, give consents and
approvals, call meetings and exercise any other rights with respect to the Pledged Shares or any other
Collateral.  This proxy and
power-of-attorney shall be in full force and effect upon the occurrence of any
Event of Default until the termination of this Agreement and is irrevocable and
exclusive and shall not be terminated or otherwise affected by any action or
inaction of Borrower or by operation of law, by death or disability of Borrower
or by the occurrence of any other event. 
Except as set forth in paragraph (a) above, Borrower shall have no right
to vote, give consents or approvals or exercise any other right with respect to
the Pledged Shares or any other Collateral.


          Section
5.    Rights of the Company.


          (a)      The Company shall have the right to deliver
any stop-order instructions to the Company’s transfer agent in order to prevent
Borrower from making any transfers or pledges of the Pledged Shares in
violation of this Agreement.  The
Company shall also have the right to remove any such stop-order instructions at
any time.


          (b)      Subject to the Company’s obligations under
secured transactions law if the Company has taken possession of the Collateral,
the Company shall not be liable for failure to collect or realize upon the
Obligations secured hereby or any collateral security or guarantee therefor, or
any put thereof, or for any delay in so doing, nor shall the Company be under
any obligation to take any action whatsoever with regard thereto.


          (c)      If an Event of Default has occurred and is
continuing, the Company shall notify Borrower in writing requesting immediate
delivery by Borrower to the Company of any and all certificates comprising a
part of the Collateral.  If Borrower
delivers such certificate(s), the Company may transfer or register or have
registered in the name of the Company or the Company’s nominee any and all
shares comprising a part of the Collateral, and the Company or its nominee may
thereafter exercise all voting and corporate rights at any meeting of the
Company’s shareholders and any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any
shares comprising a part of the Collateral as if it were the absolute owner
thereof, including, without limitation, the right to exchange, at its
discretion, any and all of the Collateral upon the merger, consolidation,
reorganization, recapitalization or other readjustment of the Company or upon
the exercise by Borrower or the Company of any right, privilege or option
pertaining to the Collateral, and, in connection therewith, to deposit and
deliver any and all of the Collateral with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for property actually
received by it. If Borrower fails to deliver such certificates within three (3)
business days of receipt of the Company’s notice, Borrower agrees that the
Company may complete one or more stock powers in order to transfer to the
Company (or such other individual or entity as the Company determines) the
number of shares necessary to satisfy the Obligations and the Company shall
have such rights described in this Section 5. 
The Company shall have no duty to exercise any of the aforesaid rights,
privileges or options, and the Company shall not be responsible for any failure
to do so or delay in so doing.





          Section
6.    Remedies.


          (a)      In the event that an Event of Default shall
have occurred and be continuing, the Company may (i) by notice to Borrower,
declare the Note, or any portion thereof, to be immediately due and payable,
and the same shall thereupon become immediately due and payable, without any
other notice and without demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, notice of intent to demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower to the extent permitted by law and/or (ii) without demand of
performance or other demand, advertisement or notice of any kind to or upon
Borrower or any other Person (all and each of which demands, advertisements
and/or notices are hereby expressly waived to the extent permitted by law),
exercise in respect of the Collateral, in addition to the other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Code (whether or not the Code
applies to the affected Collateral), including collecting, receiving,
appropriating and realizing upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give an option or options to purchase, contract to sell
or otherwise dispose of and deliver the Collateral, or any part thereof, in one
or more parcels at public or private sale or sales, at any exchange, broker’s
board or at any of the Company’s offices or elsewhere upon such terms and
conditions as it may, in its absolute discretion, deem advisable and at such
prices as it may, in its absolute discretion, deem best, for cash or on credit
or for future delivery without the assumption of any credit risk, free of any
right or equity of redemption in Borrower, which right or equity is hereby
expressly waived and released to the extent permitted by law, upon any such
sale or sales, public or private, to purchase the whole or any part of the
Collateral so sold; provided, however,
that Borrower shall not be credited with the net proceeds of any credit sale or
future delivery until cash proceeds are actually received by the Company.


          (b)      Borrower agrees that, to the extent notice of
sale shall be required by law, at least 10 days’ notice to Borrower of the time
and place of any public sale or of the time after which a private sale or other
intended disposition is to take place shall be commercially reasonable
notification of such matters.


          (c)      In case the Company shall have instituted any
proceeding to enforce any right, power or remedy under this Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Company then and in every such case Borrower and the Company
shall be restored to their respective former positions and rights hereunder
with respect to the Collateral and all rights, remedies and powers of the
Company shall continue as if no such proceeding had been instituted.


          (d)      All rights and remedies of the Company
expressed herein are in addition to all other rights and remedies possessed by
the Company under the Note, at law or in equity.


          Section
7.    Sale of Collateral.





          (a)      If at any time when the Company shall determine to exercise its right to
sell all or any part of the Collateral pursuant to Section 6 hereof, such
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Securities Act, the Company may, in its
sole and absolute discretion, sell such Collateral or part thereof by private
sale in such manner and under such circumstances as the Company may deem
necessary or advisable in order that such sale may legally be effected without
such registration. Without limiting the generality of the foregoing, in any
such event the Company, in its sole and absolute discretion, (i) may
proceed to make such private sale notwithstanding that a registration statement
for the purpose of registering such Collateral or part thereof shall have been
filed under the Securities Act, (ii) may approach and negotiate with a single
possible purchaser to effect such sale and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for
its own account, for investment, and not with a view to the distribution or
sale of such Collateral or part thereof. 
In the event of any such sale, the Company shall incur no responsibility
or liability for selling all or any part of the Collateral at a price which the
Company, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale were deferred until after
registration as aforesaid.  Borrower
agrees that the Company need not sell the Collateral in a public offering even
though it may yield a higher price than the actual method of sale.


          (b)      Borrower agrees that a sale of any Collateral
is a public sale pursuant to Section 9-504(3) of the Uniform Commercial Code if
(i) an offer to sell such Collateral has been advertised for at least one day
in each of two consecutive weeks in any newspaper of general circulation in the
San Francisco financial community and such sale is made more than 10 days after
the first such advertisement or (ii) such Collateral is offered to at least
five bona fide offerees who the
Company reasonably believes may be interested in that type of investment.  This shall not constitute an admission that
any such offer is a public offering under securities laws or that any other
method of sale is not a public sale.


          Section
8.    Application of Proceeds.  Any proceeds of disposition of any Collateral
shall be applied:


          first, to
the Company’s expenses in enforcing its rights and remedies, including
reasonable attorney’s fees and expenses,


          second, to
the satisfaction of the Obligations, in the order and manner provided in the
Note,


          third, to
the payment of any other amount required by law, and


          fourth, to
Borrower.


          Borrower
shall remain liable for any deficiency in the Obligations.





          Section
9.    Possession of Collateral.  For convenience purposes only, and not to
extend any rights to Borrower thereby, Borrower shall be entitled to hold the
Collateral in trust subject to the provisions of this Agreement, except as from
time to time the Collateral may be required for recordation or for the purpose
of enforcing or realizing upon any right or value represented 





thereby. 
As further described below in Section 12, Borrower’s possession of the
Collateral does not give Borrower the right to transfer the Collateral or take
any other action that would restrict or nullify the Company’s rights to hold a
perfected security interest in the Collateral. 
In order to handle the administrative task of transferring ownership of
the Collateral from Borrower should an Event of Default occur and Borrower fail
to provide the Company with the certificates representing the Collateral, Borrower
shall deliver to the Company three undated stock powers with respect to the
certificates representing the Pledged Shares duly executed in blank,
substantially in the form of Exhibit A attached hereto.


          Section
10.  Release of Collateral.


          (a)      If the Aggregate Market Value on any date
exceeds the Borrowing Base on such date, then Borrower shall be entitled to
obtain a release of Pledged Shares from this Agreement and the security
interest created hereby so long as, immediately after giving effect to such
release, the Aggregate Market Value is not less than the Borrowing Base.  As used herein, (i) “Aggregate Market Value”
means, as of any date, the aggregate fair market value of the Pledged Shares on
such date, as determined by the Per Share Market Value on such date, (ii) “Per
Share Market Value” means, as of any date, the closing price per share of
Common Stock of the Company as reported in the Wall Street Journal for the last
trading day immediately preceding such date and (iii) “Borrowing Base” means, as
of any date, 120% of the principal balance of the Note outstanding on such
date.


          (b)      In the event that the Aggregate Market Value
is less than the Borrowing Base, then Borrower shall have no obligation to
pledge additional shares of Common Stock of the Company.


          (c)      At the request of Borrower, the Company shall
promptly execute and deliver to Borrower all such certificates and other
instruments, including the filing of any amended UCC-1 financing statements, as
shall be necessary or appropriate in order to effectuate any release to which
Borrower has become entitled under this Section 10.


          (d)      If Borrower wishes to sell Pledged Shares
that Borrower is not entitled to have released under this Section 10 for the
purpose of using the proceeds to pay obligations under the Note, the Company
and Borrower shall cooperate to facilitate the prompt execution of such sales
and delivery to the Company of the proceeds thereof as payment under the Note.


          Section
11.  Representations and Warranties of
Borrower.  Borrower hereby represents and warrants to
the Company as follows:


          (a)      Borrower has the legal capacity necessary or
advisable to enter into and perform this Agreement.


          (b)      Borrower has duly executed and delivered this
Agreement.


          (c)      Borrower’s execution, delivery and
performance of this Agreement, and the enforcement by the Company of any of its
rights hereunder, do not and will not breach or constitute a default, give rise
to any right of acceleration or termination or result in or require the 





creation of any Lien under any agreement or instrument to
which Borrower is a party or by which Borrower or any of Borrower’s property is
bound.


          (d)      This Agreement is a legal, valid and binding
obligation of Borrower, enforceable against Borrower in accordance with its terms.


          (e)      This Agreement creates in favor of the
Company a legal, valid and binding security interest, enforceable in accordance
with its terms, in all the Collateral.


          (f)      The Company has a first priority security
interest in the Pledged Shares.  No action
by the Company is required to perfect a first priority security interest in
favor of the Company in all Collateral.


          Section
12.  Certain Covenants of Borrower.  Borrower covenants and agrees with the
Company that until the Obligations are paid and performed in full:


          (a)      Borrower shall promptly notify the Company of
the occurrence or existence of any Event of Default or the occurrence or
existence of any condition or event that, with the giving of notice or lapse of
time or both, would be an Event of Default.


          (b)      Borrower shall maintain the Collateral free
from any Lien adverse to the Company.


          (c)      Borrower shall keep accurate records with
respect to the Collateral. If requested by the Company, Borrower shall permit
the Company and its agents and representatives to examine and make copies or
abstracts of such records. If requested by the Company, Borrower shall prepare
and deliver to the Company a statement accurately identifying or describing any
or all Collateral.


          (d)      Borrower agrees to take any action (including
the execution, delivery, recording, filing, rerecording and refiling of any
financing statements, continuation statements or other documents) that the
Company may reasonably request to (i) perfect, continue, maintain, preserve and
protect the security interest purported to be created hereby as a first
priority security interest in all the Collateral, (ii) enable the Company to
exercise and enforce its rights and remedies or (iii) otherwise effect the
purposes of this Agreement.  If the
Company believes that it needs to obtain injunctive relief  in order to perfect its security interest in
the Collateral, Borrower agrees to consent to such injunctive relief without
delay or challenge.


          (e)      Borrower shall not permit or suffer to exist
any Lien on any Collateral, or part thereof, except for the security interest
created hereby.


          (f)      Borrower shall not transfer, pledge or
otherwise assign the Pledged Shares and agrees that its right to retain
possession of the collateral pursuant to Section 9 is for convenience only and
Borrower shall not take any action that would restrict or nullify the Company’s
rights hereunder.


          (g)      Borrower shall not use any proceeds from the
Loan to buy or carry public company stock.





          Section
13.  No Waiver; Modifications in Writing.  No failure or delay on the part of the
Company in exercising any right, power or remedy hereunder shall operate as a
waiver hereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. 
The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to the Company at law or in equity or
otherwise.  No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement nor
consent to any departure by Borrower shall be effective unless the same shall
be in writing and signed by or on behalf of the Company. Any amendment,
modification or supplement of or to any provision of this Agreement, any waiver
of any provision of this Agreement and any consent to any departure by Borrower
from the terms of any provision of this Agreement shall be effective only in
the specific instance and for the specific purpose for which made or
given.  Except where notice is
specifically required by this Agreement or the Note, no notice to or demand on
Borrower in any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances.


          Section
14.  Security Agreement as Financing
Statement. The
Company is authorized to file this Agreement or a photocopy hereof as a
financing statement with respect to any one or more items comprising the
Collateral.


          Section
15.  Counterparts.  This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.


          Section
16.  Security Interest Absolute.  All rights of the Company and security
interests hereunder, and all obligations of Borrower hereunder, shall be
absolute and unconditional irrespective of:


          (a)      any lack of validity or enforceability of the
Note or any other agreements or instruments relating thereto;


          (b)      any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the Note;


          (c)      any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations; or


          (d)      any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Borrower or a third party
pledgor.


          Section
17.  Governing Law.  THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAW.





          Section
18.  Severability Of Provisions.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.


          Section
19.  Notices. All written communications provided for
hereunder shall be sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (a) if to Borrower, addressed to Borrower’s
residence address on the records of the Company or at such other address as
Borrower shall have specified to the Company in writing; and (b) if to the Company,
addressed to it at its executive office address or at such other address as the
Company shall have specified to Borrower in writing.


          Section
20.  Submission to Jurisdiction.  BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CALIFORNIA
OVER ANY ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHT UNDER
THIS AGREEMENT OR THE NOTE OR (B) ARISING FROM OR RELATING TO ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT AND THE NOTE,
AND BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR FEDERAL
COURT. BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
BORROWER AT BORROWER’S ADDRESS FOR NOTICES PURSUANT TO SECTION 19, SUCH SERVICE
TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO BORROWER AT BORROWER’S ADDRESS
PROVIDED IN SECTION 19, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THAT HE MAY
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM OR VENUE TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. BORROWER AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
SECTION 20 SHALL AFFECT THE RIGHT OF ANY OTHER PERSON TO SERVE LEGAL PROCESS IN
ANY OTHER MANNER PERMITED BY APPLICABLE LAW, OR THE RIGHT OF ANY OTHER PERSON
TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR THE PROPERTY OF BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.


          Section
21.  Final Agreement of the Parties.  THE NOTE AND THIS AGREEMENT REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS REFERRED TO
THEREIN AND HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN 





ORAL AGREEMENTS BETWEEN THE PARTIES WITH
RESPECT TO THE MATTERS REFERRED TO HEREIN OR IN THE NOTE.


          Section
22.  Headings, etc. The headings, captions and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.  In
this Agreement, unless a clear contrary intention appears, (i) the words
“herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Section or other
subdivision and (ii) reference to any Section means such Section of this
Agreement.


          Section
23.  Waiver of Protest and Bond.  In the event the Company seeks to take
possession of any or all of the Collateral by injunctive relief or other
judicial process, Borrower hereby irrevocably waives protest any bonds and any
surety or security relating thereto that may be required by applicable law as
an incident to such possession, and waives any demand for possession prior to
the commencement of any such suit or action.


          Section
24.  Benefit.  The
Company may assign all or part of its rights under this Agreement to any holder
of an Obligation. Borrower, the Company and their permitted successors and
assigns shall be bound by this Agreement. They shall be the only Persons
entitled to its benefits.


 


[THE
REST OF THIS PAGE INTENTIONALLY LEFT BLANK]










          IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.


	 	BORROWER:
	 	 	 	 
	 	Signature:	/s/
  James A. Mills


	 
	 	 
	 	Printed
  Name: James A. Mills
	 	 
	 	THE COMPANY:
	 	 
	 	SCIENTIFIC LEARNING CORPORATION
	 	 	 	 
	 	By:	       /s/ Carleton A. Holstrom


	 
	 	 	Carleton
  A. Holstrom, on behalf of the

  Compensation Committee of the Board of

  Directors	 
					











EXHIBIT A


ASSIGNMENT SEPARATE FROM CERTIFICATE


          FOR VALUE RECEIVED, ______________________
hereby sells, assigns and transfers unto ______________________, ______________________ (_______) shares of the
Common Stock of Scientific Learning Corporation (the “Company”) standing in the undersigned’s name on the
books of the Company represented by Certificate No.(s) ______________________ herewith
and do hereby irrevocably constitute and appoint the Company’s transfer agent
to transfer the said stock on the books of the Company with full power of
substitution in the premises.


Dated: 
__________


	 	Signature
  of Borrower:	




	 	 	 
	 	Name
  of Borrower:	




	 	 
	 	 
	 	If Applicable:
	 	 	 
	 	Additional
  Signature:	




	 	 	 
	 	Name
  of Signatory:	







 











EXHIBIT B


UCC-1 FINANCING STATEMENT


 


	 	 	THIS
  SPACE FOR USE OF FILING OFFICER



 


 


 


FINANCING STATEMENT — FOLLOW INSTRUCTIONS CAREFULLY

This Financing
Statement is presented for filing pursuant to the Uniform Commercial Code

and will remain effective, with certain exceptions, for 5 years from date of
filing.


	A. NAME & TEL. # OF CONTACT AT FILER
  (optional)	B. FILING OFFICE ACCT. # (optional)	 
	C.
  RETURN COPY TO:  (Name and Mailing
  Address)


              Diana
  R. Sanchez
              Cooley
  Godward LLP
              3000
  El Camino  Real
              Palo
  Alto, CA  94306


	








	 
	D. OPTIONAL DESIGNATION (if applicable): :
  LESSOR/LESSEE  :
  CONSIGNOR/CONSIGNEE  :
  NON-UCC FILING	 
	1. DEBTOR’S EXACT FULL LEGAL NAME - insert only
  one debtor name (1a or 1b)
	           OR	1a. ENTITY’S NAME
	 	 
	 	1b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	1c. MAILING ADDRESS	CITY	STATE	COUNTRY	POSTAL CODE
	 	 	 	 	 
	1d. S.S. OR TAX I.D.#	OPTIONAL
ADD’NL INFO RE
ENTITY DEBTOR	1e. TYPE OF ENTITY	1f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	1g. ENTITY’S ORGANIZATION I.D.#, if any
                      
                    o NONE
	 
	2. ADDITIONAL DEBTOR’S EXACT FULL LEGAL NAME -
  insert only one debtor name (2a or 2b)
	OR	2a. ENTITY’s name
	 	 
	 	2b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	2c. MAILING ADDRESS	CITY	STATE	COUNTRY	POSTAL CODE
	 	 	 	 	 
	2d. S.S. OR TAX I.D.#	OPTIONAL
ADD’NL INFO RE
ENTITY DEBTOR	2e. TYPE OF ENTITY	2f.
  ENTITY’S STATE OR COUNTRY OF ORGANIZATION	2g. ENTITY’S ORGANIZATION I.D.#, if any
                    
                      o NONE
	 
	3. SECURED PARTY’S (ORIGINAL S/P or ITS TOTAL
  ASSIGNEE) EXACT FULL LEGAL NAME - insert only one secured party name (3a or
  3b)
	OR	3a.
  ENTITY’S NAME
                                   
     Scientific Learning Corporation
	 	3b. INDIVIDUAL’S LAST NAME	FIRST NAME	MIDDLE NAME	SUFFIX
	 	 	 	 	 
	3c.
  MAILING ADDRESS
          1995
  University Avenue, Suite 400	CITY
Berkeley	STATE
CA	COUNTRY
USA	POSTAL
  CODE
94704
	 
	4.  This FINANCING STATEMENT covers the
  following types or items of property:

All right, title and interest of Debtor in, to and under
  the personal property set forth on Exhibit A
  attached hereto and incorporated herein by reference.


	 	 
	5.CHECK o
    BOX
    (if applicable)	This
  FINANCING STATEMENT is signed by the Secured Party instead of the Debtor to
  perfect a security interest (a) in
collateral already subject to a
  security interest in another jurisdiction when it was brought into this
  state, or when the debtor’s

  location was changed to this state, or (b) in accordance with other statutory
  provisions [additional data may be required]	 	 	7.
  If filed in Florida (check one)
o Documentary            o
 Documentary
stamp tax paid                tax not applicable
	 
	6. REQUIRED SIGNATURE(S)	8. :
  This FINANCING STATEMENT is to be filed [for record]
(or recorded) in the REAL ESTATE
  RECORDS
Attach Addendum                                  
        
  [if applicable]
	 
	By:                           
                                  Title:	9. Check to REQUEST SEARCH CERTIFICATE(S) on
  debtor(s)
[ADDITIONAL FEE]
(optional)                 o All
Debtors    o Debtor 1    o Debtor 2
	 
	(1) FILING OFFICER COPY — NATIONAL FINANCING STATEMENT (FORM UCC1)
  (TRANS.) (REV. 12/18/95)
															











Exhibit A

to


UCC-1 Financing Statement


between


SCIENTIFIC LEARNING
CORPORATION, as Secured Party


and


______________________________, as Debtor


 


1.       Borrower hereby pledges, hypothecates,
assigns and grants to the Secured Party a continuing security interest of first
priority in all of the Collateral.



2.       For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings:



          “Code” means the Uniform Commercial Code
in effect in the State of California.



          “Collateral” means (a) the Pledged Shares
and the certificates representing the Pledged Shares, and all dividends, cash
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares, (b) all dividends, distributions and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares and (c) all proceeds of any of
the foregoing (whether such proceeds arise before or after the commencement of
a case under the bankruptcy laws by or against Borrower as debtor).



           “Pledged Shares” means                  
   
shares of Common Stock of the Company registered in the name of Borrower
represented by stock certificate number(s) __________________________.