Document:

Exhibit 10.1

            

            

            SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

            This Sixth Amendment to Loan and Security Agreement (this “Amendment”) is entered into as of January 30, 2009, by and between COMERICA BANK (“Bank”) and SCIENTIFIC LEARNING CORPORATION (“Borrower”).

            RECITALS

            Borrower and Bank are parties to that certain Loan and Security Agreement dated as of January 15, 2004 (as amended from time to time, including by that certain First Amendment to Loan and Security Agreement dated as of September 29, 2004, that certain Second Amendment to Loan and Security Agreement dated as of December 2, 2005, that certain Third Amendment to Loan and Security
            Agreement dated as of September 5, 2006, that certain Fourth Amendment to Loan and Security Agreement dated as of June 5, 2007 and that certain Fifth Amendment to Loan and Security Agreement dated as of June 30, 2008, the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

            NOW, THEREFORE, the parties agree as follows:

            1.         The following defined terms in Section 1.1 of the Agreement hereby are added, amended or restated as follows:

            “LIBOR Addendum” means the Daily Adjusting LIBOR Addendum to Loan and Security Agreement attached hereto as Exhibit C.

             

            “Revolving Maturity Date” means December 31, 2009.

             

            “Sixth Amendment” means that certain Sixth Amendment to Loan and Security Agreement dated as of January 30, 2009.

             

            2.         The last sentence in the defined term “Change of Control” in Section 1.1 of the Agreement hereby is amended and restated to read as follows:

            “Notwithstanding the foregoing, the present holdings of, and any additional acquisition of, securities of the Borrower by Trigran Investments or any of its affiliates shall not constitute a Change of Control for purposes of this Agreement.”

            
                	
                             

                        	
                            3.  

                        	
                            Section 2.1(a)(i) of the Agreement hereby is amended and restated in its entirety to read as follows:

                        

            

            “(i)       Subject to and upon the terms and conditions of this Agreement (1) Borrower may request Advances in an aggregate outstanding amount not to exceed the Revolving Line, less any amounts outstanding under the Letter of Credit, and (2) amounts borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at
            any time prior to the Revolving Maturity Date, at which time all Advances under this Section 2.1(a) shall be immediately due and payable. Each Advance must be in an amount equal to or greater than the lesser of Five Hundred Thousand Dollars ($500,000) or the amount that has not yet been drawn under the Revolving Line (less any amounts outstanding under the Letter of Credit). Except as set forth in the LIBOR Addendum, Borrower may prepay any Advances without penalty or
            premium.”

            4.             The last sentence in Section 6.3 of the Agreement hereby is amended and restated in its entirety to read as follows:

            “Notwithstanding the foregoing, if (x) the aggregate amount of outstanding Advances is less than or equal to Three Million Dollars ($3,000,000), and (y) the ratio of Borrower’s unrestricted cash at Bank to Borrower’s total Indebtedness to Bank is greater than or equal to 1.50 to 1.00, then all financial statements and other reporting items in
            this Section 6.3 which are required to be delivered to Bank on a monthly basis, 

             

            
                

                
                    	
                                 

                            	
                                -1-

                            

                

                 

                

            

             

            
                

            

            shall instead be delivered to Bank on a quarterly basis.”

            
                	
                             

                        	
                            5.

                        	
                            The number “1.25” in Section 6.8 of the Agreement hereby is replaced with the number “1.15”.

                        

            

            6.             The last sentence in Section 6.8 of the Agreement hereby is amended and restated in its entirety to read as follows:

            “The foregoing covenant shall be measured (i) as of the last day of each quarter if (A) the aggregate amount of outstanding Advances is less than or equal to Three Million Dollars ($3,000,000), and (B) the ratio of Borrower’s unrestricted cash at Bank to Borrower’s total Indebtedness to Bank is greater than or equal to 1.50 to 1.00, and (ii) as
            of the last day of each month at all other times.”

            
                	
                             

                        	
                            7.

                        	
                            Section 6.9 of the Agreement hereby is amended and restated in its entirety to read as follows:

                        

            

            “6.9      Measured as of (i) the last day of each quarter if (A) the aggregate amount of outstanding Advances is less than or equal to Three Million Dollars ($3,000,000), and (B) the ratio of Borrower’s unrestricted cash at Bank to Borrower’s total Indebtedness to Bank is greater than or equal to 1.50 to 1.00, or
            (ii) the last day of each month at all other times, a Net Worth greater than or equal to (a) from the date of the Sixth Amendment through December 31, 2009, negative Two Million Dollars (-$2,000,000), and (b) at all times thereafter, One Dollar ($1.00).

            
                	
                             

                        	
                            8.

                        	
                            Section 8.2(b) of the Agreement hereby is amended and restated in its entirety to read as follows:

                        

            

            “(b)      If Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in this Agreement or in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition or covenant
            that can be cured, has failed to cure such default within fifteen (15) days after Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided, however, that if the default cannot by its nature by cured within the fifteen (15) day period or cannot after diligent attempts by Borrower be cured within such fifteen (15) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period
            (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made.”

            
                	
                             

                        	
                            9.

                        	
                            Exhibit C to the Agreement hereby is replaced with Exhibit C attached hereto.

                        

            

            
                	
                             

                        	
                            10.

                        	
                            Exhibit D to the Agreement hereby is replaced with Exhibit D attached hereto.

                        

            

            
                	
                             

                        	
                            11.

                        	
                            The Schedule to the Agreement hereby is replaced with the Schedule attached hereto.

                        

            

            12.           No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank’s failure at any time to require strict
            performance by Borrower of any provision shall not affect any right of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of Bank.

            13.          Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the
            execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

             

            
                

                
                    	
                                 

                            	
                                - 2 -

                            

                

                

            

             

            
                

            

            14.       Borrower represents and warrants that the Representations and Warranties contained in the Agreement, as qualified by the Schedule included with this Amendment, are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing. 

            15.       As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:

            
                	
                             

                        	
                            (a)

                        	
                            this Amendment, duly executed by Borrower;

                        

            

            (b)        a Certificate of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Amendment;

            (c)        an amendment fee in the amount of Twelve Thousand Five Hundred Dollars ($12,500), which may be debited from any of Borrower’s accounts;

            (d)        all reasonable Bank Expenses incurred through the date of this Amendment, which may be debited from any of Borrower’s accounts; and

            (e)        such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate.

            16.       This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

             

             

             

             

            [Balance of Page Intentionally Left Blank]

            
                

                
                    	
                                 

                            	
                                - 3 -

                            

                

                

            

             

            
                

            

            IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.

            
                	
                             

                        	
                            SCIENTIFIC LEARNING CORPORATION

                        
	
                             

                        	
                             

                        
	
                             

                        	
                             

                        
	
                             

                        	
                            By: /s/ Robert Feller                                    

                        
	
                             

                        	
                             

                        
	
                             

                        	
                            Title: CFO                                                     
                            

                        
	
                             

                        	
                             

                        
	
                             

                        	
                            COMERICA BANK

                        
	
                             

                        	
                             

                        
	
                             

                        	
                             

                        
	
                             

                        	
                            By: /s/ Robert Hernandez                          

                        
	
                             

                        	
                             

                        
	
                             

                        	
                            Title: Vice President                                  

                        

            

             

             

             

            [Signature Page to Sixth Amendment to Loan and Security Agreement]

            

             

            
                
                    

                

            

            EXHIBIT C

            LIBOR/PRIME RATE ADDENDUM

            
                

                 

                
                    	
                                 

                            	
                                - 1 -

                            

                

                

            

             

            
                
                    

                

            

            EXHIBIT D

            COMPLIANCE CERTIFICATE

             

            
                	
                            TO:

                        	
                            COMERICA BANK

                        

            

            
                	
                            FROM:

                        	
                            SCIENTIFIC LEARNING CORPORATION

                        

            

            The undersigned authorized officer of SCIENTIFIC LEARNING CORPORATION hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”), (i) Borrower is in compliance for the period ending _______________ with all required covenants except as noted below and (ii) all
            representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof provided, however, that those representations and warranties the date expressly referring to another date shall be true, correct and complete in all material respects as of such date. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally
            Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes (subject to year-end adjustments with the absence of footnotes).

            Please indicate compliance status by circling Yes/No under “Complies” column.

            
                	
                            Reporting Covenant

                        	
                            Required

                        	
                            Complies

                        
	
                             

                        	
                             

                        	
                             

                        	
                             

                        
	
                            Monthly financial statements

                        	
                            Monthly within 25 days*

                        	
                            Yes

                        	
                            No

                        
	
                            Annual (CPA Audited)

                        	
                            FYE within 90 days

                        	
                            Yes

                        	
                            No

                        
	
                            10K and 10Q

                        	
                            (as applicable)

                        	
                            Yes

                        	
                            No

                        
	
                            A/R Agings

                        	
                            Monthly within 25 days*

                        	
                            Yes

                        	
                            No

                        
	
                            A/R Audit

                        	
                            Upon Bank Request

                        	
                            Yes

                        	
                            No

                        
	
                            IP Report

                        	
                            Within 60 days of new filings

                        	
                            Yes

                        	
                            No

                        
	
                            Total amount of Borrower’s cash and investments

                        	
                            Amount: $________

                        	
                            Yes

                        	
                            No

                        
	
                            Total amount of Borrower’s cash and investments maintained with Bank 

                        	
                            Amount: $________

                        	
                            Yes

                        	
                            No

                        
	
                             

                        	
                             

                        	
                             

                        	
                             

                        
	
                            Financial Covenant

                        	
                            Required

                        	
                            Actual

                        	
                            Complies

                        
	
                             

                        	
                             

                        	
                             

                        	
                             

                        	
                             

                        
	
                            Adjusted Quick Ratio**

                        	
                            1.15:1.00

                        	
                            _____:1.00

                        	
                            Yes

                        	
                            No

                        
	
                            Net Worth**

                        	
                            ($2,000,000) through 12/31/09 and $1 thereafter

                        	
                            $_________

                        	
                            Yes

                        	
                            No

                        
	
                             

                        	
                             

                        	
                             

                        	
                             

                        	
                             

                        
	
                            *provided however if there are less than or equal to $3,000,000 of Advances outstanding and the ratio of Borrower’s unrestricted cash at Bank to Borrower’s Indebtedness to Bank is greater than or equal to 1.50 to 1.00, such financial statements shall be delivered on a quarterly basis and not a monthly basis.

                             

                            **measured quarterly if the aggregate Advances outstanding are less than or equal to $3,000,000 and the ratio of Borrower’s unrestricted cash at Bank to Borrower’s Indebtedness to Bank is greater than or equal to 1.50 to 1.00, and measured monthly at all other times.

                        
	
                             

                        
	
                            Comments Regarding Exceptions: See Attached.

                        
	
                             

                        
	
                             

                        	
                            Received by: ___________________________

                        
	
                            Sincerely,

                        	
                            AUTHORIZED SIGNER

                        
	
                             

                        	
                             

                        
	
                             

                        	
                            Date: _________________________________

                        
	
                             

                        	
                             

                        
	
                            

                        	
                            Verified: 

                        
	
                            SIGNATURE

                        	
                            AUTHORIZED SIGNER

                        
	
                             

                        	
                             

                        
	
                             

                        	
                             

                        
	
                            

                        	
                            Date: _________________________________

                        
	
                            TITLE

                        	
                             

                        
	
                             

                        	
                            Compliance Status

                        
	
                            

                        	
                             

                        	
                             

                        	
                             

                        
	
                            DATE

                        	
                             

                        
	
                             

                        	
                             

                        
	
                        	
                        	
                        	
                        	
                        	
                        	
                        	
                        

            

             

            
                

                 

                
                    	
                                 

                            	
                                - 1 -

                            

                

            

             

            
                
                    

                

            

            SCHEDULE OF EXCEPTIONS

            Permitted Indebtedness (Section 1.1)

            Obligations of the Company under the Company’s Lease Agreement with Rotunda Partners II dated October 1, 2003, for the Oakland office. As of December 31, 2008, amount outstanding though the end of the lease: $5,406,000 

             

            Obligations of the Company under the Company’s Lease Agreement with TriPoint Tucson LLC dated April 5, 2006, as amended, for the Tucson office. As of December 31, 2008, amount outstanding though the end of the lease: $612,000

             

            Obligations of the Company under the Company’s Lease Agreement with Clematis LLC dated February 26, 2008, for the Waltham office. As of December 31, 2008, amount outstanding though the end of the lease: $382,000

             

            Obligations to pay royalties and patent expenses on patents licensed from the University of California and Rutgers, the State University of New Jersey, under the Exclusive License Agreement, dated September 27, 1996, between the Company and the Regents of the University of California, as amended. These patents cover most of our products and revenue. Amount paid in 2008: $857,784,
            including pass through payments; annual minimum $150,000. 

             

            Permitted Investments (Section 1.1)

            1,772,727 shares of Series A Preferred Stock of Posit Science Corporation (formerly Neuroscience Solutions Corporation) (“PSC”), issued pursuant to the Technology Transfer Agreement dated September 30, 2003, between the Company and PSC and the related Series A Preferred Stock Purchase Agreement. 

             

            Permitted Liens (Section 1.1) 

             

            None.

             

            Intellectual Property (Section  5.6)

            Certain patents and patent applications are jointly owned by the Company and the University of California and/or the University of Texas, Dallas. These jointly owned cases are listed on Exhibit A to this Schedule of Exceptions. 

             

            In August 1999, Oklahoma State University wrote the Company suggesting that the Company’s advertising materials indicated that the Fast ForWord Language product might employ concepts covered by US Patent No. 5,711,671, which is owned by the University. The Company reviewed that patent, concluded that the Company’s products were not within the scope of the patent, and
            so notified the University. The Company has not had any discussions or correspondence with this University since August 2000. 

             

            Prior Names; Locations of Assets (Section 5.7)

            The Company was originally incorporated in California under the name Scientific Learning Principles Corporation. The Company changed its name to Scientific Learning Corporation when it reincorporated in Delaware in May 1997. 

            In addition to the Company’s chief executive offices, Inventory and/or Equipment of the Company is also located at: 

            
                	
                             

                        	
                            •

                        	
                            The Company’s offices located at 6367 East Tanque Verde Rd., Suite LL 10, Tucson, Arizona.

                        

            

            
                	
                             

                        	
                            •

                        	
                            The Company’s office located at 135 Beaver St., Suite 308, Waltham, Massachusetts. 

                        

            

            
                	
                             

                        	
                            •

                        	
                            Alom Technologies,48105 Warm Springs Blvd Fremont, CA  94539. Alom is the Company’s fulfillment contractor, and as such much of the Company’s inventory is located at Alom. 

                        

            

             

            
                

                - 1 -

                

            

             

            
                
                    

                

            

            
                	
                             

                        	
                            •

                        	
                            Raging Wire Enterprise Solutions, 1200 Stryker Avenue, Sacramento, CA 95834-1157. Raging Wire hosts the Company’s primary internet operations site and certain of the Company’s computer equipment is located there. 

                        

            

            
                	
                             

                        	
                            •

                        	
                            Homes of the Company’s field sales and service personnel. The Company’s field sales and service personnel work from their homes, located throughout the US. These personnel have possession of personal computer equipment and limited quantities of software used for demonstration and display purposes. 

                        

            

            
                	
                             

                        	
                            •

                        	
                            Research sites with which the Company is working from time to time have limited amounts of computer equipment at their premises, on loan from the Company.

                        

            

             

            Transactions with Affiliates (Section 7.8)

            Under a Technology Transfer Agreement with Posit Science Corporation (formerly Neuroscience Solutions Corporation (“PSC”)), the Company licensed to PSC patents owned by the Company, patents licensed by the Company from universities, and certain software developed by the Company. All of the licenses are limited to the health field, and most are exclusive for that field.
            PSC and the Company also agreed to license to one another certain patents that may be issued in the future. Dr. Michael M. Merzenich, who is a founder, significant stockholder and former officer and director of the Company, is also a founder, director, significant stockholder and officer of PSC. Drs. Paula A. Tallal, Steven L. Miller and William Jenkins, each of whom is a founder, director, officer, and/or significant shareholder of the Company, are or have been consultants to
            Posit Science Corporation and/or members of Posit’s Scientific Advisory Board.

             

            
                

                 

                
                    	
                                 

                            	
                                - 2 -

                            

                

                

            

             

            
                
                    

                

                Exhibit A to Schedule of Exceptions

                Jointly Owned Patents

                 

                
                    	
                                Docket

                            	
                                Country

                            	
                                Serial Number

                            	
                                Patent No.

                            	
                                Title

                            	
                                Owner

                            	
                                Status

                            
	
                                701

                            	
                                US

                            	
                                08/852,651

                            	
                                6,109,107

                            	
                                Method and Apparatus for Diagnosing and Remediating Language Based Learning Impairments

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                701-D1

                            	
                                US

                            	
                                09/617,585

                            	
                                6,349,598

                            	
                                Method and Apparatus for Diagnosing and Remediating Language-Based Learning Impairments

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                701-D2

                            	
                                US

                            	
                                10/027,518

                            	
                                6,457,362

                            	
                                Method and Apparatus for Diagnosing and Remediating Language-Based Learning Impairments

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                704-AU

                            	
                                AU

                            	
                                13133/99

                            	
                                746634

                            	
                                Method for Improving Motor Control in an Individual by Sensory Training

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                704B

                            	
                                US

                            	
                                09/470,047

                            	
                                6,409,685

                            	
                                Method for Improving Motor Control in an Individual by Sensory Training

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                704C1

                            	
                                US

                            	
                                09/374,227

                            	
                                6,267,733

                            	
                                Apparatus and Methods for Treating Motor Control and Somatosensory Perception Deficits

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                706

                            	
                                US

                            	
                                08/970,564

                            	
                                6,422,869

                            	
                                Methods and Apparatus for Assessing and Improving Processing of Temporal Information in Human

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                706-JP

                            	
                                JP

                            	
                                11-528633

                            	
                                 

                            	
                                Methods and Apparatus for Assessing and Improving Processing of Temporal Information in Human

                            	
                                UC/SLC

                            	
                                PENDING

                            
	
                                724

                            	
                                US

                            	
                                09/224,510

                            	
                                6,221,908

                            	
                                System for Stimulating Brain Plasticity

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                725

                            	
                                US

                            	
                                09/134,759

                            	
                                6,231,344

                            	
                                Prophylactic Reduction and Remediation of Schizophrenic Impairments Through Interactive Behavioral Training

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                725A

                            	
                                US

                            	
                                09/153,568

                            	
                                6,165,126

                            	
                                Remediation of Depression Through Computer-Implemented Interactive Behavioral Training

                            	
                                UC/SLC

                            	
                                ISSUED

                            
	
                                0008

                            	
                                US

                            	
                                10/000,844

                            	
                                7,024,398

                            	
                                Computer -Implemented Methods and Apparatus for Remediating Abnormal Behaviors

                            	
                                UC/SLC/UofTDallas

                            	
                                ISSUED

                            

                

                 

                
                    

                    - 3 -

                

                 

                
                    
                        

                    

                

                 

                
                    	
                                Corporation Resolutions and Incumbency Certification

                                Authority to Procure Loans

                            

                

                 

                I certify that I am the duly elected and qualified Secretary of SCIENTIFIC LEARNING CORPORATION; that the following is a true and correct copy of resolutions duly adopted by the Board of Directors of the Corporation in accordance with its bylaws and applicable statutes. 

                Copy of Resolutions:

                Be it Resolved, That:

                1.         Any one (1) of the following __________________________ (insert titles only) of the Corporation are/is authorized, for, on behalf of, and in the name of the Corporation to:

                (a)        Negotiate and procure loans, letters of credit and other credit or financial accommodations from Comerica Bank (“Bank”), a Texas banking association, including, without limitation, that certain Loan and Security Agreement dated as of January 15, 2004, as may subsequently be amended from time to
                time, including but not limited to that certain First Amendment to Loan and Security Agreement dated as of September 29, 2004, that certain Second Amendment to Loan and Security Agreement dated as of December 2, 2005, that certain Third Amendment to Loan and Security Agreement dated as of September 5, 2006, that certain Fourth Amendment to Loan and Security Agreement dated as of June 5, 2007, that certain Fifth Amendment to Loan and Security Agreement dated as of June 30, 2008
                and that certain Sixth Amendment to Loan and Security Agreement dated as of January 30, 2009;

                (b)        Discount with the Bank, commercial or other business paper belonging to the Corporation made or drawn by or upon third parties, without limit as to amount;

                (c)        Purchase, sell, exchange, assign, endorse for transfer and/or deliver certificates and/or instruments representing stocks, bonds, evidences of Indebtedness or other securities owned by the Corporation, whether or not registered in the name of the Corporation;

                (d)        Give security for any liabilities of the Corporation to the Bank by grant, security interest, assignment, lien, deed of trust or mortgage upon any real or personal property, tangible or intangible of the Corporation;

                (e)        Execute and deliver in form and content as may be required by the Bank any and all notes, evidences of Indebtedness, applications for letters of credit, guaranties, subordination agreements, loan and security agreements, financing statements, assignments, liens, deeds of trust, mortgages, trust receipts
                and other agreements, instruments or documents to carry out the purposes of these Resolutions, any or all of which may relate to all or to substantially all of the Corporation’s property and assets.

                2.         Said Bank be and it is authorized and directed to pay the proceeds of any such loans or discounts as directed by the persons so authorized to sign, whether so payable to the order of any of said persons in their individual capacities or not, and whether such proceeds are deposited to the individual
                credit of any of said persons or not;

                3.         Any and all agreements, instruments and documents previously executed and acts and things previously done to carry out the purposes of these Resolutions are ratified, confirmed and approved as the act or acts of the Corporation.

                4.         These Resolutions shall continue in force, and the Bank may consider the holders of said offices and their signatures to be and continue to be as set forth in a certified copy of these Resolutions delivered to the Bank, until notice to the contrary in writing is duly served on the Bank (such notice to
                have no effect on any action previously taken by the Bank in reliance on these Resolutions).

                 

                
                    

                    - 1 -

                    

                

                 

                
                    
                        

                    

                

                5.         Any person, corporation or other legal entity dealing with the Bank may rely upon a certificate signed by an officer of the Bank to effect that these Resolutions and any agreement, instrument or document executed pursuant to them are still in full force and effect and binding upon the
                Corporation.

                6.         The Bank may consider the holders of the offices of the Corporation and their signatures, respectively, to be and continue to be as set forth in the Certificate of the Secretary of the Corporation until notice to the contrary in writing is duly served on the Bank.

                I further certify that the above Resolutions are in full force and effect as of the date of this Certificate; that these Resolutions and any borrowings or financial accommodations under these Resolutions have been properly noted in the corporate books and records, and have not been rescinded, annulled, revoked or modified; that neither the foregoing Resolutions nor any
                actions to be taken pursuant to them are or will be in contravention of any provision of the articles of incorporation or bylaws of the Corporation or of any agreement, indenture or other instrument to which the Corporation is a party or by which it is bound; and that neither the articles of incorporation nor bylaws of the Corporation nor any agreement, indenture or other instrument to which the Corporation is a party or by which it is bound require the vote or consent of
                shareholders of the Corporation to authorize any act, matter or thing described in the foregoing Resolutions. 

                I further certify that the following named persons have been duly elected to the offices set opposite their respective names, that they continue to hold these offices at the present time, and that the signatures which appear below are the genuine, original signatures of each respectively:

                (PLEASE SUPPLY GENUINE SIGNATURES OF AUTHORIZED SIGNERS BELOW)

                
                    	
                                NAME (Type or Print)

                            	
                                TITLE

                            	
                                SIGNATURE

                            
	
                                 

                            	
                                 

                            	
                                 

                            
	
                                

                            	
                                

                            	
                                

                            
	
                                 

                            	
                                 

                            	
                                 

                            
	
                                

                            	
                                

                            	
                                

                            
	
                                 

                            	
                                 

                            	
                                 

                            
	
                                

                            	
                                

                            	
                                

                            
	
                                 

                            	
                                 

                            	
                                 

                            
	
                                

                            	
                                

                            	
                                

                            
	
                                 

                            	
                                 

                            	
                                 

                            
	
                                

                            	
                                

                            	
                                

                            
	
                                 

                            	
                                 

                            	
                                 

                            
	
                                

                            	
                                

                            	
                                

                            

                

                 

                In Witness Whereof, I have affixed my name as Secretary and have caused the corporate seal (where available) of said Corporation to be affixed on January 30, 2009.

                
                                                                                                               
                

                

                	
                        	
                        	 	
                        
	
                        	
                        	Secretary	
                        

                

                

                
                    

                    The Above Statements are Correct.         ____________________________________________________

                

                SIGNATURE OF OFFICER OR DIRECTOR OR, IF NONE, A SHAREHOLDER OTHER THAN SECRETARY WHEN SECRETARY IS AUTHORIZED TO SIGN ALONE.

                Failure to complete the above when the Secretary is authorized to sign alone shall constitute a certification by the Secretary that the Secretary is the sole Shareholder, Director and Officer of the Corporation.

                 

                
                    

                     

                    
                        	
                                     

                                	
                                    - 2 -

                                

                    

                

                 

                
                    
                        

                    

                

                
                     
                

                
                     
                

            

            
                Daily Adjusting LIBOR Addendum To Loan and Security Agreement

                This Daily Adjusting LIBOR Addendum to Loan and Security Agreement (this “Addendum”) is entered into as of January 30, 2009, by and between Comerica Bank (“Bank”) and Scientific Learning Corporation, a Delaware corporation (“Borrower”). This Addendum supplements the terms of the Loan and Security Agreement dated January 15, 2004 (as amended
                from time to time, including by that certain First Amendment to Loan and Security Agreement dated as of September 29, 2004, that certain Second Amendment to Loan and Security Agreement dated as of December 2, 2005, that certain Third Amendment to Loan and Security Agreement dated as of September 5, 2006, that certain Fourth Amendment to Loan and Security Agreement dated as of June 5, 2007, that certain Fifth Amendment to Loan and Security Agreement dated as of June 30, 2008 and
                that certain Sixth Amendment to Loan and Security Agreement dated as of January 30, 2009, the “Agreement”).

                1.            Definitions. As used in this Addendum, the following terms shall have the following meanings. Initially capitalized terms used and not defined in this Addendum shall have the meanings ascribed thereto in the Agreement.

                a.         “Applicable Margin” means (i) with respect to the Daily Adjusting LIBOR Rate, three and one-half percent (3.50%) per annum, and (ii) with respect to the Prime-based Rate, three quarters of one percent (0.75%) per annum.

                b.         “Business Day” means any day, other than a Saturday, Sunday or any other day designated as a holiday under Federal or applicable State statute or regulation, on which Bank is open for all or substantially all of its domestic and international business (including dealings in foreign exchange) inDetroit,
                Michigan and San Jose, California, and, in respect of notices and determinations relating the Daily Adjusting LIBOR Rate, also a day on which dealings in dollar deposits are also carried on in the London interbank market and on which banks are open for business in London, England.

                c.         “Daily Adjusting LIBOR Rate” means, for any day, a per annum interest rate which is equal to the Applicable Margin, plus the quotient of the following:

                
                    	
                                 

                            	
                                (1)

                            	
                                for any day, the per annum rate of interest determined on the basis of the rate for deposits in United States Dollars for a period equal to one (1) month appearing on Page BBAM of the Bloomberg Financial Markets Information Service as of 8:00 a.m. (California time) (or as soon thereafter as practical) on such day, or if such day is not a Business
                                Day, on the immediately preceding Business Day. In the event that such rate does not appear on Page BBAM of the Bloomberg Financial Markets Information Service (or otherwise on such Service) on any day, the “Daily Adjusting LIBOR Rate” for such day shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be reasonably selected by Bank, or in the absence of such other service, the “Daily
                                Adjusting LIBOR Rate” for such day shall, instead, be determined based upon the average of the rates at which Bank is offered dollar deposits at or about 8:00 a.m. (California time) (or as soon thereafter as practical), on such day, or if such day is not a Business Day, on the immediately preceding Business Day, in the interbank eurodollar market in an amount comparable to the principal amount of the Obligations and for a period equal to one (1)
                                month;

                            

                

                divided by

                
                    	
                                 

                            	
                                (2)

                            	
                                a percentage (expressed as a decimal) equal to 1.00 minus the maximum rate on such day at which Bank is required to maintain reserves on “Euro-currency Liabilities” as defined in and pursuant to Regulation D of the Board of Governors of the Federal Reserve System or, if such regulation or definition is modified, and as long as Bank is
                                required to maintain reserves against a category of liabilities which includes eurodollar deposits or includes a category of assets which includes eurodollar loans, the rate at which such reserves are required to be maintained on such category.

                            

                

                d.         “LIBOR Lending Office” means Bank’s office located in the Cayman Islands, British West Indies, or such other branch of Bank, domestic or foreign, as it may hereafter designate as its LIBOR Lending Office by notice to Borrower.

                e.         “Prime Rate” means the per annum interest rate established by Bank as its prime rate for its borrowers, as such rate may vary from time to time, which rate is not necessarily the lowest rate on loans made by Bank at any such time.

                f.          “Prime-based Rate” means a per annum interest rate which is equal to the sum of the Applicable Margin plus the greater of (i) the Prime Rate; or (ii) the rate of interest equal to the sum of (a) one percent (1%), and (b) the rate of interest equal to the
                average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers (the “Overnight Rates”), as published by the Federal Reserve Bank of New York, or, if the Overnight Rates are not so published for any day, the average of the quotations for the Overnight Rates received by Bank from three (3) Federal funds brokers of recognized standing selected by Bank, as the same may be changed from time to
                time. 

                2.             Interest Rate Options. Subject to the terms and conditions of this Addendum, the Obligations under the Agreement shall bear interest at the Daily Adjusting LIBOR Rate, except during any period of time during which, in accordance with the terms and conditions of this
                Addendum, the Obligations under the Agreement shall bear interest at the Prime-based Rate. 

                
                     

                    
                        	
                                     

                                	
                                    -1-

                                

                    

                     

                    

                

                 

                
                    

                

                3.             Payment of Interest. Accrued and unpaid interest on the unpaid balance of the Obligations outstanding under the Agreement shall be payable monthly, in arrears, on the first Business Day of each month, until maturity (whether as stated herein, by acceleration, or
                otherwise). In the event that any payment under this Addendum becomes due and payable on any day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and, to the extent applicable, interest shall continue to accrue and be payable thereon during such extension at the rates set forth in this Addendum. Interest accruing hereunder shall be computed on the basis of a year of 360 days, and shall be assessed for the actual number of
                days elapsed, and in such computation, effect shall be given to any change in the applicable interest rate as a result of any change in the Daily Adjusting LIBOR Rate or, to the extent applicable, the Prime-based Rate on the date of each such change.

                4.             Bank’s Records. The amount and date of each advance under the Agreement, its applicable interest rate, and the amount and date of any repayment shall be noted on Bank’s records, which records shall be conclusive evidence thereof, absent manifest error;
                provided, however, any failure by Bank to make any such notation, or any error in any such notation, shall not relieve Borrower of its obligations to repay Bank all amounts payable by Borrower to Bank under or pursuant to this Addendum and the Agreement, when due in accordance with the terms hereof. For any advance under the Agreement bearing interest at the Daily Adjusting
                LIBOR Rate, if Bank shall designate a LIBOR Lending Office which maintains books separate from those of the rest of Bank, Bank shall have the option of maintaining and carrying such advance on the books of such LIBOR Lending Office.

                5.             Default Interest Rate. From and after the occurrence of any Event of Default, and so long as any such Event of Default remains unremedied or uncured thereafter, the Obligations outstanding under the Agreement shall bear interest at a per annum rate of five percent (5%)
                above the otherwise applicable interest rate hereunder, which interest shall be payable upon demand. In addition to the foregoing, a late payment charge equal to five percent (5%) of each late payment hereunder may be charged on any payment not received by Bank within ten (10) calendar days after the payment due date therefor, but acceptance of payment of any such charge shall not constitute a waiver of any Event of Default under the Agreement. In no event shall the interest
                payable under this Addendum and the Agreement at any time exceed the maximum rate permitted by law.

                6.             Prepayment. Borrower may prepay all or part of the outstanding balance of any Obligations at any time without premium or penalty. Any prepayment hereunder shall also be accompanied by the payment of all accrued and unpaid interest on the amount so prepaid. Borrower hereby
                acknowledges and agrees that the foregoing shall not, in any way whatsoever, limit, restrict, or otherwise affect Bank’s right to make demand for payment of all or any part of the Obligations under the Agreement due on a demand basis in Bank’s sole and absolute discretion.

                
                    	
                                7.

                            	
                                Regulatory Developments or Other Circumstances Relating to the Daily Adjusting LIBOR Rate.

                            

                

                a.         If, at any time, Bank determines that, (1) Bank is unable to determine or ascertain the Daily Adjusting LIBOR Rate, or (2) by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars in the applicable amounts or for the relative maturities are not being offered
                to Bank, or (3) the Daily Adjusting LIBOR Rate will not accurately or fairly cover or reflect the cost to Bank of maintaining any of the Obligations under this Addendum at the Daily Adjusting LIBOR Rate, then Bank shall forthwith give notice thereof to Borrower. Thereafter, until Bank notifies Borrower that such conditions or circumstances no longer exist, the Prime-based Rate shall be the applicable interest rate for all Obligations during such period of time. 

                b.         If, after the date hereof, the introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by Bank (or its LIBOR Lending Office) with any request or
                directive (whether or not having the force of law) of any such authority, shall make it unlawful or impossible for the Bank (or its LIBOR Lending Office) to make or maintain any Obligations under the Agreement with interest at the Daily Adjusting LIBOR Rate, Bank shall forthwith give notice thereof to Borrower. Thereafter, until Bank notifies Borrower that such conditions or circumstances no longer exist, the Prime-based Rate shall be the applicable interest rate for all
                Obligations during such period of time. 

                c.         Further, at any time upon prior written notice to the undersigned, Bank may, in its sole discretion based upon its good faith belief that the Prime-based Rate is an appropriate basis for its floating rate loans, suspend use of the Daily Adjusting LIBOR Rate as the applicable interest rate hereunder, at which time, the
                Prime-based Rate shall thereafter be the applicable interest rate for all Obligations outstanding under the Agreement, unless Bank, in its sole discretion based upon its good faith belief that the Prime-based Rate is no longer an appropriate basis for its floating rate loans, rescinds such notice, in which case, the Daily Adjusting LIBOR Rate shall, upon written notice from Bank to the undersigned, again be the applicable interest rate for all Obligations outstanding under the
                Agreement. 

                d.         If the adoption after the date hereof, or any change after the date hereof in, any applicable law, rule or regulation (whether domestic or foreign) of any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Bank (or its LIBOR Lending Office)
                with any request or directive (whether or not having the force of law) made by any such authority, central bank or comparable agency after the date hereof: (a) shall subject Bank (or its LIBOR Lending Office) to any tax, duty or other charge with respect to this Addendum or any Obligations under the Agreement, or shall change the basis of taxation of payments to Bank (or its LIBOR Lending Office) of the principal of or interest under this Addendum or any other amounts due under
                this Addendum in respect thereof (except for changes in the rate of tax on the overall net income of Bank or its LIBOR Lending Office imposed by the jurisdiction in which Bank’s principal executive office or LIBOR Lending Office is located); or (b) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or
                for the account of, or credit extended by Bank (or its LIBOR Lending Office), or shall impose on Bank (or its LIBOR Lending Office) or the foreign exchange and 

                 

                
                    
                        	
                                     

                                	
                                    -2-

                                

                    

                     

                    

                

                 

                
                    

                

                interbank markets any other condition affecting this Addendum or the Obligations; and the result of any of the foregoing is to increase the cost to Bank of maintaining any part of the Obligations or to reduce the amount of any sum received or receivable by Bank under this Addendum by an amount deemed by the Bank to be material, then Borrower shall pay to Bank, within fifteen (15) days of
                Borrower’s receipt of written notice from Bank demanding such compensation, such additional amount or amounts as will compensate Bank for such increased cost or reduction. A certificate of Bank, prepared in good faith and in reasonable detail by Bank and submitted by Bank to Borrower, setting forth the basis for determining such additional amount or amounts necessary to compensate Bank shall be conclusive and binding for all purposes, absent manifest error.

                e.         In the event that any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not presently applicable to Bank, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance
                by Bank with any guideline, request or directive of any such authority (whether or not having the force of law), including any risk-based capital guidelines, affects or would affect the amount of capital required or expected to be maintained by Bank (or any corporation controlling Bank), and Bank determines that the amount of such capital is increased by or based upon the existence of any obligations of Bank hereunder or the maintaining of any Obligations, and such increase has
                the effect of reducing the rate of return on Bank’s (or such controlling corporation’s) capital as a consequence of such obligations or the maintaining of such Obligations to a level below that which Bank (or such controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy), then Borrower shall pay to Bank, within fifteen (15) days of Borrower’s receipt of written notice from
                Bank demanding such compensation, additional amounts as are sufficient to compensate Bank (or such controlling corporation) for any increase in the amount of capital and reduced rate of return which Bank reasonably determines to be allocable to the existence of any obligations of the Bank hereunder or to maintaining any Obligations. A certificate of Bank as to the amount of such compensation, prepared in good faith and in reasonable detail by the Bank and submitted by Bank to
                Borrower, shall be conclusive and binding for all purposes absent manifest error.

                8.             Legal Effect. Except as specifically modified hereby, all of the terms and conditions of the Agreement remain in full force and effect.

                9.             Conflicts. As to the matters specifically the subject of this Addendum, in the event of any conflict between this Addendum and the Agreement, the terms of this Addendum shall control.

                IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date first set forth above.

                
                    	
                                COMERICA BANK

                            	
                                SCIENTIFIC LEARNING CORPORATION

                            

                

                
                    	
                                By: /s/ Robert Hernandez                      

                            	
                                By: /s/ Robert Feller                   

                            

                

                 

                
                    	
                                Title: Vice President                               

                            	
                                Its: CFO                                          

                            

                

                 

                 

                
                    
                        	
                                     

                                	
                                    -3-equity11_10thtranchewarrant.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,

    AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT ONE OF THE FOLLOWING (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY

    SATISFACTORY
TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED,

    (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL

    AUTHORITIES,
OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS
WARRANT.

    

    ECOLOGY
COATINGS, INC.

    

    
    

    

    WARRANT
TO PURCHASE 17,000 SHARES

    OF
COMMON STOCK

    

    WARRANT
NO.  W-13

    

    THIS
CERTIFIES THAT, once this warrant becomes effective, for value received, Equity
11, Ltd. and its assigns are entitled to subscribe for and purchase 17,000
shares common stock (as adjusted pursuant to Section 4 hereof, the "SHARES") of the fully paid
and nonassessable common stock, par value $0.001 per share ("COMMON STOCK"), of Ecology
Coatings, Inc., a Nevada corporation (the "COMPANY"), at the price of
$0.75 per share (such price and such other price as shall result, from time to
time, from the adjustments specified in Section 4 hereof is herein referred to
as the "WARRANT
PRICE"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "DATE OF GRANT" means August
28, 2008, and (b) the term "OTHER WARRANTS" means any
other warrants issued by the
Company in connection with the transaction with respect to which this
Warrant was issued, and any warrant issued upon transfer or partial exercise of
this Warrant. This Warrant shall become effective upon Equity 11, Ltd.’s
acquisition of an additional 34 Convertible Preferred Shares under the
Securities Purchase Agreement bringing its total acquisition of Convertible
Preferred Shares to 2,347.  The term "Warrant" as used herein
shall be deemed to include Other Warrants unless the context clearly requires
otherwise.

    

    1. Term.
The purchase right represented by this Warrant is exercisable, in whole or in
part, at any time and from time to time from the Date of Grant through five (5)
years after the Date of Grant.

    

    2. Method
of Exercise; Payment; Issuance of New Warrant. Subject to Section 1 and 4
hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of exercise
substantially in the form attached hereto as Exhibit A-1 duly completed and
executed) at the principal office of the Company and
by the  payment to the
Company, by certified or bank check, or by wire transfer to an account
designated by the Company
(a "WIRE TRANSFER") of
an amount that is $.75 multiplied by the number of Shares then being purchased,
or (b) if in connection with a registered public offering of the Company's
securities, the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A-2 duly completed and executed) at the principal
office of the Company together with notice of arrangements reasonably satisfactory to
the Company for payment to
the Company either by
certified or bank check or by Wire Transfer from the proceeds of the sale of
shares to be sold by the holder in such public offering of an amount equal to
the then applicable Warrant Price per share multiplied by the number of Shares
then being purchased, or (c) exercise of the "net issuance" right provided
for in Section 10.2 hereof. The person or persons in whose name(s) any
certificate(s) representing the Shares shall be issuable   upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as practicable and, if requested by the
holder of this Warrant, the
Company shall cause its transfer agent to deliver the certificate
representing Shares issued upon exercise of this Warrant to a broker or other
person (as directed by the holder exercising this Warrant) within the time
period required to settle any trade made by the holder after exercise of this
Warrant.

    

    3. Stock
Fully Paid; Reservation of Shares. All Shares that may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance pursuant
to the terms and conditions herein, be fully paid and nonassessable, and free
from all taxes, liens and charges with respect to the issue
thereof.  During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times
have authorized, and reserved for the purpose of the issue upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.

    

    4.
Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:

    

    (a)
Reclassification or Merger. In case of any reclassification or change of
securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company is the acquiring and
the surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the Company, or
such successor or purchasing corporation, as the case may be, shall duly execute
and deliver to the holder of this Warrant a new Warrant (in form  and
substance satisfactory to the holder of this Warrant), or the Company shall make
appropriate provision without the issuance of a new Warrant, so that the holder
of this Warrant shall have the right to receive upon exercise of this Warrant,
at a total purchase price not to exceed that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of the number of shares of Common
Stock then purchasable under this Warrant. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.

    

    (b)
Subdivision or Combination of Shares. If the Company at any time while this
Warrant remains outstanding and unexpired shall subdivide or combine its
outstanding shares of Common Stock, the Warrant Price shall be proportionately
decreased and the number of Shares issuable hereunder shall
be  proportionately increased in the case of a subdivision or the
Warrant Price shall be proportionately increased and the number of Shares
issuable hereunder shall be proportionately decreased in the case of a
combination.

    

    (c) Stock
Dividends and Other Distributions. If the Company at any time while
this Warrant is outstanding and unexpired shall (i) pay a dividend with respect
to its Common Stock payable in Common Stock, then the Warrant Price shall be
adjusted, from and after the date of determination of stockholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by a
fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(B) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), then, in each such case,
provision shall be made by
the Company such
that the holder of this Warrant shall receive upon exercise of this Warrant a
proportionate share of any such dividend or distribution as though it were the
holder of the Shares as of the record date fixed for the determination of the
shareholders of the Company entitled to receive
such dividend or distribution.

    

    (d)
Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the
number of Shares purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of Shares purchasable
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately prior to such
adjustment and the denominator of which shall be the Warrant Price immediately
thereafter.

    

    5. Notice
of Adjustments. Except for the circumstances of Section 4(a), whenever the
Warrant Price or the number of Shares purchasable hereunder shall be adjusted
pursuant to Section 4 hereof, the Company shall make a certificate signed by its
chief executive officer, chief financial officer or any vice president setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant at such holder's last known address.

    

    6.
Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash
payment therefore based on the fair market value of the Common Stock on the date
of exercise as reasonably determined in good faith by the Company's Board of Directors.

    

    7.
Compliance with Securities Act; Disposition of Warrant or Shares of Common
Stock.

    

    (a)
Compliance with Securities Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant, and the Shares to be issued upon exercise
hereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "ACT") or any applicable
state securities laws. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act and any applicable state securities laws
or an exemption from such registration is available, the holder hereof shall
confirm in writing that the Shares so purchased are being acquired for
investment and not with a view toward distribution or resale in violation of the
Act and shall confirm such other matters related thereto as may be reasonably
requested by the
Company. This
Warrant and all Shares issued upon exercise of this Warrant (unless registered
under the Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:

    

    "THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE

    SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO

    SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT ONE OF THE FOLLOWING (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE
COMPANY, THAT
SUCH

    REGISTRATIONS
ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING

    WITH
THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE

    SECURITIES
WERE ISSUED, DIRECTLY OR INDIRECTLY."

    

    This
legend shall be removed by
the Company, upon
the request of a holder, at such time as the restrictions on the transfer of the
applicable security shall have terminated. In addition, in connection with the
issuance of this Warrant, the holder specifically represents to the Company by acceptance of this
Warrant as follows:

    

    (1) The
holder is aware of the
Company's business
affairs and financial condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof in
violation of the Act.

    

    (2) The
holder understands that this Warrant has not been registered under the Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder's investment intent as
expressed herein.

    

    (3) The
holder further understands that this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available. The holder is aware of the provisions of Rule 144,
promulgated under the Act.

    

    (4) The
holder is an "accredited
investor" as such term is defined in Rule 501 of Regulation D promulgated
under the Act.

    

    (b)
Disposition of Warrant or Shares. With respect to any offer, sale or other
disposition of this Warrant or any Shares acquired pursuant to the exercise of
this Warrant prior to registration of such Warrant or Shares, the holder hereof
agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, or other evidence satisfactory to the Company, to the effect that such offer,
sale or other disposition may be effected without registration or qualification
(under the Act as then in effect or any federal or state securities law then in
effect) of this Warrant or the Shares and indicating whether or not under the
Act certificates for this Warrant or the Shares to be sold or otherwise disposed
of require any restrictive legend as to applicable restrictions on
transferability in order to ensure compliance with such law. Upon receiving such
written notice and reasonably satisfactory opinion or other evidence, the Company, as promptly as
practicable but no later than fifteen (15)days after receipt of the written
notice, shall notify such holder that such holder may sell or otherwise dispose
of this Warrant or such Shares, all in accordance with the terms of the notice
delivered to the
Company. If a
determination has been made pursuant to this Section 7(b) that the opinion of
counsel for the holder or other evidence is not reasonably satisfactory to the
Company,
the Company shall
so notify the holder promptly with details thereof after such determination has
been made. Notwithstanding the foregoing, this Warrant or such Shares may, as to
such federal laws, be offered, sold or otherwise disposed of in accordance with
Rule 144 or 144A under the Act, provided that the Company shall have been
furnished with such information as the Company may reasonably request to provide
a reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the Shares thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop
transfer instructions to its transfer agent in connection with such
restriction.

    

    (c)
Applicability of Restrictions. The restrictive legend described in this Warrant
and the requirements of Section 7(b) above shall apply to any transfer or grant
of a security interest in this Warrant (or the Common Stock obtainable upon
exercise thereof) or any part hereof (i) to a partner of the holder if the
holder is a partnership or to a member of the holder if the holder is a limited
liability company, (ii) to a partnership of which the holder is a partner or a
limited liability company of which the holder is a member, or (iii) to any
affiliate of the holder if the holder is a corporation; provided, however, in
any such transfer, if applicable, the transferee shall on the Company's request agree in writing to
be bound by the terms of this Warrant as if an original holder
hereof.

    

    8. Rights
as Shareholders; Information. No holder of this Warrant, as such, shall be
entitled to vote or receive dividends or be deemed the holder of Common Stock or
any other securities which may at any time be issuable on the exercise hereof
for any purpose, nor shall anything contained herein be construed to confer upon
the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to receive notice of meetings, or to receive dividends
or subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or series of the
securities of the Company concurrently with
the distribution thereof to the shareholders.

    

    9.
Additional Rights.  The
Company shall
provide the holder of this Warrant with at least twenty (20) days' written
notice prior to the closing thereof of the terms and conditions of any of the
following transactions: (i) the sale, lease, exchange, conveyance or other
disposition of all or substantially all of the Company's property or business,
or (ii) its merger into or consolidation with any other corporation (other than
a wholly-owned subsidiary of the
Company), or (iii) any transaction (including a merger or other
reorganization) or series of related transactions, in which more than 50% of the
voting power of the
Company is disposed of.

    

    10.
Representations and Warranties. The Company represents and warrants to
the holder of this Warrant as follows:

    

    (a) This
Warrant has been duly authorized and executed by the Company and is a valid and
binding obligation of the
Company enforceable
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, moratorium, reorganization and the relief of debtors and
the rules of law or principles at equity governing specific performance,
injunctive relief and other equitable remedies (regardless of whether
enforcement is sought in equity or at law);

    

    (b) The
Shares have been duly authorized and reserved for issuance by the Company and, when issued in
accordance with the terms hereof will be validly issued, fully paid and
non-assessable;

    

    (c) The
execution and delivery of this Warrant are not, and the issuance of the Shares
upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the
Company's
certificate of incorporation or by-laws, do not and will not contravene
any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not
conflict with or contravene any provision of, or constitute a default under, any
material indenture,
mortgage, contract or
other instrument of which the
Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the
taking of any action in respect of or by, any Federal, state or local government
authority or agency or other person, except for the filing of notices pursuant
to federal and state securities laws, which filings will be effected by the time
required thereby; and

    

    (d) There
are no actions, suits, audits, investigations or proceedings pending or, to the
knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, will have a
material adverse effect on the ability of the Company to perform its obligations
under this Warrant.

    

    11.
Modification and Waiver. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the same is sought.

    

    12.
Notices. Any notice, request, communication or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered, or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the Company at the address indicated
therefore on the signature page of this Warrant.

    

    13.
Binding Effect on Successors. This Warrant shall be binding upon any corporation
succeeding the Company by
merger, consolidation or acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company
relating to the Shares issuable upon the exercise or conversion of this Warrant
shall survive the exercise, conversion and termination of this Warrant and all
of the covenants and agreements of the Company shall inure to the
benefit of the successors and assigns of the holder hereof.

    

    14. Lost
Warrants or Stock Certificates. The Company covenants to the holder
hereof that, upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such
mutilation upon surrender and cancellation of such Warrant or stock certificate,
the Company will make and deliver a
new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.

    

    15.
Descriptive Headings. The descriptive headings of the several paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. The language in this Warrant shall be construed as to its fair meaning
without regard to which party drafted this Warrant.

    

    16.
Governing Law. This Warrant shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the laws of the State of
Michigan.

    

    17.
Survival of Representations, Warranties and Agreements. All representations and
warranties of the
Company and
the holder hereof contained herein shall survive the Date of Grant, the exercise
or conversion of this Warrant (or any part hereof) or the termination or
expiration of rights hereunder. All agreements of the Company and the holder
hereof contained herein shall survive indefinitely until, by their respective
terms, they are no longer operative.

    

    18.
Remedies. In case any one or more of the covenants and agreements contained in
this Warrant shall have been breached, the holders hereof (in
the  case of a breach by the Company), or the Company (in the case of a
breach by a holder), may proceed to protect and enforce their or its rights
either by suit  in equity and/or by action at law, including, but not
limited to, an action for damages as a result of any such breach and/or an
action for specific performance of any such covenant or agreement contained in
this Warrant.

    

    19. No
Impairment of Rights. The
Company will not, by amendment of its certificate of incorporation or
through any other means, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.

    

    20.
Severability. Whenever possible, each provision of this Warrant shall be
interpreted in such a manner as to be valid, legal and enforceable under all
applicable laws and regulations. If, however, any provision of this Warrant
shall be invalid, illegal or unenforceable under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed to be so modified, it shall be invalid, illegal or
unenforceable only to the extent of such invalidity, illegality or limitation on
enforceability without affecting the remaining provisions of this Warrant or the
validity, legality or enforceability of such provision in any other
jurisdiction.

    

    21.
Entire Agreement; Modification. This Warrant constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.

    

    

    Ecology
Coatings, Inc.

    

    By:
/s/ Robert G.
Crockett

    Robert G. Crockett

    

    Title:  CEO

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
A-1

    

    NOTICE
OF EXERCISE

    

    TO:   ECOLOGY
COATINGS, INC. (THE "COMPANY")

    

    1. The
undersigned hereby:

    

     [ ] elects to purchase _____
shares of Common Stock of the Company pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.

    

    

    2. Please
issue a certificate or certificates representing said shares in the name of the
undersigned or in such other name or names as are specified below:

    

    --------------------------------------------

    (Name)

    

    --------------------------------------------

    

    --------------------------------------------

    (Address)

    

    3. The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view  to, or
for resale in connection with, the distribution thereof and that the undersigned
has no present intention of distributing or reselling such shares, all except as
in compliance with applicable securities laws.

    

    --------------------------------------------

    (Signature)

    

    ------------------------

    (Date)

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

     EXHIBIT
A-2

    

    NOTICE
OF EXERCISE

    

    TO:   ECOLOGY
COATINGS, INC. (THE "COMPANY")

    

    1.
Contingent upon and effective immediately prior to the closing (the "Closing") of the Company's public offering
contemplated by the Registration Statement on Form S_, filed, _____________,
200__, the undersigned hereby:

    

    [ ]
elects to purchase _____ shares of Common Stock of the Company or such lesser
number of shares as may be sold on behalf of the undersigned at the Closing)
pursuant to the terms of the attached Warrant.

    

    2. Please
deliver to the custodian for the selling shareholders a stock certificate
representing such _____________ shares.

    

    3. The
undersigned has instructed the custodian for the selling shareholders to deliver
to the Company $_____ or,
if less, the net proceeds due the undersigned from the sale of shares in the
aforesaid public offering. If such net proceeds are less than the purchase price
for such shares, the undersigned agrees to deliver the difference to the Company prior to the
Closing.

    

    --------------------------------------------

    (Name)

    

    --------------------------------------------

    

    --------------------------------------------

    (Address)

    

    -------------------------

    (Date)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00157-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00157-of-00352.parquet"}]]