Exhibit 10.3
No. ____

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT TO SEC RULE 144 OR
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND THE
SECURITIES LAWS OF ANY STATE COVERING SUCH SECURITIES OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933
ACT AND APPLICABLE STATE SECURITIES LAWS.

                                   SCOLR, INC.

                              COMMON STOCK WARRANT

ISSUE DATE: September 30, 2002                    750,000 shares of common stock

        THIS IS TO CERTIFY THAT FOR GOOD AND VALUABLE CONSIDERATION, Clyde Berg,
an individual residing in the State of California, whose principal place of
residence is 10050 Bandley Dr., Cupertino, CA 95014 (the "Holder"), is entitled
to subscribe for and purchase from SCOLR, Inc. (the "Company"), Seven Hundred
Fifty Thousand (750,000) shares of the Company's common stock (the "Warrant
Shares") at an exercise price, subject to adjustment as set forth below, of
$0.50 per share (the "Exercise Price"). This Warrant is issued in connection
with that certain Promissory Note dated as of the date hereof (the "Note"),
purchased by the Holder from the Company in the principal amount set forth on
the Note. The Holder is subject to certain restrictions, and is entitled to
certain rights and privileges, set forth in the Note.

ARTICLE 1.     EXERCISE OF WARRANT.

        1.01. EXERCISE OF WARRANT. This Warrant will expire (the "Expiration
Date"), upon the earliest of (i) ten (10) years from the Issue Date (as defined
in Section 5.01(b) hereof), and (ii) a "Change of Control" (as defined in
Section 5.01(a) hereof). The Holder may exercise this Warrant, in whole or in
part, at any time or from time to time, commencing on the earliest to occur of
June 30, 2003 or immediately prior to a Change of Control (the "Commencement
Date"), and continuing thereafter until the Expiration Date.

        1.02. METHOD OF EXERCISE.

               (a) At any time on or after the Commencement Date, the Holder
shall exercise this Warrant, in whole or in part, at any time or from time to
time, at or prior to the

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Expiration Date, by surrendering it at the offices of the Company at the address
designated for notice purposes under Section 5.03 below, together with either
(i) a duly executed and completed subscription in substantially the form of the
Subscription Notice attached hereto as Exhibit A, and a check payable to the
Company in the amount equal to the aggregate Exercise Price, for the number of
Warrant Shares being purchased, or (ii) a duly executed and completed Conversion
Notice in the form attached hereto as Exhibit B. Upon exercise through a
conversion (subject to Section 3.03 and without payment by the Holder of the
Exercise Price), the Holder shall be entitled to receive that number of Warrant
Shares equal to the quotient obtained by dividing ((A-B) x C) by A, where:

                      A = The Fair Market Value of one (1) Warrant Share on the
               date of exercise of the Warrant;

                      B = The per share Exercise Price; and

                      C = The total number of Warrant Shares subject to purchase
               upon exercise of the Warrant.

If the above calculation results in a number less than one (1), then no Warrant
Shares shall be issuable or issued pursuant to a conversion.

               (b) For purposes of the foregoing, the term "Fair Market Value"
of a Warrant Share shall mean:

                      (i) The average of the closing bid and asked prices of the
Company's common stock quoted in the Over-The-Counter Market Summary, the last
reported sale price quoted on the Nasdaq National Market or on any exchange on
which the common stock is listed, whichever is applicable, as published in the
Western Edition of the Wall Street Journal for the ten (10) trading days prior
to the date of determination of Fair Market Value; or

                      (ii) In the event of an exercise in connection with a
Change of Control, the Fair Market Value shall be the value received per share
of common stock by all holders of common stock in such transaction as determined
by the Board of Directors of the Company; or

                      (iii) In any other instance, the Fair Market Value shall
be as determined in good faith by the Board of Directors of the Company.

               (c) Surrendered Warrants shall be canceled by or on behalf of the
Company. In the event of a partial exercise, the Company will forthwith issue
and deliver to the Holder a new Warrant of like tenor for the number of Warrant
Shares represented by the Warrant after giving effect to the partial exercise as
set forth above.

        1.03. SHARES ISSUED UPON EXERCISE OF WARRANT. As soon as practicable
after the Warrant has been so exercised, and in any event within twenty (20)
days thereafter, the Company shall issue and deliver, in such name or names as
Holder may direct, a certificate or certificates for the number of Warrant
Shares to which such Holder is entitled. All Warrant Shares shall be

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duly authorized, validly issued, fully paid and nonassessable. The Company shall
pay all documentary stamp taxes attributable to the initial issuance of the
Warrant Shares, but shall not be required to pay any tax imposed in connection
with any transfer involved in the issue of the Warrant Shares in a name other
than that of the Holder. Irrespective of the date of issue of certificates for
the Warrant Shares, the Holder shall be deemed to have become the holder of
record of the Warrant Shares represented thereby on the date on which the
Warrant is exercised and payment of the Exercise Price is received by the
Company as provided in Section 1.02.

ARTICLE 2.     TRANSFER OF THE WARRANT.

        Subject to Section 4.11 hereof, this Warrant may be transferred in whole
or in part, including to any "affiliate" of the Holder, as such term is defined
in Rule 144 of the Securities Act of 1933, as amended (the "Securities Act"), by
presentation of the Warrant to the Company with written instructions for
transfer; provided however, that Holder agrees not to transfer the Warrant or
the Warrant Shares in any manner that would result in a violation of the
registration provisions of the Securities Act or any applicable state securities
laws, and the Company shall not be required to take any action hereunder that
would result in a violation of such provisions. On presentation for transfer,
the Company will execute and deliver a new Warrant in the name of the
transferee.

ARTICLE 3.     PROVISIONS FOR PROTECTION OF THE HOLDER.

        3.01. LOST, STOLEN OR MUTILATED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Company will, on such reasonable terms with
respect to indemnity or otherwise as it may in its discretion impose, issue a
new warrant of like denomination, tenor and date as this Warrant. Any such new
warrant shall constitute an original contractual obligation of the Company, and
the lost, stolen, mutilated or destroyed, as applicable, Warrant shall be null
and void.

        3.02. HOLDER NOT SHAREHOLDER. This Warrant does not confer upon the
Holder, as such, any rights or liabilities whatsoever as a shareholder of the
Company, whether such rights or liabilities are asserted by the Company or by
its creditors.

        3.03.  COMPLIANCE WITH SECURITIES LAWS.

                      (a) Neither this Warrant nor the Warrant Shares have been
registered under the Securities Act or any state securities laws. This Warrant
has been acquired for investment purposes and not with a view to distribution or
resale and may not be pledged, hypothecated, sold or otherwise transferred
without an effective registration statement for such Warrant under the
Securities Act or any applicable state securities laws or an opinion of counsel
or other evidence reasonably satisfactory to the Company that registration is
not required thereunder. Certificates representing the Warrant Shares shall bear
a legend substantially in the following form:

        THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE
        SECURITIES LAWS OF ANY STATE, AND

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        MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT
        TO SEC RULE 144 OR UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
        UNDER THE 1933 ACT AND THE SECURITIES LAWS OF ANY STATE COVERING SUCH
        SECURITIES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER
        OF THE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT
        SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
        REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT AND
        APPLICABLE STATE SECURITIES LAWS.

                      (b) The Holder represents and warrants to the Company as
follows:

                             (i) This Warrant and the Warrant Shares issuable
upon exercise thereof are being acquired for the Holder's own account, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities
Act. Upon exercise of this Warrant, the Holder shall, if so requested by the
Company, confirm in writing, in a form satisfactory to the Company, that the
securities issuable upon exercise of this Warrant are being acquired for
investment and not with a view toward distribution or resale.

                             (ii) The Holder understands that the Warrant and
the Warrant Shares have not been registered under the Securities Act by reason
of their issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) or Section
4(6) thereof, and that they must be held by the Holder indefinitely, and that
the Holder must therefore bear the economic risk of such investment
indefinitely, unless a subsequent disposition thereof is registered under the
Securities Act or is exempted from such registration. The Holder understands
that the Company is under no obligation to register any of the securities sold
hereunder.

                             (iii) The Holder is an "accredited investor" within
the meaning of Regulation D promulgated under the Securities Act.

        3.04. ADJUSTMENT FOR STOCK DIVIDENDS, SPLITS, ETC. If at any time after
the Issue Date of this Warrant the number of shares into which this Warrant is
exercisable is increased by a stock dividend or other distribution thereon
payable or by a subdivision, split-up or reclassification thereof, then
immediately after the record date fixed for the determination of holders of such
stock entitled to receive such stock dividend or the effective date of such
subdivision, split-up or reclassification, as the case may be, the Exercise
Price shall be reduced and the number of Warrant Shares issuable hereunder shall
be increased, in each case appropriately so that the Holder shall be entitled to
receive the number of Warrant Shares thereof that it would have owned
immediately following such action had this Warrant been exercised in full for
cash immediately prior thereto.

        3.05. ADJUSTMENT FOR COMBINATION OF WARRANT SHARES. If at any time after
the Issue Date of this Warrant the number of Warrant Shares into which this
Warrant is exercisable is

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decreased by a combination or reclassification of such shares, then, immediately
after the effective date of such combination or reclassification, the number of
Warrant Shares shall be decreased appropriately and the Exercise Price shall
increase proportionately, as applicable, so that the Holder shall be entitled to
receive the number of Warrant Shares which it would have owned immediately
following such action had this Warrant been exercised immediately prior thereto.

        3.06. ADJUSTMENT FOR CAPITAL REORGANIZATION OR RECLASSIFICATION. If the
Company's common stock is changed into the same or a different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for above), then in each such event, the Holder shall
have the right thereafter to exercise this Warrant into the kind and amount of
shares of stock and other securities and property that would have been
receivable upon such reorganization, reclassification or other change in respect
of the number of such shares into which this Warrant could have been exercised
in full for cash immediately prior to such reorganization, reclassification or
change, all subject to further adjustment as provided herein.

        3.07. ADJUSTMENT FOR MERGER OR CONSOLIDATION. If at any time while the
Warrant remains outstanding, any capital reorganization or reclassification of
the Company, or any consolidation or merger of the Company with another
corporation occurs in which the Company is the continuing or surviving
corporation, the Holder shall have the right upon the exercise of this Warrant
to receive the kind and amount of shares or other securities and property
receivable by a holder of shares of common stock upon such reorganization,
reclassification, consolidation, or merger in exchange for the number of shares
that might have been purchased upon exercise of such Warrant, immediately prior
to such reorganization, reclassification, consolidation or merger.

        3.08. ANTI-DILUTION ADJUSTMENTS.

               (a) FULL RATCHET ANTI-DILUTION. Upon the occurrence of any
issuance or sale of any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Exercise Price then
in effect, as of the close of business on the date of such issuance or sale, the
Exercise Price shall be adjusted to equal the price paid per share for such
Additional Stock.

               (b) DEFINITION OF "ADDITIONAL STOCK". For purposes of this
Section 3.08, "Additional Stock" shall mean any shares of common stock issued
other than:

                      (1) common stock issued pursuant to a transaction
described in Sections 3.04 -- 3.07 hereof;

                      (2) common stock issuable or issued to employees,
consultants or directors of the Company directly or pursuant to a stock option
plan or restricted stock plan approved by the Company's Board of Directors;

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                      (3) capital stock, or warrants or options to purchase
capital stock, issued to financial institutions or lessors in connection with
commercial credit arrangements, equipment financings or similar transactions;

                      (4) capital stock issuable upon exercise or conversion of
options, warrants, capital stock or other convertible securities outstanding or
which the Company is obligated to issue as of the date hereof; and

                      (5) capital stock, or warrants or options to purchase
capital stock, issued in connection with bona fide acquisitions, mergers, joint
venture agreements, distribution agreements, other strategic alliances, or
similar transactions, the terms of which are approved by the Company's Board of
Directors.

               (c) NO FRACTIONAL ADJUSTMENTS. No adjustment of the Exercise
Price shall be made in an amount less than one cent per share, provided that any
adjustments which are not required to be made by reason of this sentence shall
be carried forward and shall be either taken into account in any subsequent
adjustment made prior to three (3) years from the date of the event giving rise
to the adjustment being carried forward, or shall be made at the end of three
(3) years from the date of the event giving rise to the adjustment being carried
forward.

               (d) DETERMINATION OF CONSIDERATION. In the case of the issuance
of common stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Company for any underwriting or
otherwise in connection with the issuance and sale thereof. In the case of the
issuance of common stock for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to be the fair value
thereof as determined by the Company's Board of Directors irrespective of any
accounting treatment.

        3.09. NOTICE TO HOLDER OF CERTAIN EVENTS. In the event the Company shall
propose to take any action of the type described in Sections 3.04, 3.05, 3.06,
3.07, 3.08 or a Change of Control, the Company shall give notice to the Holder,
which notice shall specify the record date, if any, with respect to any such
action and the approximate date on which such action is to take place. In the
case of any action which would require the fixing of a record date, such notice
shall be given at least ten (10) days prior to the date so fixed, and in case of
all other action, such notice shall be given at least fifteen (15) days prior to
the taking of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.

        3.10. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
issuance or sale of securities or otherwise, avoid or seek to avoid the
observance or performance of any of the terms of this Article 3 or the other
provisions of this Warrant and will at all times in good faith assist in the
carrying out of all provisions hereof and in the taking of all actions as may be
necessary in order to protect the rights of the Holder hereunder against
impairment.

ARTICLE 4.     REGISTRATION RIGHTS.

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        The Company covenants and agrees as follows:

        4.01. DEFINITIONS. For purposes of this Article 4:

               (a) The term "FORM S-3" means such form under the Securities Act
as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the SEC that permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

               (b) The term "HOLDER" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof to whom registration
rights under this Warrant are assigned in accordance with Section 4.11 hereof.

               (c) The term "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

               (d) The term "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.

               (e) The term "REGISTRABLE SECURITIES" means (i) the Warrant
Shares, and (ii) any common stock of the Company issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
shares referenced in (i) above; provided, however, that the foregoing definition
shall exclude in all cases any Registrable Securities sold by a person in a
transaction in which his, her or its rights under this Warrant are not assigned.
In addition, Warrant Shares or other securities shall only be treated as
Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, including sales made pursuant to Rule 144 promulgated
under the Securities Act or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
The number of shares of "Registrable Securities" outstanding shall be the sum of
the number of shares of common stock outstanding that are Registrable Securities
plus the number of shares of common stock issuable pursuant to then exercisable
or convertible securities that are Registrable Securities.

               (f) The term "SEC" shall mean the Securities and Exchange
Commission.

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        4.02 REQUEST FOR REGISTRATION.

               (a) Subject to the conditions of this Section 4.02, if the
Company shall receive at any time after two (2) years after the date of this
Warrant a written request from the Holder that the Company file a registration
statement under the Securities Act covering the registration of Registrable
Securities with an anticipated aggregate offering price of at least $1,000,000
net of underwriter discounts and commissions, then the Company shall, subject to
the limitations of this Section 4.02, use all reasonable efforts to file, within
forty-five days, a registration statement under the Securities Act covering the
Registrable Securities that the Holder requests to be registered, and to use
reasonable efforts to cause such registration statement to become effective
within one hundred twenty days of the Holder's request for registration.

               (b) If the Holder intends to distribute the Registrable
Securities covered by the Holder's request by means of an underwriting, the
Holder shall so advise the Company as a part of the request made pursuant to
this Section 4.02.

               (c) The Company shall not be required to effect a registration
pursuant to this Section 4.02:

                      (1) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, unless the Company is already subject to service in
such jurisdiction and except as may be required under the Securities Act;

                      (2) after the Company has effected one (1) registration
pursuant to this Section 4.02, and such registrations have been declared or
ordered effective;

                      (3) during the period starting with the date sixty days
prior to the Company's good faith estimate of the date of the filing of, and
ending on a date one hundred eighty days following the effective date of, a
Company-initiated registration subject to Section 4.03 below, provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;

                      (4) if the Holder proposes to dispose of Registrable
Securities that may be registered on Form S-3 pursuant to Section 4.04 hereof;
or

                      (5) if the Company shall furnish to the Holder requesting
a registration statement pursuant to this Section 1.2, a certificate signed by
the Company's Chief Executive Officer or Chairman of the Board stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be effected at such time, in which event the Company shall have the
right to defer such filing for a period of not more than one hundred twenty days
after receipt of the request of the Holder, provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve-month
period.

        1.3 COMPANY REGISTRATION.

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               (a) If the Company proposes to register (including for this
purpose a registration initiated by the Company for shareholders other than the
Holder) any of its stock or other securities under the Securities Act in
connection with the public offering for cash of such securities (other than a
registration relating solely to the sale of securities to participants in a
Company stock plan, a registration relating to a corporate reorganization or
other transaction under Rule 145 of the Securities Act, a registration on any
form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities, or a registration in which the only common stock being
registered is common stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give the
Holder written notice of such registration. Upon the written request of the
Holder given within twenty days after mailing of such notice by the Company, the
Company shall use all reasonable efforts to cause to be registered under the
Securities Act all of the Registrable Securities that the Holder has requested
to be registered.

               (b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 4.03 prior to the effectiveness of such registration whether or not the
Holder has elected to include securities in such registration. The expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 4.07 hereof.

               (c) UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under this Section 4.03 to include any of the Holder's
securities in such underwriting unless the Holder accepts the terms of the
underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters) and enters into an
underwriting agreement in customary form with an underwriter or underwriters
selected by the Company, and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
that the underwriters determine in their sole discretion will not jeopardize the
success of the offering.

        4.04 FORM S-3 REGISTRATION. In case the Company shall receive from the
Holder a written request that the Company effect a registration on Form S-3 and
any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by the Holder, the Company shall use all reasonable
efforts to effect, within forty-five days of the initial request for
registration pursuant to Section 4.04, such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of the Holder's
Registrable Securities as are specified in such request; provided, however, that
the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 4.04:

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                      (1) if Form S-3 is not available for use by the Company
with respect to such offering by the Holder;

                      (2) if the Holder, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public (net of any underwriters' discounts or commissions) of less
than $500,000;

                      (3) if the Company shall furnish to the Holder a
certificate signed by the Chief Executive Officer or Chairman of the Board of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than one hundred twenty days
after receipt of the request of the Holder under this Section 4.04; provided,
however, that the Company shall not utilize this right more than once in any
twelve month period;

                      (4) if the Company has already effected one (1)
registration on Form S-3 for the Holder pursuant to this Section 4.04; or

                      (5) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.

        4.05. OBLIGATIONS OF THE COMPANY. Whenever required under this Article 4
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

               (a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holder, keep such registration statement effective for a period of up to one
hundred twenty days or, if earlier, until the distribution contemplated in the
Registration Statement has been completed;

               (b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;

               (c) furnish to the Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as the Holder may reasonably request in
order to facilitate the disposition of Registrable Securities owned by the
Holder;

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               (d) use reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holder,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;

               (e) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering;

               (f) notify the Holder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act or the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing;

               (g) cause all such Registrable Securities registered pursuant to
this Warrant to be listed on each securities exchange on which similar
securities issued by the Company are then listed;

               (h) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to this Warrant and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and

               (i) use its best efforts to furnish, at the request of the
Holder, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this Article
4, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (1) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holder and (2) a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holder.

        4.06 INFORMATION FROM HOLDER. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Article 4 with
respect to the Registrable Securities of the Holder that the Holder shall
furnish to the Company such information regarding the Holder, the Registrable
Securities held by the Holder, and the intended method of disposition of such
securities as shall be required to effect the registration of the Holder's
Registrable Securities.

                                       11
 

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        4.07 EXPENSES OF REGISTRATION. All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Sections 4.02, 4.03 and 4.04, including (without
limitation) all registration, filing and qualification fees, printer's and
accounting fees, fees and disbursements of counsel for the Company and fees and
disbursements of one counsel for the Holder (subject to a maximum limit of
$15,000 for registrations pursuant to Sections 4.02 and 4.03 and $10,000 for
registrations pursuant to Section 4.04, shall be borne by the Company.
Notwithstanding the foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 4.04 if the
registration request is subsequently withdrawn at the request of the Holder (in
which case the Holder shall bear all such expenses).

        4.08 DELAY OF REGISTRATION. The Holder shall not have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Article 4.

        4.09 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Article 4:

               (a) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder, legal counsel and accountants for the Holder, any
underwriter (as defined in the Securities Act) for the Holder and each person,
if any, who controls the underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or any state securities laws, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities laws or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities laws; and the
Company will reimburse the Holder, underwriter or controlling person for any
legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
4.09(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation that
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the Holder,
underwriter or controlling person.

               (b) To the extent permitted by law, the Holder will severally but
not jointly indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the

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meaning of the Securities Act, legal counsel and accountants for the Company,
any underwriter, any other shareholder selling securities in such registration
statement and any controlling person of any such underwriter or other
shareholder, against any losses, claims, damages or liabilities to which any of
the foregoing persons may become subject, under the Securities Act, the Exchange
Act or any state securities laws, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by the Holder expressly for use in connection with such registration;
and the Holder will reimburse any person intended to be indemnified pursuant to
this Section 4.09(b), for any legal or other expenses reasonably incurred by
such person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity agreement
contained in this Section 4.09(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder (which consent shall not be
unreasonably withheld), provided that in no event shall any indemnity under this
Section 4.09(b) exceed the net proceeds from the offering received by the
Holder.

               (c) Promptly after receipt by an indemnified party under this
Section 4.09 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4.09, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
4.09, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4.09.

               (d) If the indemnification provided for in this Section 4.09 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense, as well as any other relevant equitable
considerations; provided, however, that the Holder will not be obligated to
contribute more than the net proceeds received by the Holder from such offering.
The relative fault of the

                                       13
 

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indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.

               (e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

               (f) The obligations of the Company and the Holder under this
Section 4.09 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Article 4, and otherwise.

        4.10. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holder the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit the Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:

               (a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times;

               (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

               (c) furnish to the Holder, forthwith upon request (i) a written
statement by the Company that it has complied with the reporting requirements of
SEC Rule 144 (at any time after ninety days after the effective date of the
first registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing the Holder of any rule or regulation of the
SEC that permits the selling of any such securities without registration or
pursuant to such form.

                                       14

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        4.11. ASSIGNMENT OF REGISTRATION RIGHTS. Subject to Article 2, the
rights to cause the Company to register Registrable Securities pursuant to this
Article 4 may be assigned (but only with all related obligations) by the Holder
to a transferee or assignee of such securities that after such assignment or
transfer, holds all of the shares of Registrable Securities originally issued to
the Holder (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations), provided: (a) the Company is, within
a reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; (b) such transferee or
assignee agrees in writing to be bound by and subject to the terms and
conditions of this Warrant, including without limitation the provisions of
Section 4.12 below; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act.

        4.12 TERMINATION OF REGISTRATION RIGHTS. The Holder shall not be
entitled to exercise any right provided for in this Article 4 after such time at
which all Registrable Securities held by the Holder (and any affiliate of the
Holder with whom such Holder must aggregate its sales under Rule 144) can be
sold in any three (3)-month period without registration in compliance with Rule
144 of the Securities Act.

ARTICLE 5.     MISCELLANEOUS PROVISIONS.

        5.01. DEFINITIONS. As used herein, the following terms shall have the
meanings ascribed below:

               (a) "Change of Control" means any of the following events: (i)
consummation of any merger or consolidation of the Company in which the Company
is not the continuing or surviving corporation, or pursuant to which shares of
the Company's common stock are converted into cash, securities, or other
property, if following such merger or consolidation the holders of the Company's
outstanding voting securities immediately prior to such merger or consolidation
own less than 50% of the outstanding voting securities of the surviving
corporation; or (ii) a change in ownership of the Company's capital stock as a
result of which the owners of the Company's outstanding capital stock
immediately prior to the change own less than 50% of the Company's outstanding
capital stock following such change.

               (b) "Issue Date" means September 30, 2002.

        5.02. GOVERNING LAW; VENUE. This Warrant shall be governed by and
construed in accordance with the laws of the State of Washington, and venue for
any action taken in connection herewith or related hereto shall exclusively
reside in King County, Washington.

        5.03. NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery; upon confirmed transmission by telecopy or telex; or
three (3) business days after deposit with the United States Post Office, by
first-class mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to the Company, at 8340 154th Avenue NE, Redmond,
Washington 98052, to the attention of the President, or at such other address as
the Company shall have furnished to the

                                       15
 

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Holder, and (b) if to the Holder at the last address shown on the books of the
Company or its transfer agent maintained for the registry and transfer of the
Warrant.

        5.04. SUCCESSORS. All covenants and provisions of this Warrant by or for
the benefit of the Company shall bind and inure to the benefit of its respective
successors and assigns.

        5.05. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or claim under this Warrant. This
Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.

        5.06. WAIVER AND AMENDMENT. Any provision of this Warrant may be
amended, waived or modified upon the written consent of the Company and Holder.

                                       16
 

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This Warrant has been executed and delivered as of the date first above written.

                                             SCOLR, INC.

                                             By   /s/    David T. Howard
                                                  ------------------------------
                                                  David T. Howard
                                                  Print Name
                                                  Its President & CEO

                                             AGREED AND ACKNOWLEDGED:

                                             /s/      Clyde Berg
                                             -----------------------------------
                                             CLYDE BERG

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                               SECURITY AGREEMENT

        This Security Agreement, dated as of September 30, 2002, is being
entered into by SCOLR, Inc., a Delaware corporation (the "Company") for the
benefit of Clyde Berg, an individual residing in the State of California, whose
principal address is 10050 Bandley Drive, Cupertino, California 95014 (the
"Lender").

                                    RECITALS

        WHEREAS, the Lender has agreed to loan the Company funds in
consideration of that certain Promissory Note, dated as of the date hereof,
executed by the Company for the benefit of the Lender (the "Promissory Note");
and

        WHEREAS, the Company has previously granted a security interest in some
or all of the Collateral (as defined below) to Access Business Finance LLC (the
"Access Security Interest"), pursuant to that certain Loan and Security
Agreement dated April 30, 2002, by and between the Company and Access Business
Finance LLC.

        NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth below, and for other good and valuable
consideration, the parties hereto agree as follows:

                                    AGREEMENT

1. GRANT OF COLLATERAL. As security for the payment and performance of (i) the
obligations to pay principal of, interest on and all other obligations under the
Promissory Note and (ii) all obligations of the Company under this Agreement
(all of the foregoing in the preceding clauses (i) and (ii), collectively, the
"Secured Obligations"), the Company hereby grants a security interest in favor
of the Lender and the other holders from time to time of the Secured Obligations
in all of the Company's right, title and interest in and to (but none of its
obligations or liabilities with respect to) the items and types of property
described below in this Section 1, whether now owned or hereafter acquired and
whether mentioned once or more than once in the following description:

        Accounts, contract rights, leases, documents, instruments, inventory,
        equipment, all other goods, intellectual property rights (including, but
        not limited to: patents, copyrights, trademarks, tradenames, and domain
        names), goodwill, all other general intangibles, stock or other
        evidences of ownership, all other investment property, chattel paper,
        instruments, leases, cash, cash equivalents, deposit accounts,
        letter-of-credit rights, books, records, insurance proceeds, dividends,
        all other property, assets and items of value, all supporting
        obligations, and all proceeds and products of any and all of the
        foregoing (all of the above being included in the term "Collateral"). As
        used in this Agreement, the following terms shall have the respective
        meanings given such terms in the Uniform Commercial Code as adopted in
        the State of Washington as of the date hereof: accounts, documents,
        instruments, inventory, equipment, goods, general

 

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        intangibles, investment property, chattel paper, instruments, deposit
        accounts, letter-of-credit rights, supporting obligations and proceeds.

2. NO VIOLATION. Notwithstanding anything contained in this Agreement to the
contrary, no security interest shall be granted in any item of Collateral to the
extent that the terms of any agreement, including without limitation the
documents and instruments governing the Access Security Interest, or the
provisions of any law applicable thereto would prohibit the grant of such
security interest or to the extent that the grant of such security interest
would create a default under any such agreement or a violation of any such law
(other than to the extent that any such term or provision would be rendered
ineffective pursuant to Section 9-406, Section 9-407 or 9-408 of the Uniform
Commercial Code).

3. PERFECTION OF COLLATERAL. Upon the Lender's reasonable request from time to
time, the Company will execute and deliver, and file and record in the proper
filing and recording places, all such instruments, and take all such other
action as the Lender deems reasonably necessary for perfecting or otherwise
confirming to the Lender his security interest in the Collateral. The Company
hereby authorizes the Lender to file or record Uniform Commercial Code financing
statements in all jurisdictions and with all filing offices as the Lender may
deem necessary or advisable to perfect the security interest guaranteed to the
Lender hereunder. Such financing statements may describe the Collateral in the
same manner as described herein or may contain an indication or description of
the Collateral that describes the Collateral as "all assets" or "all personal
property".

4. INSURANCE. The Company shall at all times maintain comprehensive casualty
insurance on the physical Collateral against such risks, in such amounts, with
such deductibles, and with such insurance companies as is typical in the
industry in which the Company is engaged. All such policies shall name the
Lender as a loss payee and provide that no such policy may be cancelled or
materially amended without providing at least 10 days prior written notice to
the Lender of the impending cancellation or amendment. All insurance proceeds
shall be applied by the Company, if no Event of Default then exists, to either
the repair or replacement of the damaged or destroyed Collateral (if such repair
or replacement is practicable) or the payment of the Secured Obligations,
provided, that, if an Event of Default exists, the Lender shall have the right
to direct whether the insurance proceeds are applied to such repair or
replacement or to such payment.

5. GENERAL. The Company hereby acknowledges that the Lender is relying on this
Agreement in making the loans evidenced by the Promissory Note. This Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns but no assignment shall release the Company of its
obligations hereunder. Notices shall be furnished in writing to each party at
its address appearing below or as it may otherwise direct in a writing actually
received by the other party. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any other provision
hereof, and any invalid or unenforceable provision shall be modified so as to be
enforceable to the maximum extent of its validity or enforceability. The
headings in this Agreement are for convenience of reference only and shall not
limit, alter or otherwise affect the meaning hereof. This Agreement constitutes
the entire understanding of the parties with respect to the subject matter
hereof and supersedes all prior and current understandings and agreements,
whether written or oral. This Agreement shall

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be governed by and construed in accordance with the laws (other than the
conflict of laws rules) of the State of Washington, except as may be required by
the Uniform Commercial Code of other jurisdictions with respect to matters
involving the perfection of the Lender's lien on the Collateral.

        Each of the undersigned has caused this Agreement to be executed and
delivered as of the date first written above.

                                    SCOLR, INC.

                                    By:     /s/ David T. Howard
                                           -------------------------------------
                                    Name:  David T. Howard
                                    Title: President and Chief Executive Officer

                                           Address:  8340 154th Avenue NE
                                                     Redmond, Washington 98052

Acknowledged and Agreed to:

     CLYDE BERG

     /s/ Clyde Berg
     ------------------------------------------

          Address:  10050 Bandley Drive
                    Cupertino, California 95014

                                       3