Exhibit 10.34
EMPLOYMENT AGREEMENT
 
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
January 30, 2009 (the "Effective Date"), by and between SCOLR Pharma, Inc., a
Delaware corporation ("Company"), and Bruce S. Morra ("Employee").
 
 The parties agree as follows:
 
 
1.
Employment.

 
 
1.1.
Title and Duties. Company hereby employs Employee as President and Chief
Executive Officer, and Employee hereby accepts such employment, on the terms and
conditions set forth herein. Employee shall perform such duties as are customary
for the position of President and Chief Executive Officer and any additional
such duties that Company's Board of Directors ("Board") may assign from time to
time.

 
 
1.2.
Full-time and Best Efforts. Employee will expend Employee's best efforts on
behalf of Company, and will abide by all policies and decisions made by Company,
as well as all applicable federal, state and local laws, regulations or
ordinances. Employee will act in the best interests of Company at all times and,
subject to Section 1.4 below, will devote Employee's full business time and
efforts to the performance of Employee's assigned duties to Company.

 
 
1.3.
Term. The employment relationship formed pursuant to this Agreement shall be
effective for twelve months commencing on the Effective Date (the "Term").  The
Term may be extended by mutual agreement of Employee and Company.

 
 
1.4.
Outside Activities. Employee may serve in various capacities for non-profit,
charitable and educational organizations from time to time. Any such non-profit
work that has the potential to interfere to any degree with Employee's services
to Company must be disclosed to, and approved by, the Board. Employee agrees
that he will not accept any position with, be employed by, provide any paid
services, or serve on any Board of Directors for a profit organization or entity
other than Company without the written approval of the Board; provided, that
Employee may serve as a director of companies that do not compete with Company,
and will not materially detract from Employee's responsibilities hereunder as
determined in the sole judgment of the Board.  Company has agreed that Employee
may continue to serve as a director of Unigene Laboratories, Inc., and
InforMedix Holdings Inc.

 
 
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2.
Compensation.

 
 
2.1.
Base Salary. As compensation for Employee's performance of Employee's duties
hereunder, Company shall pay Employee an initial base salary ("Base Salary") of
Three Hundred and Sixty Seven Thousand Five Hundred Dollars ($367,500) for the
12 month term, payable in accordance with the normal payroll practices of
Company, less any amounts that Company is required by applicable federal, state
or local law to withhold therefrom on account of employment, income or other
taxes. Employee's Base Salary shall be reviewed annually by the Compensation
Committee of the Board and may be increased (but not decreased without the
consent of Employee) and such increased amount shall hereafter be his "Base
Salary".

 
 
2.2.
Stock Options Upon execution of this Agreement, the Company shall grant Employee
options to purchase 500,000 shares of Company's Common Stock under Company's
2004 Equity Incentive Plan (“Plan”) at an exercise price equal to the Closing
Price of the Company’s Common Stock on the NYSE Alternext (“Closing Price”) on
January 29, 2009. Options to purchase 250,000 shares of Company’s common Stock
shall be fully vested upon execution of this Agreement. Options to purchase
125,000 shares of Company’s Common Stock shall vest on June 18, 2009, provided
that Employee continues to serve as Chief Executive Officer on the vesting date.
The remaining options shall vest on January 18, 2010, provided that Employee
continues to serve as the Chief Executive Officer on the vesting date.
Notwithstanding anything to the contrary contained in the Plan, Employee shall
have one year from the date of termination of employment to exercise vested
stock options as of the date of termination. Otherwise the options will be
subject to the terms and conditions of the Plan and standard form of stock
option agreement, which Employee will be required to sign as a condition of
receiving the options.

 
 
2.3.
Bonuses.

 
 
a)
On January 4, 2010, the Company shall issue Employee 214,285 shares of the
Company’s Common Stock (subject to availability under the Plan); provided, that
in the event there are not sufficient shares available for issuance under the
Plan to grant the full amount of such award, Employee will be issued such lesser
number of shares as is available under the Plan and the remainder shall be
issued when sufficient shares are available for issuance under the Plan. The
Company shall use its best efforts to make the full amount of shares to be
issued to Employee under this subsection available to Employee on the date due.

 
 
b)
Employee shall be eligible to receive a performance-based cash bonus at the end
of 2009 in a targeted amount of up to 50% of Base Salary (as adjusted from time
to time) based on the achievement of certain objectives approved by the Board of
Directors in its sole discretion with the opportunity to receive a bonus of 100%
of Base Salary if target goals are exceeded and Employee

 
 
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remains employed on the last day of the performance period. If Employee is
terminated earlier by Company without Cause (as defined below), Employee shall
be entitled to a pro-rated bonus to the date of termination (as calculated in
6.2). The bonus shall be based on the criteria established by the Board of
Directors as described below applied on a basis consistent with the
determination of bonus payments for other executive employees. The terms and
amount of such bonus shall be determined by the Compensation Committee of the
Board in its sole discretion, based on performance factors and objectives that
are established no later than ninety (90) days after the first day of the fiscal
year.  Any such bonus that becomes payable shall be made within 75 days after
the end of the calendar year, with the actual payment timing during such period
within Company's sole discretion.

 
 
3.
Benefits.

 
 
3.1.
Health, Other Welfare and Fringe Benefits. Employee will be eligible for all
customary and usual health, other welfare and fringe benefits generally
available to employees of Company, subject to the terms and conditions of
Company's plan documents. Company reserves the right to change or eliminate its
health, other welfare and fringe benefit programs on a prospective basis, at any
time, effective upon notice to Employee. In addition, Employee will also receive
$500 per month for automobile allowance.  Company’s health, other welfare and
fringe benefits, along with the automobile allowance, shall be collectively
referred to as the “Other Benefits”.

 
 
3.2.
Vacation and Personal Days. Employee will be entitled to accrue vacation of four
(4) weeks per year in accordance with Company's vacation policy and one (1) week
per year for personal days, for Employees other business . Vacation and personal
days may be carried over from year to year and any accrued but unused vacation
will be paid to Employee as additional compensation at the time of Employee's
termination of employment.  Employee will be responsible for written reporting
of vacation time on a timely basis.

 
 
3.3.
Relocation and Temporary Living Expenses. Company will reimburse Employee up to
a maximum amount of thirty thousand dollars ($30,000) for actual living expenses
in the Bothell area, reasonable expenses related to moving his family and
possessions to the Bothell area from both Utah and New Jersey, trips for
Employee and his spouse to assist with relocation, and replacement of furniture
and other household items that Employee decides not to move to the Bothell area.
Payment shall be made upon receipt of documentation for actual expenses.

 
 
3.4.
Fees. Company shall pay reasonable professional fees incurred by Employee, and
an appropriate gross up for applicable federal income taxes, to negotiate and
prepare this Agreement in an amount not to exceed Ten Thousand Dollars
($10,000).

 
 
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4.
Business Expenses. Company will reimburse Employee for all reasonable
out-of-pocket expenses incurred in the performance of Employee's duties on
behalf of Company in accordance with Company's policies.

 
 
5.
Director. As long as Employee is serving as the Chief Executive Officer and
President of Company, the Board of Directors agrees to nominate Employee for
election by the stockholders to serve as a director of Company.

 
 
6.
Termination of Employee's Employment.

 
 
6.1.
Termination for Cause by Company, Disability or Death. Company may terminate
Employee's employment immediately at any time for Cause. For purposes of this
Agreement, "Cause" is defined as (a) Employee's indictment for, or conviction
(or plea of nolo contendere) of fraud, embezzlement, misappropriation, or any
felony or any misdemeanor involving an act of moral turpitude; (b) acts or
omissions constituting gross negligence, recklessness or willful misconduct on
the part of Employee with respect to Employee's obligations to Company or
otherwise relating to the business of Company; (c) Employee's material breach of
this Agreement, Company's Code of Conduct or Company's Confidentiality and
Non-Compete Agreement, following written notice and a 30-day opportunity to
cure, or (d) any similar or related act or failure to act which is materially
injurious to Company., following written notice and a 30 day opportunity to
cure. In the event that Employee's employment is terminated in for Cause, or if
Employee's employment is terminated because of Employee's death or Employee's
inability to perform the essential functions of the position, with or without
reasonable accommodation, due to a mental or physical disability, where such
inability continues for a period or periods aggregating ninety (90) calendar
days in any 12-month period, Employee shall be entitled to receive only the Base
Salary then in effect, prorated to the date of termination and any of the Other
Benefits (including without limitation any applicable disability insurance) and
expense reimbursements to which Employee is entitled under Sections 3 and 4
above and otherwise by virtue of his prior employment by Company or as required
by law (collectively, the "Standard Entitlements"). All other Company
obligations to Employee pursuant to this Agreement will become automatically
terminated and completely extinguished. Employee will not be entitled to receive
the Severance Package described in Section 6.2 or 6.4 below or any part thereof.

 
 
6.2.
Termination Without Cause by Company/Severance. Company may terminate Employee's
employment under this Agreement without Cause at any time upon written notice to
Employee. In the event of such termination, whether during or at the end of the
Term, Employee will receive the Standard Entitlements plus a prorated portion
(based on the percentage of the year actually employed by the Company) of the
bonus for the year of termination; provided that such bonus will be a minimum of
25% and maximum of 75% of the Base Salary. The remainder of the bonus, if any,
will be paid based on the average percentage of bonus awards (as a ratio to
target) for the Company’s other executive officers. The

 
 
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minimum 25% bonus will be paid to Employee at the same time as the Standard
Entitlements and any additional bonus shall be paid to Employee at the time
bonus payments are made to Company’s other executive employees. Employee will
also receive a "Severance Package" consisting of (a) a lump sum cash payment
equal to twelve (12) months of Employee's Base Salary in effect and bonus (as
calculated above) on the date of termination, and (b) for a period of twelve
(12) months following the date of termination, continued medical coverage at
Company's expense pursuant to COBRA at existing levels as of the date of
termination, and Other Benefits to the extent the applicable plans provide
continuation coverage to non-employees. Notwithstanding the foregoing sentence,
in the event  this Agreement is extended beyond the initial Term, the Severance
Package payable to Employee will be increased to sixteen (16) months of Base
Salary and bonus (as calculated above), and continuation of medical and Other
Benefits at Company’s expense for sixteen (16) months. Company shall provide
Employee with at least thirty days notice if it determines not to extend this
Agreement. The payment of the Severance Package is payable in a lump sum on the
45tth day following Employee's termination date and is contingent upon
Employee's satisfaction of the Severance Conditions described below. All other
Company obligations to Employee pursuant to this Agreement will be automatically
terminated and completely extinguished.

 
 
6.3.
Voluntary Resignation by Employee With Good Reason. Employee will be deemed to
have resigned for “Good Reason” if Employee resigns within ninety (90) days
after any of the following have occurred, without Employee’s written consent,
and after the expiration of the notice and cure periods described in this
paragraph above: (a) Company reduces the level of Employee’s responsibilities or
changes Employee’s duties so that Employee’s duties are no longer consistent
with the position of a Chief Executive Officer; (b) Company reduces Employee’s
Base Salary; (c) Company relocates Employee’s principal place of work to a
location more than fifty (50) miles from its current location in Bothell, WA; or
(d) Company fails to assign the terms of this Agreement to any successors
contemplated in Section 13.1.  Notwithstanding the foregoing, Employee’s
resignation as a result of any of the foregoing conditions shall be considered a
Voluntary Resignation by Employee Without Good Reason (as described in Section
6.4) unless Employee shall have provided written notification to Company of the
condition(s) allegedly constituting Good Reason and Company shall have failed to
correct such condition(s) within ten (10) days after Company’s receipt of such
notice.
 
In the event that Employee voluntarily resigns with Good Reason, Employee will
receive the Standard Entitlements plus a prorated portion of the bonus for the
year of termination, (as calculated in 6.2, Termination Without Cause by
Company/Severance) and a "Severance Package" consisting of (a) a lump sum cash
payment equal to twelve (12) months of Employee's Base Salary in effect and
bonus (as calculated above) on the date of termination, and (b) for a period of
twelve (12) months following the date of termination, continued medical coverage
at Company's expense pursuant to COBRA at existing levels as of the

 
 
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date of termination, and Other Benefits to the extent the applicable plans
provide continuation coverage to non-employees. Notwithstanding the foregoing
sentence, in the event Company determines to extend this Agreement beyond the
initial Term, the Severance Package payable to Employee will be increased to
sixteen (16) months of Base Salary and bonus (as calculated above), and
continuation of medical and Other Benefits at Company’s expense for sixteen (16)
months.

 
 
6.4.
Voluntary Resignation by Employee Without Good Reason. Employee may voluntarily
resign Employee's position with Company for any reason or no reason on sixty
(60) days' advance written notice to Company. In the event of Employee's
resignation under such circumstances, Employee will be entitled to receive the
Standard Entitlements, including salary and benefits for the sixty (60) day
notice period, but no other salary or benefits for the remaining months of the
current Term, if any. Company may, in its sole discretion, elect to waive all or
any part of such notice period provided that Employee will be entitled to
receive payment of salary and Standard Entitlements for the full sixty (60) day
period. All other Company obligations to Employee pursuant to this Agreement
will become automatically terminated and completely extinguished. In addition,
Employee will not be entitled to receive the Severance Package described in
subsection 6.2 or 6.4 herein.

 
 
6.5.
Voluntary Resignation by Employee for Good Reason Following a Change of
Control.  In the event that in connection with or within three (3) months prior
to a 409A Change of Control (as defined below) or twelve (12) months following a
Change of Control (as defined below) Employee resigns for Good Reason (as
defined above in 6.3), following thirty (30) days’ advance written notice to
Company and Company's failure to cure the condition(s) giving rise to Good
Reason within thirty (30) days following such notice, provided that Company may,
in its sole discretion, elect to waive all or any part of such notice period,
Employee will be entitled to receive the Standard Entitlements and the Change of
Control Severance Package described below, contingent on the satisfaction of the
Severance Conditions.  As long as Employee provides the required notice,
Employee will be paid the Standard Entitlements for the duration of the required
notice period, even if Company elects to relieve Employee of Employee‘s duties
at an earlier time.  All other Company obligations to Employee pursuant to this
Agreement other than the Change of Control Severance Package will become
automatically terminated and completely extinguished.
 
For purposes of this Agreement, the “Change of Control Severance Package” shall
include the following:

         
 
a)
a payment equal to sixteen (16) months of Employee’s Base Salary and bonus in
effect on the date of termination (bonus calculated as set forth in Section
6.2,), less required deductions, payable in a lump sum on the 45th day following
Employee's termination date;

 
 
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b)
payment of the premiums required to continue Employee’s group health care
coverage pursuant to COBRA for a period of sixteen (16) months following the
date of termination, provided Employee elects to continue and remains eligible
for such benefits and does not become eligible for health coverage through
another employer during this period, and payment for continuation of the Other
Benefits for sixteen (16) months; and

 
 
c)
100% acceleration of vesting, as of the termination date, of all of the
then-unvested equity awards under this agreement and any employee benefit plan
of Company held by Employee at the time of such termination.

 
 
6.6.
Change of Control.

 
 
a)
280G/Limitation of Payments and Benefits.  If, due to the benefits provided
under this Agreement, Employee is subject to any excise tax due to
characterization of any amounts payable under such sections as excess parachute
payments pursuant to Section 4999 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (collectively, the “Code”),
the amounts payable under such sections will be restructured (to the least
extent possible) in order to avoid any “excess parachute payment” under
Section 280G(b)(1) of the Code.

 
 
b)
A “Change in Control” is defined as any one of the following occurrences:

 
 
i.
any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”)), other than a trustee or other
fiduciary holding securities of Company under an employee benefit plan of
Company, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of the securities of Company
representing more than 50% of (A) the outstanding shares of common stock of
Company or (B) the combined voting power of Company’s then-outstanding
securities;

 
 
ii.
the sale or disposition of all or substantially all of Company’s assets (or any
transaction having similar effect is consummated);

 
 
iii.
Company is party to a merger or consolidation that results in the holders of
voting securities of Company outstanding immediately prior thereto failing to
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of Company or such surviving entity
outstanding immediately after such merger or consolidation; or

 
 
iv.
the dissolution or liquidation of Company.

 
 
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c)
A “409A Change of Control” is defined as a Change of Control that also
constitutes a “Change of Control event” within the meaning of Section 409A.

 
 
6.7.
Conditions to Receive and Payment of Severance Package.  A Severance Package
pursuant to Sections 6.2 and 6.4, as applicable, will be paid provided Employee
satisfies all of the following conditions (the “Severance Conditions”):

 
 
a)
Employee executes, at the time of Employee’s termination of employment and
within the same taxable year, or, if later, before the expiration of any
applicable statutory revocation period, a full general release, releasing all
claims, known or unknown, Employee may have against Company, its employees,
officers, directors, agents and other affiliates, arising out of or any way
related to Employee’s employment or termination of employment with Company.

 
 
b)
Employee complies with all surviving provisions of this Agreement.

 
 
6.8.
Section 409A Compliance.  The parties intend for this Agreement either to
satisfy the requirements of Section 409A or to be exempt from the application of
Section 409A, and this Agreement shall be construed and interpreted
accordingly.  If Company or Employee reasonably determines that any provision of
this Agreement either fails to satisfy the requirements of Section 409A or is
not exempt from the application of Section 409A, then the parties hereby agree
to amend or to clarify this Agreement in a timely manner so that this Agreement
either satisfies the requirements of Section 409A or is exempt from the
application of Section 409A.

 
 
a)
Notwithstanding any provision in this Agreement to the contrary, in the event
Employee is a “specified employee” as defined in Section 409A, any amounts
payable under this Agreement that are subject to the requirements of Section
409A and to the special rule regarding payments to “specified employees” under
Section 409A(a)(2)(B) of the Code shall not be paid to Employee during such
period, but shall instead be accumulated and paid to Employee (or, in the event
of Employee's death, to Employee's estate) in a lump sum on the first business
day after the earlier of the date that is six months following Employee's
separation from service or Employee's death, with Company to additionally pay
interest at a reasonable rate on such delayed payments for the period from the
payment due date (determined without regard to this paragraph) until the actual
payment date, and any remaining payments due under this Agreement shall be paid
as otherwise provided herein.

 
 
b)
No amounts shall be transferred with respect to this Agreement in a manner that
could result in income inclusion pursuant to Section 409A(b)(3) of the Code.

 
 
c)
To the extent that any payments due under this Agreement are conditioned on
Employee’s termination of employment or similar event and also subject to

 
 
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the requirements of Section 409A, such payments shall be made only if such
termination of employment or similar event constitutes a “separation from
service” within the meaning of Section 409A.

 
 
d)
To the extent that any reimbursement of any expense or in-kind benefits provided
under this Agreement are deemed to constitute taxable compensation to Employee,
such amounts shall be reimbursed or provided no later than December 31 of the
year following the year in which the expense was incurred.  The amount of any
such expenses reimbursed or in-kind benefits provided in one year shall not
affect the expenses or in-kind benefits eligible for reimbursement or payment in
any subsequent year, and Employee’s right to such reimbursement or payment of
any such expenses will not be subject to liquidation or exchange for any other
benefit.

 
 
e)
Company hereby informs Employee that the federal, state, local and/or foreign
tax consequences (including without limitation those tax consequences implicated
by Section 409A) of this Agreement are complex and subject to change.  Employee
hereby acknowledges that Company has advised Employee that Employee should
consult with Employee’s own personal tax or financial advisor in connection with
this Agreement and its tax consequences.  Employee understands and agrees that
Company has no obligation and no responsibility to provide Employee with any tax
or other legal advice in connection with this Agreement.  Employee agrees that
Employee shall bear sole and exclusive responsibility for any and all adverse
federal, state, local and/or foreign tax consequences (including without
limitation those tax consequences implicated by Section 409A) of this Agreement,
and fully indemnifies and holds Company harmless therefor, except to the extent
any such tax consequences relate to Company's violation of this Agreement,
negligence or willful misconduct.

 
 
6.9.
Taxes and Withholdings.  Company may withhold from any amounts payable under
this Agreement, including any benefits or severance pay, such federal, state,
local or international taxes as may be required to be withheld pursuant to
applicable law or regulations.

 
 
7.
No Conflict of Interest. During the term of Employee's employment with Company,
Employee will not either directly or indirectly, whether as a owner, director,
officer, manager, consultant, agent or employee, work for a competitor, which is
defined as any company that is developing formulations for extended release oral
delivery of small molecules via routes that would directly compete with SCOLR,
but excluding, for example, companies engaged in delivery of peptides or
proteins, such as Unigene Laboratories, Inc. ("Restricted Business"). However
Employee may continue to serve in the positions identified in Section 1.4.

 
 
8.
Proprietary Information. Employee agrees to sign, and abide by Company's
Confidentiality and Non-Compete Agreement, which is provided with this Agreement
and incorporated herein by reference.

        
 
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9.
Post-Termination Non-Competition.

 
 
9.1.
Consideration For Promise To Refrain From Competing. Employee agrees that
Employee's services are special and unique, that Company's disclosure of
confidential, proprietary information and specialized training and knowledge to
Employee, and that Employee's compensation and benefits and severance, as
applicable, are partly in consideration of and conditioned upon Employee not
competing with Company. Employee acknowledges that such consideration for
Employee's services under this Agreement is adequate consideration for
Employee's promises contained within this Section 9.

 
 
9.2.
Promise To Refrain From Competing. In exchange for the consideration described
in subsection 9.1 above, Employee agrees that for the period of six (6) months
following the date Employee ceases to be employed as Chief Executive Officer of
the Company, Employee will not either directly or indirectly, whether as a
owner, director, officer, manager, consultant, agent or employee work for a
Restricted Business. For purposes of this Section 9, the term "Company" shall
mean and include Company, any subsidiary or affiliate of Company, any successor
to the business of Company (by merger, consolidation, sale of assets or stock or
otherwise) and any other corporation or entity of which Employee may serve as a
director, officer or employee at the request of Company or any successor of
Company.

 
 
9.3.
Reasonableness of Restrictions. Employee represents and agrees that the
restrictions on competition, as to time, geographic area, and scope of activity,
required by this Section 9 are reasonable, do not impose a greater restraint
than is necessary to protect the goodwill and business interests of Company, and
are not unduly burdensome to Employee. Employee expressly acknowledges that
Company competes on a nationwide basis and that the geographical scope of these
limitations is reasonable and necessary for the protection of Company's trade
secrets and other confidential and proprietary information.

 
 
9.4.
Reformation if Necessary. In the event a court of competent jurisdiction
determines that the geographic area, duration, or scope of activity of any
restriction under this Section 9 and its subsections is unenforceable, the
restrictions under this Section and its subsections shall not be terminated but
shall be reformed and modified to the extent required to render them valid and
enforceable.

 
 
10.
Non-Solicitation. Employee agrees that during the term of this Agreement and for
a period of six (6) months after the termination of this Agreement, Employee
will not, either directly or indirectly, separately or in association with
others, interfere with, impair, disrupt or damage Company's business by
soliciting, encouraging or recruiting any of Company's employees or causing
others to solicit or encourage or recruit any of Company's employees to
discontinue their employment with Company.

 
 
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11.
Right To Injunction/Costs Of Enforcement. Employee acknowledges that Company
will suffer immediate and irreparable harm that will not be compensable by
damages alone in the event Employee repudiates or breaches Section 7, 8, 9 or 10
or threatens or attempts to do so. In the event of any such breach or any
threatened or attempted breach, Employee agrees that Company, in addition to and
not in limitation of any other rights, remedies or damages available to it at
law or in equity, shall be entitled to obtain temporary, preliminary and
permanent injunctions to prevent or restrain any such breach, and Company shall
not be required to post a bond as a condition for the granting of such relief.

 
 
12.
Agreement to Arbitrate. To the fullest extent permitted by law, Employee and
Company agree to arbitrate any controversy, claim or dispute between them
arising out of or in any way related to this Agreement, the employment
relationship between Company and Employee and any disputes upon termination of
employment. Claims for workers' compensation, unemployment insurance benefits
and Company's right to obtain injunctive relief pursuant to Section 11 above are
excluded. The arbitration will be conducted in Seattle, Washington by a single
neutral arbitrator and in accordance with the then current rules for resolution
of employment disputes of the American Arbitration Association ("AAA"). The
parties are entitled to representation by an attorney or other representative of
their choosing. The arbitrator shall have the power to enter any award that
could be entered by a judge of the trial court of the State of Washington, and
only such power, and shall follow the law. In the event the arbitrator does not
follow the law, the arbitrator will have exceeded the scope of his or her
authority and the parties may, at their option, file a motion to vacate the
award in court. The parties agree to abide by and perform any award rendered by
the arbitrator. Judgment on the award may be entered in any court having
jurisdiction thereof. Each party initially shall bear one half the cost of the
arbitration filing and hearing fees, and the cost of the arbitrator. The
arbitrator shall have discretion to award to the prevailing party its
arbitration costs and hearing fees. The parties acknowledge that standard
statute of limitations will apply and arbitration shall constitute an “action”
for purposes of the statutes of limitation.

 
 
13.
General Provisions.

 
 
13.1.
Assignment. The rights and obligations of Company under this Agreement shall
inure to the benefit of, and be binding upon, the successors and assigns of
Company. Employee shall not be entitled to assign any of Employee's rights or
obligations under this Agreement.

 
 
13.2.
Waiver. Either party's failure to enforce any provision of this Agreement shall
not in any way be construed as a waiver of any such provision, or prevent that
party thereafter from enforcing each and every other provision of this
Agreement.

 
 
13.3.
Severability. In the event any provision of this Agreement is found to be
unenforceable by an arbitrator or court of competent jurisdiction, such
provision shall be deemed modified to the extent necessary to allow
enforceability of the

     
 
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provision as so limited, it being intended that the parties shall receive the
benefit contemplated herein to the fullest extent permitted by law. If a deemed
modification is not satisfactory in the judgment of such arbitrator or court,
the unenforceable provision shall be deemed deleted, and the validity and
enforceability of the remaining provisions shall not be affected thereby.

 
 
13.4.
Interpretation; Construction. The headings set forth in this Agreement are for
convenience only and shall not be used in interpreting this Agreement. Legal
counsel representing Company has drafted this Agreement and Employee has been
represented by independent counsel. Therefore, the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.

 
 
13.5.
Governing Law. This Agreement will be governed by and construed in accordance
with the laws of the United States and the State of Washington. Each party
consents to the jurisdiction and venue of the state or federal courts in
Seattle, Washington, if applicable, in any action, suit, or proceeding arising
out of or relating to this Agreement.

 
 
13.6.
Notices. Any notice required or permitted by this Agreement shall be in writing
and shall be delivered as follows with notice deemed given as indicated: (a) by
personal delivery when delivered personally; (b) by overnight courier upon
written verification of receipt; (c) by telecopy or facsimile transmission upon
acknowledgment of receipt of electronic transmission; or (d) by five (5) days
following deposit in the U.S. Mail, certified or registered mail, postage
prepaid and return receipt requested. Notice shall be sent to the addresses set
forth below, or such other address as either party may specify in writing.

 
IF TO COMPANY, TO:                                           SCOLR Pharma, Inc.
19204 North Creek Pkwy, Ste 100
Bothell, WA  98011
 
IF TO EMPLOYEE, TO:                                           Bruce S. Morra
51 Spring House Lane
Basking Ridge, NJ 07920
With copy via email to brucemorra@gmail.com

 
13.7.
Survival. Sections 7 ("No Conflict of Interest"), 8 ("Confidentiality and
Proprietary Information"), 9 ("Post-Termination Non-Competition"), 10
("Nonsolicitation"), 13 ("General Provisions") and 14 ("Entire Agreement") of
this Agreement shall survive Employee's employment by Company.

 
 
14.
Entire Agreement. This Agreement, including Employee's Confidentiality and
Non-Compete Agreement incorporated herein by reference and the Plan and related
option documents described in Subsection 2.3, constitutes the entire agreement
between the parties relating to this subject matter and supersedes all prior or
simultaneous

 
 
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representations, discussions, negotiations, and agreements, whether written or
oral. This Agreement may be amended or modified only with the written consent of
Employee and the Board. No oral waiver, amendment or modification will be
effective under any circumstances whatsoever.

 
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, AND FULLY UNDERSTAND
EACH AND EVERY PROVISION. WHEREFORE, THE PARTIES HAVE EXECUTED AND MADE THIS
AGREEMENT EFFECTIVE AS OF THE DATE SET FORTH ABOVE.
 
"Company"                                                                         
SCOLR Pharma, Inc.
 
By
 
/s/ Michael N. Taglich
__________________________________________
                                Michael N. Taglich, Chairman of the Board
 
"Employee"
 
/s/ Bruce S. Morra
__________________________________________
 
Bruce S. Morra
 
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