exhibit_10-3.htm


    Exhibit
10.3

    


    CONFIDENTIAL
SEPARATION AGREEMENT AND RELEASE OF CLAIMS

    


    This
Confidential Separation Agreement and Release of Claims (“Agreement and
Release”) is entered into this 28th day
of August 2009 between SCOLR Pharma, Inc. (“Company”) and Bruce Morra
(“Executive”).

    


    WHEREAS,
Executive has been employed by the Company under an Executive Employment
Agreement, dated January 30, 2009 (the “Employment Agreement”), which provides
for the payment of potential severance benefits to Executive under the terms and
conditions set forth therein; and

    


    WHEREAS,
the parties desire to have Executive remain on the Company’s Board of Directors
but have agreed to end their employment relationship and wish to do so amicably
on the terms described herein, which are different from those potentially
available under the Employment Agreement; and

    


    WHEREAS,
except as provided herein, the parties wish to completely and forever resolve
Executive's claims and rights under the Employment Agreement and any and all
other existing or potential claims between them and to agree upon modified terms
related to his departure;

    


    NOW,
THEREFORE, in consideration of the foregoing and the potential benefits to be
realized by Executive as a result of executing this Agreement and Release,
Executive and the Company hereby agree as follows:

    


    
      	
              1.  

            	
              End of Employment
      Relationship.  The parties agree that Executive’s
      employment with the Company shall end on August 28, 2009 [last day of
      employment] and that Executive shall resign as CEO and President as of
      close of business on that day; provided that the
      Company shall not characterize Executive’s resignation as voluntary in
      response to any claim Executive may make for unemployment
      benefits.   Executive shall receive payment for work
      through the last day of employment in the next regularly scheduled payroll
      after August 28, 2009.   The parties desire Executive to
      continue to serve as a Director of the Company and, except as specifically
      addressed to the contrary herein, to be compensated pursuant to the
      Director compensation policy as such may be amended from time to time, but
      agree that the Company is not contractually obligated to continue
      Executive as a Director.

            


    

     

    
      	
              2.  

            	
              Additional
      Payments.

            


    

     

    
      	
              a.  

            	
              Within
      eight (8) business days of Executive's execution and return of this
      Agreement and Release (the “Effective Date”), the Company will pay
      Executive:

            


    

     

    
      	
              i.  

            	
              the
      gross sum of $222,800.

            


    

     

    
      	
              ii.  

            	
              the
      gross sum of $16,916.72 as payment for 95.75 hours of accrued but unused
      paid time off (PTO).

            


    

     


    
      
         


      

      
        1

        
          

        

      

      
         


      

    

     

    
      	
              b.  

            	
              Also,
      commencing January 1, 2010 and ending June 1, 2010, Executive shall
      receive $35,466.66 each month in six monthly installments paid on the
      first of each month.

            


    

     

    Each of
the foregoing payments shall be subject to normal, customary, and/or required
withholdings and deductions related to the payment of wages by a company to an
employee including federal taxes, Medicare, and FICA.

     

    Executive
and the Company recognize that their respective views differ on their rights and
obligations under the Employment Agreement.  Executive understands
that the Company does not admit that any severance is, in fact, owed under the
circumstances, and the Company understands that Executive does not
agree.  Executive acknowledges, however, that he would not be entitled
to severance from the Company without a separation and release agreement and
that this Agreement and Release represents a compromise intended to resolve any
disagreement based on the parties’ differing views.  Executive
understands and agrees that he is giving up all potential rights to additional
payments – whether severance, bonus, options or stock grants – not specifically
provided for in this Agreement and Release.

     

    
      	
              3.  

            	
              Non-Competition
      Restrictions.  Executive is released from the
      non-competition restrictions of Section 9 of the Employment Agreement, but
      Sections 10 and 11 remain in full effect unless specifically modified
      herein.  The Confidentiality and Non-Compete Agreement signed on
      January 30, 2009 continues in full force and effect to the extent
      applicable, provided that the reference to non-compete in Section 2 is
      hereby deleted.

            


    

     

    
      	
              4.  

            	
              Stock
      Grant.  On January 4, 2010, the Company shall issue
      Executive 214,285 shares of the Company’s Common
  Stock.

            


    

     

    
      	
              5.  

            	
              Stock
      Options.  The parties agree that on the Effective Date
      Executive shall vest in the 125,000 stock options that would have vested
      on January 18, 2010 if Executive had continued to serve as
      CEO.  In addition, any options granted pursuant to Section 2.2.
      of the Employment Agreement will expire one year after Executive’s last
      day of employment.  Executive relinquishes any right to other
      options mentioned during contract discussions which the parties determined
      could not be granted.

            


    

     

    
      	
              6.  

            	
              COBRA.  Assuming
      that Executive exercises his rights under COBRA and, throughout the twelve
      months, does not have medical insurance available through other
      employment, Executive will receive continued medical coverage at the
      Company's expense for a period of twelve (12) months following the
      Effective Date, pursuant to COBRA at existing levels for his own medical
      coverage and for fifty percent of his spouse and children’s coverage, if
      such is elected.

            


    

     

    
      	
              7.  

            	
              Purchase of
      Equipment. Executive agrees to buy his Company cell phone and
      computer systems for $1,000, consisting
of:

            


    

     

    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    
      	
              ·  

            	
              Apple
      iPhone, case, car charger, and wireless
headset

            


    

     

    
      	
              ·  

            	
              Sony
      Vaio lap top computer system (including docking station, cables,
      connectors, mouse, keyboard, monitor, printer, surge protector) and
      software

            


    

    
      	
              ·  

            	
              Manuals,
      disks, licenses and proof of purchases for all of the
  above

            


    

    


    The
Company will provide reasonable assistance to Executive to adapt the systems for
personal use.  If more than reasonable assistance is required, as
determined by the Company in its sole discretion, and hence, is not provided,
then Executive can elect not to purchase the equipment.

     

    
      	
              8.  

            	
              Section
      409A Compliance.  The parties intend for this Agreement and
      Release to be exempt from the application of Section 409A, whether
      pursuant to the short-term deferral exception described in Treasury
      Regulation Section 1.409A-1(b)(4), the involuntary separation pay plan
      exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii), or
      otherwise, and this Agreement and Release shall be construed and
      interpreted accordingly.  If the Company or Executive reasonably
      determines that any provision of this Agreement and Release 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 and Release in a timely manner so that this
      Agreement and Release either satisfies the requirements of Section 409A or
      is exempt from the application of Section
409A.

            


    

     

    
      	
              9.  

            	
              Reimbursement of
      Attorney’s Fees.  The Company shall pay Executive’s legal
      counsel up to $5,000 for attorney’s fees incurred by Executive related to
      this Agreement and Release.  Executive shall be responsible for
      submitting an invoice to the Company after the Effective Date detailing
      actual attorney’s fees incurred.  Payment shall be made within
      ten (10) days of receipt of such
invoice.

            


    

     

    
      	
              10.  

            	
              Unemployment
      Insurance.  Notwithstanding the reference in Section 1
      above to Executive resigning as president and CEO of the Company, it is
      understood that the Company will not contest Executive’s application for
      unemployment benefits; however, the Company will disclose that Executive
      is receiving severance pursuant to this Agreement and
    Release.

            


    

     

    
      	
              11.  

            	
              Waiver and Release of
      Claims.  Executive understands that in conjunction with
      this Agreement and Release, he is being provided with certain benefits to
      which he would not otherwise be entitled and other benefits as to which he
      and the Company have differing views regarding his entitlement and that
      the terms of this Agreement and Release are intended as a compromise of
      their differing views.  With that understanding, Executive, on
      his own behalf, as well as on behalf of his marital community and his
      heirs, executors, administrators and assigns, hereby releases in full and
      forever discharges, acquits and holds harmless SCOLR Pharma, Inc. and any
      parent, subsidiary or otherwise affiliated corporation, partnership or
      other business enterprise, and all of its or their past or current
      affiliates, related entities, partners, subsidiaries, insurers,
      predecessors, successors, assigns, directors, officers, shareholders,
      attorneys, investors,
representatives,

            


    

     

    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    agents
and employees (herein collectively referred to as “Associated Persons”) from any
and all claims, causes of action, demands, suits, liabilities, damages,
including damages for pain and suffering and emotional harm, charges,
controversies, expenses and obligations of every nature, character or
kind,  (collectively “Claims”), arising up to and including the date
of this Agreement and Release, whether known or unknown, suspected or
unsuspected,  including, but not limited to, any Claims which in any
manner or fashion arise from or relate to Executive’s employment with the
Company, any contractual agreements between Executive and the Company, including
but not limited to the Employment Agreement, or Executive’s separation from
employment with the Company, including without limitation any claims for
damages, equitable relief, attorney fees or costs.

     

    This
release includes, but is not limited to, any Claims that Executive might have
for reinstatement, reemployment or for additional compensation for work
performed, including without limitation wages, bonuses, commissions, fees,
payments, incentive payments, sick leave pay-out, extended illness bank pay-out,
severance pay, expenses, salary, paid time off or vacation pay (besides what is
paid at termination per this Agreement and Release), fees or costs, losses,
penalties or benefits.  Without limitation, it applies to Claims for
damages or other personal remedies that Executive might have under any federal,
state and/or local law, statutory, regulatory or common, dealing with
employment, tort, contract, wage and hour, civil rights or any other matters,
including, by way of example and not limitation, applicable civil rights laws,
retaliation, federal and state whistleblower laws, Title VII of the Civil Rights
Act of 1964, the Post-War Civil Rights Act of 1964, the Post-War Civil Rights
Acts (42 USC Sections 1981-1988), the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Age Discrimination in Employment Act, the Older
Workers Benefit Protection Act, the U.S. Family and Medical Leave Act; all State
of Washington laws and regulations, including those governing employment,
discrimination, accommodation, and leave; the Fair Labor Standards Act, the
National Labor Relations Act, the Employment Retirement Income Security Act
(excluding COBRA), the Vietnam Era Veterans Readjustment Assistance Act, the
Fair Credit Reporting Act, the Occupational Safety and Health Act, the
Sarbanes-Oxley Act of 2002, the Health Insurance Portability and Accountability
Act of 1995, the Rehabilitation Act of 1973, the Equal Pay Act of 1963,
Executive Order 11246, Washington’s Law Against Discrimination, Chapter 49.60
RCW, Washington’s Minimum Wage Act, Chapter 49.46 RCW, Chapter 49.48 RCW, and
any regulations under such laws.  This release further applies to any
Claims or right to personal damages, benefits or other personal legal or
equitable remedies that Executive may have as a result of filing any complaint,
charge or other action before any administrative agency.  EXECUTIVE
ACKNOWLEDGES AND AGREES THAT THROUGH THIS RELEASE HE IS GIVING UP ALL RIGHTS AND
CLAIMS OF EVERY KIND AND NATURE WHATSOEVER, KNOWN OR UNKNOWN, CONTINGENT OR
LIQUIDATED, THAT HE MAY HAVE AGAINST THE COMPANY AND ASSOCIATED PERSONS, ARISING
ON OR BEFORE THE DATE OF THIS AGREEMENT AND RELEASE.

    
 

    
      
        
           


        

        
          4

          
            

          

        

        
           


        

      

    

    


    ADEA
Waiver.  Executive acknowledges that his waiver and release
hereunder of any rights he may have under the Age Discrimination in Employment
Act of 1967 (ADEA), as amended by the Older Workers Benefit Protection Act, is
knowing and voluntary.  He certifies that he has read, has received an
explanation of, and understands the provisions of this release of
claims.  The parties agree that this waiver and release does not apply
to any rights or claims that may arise under ADEA after the date this Agreement
is executed.  Executive acknowledges that he has been advised by this
writing, as required by the Older Workers Benefit Protection Act, that (a) he
should consult with an attorney prior to executing this Agreement; (b) he has
twenty-one (21) days to consider this Agreement (although he may, by his own
choice, execute this Agreement earlier); (c) he has seven (7) days following the
execution of this Agreement by him to revoke the Agreement; and (d) this
Agreement shall not be effective until the Effective Date (which is after the
revocation period has expired).

     

    The
foregoing release does not apply to claims relating to breach or enforceability
of this Agreement and Release, Executive’s right to file a complaint with a
governmental agency, or claims arising after the execution of this Agreement and
Release.  However, with respect to agency complaints, Executive
understands and agrees that he is expressly waiving any right to obtain monetary
damages or any other
relief that provides personal benefit resulting from the agency
claim.  This waiver and release is effective to the full extent the
law permits him to release his individual claims.  It does not affect
accrued reimbursement rights he may currently possess under any health insurance
coverage or accrued rights he may have under any retirement plan after
termination.

     

    Through
this release Executive is fully, finally, and for all times settling and
releasing all disputes and differences within the scope of matters known or
unknown, suspected or unsuspected, which now exist, or may have existed between
Executive, the Company and/or Associated Persons, on or before the date of this
Agreement and Release.  In furtherance of this intention, this release
shall be and remain in effect as a full and complete release of claims arising
on or before the date of this Agreement and Release notwithstanding the
discovery or existence of any such additional or different Claim or
fact.  The provisions of any law, regulation, statue or ordinance
providing in substance that releases shall not extend to Claims, damages or
injuries which are unknown or unsuspected to exist at the time the person
executes the release are hereby expressly waived by Executive.

     

    This
Agreement and Release is not intended to and does not release or reduce any
indemnification rights possessed by Executive or any rights to insurance
coverage afforded to Executive by virtue of his service as a director and/or
officer of the Company.

     

    
      	
              12.  

            	
              Release
      by Company.  In consideration of Executive's entering into this
      Agreement and Release, SCOLR Pharma Inc. (including any parent, subsidiary
      or otherwise affiliated corporation, partnership or other business
      enterprise, and all of its or their past or current affiliates, related
      entities, and/or subsidiaries),  hereby releases in
      full

            


    

     

    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    and
forever discharges, acquits and holds harmless Executive from any or all Claims
that SCOLR might possess to the extent that it is found that Executive was
acting in good faith and within the scope of his employment, provided, however,
that this release shall not extend to any rights (a) to obtain contribution as
permitted by law in the event of entry of judgment against the Company as a
result of any act or failure to act for which the Executive and the Company are
jointly liable, (b) arising under, or preserved by, this Agreement and Release,
(c) arising after Executive’s last day of employment or (d) arising out of any
investor, account, insurance or client relationship, which rights shall be
preserved, unaffected by this release.  If the Company brings any
claim against the Executive in a civil action or in arbitration, the judge
or arbitrator shall have discretion based on equitable considerations to award
the prevailing party some or all of its/his reasonable costs, including
attorney's fees, or to deny any such award.

     

    
      	
              13.  

            	
              Surviving
      Terms.  In addition to Sections 10 and 11, the parties
      intend for Sections 6.6 (a), 6.7, 6.8, 12, and 13 of the Employment
      Agreement to continue in full force and effect to the extent applicable to
      Executive’s post-employment.

            


    

     

    
      	
              14.  

            	
              Nonadmission of
      Liability.  The Company and Executive each expressly
      agree and acknowledge that this Agreement in no way constitutes an
      admission of liability on the Company’s part, including Associated
      Persons, or the Executive, and this Agreement does not constitute the
      admission of any fact from which liability to the Company, including
      Associated Persons, or Executive can be attributed now or at any time in
      the future.  The parties agree that this agreement is not
      admissible for any purpose other than an action for enforcement of its
      terms.

            


    

     

    
      	
              15.  

            	
              No
      Transfer.  Executive covenants that he has not assigned,
      transferred, sold, encumbered, pledged, mortgaged, distributed or
      otherwise disposed of or conveyed to any third party any right or Claim
      against the Company or Associated Persons that has been released by this
      Agreement.

            


    

     

    
      	
              16.  

            	
              No
      Representations.  The Company and Executive each warrant
      that no promise or inducement has been offered for this Agreement and
      Release other than as set forth herein and that this Agreement is executed
      without reliance upon any other promises or representations, oral or
      written.  The Executive specifically acknowledges and agrees
      that the Company has made no representations to Executive regarding the
      tax consequences of any amounts received by Executive or provided for
      Executive’s benefit pursuant to this Agreement.  Any
      modification of this Agreement must be made in writing and signed by the
      Executive and the Company.

            


    

     

    
      	
              17.  

            	
              Modification and
      Supplementation.  Except as noted herein, this Agreement
      and Release modifies and supersedes all prior understandings between the
      Company and Executive, including the Employment Agreement, and represents
      the entire Agreement between the parties with respect to all matters
      involving Executive’s employment with and termination from the
      Company.

            



      
        
           


        

        
          6

          
            

          

        

        
           


        

      



    
      	
              18.  

            	
              Severability.  In
      the event any provision of this Agreement and Release is found
      unenforceable by an arbitrator or court of competent jurisdiction, such
      provision shall be deemed modified to the extent necessary to allow
      enforceability of the provision as so limited, it being intended that the
      parties shall receive the benefits 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.

            


    

     

    
      	
              19.  

            	
              Governing Law and
      Dispute Resolution.  This Agreement and Release shall be
      governed in accordance with the laws of the State of Washington, without
      regard to its conflict of law principles.  The parties further
      agree that disputes arising out of the Agreement and Release will be
      submitted for binding arbitration, with the exception that the Company may
      seek injunctive and/or declaratory relief in a court of competent
      jurisdiction to protect the Company’s trade secret(s), proprietary
      information, confidential information and other Company property, and/or
      the Company’s business reputation.  Arbitration will be
      conducted by the American Arbitration Association (“AAA”) and governed by
      the AAA National Rules for the Resolution of Employment Disputes (“AAA
      Rules”).

            


    

     

    
      	
              20.  

            	
              Notice.  For
      the purposes of any notice to Executive, his current address
      is

            


    

     

    Bruce S.
Morra

    427
11th
Avenue West

    Kirkland,
WA 98033

    With a
copy e-mailed to: brucemorra@gmail.com

     

                          For
the purposes of any notice to Company, its current address is

     

    Stephen
Turner

    Vice
President & Chief Technical Officer

    SCOLR
Pharma, Inc.

    19204
North Creek Parkway

    Suite
100

    Bothell,
WA 98011

    With a
copy e-mailed to: sturner@scolr.com

    With a
copy e-mailed to: apreston@gsblaw.com

     

    EXECUTIVE
ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS CAREFULLY READ AND VOLUNTARILY SIGNED
THIS AGREEMENT, THAT EXECUTIVE HAS HAD AN OPPORTUNITY TO CONSULT WITH AN
ATTORNEY OF EXECUTIVE’S CHOICE, AND THAT EXECUTIVE SIGNS THIS AGREEMENT WITH THE
INTENT OF RELEASING ALL ASSOCIATED PERSONS, INCLUDING, THE COMPANY AND ITS
OFFICERS, DIRECTORS, EXECUTIVES AND AGENTS FROM ANY AND ALL CLAIMS.

     

    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

     

    IN
WITNESS WHEREOF, Executive and the Company have caused this Agreement and
Release to be executed as of the day and year first above written.

    


    
      	
              Executive

               

               

              /s/ Bruce
      Morra

              Bruce
      Morra

            	
              SCOLR
      Pharma, Inc.

               

               

              By: /s/
      Michael Taglich

               

              Its:
      Chairman

            


    

    


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