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                                                                   EXHIBIT 10.28

                              SEPARATION AGREEMENT

      THIS AGREEMENT ("Agreement") is entered into as of the 7th day of August,
2003, by and between SCOLR, Inc., a Delaware corporation (the "Company") and
David T. Howard ("Howard") in order to provide the terms and conditions of
Howard's separation of employment, and to fully and completely resolve any and
all issues that Howard might have in connection with his relationship with the
Company and any related or affiliated Companies and the termination of such
relationships.

      NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, the parties agree as follows:

1.    Termination of Employment Relationship and Separation. Howard's employment
      with the Company shall cease effective August 7, 2003 (the "Separation
      Date"). All of Howard's wages and employee benefits (except as otherwise
      provided herein) will also cease as of the Separation Date. The parties
      agree that Howard will be paid accrued wages through the Separation Date
      and will be paid for two weeks of accrued vacation, both computed at his
      current rate of compensations and less lawfully required witholdings.

2.    Resignation. Howard hereby resigns from all employee and officer and
      Director positions with the Company and its subsidiaries; provided,
      however, that Howard shall continue as a director of the Company for the
      remainder of his term or until such time as he determines (in his
      discretion) that his resignation would be appropriate.

3.    Bonus. Howard shall receive a bonus of $100,000 in recognition of services
      rendered to the Company and in consideration of the execution of this
      Agreement.

4.    Stock Options. Howard has been granted stock options (the "Options")
      exercisable for up to 800,000 shares of the Company's common stock. The
      terms of the Options are hereby amended as follows:

      4.1   The Options shall become vested and immediately exercisable as to an
            aggregate of 480,000 shares ("Vested Options"). The remaining
            320,000 options may be terminated by the Company. Howard may receive
            additional option grants during the period of his service as a
            director of the Company and such options shall vest in accordance
            with the terms of the respective grants and the Company's 1995 Stock
            Option Plan (the "Plan").

      4.2   The Vested Options shall remain exercisable until the later of close
            of business on December 31, 2004, or until Howard ceases to serve as
            a director of the Company and for such period thereafter as provided
            in the applicable Option grant and in the Plan.
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      4.3   On the later of December 31, 2004, or when Howard ceases to serve as
            a director of the Company and such period thereafter that the
            Options are exercisable in accordance with the terms of the Option
            grant and the Plan, any portion of the Options remaining unexercised
            shall be cancelled and shall revert back to the Plan.

5.    Attorney's Fees. The Company shall pay Howard's reasonable attorney's fees
      incurred in connection with the negotiation, drafting and review of this
      Agreement and the Advisory Agreement in an amount not to exceed $2,000

6.    Waiver of Claims. In return for the benefits conferred by this Agreement
      and other related events, Howard, on behalf of himself and his marital
      community, heirs, executors, administrators and assigns, hereby releases
      in full, and forever discharges, acquits, and holds harmless, the Company,
      including any of the Company's past or present parent, subsidiary or
      otherwise affiliated (through common ownership to any extent or otherwise)
      corporations, partnerships, or other business enterprises, and all of its
      or their past or present affiliates, related entities, partners,
      subsidiaries, insurers, predecessors, successors, assigns, directors,
      officers, shareholders, attorneys, accountants, representatives, agents
      and employees (these entities/persons together with the Company are
      collectively referred to as "Associated Persons"), from any and all
      claims, disputes, suits, demands, causes of action, liabilities, damages,
      expenses and obligations of every nature, character and kind (collectively
      "Claims") that Howard may possess, whether known or unknown, which may now
      exist or hereafter may be discovered, specifically including without
      limitation any and all Claims arising from or relating to Howard's
      employment or relationship with the Company, or the Separation of such
      employment; provided that this release does not Claims arising under the
      express terms of this Agreement and since it is the Equal Employment
      Opportunity Commission's position that a right to file a claim cannot be
      waived, this release does not include the right to file a claim with the
      Equal Employment Opportunity Commission (although Howard expressly waives
      his right to obtain any personal relief or damages related to any EEOC
      claim or charge). This release includes, but is not limited to, any Claims
      that Howard might have for additional compensation, including without
      limitation any Claim for any past, current or future wages, bonuses,
      incentive payments, severance or benefits and applies to Claims for
      damages or other personal remedies that he might have under federal, state
      and/or local law dealing with employment, contract, wage and hour, civil
      rights or any other matters, including, by way of example and not
      limitation, applicable civil rights laws, Title VII of the Civil Rights
      Act of 1965, the Post-War Civil Rights Act of 1964, the Post-War Civil
      Rights Acts (42 USC Sections 1981-1988), the Age Discrimination in
      Employment Act, the Americans with Disabilities Act, the Family and
      Medical Leave Act, the Rehabilitation Act of 1973, the Equal Pay Act of
      1963, Executive Order 11246, Washington's Law Against Discrimination,
      Chapter 49.60 RCW, and Washington's Minimum Wage Act, Chapter 49.46 RCW,
      and any regulations under such laws. This release further applies to any
      Claims or right to personal damages or other personal legal or equitable
      remedies that Howard may have as a result of filing any complaint, charge
      or other action before any administrative agency. This release shall not
      affect any reimbursement rights Howard may have under any medical
      insurance or any accrued rights under any retirement savings plan and
      shall not affect or include any


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      rights he now has or may have in the future as a shareholder or
      stockholder of the Company or any related or affiliated company or entity
      nor does it nor will it affect or include any rights he has to
      indemnification by the Company for claims against him by third parties,
      and such indemnification rights shall remain in full force and effect
      beyond the term of this Agreement. HOWARD 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, INCLUDING ASSOCIATED PERSONS, EXCEPT FOR THE
      RIGHTS SPECIFICALLY EXCLUDED ABOVE AND THOSE RIGHTS PROVIDED HEREIN.

      Similarly, in return for the benefits conferred by this Agreement and
      other related events, the Company hereby releases in full, and forever
      discharges acquits, and holds harmless, Howard, from any and all claims,
      disputes, suits, demands, causes of action, liabilities, damages, expenses
      and obligations of every nature, character and kind (collectively
      "Claims") that the Company may possess, whether known or unknown, which
      may now exist or hereafter may be discovered, specifically including
      without limitation any and all Claims arising from or relating to Howard's
      employment with the Company, or the Separation of such employment and/or
      his role or status as an officer, director and agent of the Company.

7.    Indemnification. To the fullest extent authorized or permitted by the laws
      of the State of Delaware and the Company's Certificate of Incorporation,
      the Company shall defend and indemnify Howard against liability in
      connection with any proceeding to which Howard is made or is threatened to
      be made a party by reason of the fact that he is or was an officer or
      director of the Company.

8.    Non-Admission of Liability. The Company is offering these benefits to
      Howard due to its desire to have an amicable separation of employment with
      him and in recognition of his past contributions to the Company. This
      Agreement shall not be construed as an admission by the Company of any
      liability to Howard, breach of any agreement between the parties, or
      violation by the Company of any statute or regulation. Howard is accepting
      these benefits due to his desire to have an amicable separation of
      employment from the Company. This Agreement shall not be construed as an
      admission by Howard of any liability to the Company, breach of any
      agreement between the parties, or violation by Howard of any statute or
      regulation.

9.    Confidentiality. Howard and the Company executed a Proprietary Information
      and Invention Agreement dated June 8, 2000 which remains in full force and
      effect.

10.   Reference. The Company agrees to provide Howard a favorable letter of
      recommendation executed by the Chairman of the Company's Board of
      Directors for Howard's use with respect to prospective employers, in such
      form as the parties shall reasonably agree.


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11.   Miscellaneous.

      11.1  Entire Agreement. This document is the entire, final and complete
            agreement and understanding of the parties with respect to the
            subject matter hereof, and supersedes and replaces all written and
            oral agreements and understandings heretofore made or existing by
            and between the parties or their representatives with respect
            thereto.

      11.2  Waiver. No waiver of any provision of this Agreement shall be
            deemed, or shall constitute, a waiver of any other provisions,
            whether or not similar, nor shall any waiver constitute a continuing
            waiver. No waiver shall be binding unless executed in writing by the
            party making the waiver.

      11.3  Binding Effect. All rights, remedies and liabilities herein given to
            or imposed upon the parties shall extend to, inure to the benefit of
            and bind, as the circumstances may require, the parties and their
            respective heirs, personal representatives, administrators,
            successors and permitted assigns.

      11.4  Amendment. No supplement, modification or amendment of this
            Agreement shall be valid, unless the same is in writing and signed
            by all parties hereto.

      11.5  Severability. In the event any provision or portion of this
            Agreement is held to be unenforceable or invalid by any court of
            competent jurisdiction, the remainder of this Agreement shall remain
            in full force and effect and shall in no way be affected or
            invalidated thereby.

      11.6  Enforcement. In the event that there is a breach of this Agreement
            by either party or noncompliance with the terms contained herein,
            the nondefaulting or prevailing party shall be entitled to recovery
            of any reasonable attorney's fees and costs incurred in enforcing
            this Agreement.

      11.7  Governing Law and Venue. This Agreement and the rights of the
            parties hereunder shall be governed, construed and enforced in
            accordance with the laws of the State of Washington, without regard
            to its conflict of law principles. Any suit or action arising out of
            or in connection with this Agreement, or any breach hereof, shall be
            brought and maintained in the federal or state courts in Seattle,
            Washington. The parties hereby irrevocably submit to the
            jurisdiction of such courts for the purpose of such suit or action
            and hereby expressly and irrevocably waive, to the fullest extent
            permitted by law, any objection it may now or hereafter have to the
            venue of any such suit or action in any such court and any claim
            that any such suit or action has been brought in an inconvenient
            forum.

      11.8  Counterparts. This Agreement may be executed by the parties
            individually or in separate counterparts, each of which shall be an
            original, and each of which taken together shall constitute one in
            the same agreement.


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      11.9  Further Acts. The parties agree to execute such additional documents
            and take such other actions as are reasonably necessary to implement
            the terms of this Agreement.

12.   No Pressure or Coercion. Howard acknowledges that he has read this
      Agreement and is being given an opportunity to consider it for up to
      twenty-one days, although he may sign it and deliver it to the Company
      during the twenty-one day period. Howard has been advised to discuss it
      with financial and legal counsel of his choice. The parties further
      acknowledge that he may revoke this Agreement within seven (7) days after
      he has signed and delivered it. Only after that seven-day period has
      passed, will the obligations under this Agreement become effective.

      IN WITNESS WHEREOF, the parties have executed this agreement freely,
voluntarily and with a complete understanding of its terms and present and
future effect as of the date set forth above.

DAVID T. HOWARD                                  SCOLR, INC.



/s/   DAVID T. HOWARD                            /s/    Daniel B. Ward
---------------------------                      ---------------------------
                                                 By:    Daniel B. Ward
                                                 Title: Director and Chairman of
                                                        Compensation Committee

Date:                                            Date:
     ----------------------                           ----------------------


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