Document:

Exhibit 10.1

RESTRICTED STOCK UNIT AWARD AGREEMENT

Long-Term Incentive Compensation Award

______________ Performance Period

          This
Restricted Stock Unit Award Agreement (the “Agreement”) made under the Foot
Locker 2007 Stock Incentive Plan, Amended and Restated as of May 19, 2010 (the
“Plan”) as of the ___ day of ___________ 20 ___ by and between Foot Locker,
Inc., a New York corporation with its principal office located at 112 West 34th
Street, New York, New York 10120 (the “Company”) and ______________ .

          1.        General.
As a participant in the Company’s long-term incentive compensation program for
the __________ Performance Period which covers the fiscal years beginning
_______ and _________ (the “Performance Period”), you were granted a long-term
incentive award that will be payable following the end of the Performance
Period, provided the performance goals set by the Compensation and Management
Resources Committee (the “Compensation Committee”) of the Board of Directors of
the Company on ____________ for the Performance Period are achieved. The award
is payable as follows: 50 percent of the award is payable in cash under the
Long-Term Incentive Compensation Plan (the “LTIP”), and 50 percent of the award
is payable in restricted stock units (“RSUs”) under the Plan as provided
herein. The RSUs are intended to constitute “Other Stock-Based Awards” under
the Plan. Each RSU represents the right to receive one share of the Company’s
Common Stock, par value $.01 per share (“Common Stock”), upon the satisfaction
of the terms and conditions set forth in this Agreement and the Plan. 

                    This
Agreement sets forth the terms and conditions with regard to the portion of
your long-term award that is payable in RSUs. You have been granted ___________
RSUs, subject to the conditions set forth herein. Unless otherwise indicated,
any capitalized term used but not defined herein shall have the meaning
ascribed to such term in the Plan. 

          2.       Earning
of RSUs. Subject to the terms and conditions of the Plan and this
Agreement, you shall be entitled to receive, for each RSU earned in accordance
with this Section 2 and Appendix A hereto, one share of Common Stock. You shall
earn the number of RSUs set forth above for achievement at the maximum
performance goal as specified in Appendix A attached hereto, subject to
adjustment for achievement below the maximum performance goal in accordance
with the provisions of Appendix A attached hereto. If the threshold performance
level set forth in Appendix A is not achieved, none of the RSUs granted to you
shall be earned. The Compensation Committee shall certify the level of
achievement of the performance goals during the Company’s first fiscal quarter
in _________ and at such time shall determine the number of RSUs you are
eligible to receive, subject to the provisions of Section 3 below. 

          3.       Vesting
and Delivery. 

                    (a)          The
RSUs you are eligible to receive as described in Section 2 shall be

subject to a
one-year holding period following the end of the Performance Period and shall
become vested on __________ (the “Vesting Date”). Subject to the terms of this
Agreement and the Plan, shares of Common Stock equal to the number of RSUs you
earn shall be delivered to you as described below if you have been continuously
employed by the Company or its subsidiaries within the meaning of Section 424
of the Code (the “Control Group”) until such Vesting Date. 

                    (b)          Other
than as specifically provided herein, there shall be no proportionate or
partial vesting in the periods prior to the Vesting Date, and all vesting shall
occur only on the Vesting Date, subject to your continued employment with the
Control Group as described in Section 3(a). 

                    (c)          Upon
a Change in Control as defined in Appendix B hereto that occurs following the
end of the Performance Period and the certification by the Compensation
Committee of the achievement of the performance goal, all unvested RSUs shall
become immediately vested and shall be paid in accordance with Section 3(f). 

                    (d)          Upon
a Change in Control as defined in Appendix B hereto that occurs prior to the
end of the Performance Period, or coincident with or following the end of the
Performance Period and prior to the certification by the Compensation Committee
of the achievement of the performance goal, you shall be entitled to receive a
pro rata portion of the RSUs that you would have been entitled to receive had
the target performance level set forth in Appendix A been achieved and such
RSUs shall become immediately vested and shall paid in accordance with Section
3(f). The pro rated portion shall be determined by multiplying the number of
RSUs you would have been entitled to receive without respect to the Change in
Control by a fraction, the numerator of which is the number of days from
_____________, 20 ____ to date of the earlier of the Change in Control or the
last day of the Performance Period and the denominator of which is the total
number of days in the Performance Period without respect to the Change in
Control. 

                    (e)          In
the event of your Termination by reason of death, Disability (within the
meaning of Code Section 409A(a)(2)(C)(i) or (ii)) or Retirement prior to the
Vesting Date, on the Vesting Date you (or in the event of your death, your
estate) shall receive a pro rata portion of the RSUs that you would have
received if you had been employed by the Company on the Vesting Date, based on
the actual level of achievement of the performance goals set forth in Appendix
A. The pro rated portion shall be determined by multiplying the number of RSUs
you would have been entitled to receive if you had not incurred such Termination
by a fraction, the numerator of which is the number of days from _____________,
20 ____ to date of your Termination and the denominator of which is the total
number of days in the Performance Period, and shall vest on the Vesting Date
and shall be paid in accordance with Section 3(f). Notwithstanding the
foregoing, in the event of a Change in Control following your death, Disability
(within the meaning of Code Section 409A(a)(2)(C)(i) or (ii)) or Retirement,
but prior to the certification by the Compensation Committee of the achievement
of the performance goal, the provisions of Section 3(d) above shall supersede
this Section 3(e). 

                    (f)          Subject
to Section 8, the Company shall issue and deliver to you a stock 

certificate
registered in your name for shares of the Company’s Common Stock equal to the
number of vested RSUs you earn within 30 days following the earlier of a Change
in Control or the Vesting Date. 

          4.       Forfeiture.

                    (a)          Any
RSUs that are not earned in accordance with Section 2 or vested in accordance
with Section 3 of this Agreement shall be forfeited without compensation
following the Compensation Committee’s certification of the goals for the
Performance Period. 

                    (b)          Except
as expressly set forth in Section 3(e), in the event of your Termination prior
to the Vesting Date or your breach of the Non-Competition Provision in Section
10, all unvested RSUs shall be forfeited to the Company, without compensation.

          5.       Adjustments.
RSUs shall be subject to the adjustment provisions included in Section 5(e) of
the Plan. 

          6.       Withholding.
You agree that: 

                    (a)          No
later than the date on which any RSUs shall have become vested, you will pay to
the Company, or make arrangements satisfactory to the Company regarding payment
(including through the withholding of shares from the award) of, any federal,
state, international, or local taxes of any kind required by law to be withheld
with respect to any RSUs which shall have become so vested; and 

                    (b)          The
Company shall, to the extent permitted by law, have the right to deduct from
any payment of any kind otherwise due to you any federal, state, international
or local taxes of any kind required by law to be withheld with respect to any
RSUs which shall have become so vested. 

          7.        Special
Incentive Compensation. You agree that the award of the RSUs is special incentive
compensation and that the RSUs will not be taken into account as “salary” or
“compensation” or “bonus” in determining the amount of any payment under any
pension, retirement or profit-sharing plan of the Company or any life
insurance, disability or other benefit plan of the Company, except as
specifically provided in any such plan. 

          8.        Delivery
Delay. Notwithstanding anything herein, the delivery of any certificate
representing shares of Common Stock for vested RSUs may be postponed by the
Company for such period as may be required for it to comply with any applicable
federal or state securities law, or any national securities exchange listing
requirements and the Company is not obligated to issue or deliver any
securities if, in the opinion of counsel for the Company, the issuance of such
shares shall constitute a violation by you or the Company of any provisions of
any law or of any regulations of any governmental authority or any national
securities exchange. 

          9.        Restriction
on Transfer of RSUs. You shall not sell, negotiate, transfer, pledge,
hypothecate, assign or otherwise dispose of the RSUs. Any attempted sale,
negotiation, transfer, 

pledge,
hypothecation, assignment or other disposition of the RSUs or unvested shares
in violation of the Plan or this Agreement shall be null and void. 

          10.     Non-Competition.

                    (a)     Competition.
By accepting this award of RSUs, as provided below, you agree that during the
“Non-Competition Period” you will not engage in “Competition” with the Control
Group. As used herein, “Competition” means: 

                              (i)          participating,
directly or indirectly, as an individual proprietor, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any capacity
whatsoever within Canada, the United States of America or in any other country
where any of your former employing members of the Control Group does business,
in (A) a business in competition with the retail, catalog, or on-line sale of
athletic footwear, athletic apparel and sporting goods conducted by the Control
Group (the “Athletic Business”), or (B) a business that in the prior fiscal
year supplied product to the Control Group for the Athletic Business having a
value of $20 million or more at cost to the Control Group; provided, however,
that such participation shall not include (X) the mere ownership of not more
than 1 percent of the total outstanding stock of a publicly held company; (Y)
the performance of services for any enterprise to the extent such services are
not performed, directly or indirectly, for a business in competition with the
Athletic Business or for a business which supplies product to the Control Group
for the Athletic Business; or (Z) any activity engaged in with the prior
written approval of the Chief Executive Officer of the Company; or 

                              (ii)          intentionally
recruiting, soliciting or inducing, any employee or employees of the Control
Group to terminate their employment with, or otherwise cease their relationship
with the former employing members of the Control Group where such employee or
employees do in fact so terminate their employment. 

                    (b)      “Non-Competition
Period”. As used herein, “Non-Competition Period” means: the period
commencing _____________ , ___20 and ending on the Vesting Date, or any part
thereof, during which you are employed by the Control Group and (ii) if your
employment with the Control Group terminates for any reason during such period,
the [one year/two-year] period commencing on the date your employment with the
Control Group terminates. Notwithstanding the foregoing, the Non-Competition
Period shall not extend beyond the date your employment with the Control Group
terminates if such termination of employment occurs following a “Change in
Control” as defined in Attachment B hereto. 

                    (c)      Breach
of Non-Competition Provision. You agree that your breach of the provisions
included herein under Section 10 under the heading “Non-Competition” (the
“Non-Competition Provision”) would result in irreparable injury and damage to
the Company for which the Company would have no adequate remedy at law. You
agree, therefore, that in the event of a breach or a threatened breach of the
Non-Competition Provision, the Company shall be entitled to (i) an immediate
injunction and restraining order to prevent such breach, threatened breach, or
continued breach, including by any and all persons acting for or with you,
without having to prove damages, and (ii) any other remedies to which the
Company may be entitled at 

law or in
equity. The terms of this paragraph shall not prevent the Company from pursuing
any other available remedies for any breach or threatened breach of the
Non-Competition Provision, including, but not limited to, recovery of damages.
In addition, in the event of your breach of the Non-Competition Provision, the
RSUs covered by this Agreement that are then unvested shall be immediately
forfeited. You and the Company further agree that the Non-Competition Provision
is reasonable and that the Company would not have granted the award of RSUs
provided for in this Agreement but for the inclusion of the Non-Competition
Provision herein. If any provision of the Non-Competition Provision is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range of activities or in too
broad a geographic area, it shall be interpreted to extend over the maximum
period of time, range of activities, or geographic area as to which it may be
enforceable. The validity, construction, and performance of the Non-Competition
Provision shall be governed by the laws of the State of New York without regard
to its conflicts of laws principles. For purposes of the Non-Competition
Provision, you and the Company consent to the jurisdiction of state and federal
courts in New York County, New York. 

          11.     Not
an Employment Agreement. 

          The award
of RSUs hereunder does not constitute an agreement by the Company to continue
to employ you during the entire, or any portion of the, term of this Agreement,
including but not limited to any period during which the RSUs are outstanding. 

          12.     [Securities
Representations. This Agreement is being made by the Company in reliance
upon the following express representations and warranties. You acknowledge,
represent and warrant that you have been advised that 

                    You
may be an “affiliate” within the meaning of Rule 144 under the Securities Act
of 1933, as amended (the “Securities Act”) and in this connection the Company
is relying in part your representations set forth in this section; 

                    If
you are deemed an affiliate within the meaning of Rule 144 under the Securities
Act, the Common Stock must be held indefinitely by you unless (i) an exemption
from the registration requirements of the Securities Act is available for the
resale of such Common Stock or (ii) the Company files an additional
registration statement (or a “re-offer prospectus”) with regard to the resale
of such Common Stock and the Company is under no obligation to continue in
effect a Form S-8 Registration Statement or to otherwise register the resale of
the Common Stock (or to file a “re-offer prospectus”); 

                    If
you are deemed an affiliate within the meaning of Rule 144 under the Securities
Act, you understand that the exemption from registration under Rule 144 will not
be available under current law unless (i) a public trading market then exists
for the Common Stock, (ii) adequate information concerning the Company is then
available to the public, and (iii) other terms and conditions of Rule 144 or
any exemption therefrom are complied with and that any sale of the Common Stock
may be made only in limited amounts in accordance with such terms and
conditions.] 

         13.       Miscellaneous.

                    (a)          In
no event shall any dividend equivalents accrue or be paid on any RSUs. 

                    (b)          This
Agreement shall inure to the benefit of and be binding upon all parties hereto
and their respective heirs, legal representatives, successors and assigns. 

                    (c)          This
Agreement shall be subject to any compensation recoupment policy that the
Company may adopt. 

                    (d)          This
Agreement constitutes the entire agreement between the parties and cannot be
changed or terminated orally. No modification or waiver of any of the
provisions hereof shall be effective unless in writing and signed by the party
against whom it is sought to be enforced. 

                    (e)          This
Agreement may be executed in one or more counterparts, all of which taken
together shall constitute one contract. 

                    (f)          The
failure of any party hereto at any time to require performance by another party
of any provision of this Agreement shall not affect the right of such party to
require performance of that provision, and any waiver by any party of any
breach of any provision of this Agreement shall not be construed as a waiver of
any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right under this Agreement. 

                    (g)          This
Agreement is subject, in all respects, to the provisions of the Plan, and to
the extent any provision of this Agreement contravenes or is inconsistent with
any provision of the Plan, the provisions of the Plan shall govern. 

                    (h)          The
headings of the sections of this Agreement have been inserted for convenience
of reference only and shall in no way restrict or modify any of the terms or
provisions hereof. 

                    (i)          All
notices, consents, requests, approvals, instructions and other communications
provided for herein shall be in writing and validly given or made when
delivered, or on the second succeeding business day after being mailed by
registered or certified mail, whichever is earlier, to the persons entitled or
required to receive the same, at, in the case of the Company, the address set
forth at the heading of this Agreement and, in the case of you, your principal
residence address as shown in the records of the Company, or to such other
address as either party may designate by like notice. Notices to the Company
shall be addressed to the General Counsel. 

                    (j)          This
Agreement shall be governed and construed and the legal relationships of the
parties determined in accordance with the laws of the State of New York without
regard to its conflicts of laws principles. 

                    (k)          Although
the Company does not guarantee the tax treatment of the RSUs, 

this Agreement is intended
to comply with, or be exempt from, the applicable requirements of Code Section
409A and shall be limited, construed and interpreted in accordance with such
intent. Accordingly, in the event that you are a “specified employee” within
the meaning of Code Section 409A as of the date of your separation from service
(as determined pursuant to Code Section 409A and any procedure set by the
Company), any award of RSUs payable as a result of such separation from service
shall be settled no earlier than the day following the 6 month anniversary of
your separation from service, or, if earlier, your death. 

                    (l)          To
indicate your acceptance of the terms of this Agreement, you must sign and
deliver or mail not later than _________, 20___ a copy of this Agreement to the
General Counsel of the Company at the address provided in the heading of this
Agreement. 

          IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written. 

	
  
 	
  
 	
  
 	
  
 
	
  
 	
 FOOT LOCKER, INC.
 
	
  
 	
  
 	
  
 
	
  
 	
 By:
 	
  
 	
  
 
	
  
 	
  
 	  	
  
 
	 	 	 	 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
  
 	  	
  
 
	
  
 	
  
 	
 Executive
 	
  
 

ACKNOWLEDGMENT

	
  

 	
  

 
	
 STATE OF_____________)

 	
  

 
	
 ) s.s.:

 	
  

 
	
 COUNTY OF___________)

 	
  

 
	
  

 	
  

 

          On
this________ day of _______________, before me personally appeared _________,
to me known to be the person described in and who executed the foregoing
agreement, and acknowledged that he/she executed the same as his/her free act
and deed. 

	
  

 	
  

 	
  

 
	
  

 	 

 	
  

 
	
  

 	
 Notary
 Public

 	
  

 

APPENDIX A 

	
  

 	
  

 	
  

 
	
 Number
 of

 	
 Number
 of

 	
 Number
 of RSUs

 
	
 RSUs
 at

 	
 RSUs
 at Target

 	
 at
 Maximum

 
	
 Threshold

 	
 Payout

 	
 Payout

 
	
 Payout

 	
  

 	
  

 
	
  

 	
  

 	
  

 

[Performance Goals for ___________ Performance Period]

APPENDIX B

Change in Control

          A
Change in Control shall mean any of the following: (i) the merger or
consolidation of the Company with, or the sale or disposition of all or
substantially all of the assets of the Company to, any Person other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving or parent entity) fifty percent (50%) or more of the combined voting
power of the voting securities of the Company or such surviving or parent
entity outstanding immediately after such merger or consolidation; or (B) a
merger or capitalization effected to implement a recapitalization of the
Company (or similar transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly (as determined under Rule 13d-3
promulgated under the Securities Exchange Act of 1934), of securities
representing more than the amounts set forth in (ii) below; (ii) the
acquisition of direct or indirect beneficial ownership (as determined under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934), in the
aggregate, of securities of the Company representing thirty-five percent (35%)
or more of the total combined voting power of the Company’s then issued and
outstanding voting securities by any Person acting in concert as of the date of
this Agreement; or (iii) during any period of not more than twelve (12) months,
individuals who at the beginning of such period constitute the Board of
Directors of the Company (referred to herein as the “Board”), and any new
director whose election by the Board or nomination for election by the
Company’s shareholders was approved by a vote of at least two-thirds (2⁄3) of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof.exhibit_10-1.htm

EXHIBIT 10.1

S. Emerson Group Inc.

Sales Agency Agreement

This Sales Agency Agreement (this “Agreement”) executed on this 27th day of August, but effective as of August 1, 2010 (the “Effective Date”), is between S. Emerson Group, Inc., a Pennsylvania corporation located at 407 E. Lancaster Avenue, Wayne, PA 19087 (“Emerson”), and SCOLR Pharma, Inc., a Delaware corporation located at 19204 North Creek Pkwy #100, Bothell, WA (“SCOLR”).

WHEREAS, SCOLR and Emerson wish to provide for terms under which Emerson will act as a sales agent with respect to SCOLR’s line of extended release formulation nutritional products; and

WHEREAS, SCOLR and an affiliate of Emerson (the “Service Affiliate”) are simultaneously entering into an Account Services Agreement with respect to which the Service Affiliate will perform certain logistics and operational services for SCOLR in connection with its nutritional products business (the “Services Agreement”).

NOW THEREFORE; in consideration of the foregoing, and for other good and valuable consideration, the receipt of which is hereby acknowledged, SCOLR and Emerson, intending to be legally bound, agree as follows:

AGREEMENT

1.        Appointment; Services. SCOLR hereby appoints Emerson as its non-exclusive agent solely for purposes of performing sales management and marketing related services in the United States (the “Services”), with respect to the products designated on Schedule A hereto, as such schedule may be amended or supplemented from time to time (the “Products”). Emerson hereby accepts such appointment and agrees to perform the Services.

2.        Duties of Emerson.

(a)          Emerson shall diligently perform the Services.  Subject to Section 2(b), Emerson shall perform the Services in accordance with its own means, methods, schedules and guidelines and shall ensure that each person to whom any portion of the Services is delegated is trained and capable to perform the Services in a competent, professional and diligent manner.  The Services shall include, without limitation, the following:

(i)           Emerson shall initiate and maintain contacts with customers, retailers and other potential purchasers of the Products.

	
  

	
(ii)

	
Emerson shall monitor all sales and distribution of the Products, including all activities of the Service Affiliate, and promptly inform SCOLR with respect thereto.

	
  

	
(iii)

	
Emerson shall assist in the design, preparation and distribution of marketing materials for the Products and shall coordinate SCOLR’s presence at trade shows and industry events and meetings as Emerson and SCOLR shall determine to attend.

  

  

  

	
  

	
(iv)

	
Emerson shall assist SCOLR with the design of sales strategies, inventory management requirements and forecasting.

	
  

	
(v)

	
Emerson or the Service Affiliate shall provide accurate reporting of its sales activities in such form and with such frequency as SCOLR shall reasonably request, including without limitation the provision of daily sales reports.  Additionally, on or before the fifth day of each month, Emerson or the Service Affiliate shall promptly provide SCOLR with an activity report (an “Activity Report”) showing completed sales of the Products for the prior month, including the quantity sold by type, the price received and all related expenses, including Emerson’s sales commission.  Such activity report shall also include information concerning sales terms and account aging information.  Further, Emerson will provide SCOLR, on or before December 1, 2010, and on or before each December 1 thereafter during the term of this Agreement, a sales forecast setting forth in reasonable detail Emerson’s best estimate of projected Net Sales of the Products for the annual period beginning the following January 1 and ending December 31 of such year (the “Sales Forecast”).  Emerson shall provide SCOLR with updates to the Sales Forecast as frequently as reasonably requested by SCOLR and in accordance with the Standard Operating Procedures (as defined below), provided, that, notwithstanding any such update or revision, the Sales Forecast first delivered with respect to any annual period pursuant to this Section 2(a)(v) shall be operative for purposes of Section 5(b).

	
  

	
(vi)

	
Emerson shall sell the Products on commercially reasonable terms with the objective of maximizing the price received by SCOLR for the Products.  Emerson shall be permitted to accept and execute orders as agent on behalf of SCOLR only to the extent that such orders are consistent with the credit terms, promotional allowances, sales prices, delivery timeframes, inventory or manufacturing requirements and/or packaging requirements typically expected of the customers for the Products of the types contemplated to be solicited pursuant to this Agreement and the Standard Operating Procedures.

	
  

	
(vii)

	
Emerson shall keep SCOLR informed generally of all contacts and communications with and from Customers.  Emerson shall notify SCOLR promptly of any claims asserted by customers related to the quality of the Products, including issues related to packaging, or any other matter affecting the salability of the Products.

	
  

	
(viii)

	
Emerson shall be responsible for and shall oversee the Service Affiliate with respect to all accounting, marketing, collection and administrative functions contemplated by the Service Agreement.

(b)           As promptly as practicable after execution of this Agreement SCOLR and Emerson shall jointly develop written policies and procedures detailing the operational responsibilities of each party with respect to the Services and the activities and transactions contemplated by this Agreement (the “Standard Operating Procedures”).  The Standard Operating Procedures may be updated and modified from time to time by agreement of SCOLR and Emerson. Without limitation, the Standard Operating Procedures shall address reporting and notice requirements related to sales activities, account or product events, inventory and sales forecasting, account and product conflict management, trade promotional activities and sales allowances, product pricing, terms of sale and such other matters as the parties shall agree should be included in the Standard Operating Procedures.  The parties shall perform their respective duties and obligations in material compliance with the Standard Operating Procedures.

  

Page 2

  

3.      Compensation. In consideration of the appointment referred to above and performance by Emerson of the Services, SCOLR shall pay Emerson as follows:

(a)           Retainer.  SCOLR shall pay Emerson a monthly retainer of *, in advance, on or before the first day of each month until expiration or earlier termination of this Agreement (“Retainer”).

(b)           Commission.

 

	
  

	
(i)

	
SCOLR shall pay Emerson a percentage of Net Sales generated by Emerson in its performance of the Services (“Commissions”).  Commissions shall be payable based on the achievement of Net Sales thresholds in an annual period beginning each January 1 during the term of this Agreement in amounts as follows:

	
Annual Net Sales Threshold

	
Commission Percentage

 

	
$0-$*

	
*%

	
$*-$*

	
*%

	
Net Sales greater than $*

	
*%

	
  

	
(ii)

	
Commissions owing to Emerson shall accrue continuously based on recorded Net Sales, however Commissions shall become due and payable only at such time and only to the proportionate extent that collected proceeds associated with such Net Sales have been disbursed to SCOLR.  For example, if, based on a *% rate of Commission, Emerson has completed Net Sales equal to $* million, and of such amount $*has been collected, $*of which has been retained by Emerson or the Services Affiliate as a permitted reserve and $*of which has been disbursed to SCOLR, then Commissions equal to $* shall have been accrued based on Net Sales, of which $* shall be due and payable based on the proportional reserve and disbursement of the collected amounts.  Commissions due and payable shall be paid by SCOLR on or before the tenth (10th) day following the receipt by SCOLR of the disbursed amount.

	
  

	
(iii)

	
For purposes of this Agreement, the term “Net Sales” means the invoice price (i.e. gross sales price) of sales by Emerson of the Products, less cash discounts, any off-invoice allowances and returns, and products subject to recall.

	
  

	
(c)

	
Annual Bonus.

 

* Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

  

Page 3

  

	
  

	
(i)

	
Emerson shall be eligible for a bonus (the “Bonus”) based on Net Sales recorded during the twelve (12) month period beginning on January 1, 2011 and continuing through December 31, 2011 (the “Bonus Period”).  Emerson shall receive a Bonus equal to *% of any Net Sales recorded during the Bonus Period above $*, up to $*.  Thereafter, Emerson shall receive an additional amount equal to *% of any Net Sales recorded during the Bonus Period above $*.  Notwithstanding the foregoing, the Bonus payable under this paragraph shall in no event exceed $*.

	
  

	
(ii)

	
The annual bonus program described in this Section 3(c) shall be subject to negotiation and agreement of SCOLR and Emerson on or prior to December 1 of each year during the term of this Agreement, effective the following January 1.

	
  

	
(d)

	
Special Bonus.  Emerson shall be eligible to receive a one-time special bonus of $*, payable within thirty (30) days after the filing of SCOLR’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 if Net Sales during the period beginning on the Effective Date and ending on December 31, 2010 equal or exceed $*.

	
  

	
(e)

	
Warrant.  Promptly following execution of this Agreement SCOLR will issue to Emerson a warrant to purchase 100,000 shares of SCOLR’s common stock at an exercise price per share equal to the greater of (i) the market price of such common stock on the execution date of this Agreement or (ii) $0.50, and subject to the terms and conditions set forth in a warrant agreement between SCOLR and Emerson.

 

4.      Term. Except as provided otherwise herein, this Agreement shall remain in effect for an Initial Term of thirty-six (36) months from the Effective Date (the “Initial Term”) unless earlier terminated in accordance with this Agreement.  Thereafter, this Agreement, including any portion assigned to a sub-agent pursuant to Section 15, shall automatically extend for successive additional twelve (12) month terms (each a “Renewal Term”).

5.      Termination; Effect of Termination.

	
  

	
(a)

	
Termination, Notices.  This Agreement may be terminated by either party at any time for any or no reason by delivering a written notice (a “Termination Notice”) to the other party setting forth the effective date of the termination (the “Termination Date”), which must be a date at least twelve (12) months after delivery of the Termination Notice.  Notwithstanding the foregoing, either party may terminate this Agreement for Good Cause by providing a Termination Notice setting forth in reasonable detail the circumstances that constitute Good Cause for termination, and identifying the Termination Date, which must be a date at least ten (10) days from the date of the Termination Notice.

	
  

	
(b)

	
Termination for Good Cause. For purposes of this Agreement a party shall have “Good Cause” to terminate this Agreement if  (a) the other party or any affiliate or agent of the other party commits a felony, or a crime involving theft, embezzlement, material dishonesty or moral turpitude in relation to the matters contemplated hereby or by the Services Agreement; (b) the other party or any affiliate or agent of such party makes any material intentional misrepresentation or material prejudicial non-disclosure to the terminating party in connection with the performance of such party’s duties and obligations under this Agreement or the Services Agreement; (c) the other party or any affiliate or agent of the other party commits any material breach of this Agreement or the Services Agreement, or fails to perform its material duties under this Agreement or the Services Agreement, which failure or breach shall not be cured to the other party’s reasonable satisfaction within 30 days after notice thereof, or (d) the other party seeks protection under bankruptcy laws or any receivership, trustee, creditors’ arrangement or comparable proceeding, or any comparable proceeding is instituted (including an involuntary bankruptcy petition) and is not dismissed within forty-five (45) days.  Without limiting the generality of subsection (c) of this paragraph, and except as set forth in Section 17, Good Cause for termination of this Agreement by SCOLR shall exist if Emerson fails as of December 31 of any year during the term of this Agreement to achieve Net Sales equal to Eighty Percent (80%) of the projected Net Sales for the annual period ended on such date, as shown on the Sales Forecast delivered to SCOLR pursuant to Section 2(a)(v).

 

* Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.

  

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(c)

	
Effect of Expiration or Termination.  On and as of the Termination Date, and except as expressly provided in Section 7, (a) all rights and obligations of Emerson and SCOLR shall terminate and (b) any and all sums owed by one party to another shall become immediately due and payable.  For the avoidance of doubt, each of SCOLR and Emerson shall not be relieved of their duties and obligations under this Agreement until the Termination Date, notwithstanding the delivery of a Termination Notice.  All payments in respect of the Retainer, the Commission, any bonus and any other compensation due to Emerson pursuant to the terms of this Agreement for the period beginning on the date of a Termination Notice and ending on the Termination Date shall be calculated and paid in accordance with the provisions of Section 3 hereof, as may be modified or amended from time to time, based on Net Sales achieved, and any other relevant metrics, during such period.

6.      Finders Fee.  If any transaction of the type described below is initially proposed to SCOLR by Emerson during the term of this Agreement in a written notice containing explicit reference to this Section 6,  then, to the extent such transaction closes during the term of this Agreement or within 180 days after the expiration or earlier termination hereof, SCOLR shall pay to Emerson, as the case may be: (i) *% of the gross sales price obtained by SCOLR with respect to any divestiture by SCOLR of any material product, brand or formulation asset (other than in connection with a sale of substantially all of SCOLR’s assets), or (ii) *% of the Acquisition Value (the “Acquisition Fee”) in any transaction or series of related transactions involving SCOLR as either the acquired or acquiring company (an “Acquisition”).  Any such payments shall be payable on the closing of the contemplated transaction, and shall be subject to an aggregate maximum for all payments made or payable under this Section 6 of $*.

For purposes of calculating the Acquisition Fee, the “Acquisition Value” shall mean the total amount paid or payable, directly or indirectly, to, or for the benefit of, the acquired company (including any subsidiary thereof) and/or its security holders in cash and/or equity or debt securities or other equity interests.  Any Acquisition Fee otherwise payable to Emerson which is attributable to contingent consideration held pursuant to an escrow account established before or in connection with the consummation of an Acquisition, or which is subject to an “earn-out” or other similar deferral feature shall become payable to Emerson only when received by the target company.  If any portion of the consideration paid or payable to, or for the benefit of, the target company and/or its security holders is paid in the form of securities or other equity interests, SCOLR may elect, in its sole discretion, to deliver the Acquisition Fee to Emerson in the form of securities or interests of like kind to those received or delivered by SCOLR, as the case may be, in the Acquisition.   Notwithstanding the foregoing, if SCOLR determines to deliver all or any portion of the Acquisition Fee in cash, the value of such securities or interests shall be determined in such manner as is set forth in the definitive agreement related to the acquisition, or if such definitive agreement is silent thereon, by the average of the last sale prices for such securities on the five trading days ending five days prior to the consummation of the Acquisition. If such securities or interests do not have an existing public trading market, the value thereof shall be the fair market value thereof on the day prior to the consummation of the Transaction as determined in good faith by Emerson and SCOLR.

 

 

* Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.

  

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7.      Survival of Rights and Obligations.  Sections 8, 9, 11, 12, 13, 14, 15, 18, 19, 20 and 21 shall survive expiration or termination of this Agreement and shall remain effective in accordance with their terms.

8.      Expenses. Emerson shall be solely responsible to pay for all costs and expenses associated with its normal operation and the performance of the Services, except that SCOLR shall reimburse all reasonable travel expenses for representatives of Emerson to be present in any location at the specific request of SCOLR (e.g. attendance by Emerson at a meeting of SCOLR’s Board of Directors).  For the avoidance of doubt, all travel and other expenses incurred by Emerson in the course of performing the Services shall be the sole responsibility of Emerson, including without limitation all travel and other expenses associated with customer calls, corporate gifts and hospitality, trade shows and similar events, regardless of whether such costs or expenses are for the sole direct benefit of SCOLR.

9.      Indemnification. SCOLR shall indemnify, defend, release and hold Emerson and its agents and employees harmless from and against any and all claims, suits, damages, liabilities, judgments, costs and expenses (including but not limited to legal fees, settlements and judgments) (collectively “Damages”) arising out of or related to any bodily injury, death, damage to property or other damage attributable, or alleged to be attributable to, any of SCOLR’s products, including but not limited to any products liability claims attributable, or alleged to be attributable to, any of SCOLR’s products, except to the extent that such Damages are the result of negligence, contributory or otherwise, of Emerson or its assignee in the performance or delegation of the Services.  Emerson shall indemnify, defend, release and hold SCOLR and its agents and employees harmless from and against any obligations or Damages arising out of or related to any action by Emerson which constitutes a breach of this Agreement, except to the extent that such obligations or Damages are the result of negligence, contributory or otherwise, of SCOLR.

10.       Conflicts, Obligations; No Exclusivity.

	
  

	
(a)

	
Emerson Group maintains a policy in regard to representation of multiple brands within categories. Subject to the Standard Operating Procedures, Emerson reserves the right to represent all brands, products, companies or supply services.  Emerson will at all times deal honestly, fairly and equitably with customers, and will not engage in any deceptive, misleading or unethical trade practice advertising, or any other conduct or activity which tends to mislead, deceive or defraud the public, or to adversely affect the good name or reputation of SCOLR, its affiliates, or the Products.

 

 

  

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(b)

	
Emerson is being retained by SCOLR on a non-exclusive basis, and SCOLR reserves the right to engage other sales agents, brokers, distributors and independent representatives to sell its products.

11.       Confidentiality.  Emerson agrees to keep confidential during the Initial and any Renewal Term of this Agreement, and for thirty-six (36) months after the expiration or earlier termination of this Agreement, all information (the “Information”) provided to it by SCOLR that is (i) material and non-public or (ii) confidential and proprietary.  Notwithstanding any provision herein to the contrary, Emerson may disclose nonpublic information to its affiliates, agents and advisors whenever Emerson determines that such disclosure is necessary to provide the services contemplated hereunder or for internal control or compliance purposes.  For purposes of this Section 11, the Information shall include, without limitation, non-public information, whether disclosed orally or in writing by SCOLR, or generated internally by Emerson, concerning: (i) sales, revenue, orders, inventory, collections and similar financial information related to sales by SCOLR of nutritional products; (ii) plans and forecasts, whether relating specifically to SCOLR’s nutritional business or to SCOLR’s other businesses; (iii) the existence of and information concerning actual or potential Acquisitions or other transactions contemplated by this Agreement; (iv) information regarding SCOLR’s proprietary drug-delivery technology to the extent identified by SCOLR orally or in writing as confidential, or if no such designation is made, to the extent that the confidential nature of such information is reasonably apparent from the circumstances of disclosure.

12.        Securities Laws.  Emerson hereby acknowledges that it is aware, and that it will advise its affiliates, agents and assignees who are informed of the matters that are the subject of this letter agreement, that the United States securities laws prohibit any person who has received from the issuer of such securities material, nonpublic information from purchasing or selling securities of such issuer or from communicating such information to any other person when it is reasonably foreseeable that such other person is likely to purchase or sell such securities in reliance upon such information.  Further, Emerson hereby acknowledges and consents to any public or other disclosure concerning this Agreement made by SCOLR pursuant to regulatory or legal obligations, including without limitation disclosure by SCOLR of the material terms of this Agreement, and the filing by SCOLR of a copy of this Agreement pursuant to applicable requirements of the U.S. Securities and Exchange Commission or any securities exchange on SCOLR’s securities are listed.

13.        Attorneys’ Fees.  If any action or suit in law or equity or any arbitration proceeding is initiated to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover its costs and expenses incurred in connection with such action or suit, including without limitation, reasonable attorneys’ fees incurred at all levels and proceedings, including settlement and appeal, in addition to any other relief to which it may be entitled.

14.       Entire Agreement.  This Agreement contains the entire agreement of the parties and there are no oral or written representations, understandings or agreements between the parties respecting the subject matter of this Agreement that are not fully expressed herein.

15.       Assignment.  Emerson may assign its rights and delegate its duties under this Agreement with the consent of SCOLR, which consent shall not be unreasonably withheld.  SCOLR may assign its rights and delegate its duties under this Agreement to any acquirer of substantially all of SCOLR’s business assets, or substantially all the assets of its nutritional products business upon 30 days prior written notice to Emerson.

 

  

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16.       Notices.  All notices permitted or required to be given under this Agreement shall be in writing and shall be deemed duly given upon personal delivery by mail or courier, evidenced by receipt; upon transmittal by telephone facsimile (fax) to a fax number specified in writing by the party to be notified; or upon transmittal by electronic mail (e-mail) to the party at the email address specified in writing by the party to be notified.  All notices shall be delivered or sent to the other party at the address(es) set forth in the introductory paragraph of this Agreement or to such other addresses, fax numbers or e-mail addresses as a party may hereafter specify from time to time by notice to the other.

17.       Force Majeure.  Neither party will be considered in default in the performance of any obligation hereunder, and Good Cause for termination shall not exist, to the extent that the performance of an obligation under this Agreement is prevented or delayed by fire, flood, explosion, strike, war, insurrection, embargo, government requirement, civil or military authority, act of terrorism, act of God, or any other event, occurrence of condition which is not caused, in whole or in part, by that party, and which is beyond the reasonable control of that party.

18.      Independent Contractor; Limited Agency.  Emerson is an independent contractor.  The parties do not intend to create, and this Agreement shall not be interpreted to create, any other relationship between the parties.  This Agreement shall not be construed to create a partnership or joint venture between the parties.  Nothing in this Agreement shall be construed, and Emerson shall not indicate, or use words or actions which would tend to indicate that its appointment as SCOLR’s agent pursuant to the terms hereof extends beyond the express scope of the agency granted by SCOLR pursuant to this Agreement.

19.       Inspection of Books and Records.  Emerson or the Service Affiliate shall keep and preserve at its principal place of business accurate and complete copies of all books and records relating to the subject of this Agreement and the Sales Agreement during the term of such agreements, and for a period of two (2) years thereafter.  During such period SCOLR shall be permitted without notice, at its expense, to inspect, copy and take extracts from such books and records for any purpose.  In furtherance and not in limitation of the foregoing, such records shall include, at a minimum, records of: (i) all sales slips and invoices, (ii) all sales expenses include freight, logistics, remittance and other information and records concerning the business, (iii) all collections and account information and (iv) banks statements showing all inflows and outflows of cash in connection with the transactions and procedures contemplated by the terms of this Agreement.  At the conclusion of such inspection Emerson shall pay to SCOLR any amounts shown to be due to SCOLR as a result of an overpayment by SCOLR or underpayment by Emerson in connection with the Sales Agreement or the Services Agreement.  Further, to the extent that the inspection reveals an amount owing to SCOLR that is greater than $25,000, then Emerson shall reimburse SCOLR for the costs and expenses associated with its inspection of the Books and Records and any action to collect such amounts, including without limitation, attorney’s fees, costs and expenses.

 

  

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20.  Arbitration; Governing Law.  Notwithstanding anything to the contrary contained in this Agreement, any controversy or claim arising out of or in connection with this Agreement, its construction, interpretation, effect, performance, non-performance, termination, or consequences thereof, or any transaction contemplated hereby, however characterized as a matter of law (whether in contract, tort or otherwise), including, without limitation, all claims under any federal, state, or local statute, ordinance, regulation or other law, will be settled by arbitration in King County, Washington, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  If it becomes necessary to file suit to compel arbitration hereunder and arbitration is subsequently ordered by the court, the party instituting such suit will be entitled to recover its actual costs and expenses, including, without limitation, attorney's fees, incurred in such action.  This Agreement will be governed by and construed in accordance with the laws of the State of Washington, without regard to its conflicts of law principles, and such laws will be applied and controlling in any arbitration conducted pursuant to this Section 20.

21.        Schedules.  Schedules referred to in this Agreement are incorporated into and made a part of this Agreement to the same extent as if set forth in full in the body of this Agreement.  In the event of a conflict between any such Schedule and the terms of this Agreement, the terms of this Agreement shall prevail.

[Remainder of this Page is Intentionally Blank]

 

 

 

 

 

 

 

 

 

 

 

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Sales Agency Agreement on the day and year first set forth above, effective as of August 1, 2010.

SCOLR PHARMA, INC.

By: /s/ Richard M. Levy                                                      

Name:  Richard M. Levy

Title:           Chief Financial Officer

S. EMERSON GROUP, INC.

By: /s/ Richard A. Wellinger                                                                

Name:  Richard A. Wellinger

Title:           President

  

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Schedule A

Products

SCOLR Nutritional formulations, available or in development: (current list as of August 17, 2010)

	
  

	
1.

	
**

	
  

	
2.

	
*

	
  

	
3.

	
*

	
  

	
4.

	
*

	
  

	
5.

	
*

	
  

	
6.

	
*

	
  

	
7.

	
*

	
  

	
8.

	
*

	
  

	
9.

	
*

	
  

	
10.

	
*

	
  

	
11.

	
*

	
  

	
12.

	
*

	
  

	
13.

	
*

	
  

	
14.

	
*

	
  

	
15.

	
*

	
  

	
16.

	
*

	
  

	
17.

	
*

	
  

	
18.

	
*

	
  

	
19.

	
*

	
  

	
20.

	
*

	
  

	
21.

	
*

	
  

	
22.

	
*

	
  

	
23.

	
*

	
  

	
24.

	
*

SCOLR shall have the right in its sole discretion to change or discontinue any Product, and to otherwise add or subtract Products from the above list upon written notice to Emerson.

 

 

* Certain information on this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested with respect to the omitted portions.

 

 

Page 11

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