Document:

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                                                                EXHIBIT 10.3
                                                            Annual Option Grants
                                                                to Directors

                               SCOLR PHARMA, INC.
                        OUTSIDE DIRECTOR OPTION AGREEMENT

      SCOLR Pharma, Inc. has granted to the individual (the "OPTIONEE") named in
the Notice of Grant of Outside Director Option (the "NOTICE") to which this
Outside Director Option Agreement (the "OPTION AGREEMENT") is attached an option
(the "OPTION") to purchase certain shares of Stock upon the terms and conditions
set forth in the Notice and this Option Agreement. The Option has been granted
pursuant to and shall in all respects be subject to the terms and conditions of
the SCOLR Pharma, Inc. 2004 Equity Incentive Plan (the "PLAN"), as amended to
the Date of Option Grant, the provisions of which are incorporated herein by
reference. By signing the Notice, the Optionee: (a) represents that the Optionee
has received copies of, and has read and is familiar with the terms and
conditions of the Notice and this Option Agreement, (b) accepts the Option
subject to all of the terms and conditions of the Notice, the Plan and this
Option Agreement, (c) agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under the
Notice, the Plan or this Option Agreement.

      1.    DEFINITIONS AND CONSTRUCTION.

            1.1   DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Notice or the Plan.

            1.2   CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.

      2.    TAX STATUS OF OPTION.

            This Option is intended to be a Nonstatutory Stock Option and shall
not be treated as an Incentive Stock Option within the meaning of Section 422(b)
of the Code.

      3.    ADMINISTRATION.

            All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option. Any Officer shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the Officer has apparent authority
with respect to such matter, right, obligation, or election.

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      4.    EXERCISE OF THE OPTION.

            4.1   RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Date of Option Grant and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the number of Number of Option Shares less the number of shares
previously acquired upon exercise of the Option.

            4.2   METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.

            4.3   PAYMENT OF EXERCISE PRICE.

                  (a)   FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value not less than the aggregate Exercise Price, (iii) by means of a Cashless
Exercise, as defined in Section 4.3(b), or (iv) by any combination of the
foregoing.

                  (b)   LIMITATIONS ON FORMS OF CONSIDERATION.

                        (i)   TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. The Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock unless such shares either have been owned by the Optionee for more than
six (6) months (and not used for another option exercise by attestation during
such period). The Company reserves, at any and all times, the right, in the
Company's sole and absolute discretion, to refuse to allow the exercise by
tender to the Company, or attestation to the ownership, of shares of Stock.

                        (ii)  CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
delivery of a properly executed notice together with irrevocable instructions to
a broker in a form

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acceptable to the Company providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure
approved by the Company (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System). The Company reserves,
at any and all times, the right, in the Company"s sole and absolute discretion,
to decline to approve or terminate any such program or procedure. Cashless
exercise shall not be permitted if the exercise by means of a Cashless Exercise
would be a violation of any law, including the Sarbanes-Oxley Act of 2002, which
prohibits public companies from making personal loans to any director or
executive officer.

            4.4   TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Company shall have no obligation to deliver shares of Stock until the tax
withholding obligations of the Participating Company Group have been satisfied
by the Optionee.

            4.5   CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.

            4.6   RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN

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THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

            4.7   FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.

      5.    NONTRANSFERABILITY OF THE OPTION.

            The Option may be exercised during the lifetime of the Optionee only
by the Optionee or the Optionee's guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of
descent and distribution. Following the death of the Optionee, the Option, to
the extent provided in Section 7, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.

      6.    TERMINATION OF THE OPTION.

            The Option shall terminate and may no longer be exercised after the
first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.

      7.    EFFECT OF TERMINATION OF SERVICE.

            7.1   OPTION EXERCISABILITY. If the Optionee's Service with the
Participating Company Group terminates for any reason, the Option may be
exercised by the Optionee (or the Optionee's legal representative, designated
beneficiary or other person who acquired the right to exercise the Option by
reason of the Optionee's death) at any time prior to the expiration of two (2)
years after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date.

            7.2   EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the time period set forth in
Section 7.1 is prevented by the provisions of Section 4.6, the Option shall
remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

            7.3   EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the time period set forth in
Section 7.1 of shares acquired upon the

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exercise of the Option would subject the Optionee to suit under Section 16(b) of
the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Optionee would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Optionee's termination of Service,
or (iii) the Option Expiration Date.

      8.    CHANGE IN CONTROL.

            8.1   DEFINITIONS.

                  (a)   An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.

                  (b)   A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 8.1(a)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the "TRANSFEREE"), as the case
may be. For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting securities of one or more corporations or other business entities which
own the Company or the Transferee, as the case may be, either directly or
through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of
the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.

            8.2   EFFECT OF CHANGE IN CONTROL ON OPTION. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the
"ACQUIRING CORPORATION"), may, without the consent of the Optionee, either
assume the Company's rights and obligations under the Option or substitute for
the Option a substantially equivalent option (as determined by the Board) for
the Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Change in Control to the extent that
the Option is neither assumed or substituted for by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control. Notwithstanding the foregoing, shares acquired upon exercise of the
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise
provided

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herein. Furthermore, notwithstanding the foregoing, if the corporation the stock
of which is subject to the Option immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving
or continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its discretion. The Board may,
in its discretion, determine that upon a Change in Control the Option shall be
canceled in exchange for payment with respect to each Vested Share subject to
such Option immediately prior to its cancellation in (a) cash, (b) stock of the
Company or the Acquiring Corporation or (c) other property which, in any such
case, shall be in an amount having a Fair Market Value equal to the excess of
the Fair Market Value of the consideration to be paid per share of Stock in the
Change in Control over the Exercise Price per share under the Option (subject to
any required tax withholding). Such payment shall be made as soon as practicable
following the Change in Control.

      9.    ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

            In the event of any stock dividend, stock split, reverse stock
split, recapitalization, merger, combination, reclassification, or similar
change in the capital structure of the Company, appropriate adjustments shall be
made in the number, Exercise Price and class of shares of stock subject to the
Option. If a majority of the shares which are of the same class as the shares
that are subject to the Option are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 9 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

      10.   RIGHTS AS A STOCKHOLDER, EMPLOYEE OR DIRECTOR.

            The Optionee shall have no rights as a stockholder with respect to
any shares covered by the Option until the date of the issuance of a certificate
for the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 9. Nothing in this Option Agreement
shall confer upon the Optionee any right to continue in the Service of a
Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee's Service as an Employee
or Director, as the case may be, at any time.

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      11.   LEGENDS.

            The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this Section.

      12.   MISCELLANEOUS PROVISIONS.

            12.1  BINDING EFFECT. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

            12.2  TERMINATION OR AMENDMENT. The Board may terminate or amend the
Plan or the Option at any time; provided, however, that except as provided in
Section 8.2 in connection with a Change in Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No
amendment or addition to this Option Agreement shall be effective unless in
writing.

            12.3  NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt
of such notice) upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party's signature
on the Notice or at such other address as such party may designate in writing
from time to time to the other party.

            12.4  INTEGRATED AGREEMENT. The Notice, and this Option Agreement
and the Plan constitute the entire understanding and agreement of the Optionee
and the Participating Company Group with respect to the subject matter contained
herein or therein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those
as set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of the Notice and the Option Agreement shall
survive any exercise of the Option and shall remain in full force and effect.

            12.5  APPLICABLE LAW. This Option Agreement shall be governed by the
laws of the State of Washington as such laws are applied to agreements between
Washington residents entered into and to be performed entirely within the State
of Washington.

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            12.6  COUNTERPARTS. The Notice may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

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                                                   Optionee: ___________________

                                                          Date: ________________

                             OUTSIDE DIRECTOR OPTION
                                 EXERCISE NOTICE

SCOLR Pharma, Inc.
Attention: Chief Financial Officer
3625 132nd Avenue NE
Suite 300
Bellevue, WA 98006

Ladies and Gentlemen:

      1.    OPTION. I was granted an option (the "OPTION") to purchase shares of
the common stock (the "SHARES") of SCOLR Pharma, Inc. (the "COMPANY") pursuant
to the Company's 2004 Equity Incentive Plan (the "PLAN"), my Notice of Grant of
Outside Director Option (the "NOTICE") and my Outside Director Option Agreement
(the "OPTION AGREEMENT") as follows:

            Grant Number:                                          _____________

            Date of Option Grant:                                  _____________

            Number of Option Shares:                               _____________

            Exercise Price per Share:                              $ ___________

      2.    EXERCISE OF OPTION. I hereby elect to exercise the Option to
purchase the following number of Shares in accordance with the Notice and the
Option Agreement:

            Total Shares Purchased:                                _____________

            Total Exercise Price (Total Shares X Price per Share)  $ ___________

      3.    PAYMENTS. I enclose payment in full of the total exercise price for
the Shares in the following form(s), as authorized by my Option Agreement:

            (TM) Cash:                                             $ ___________

            (TM) Check:                                            $ ___________

            (TM) Tender of Company Stock:            Contact Plan Administrator

            (TM) Cashless exercise (same-day sale):  Contact Plan Administrator

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      4.    TAX WITHHOLDING. I authorize payroll withholding and otherwise will
make adequate provision for the federal, state, local and foreign tax
withholding obligations of the Company, if any, in connection with the Option.

      5.    OPTIONEE INFORMATION.

            My address is: _____________________________________________________

                           _____________________________________________________

            My Social Security Number is: ______________________________________

      7.    BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon my heirs, executors, administrators, successors and assigns.

      I understand that I am purchasing the Shares pursuant to the terms of the
Plan, the Notice and my Option Agreement, copies of which I have received and
carefully read and understand.

                                                   Very truly yours,

                                                   _____________________________
                                                   (Signature)

Receipt of the above is hereby acknowledged.

SCOLR Pharma, Inc.

By: __________________________

Title: _______________________

Dated: _______________________

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                               SCOLR PHARMA, INC.

                   NOTICE OF GRANT OF OUTSIDE DIRECTOR OPTION

      ________________________ (the "OPTIONEE") has been granted an option (the
"OPTION") to purchase certain shares of Stock of SCOLR Pharma, Inc. pursuant to
the SCOLR PHARMA, INC. 2004 EQUITY INCENTIVE PLAN (the "PLAN"), as follows:

      GRANT NUMBER:                 __________________

      DATE OF OPTION GRANT:         __________________

      NUMBER OF OPTION SHARES:      __________________

      EXERCISE PRICE:               $ _______________ per share

      OPTION EXPIRATION DATE:       The date five (5) years after the Date of
                                    Option Grant.

      TAX STATUS OF OPTION:         Nonstatutory Stock Option

      VESTING:                      100% of the Number of Option Shares shall be
                                    vested on and after the Date of Option
                                    Grant.

      By their signatures below, the Company and the Optionee agree that the
Option is governed by this Notice and by the provisions of the Plan and the
Outside Director Option Agreement attached to and made a part of this document.
The Optionee acknowledges receipt of a copy of the Outside Director Option
Agreement, represents that the Optionee has read and is familiar with the Plan
and the provisions of the Outside Director Stock Option Agreement, and hereby
accepts the Option subject to all of its terms and conditions.

SCOLR Pharma, Inc.                                OPTIONEE

By: ___________________________                   _____________________________
                                                  Signature

Its: __________________________                   _____________________________
                                                  Date

Address: 3625 132nd Avenue SE                     ______________________________
         Suite 300                                Address
         Bellevue, WA 98006                       _____________________________

ATTACHMENTS: Outside Director Option Agreement
             Outside Director Option Exercise Notice

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                                                                 EXHIBIT 10.4
                                                               STOCK BASED FEE
                                                             AWARD FOR DIRECTORS

                               SCOLR PHARMA, INC.
                      NONEMPLOYEE DIRECTOR OPTION AGREEMENT

      SCOLR Pharma, Inc. has granted to the individual (the "OPTIONEE") named in
the Notice of Grant of Nonemployee Director Option (the "NOTICE") to which this
Nonemployee Director Option Agreement (the "OPTION AGREEMENT") is attached an
option (the "OPTION") to purchase certain shares of Stock upon the terms and
conditions set forth in the Notice and this Option Agreement. The Option has
been granted pursuant to and shall in all respects be subject to the terms and
conditions of the SCOLR Pharma, Inc. 2004 Equity Incentive Plan (the "PLAN"), as
amended to the Date of Option Grant, the provisions of which are incorporated
herein by reference. By signing the Notice, the Optionee: (a) represents that
the Optionee has received copies of, and has read and is familiar with the terms
and conditions of the Notice and this Option Agreement, (b) accepts the Option
subject to all of the terms and conditions of the Notice, the Plan and this
Option Agreement, (c) agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under the
Notice, the Plan or this Option Agreement.

      1.    DEFINITIONS AND CONSTRUCTION.

            1.1   DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Notice or the Plan.

            1.2   CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.

      2.    TAX STATUS OF OPTION.

            This Option is intended to be a Nonstatutory Stock Option and shall
not be treated as an Incentive Stock Option within the meaning of Section 422(b)
of the Code.

      3.    ADMINISTRATION.

            All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option. Any Officer shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the Officer has apparent authority
with respect to such matter, right, obligation, or election.

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      4.    EXERCISE OF THE OPTION.

            4.1   RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Date of Option Grant and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the number of Number of Option Shares less the number of shares
previously acquired upon exercise of the Option.

            4.2   METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.

            4.3   PAYMENT OF EXERCISE PRICE.

                  (a)   FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value not less than the aggregate Exercise Price, (iii) by means of a Cashless
Exercise, as defined in Section 4.3(b), or (iv) by any combination of the
foregoing.

                  (b)   LIMITATIONS ON FORMS OF CONSIDERATION.

                        (i)   TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. The Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock unless such shares either have been owned by the Optionee for more than
six (6) months (and not used for another option exercise by attestation during
such period). The Company reserves, at any and all times, the right, in the
Company's sole and absolute discretion, to refuse to allow the exercise by
tender to the Company, or attestation to the ownership, of shares of Stock.

                        (ii)  CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
delivery of a properly executed notice together with irrevocable instructions to
a broker in a form

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acceptable to the Company providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares of Stock
acquired upon the exercise of the Option pursuant to a program or procedure
approved by the Company (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System). The Company reserves,
at any and all times, the right, in the Company's sole and absolute discretion,
to decline to approve or terminate any such program or procedure. Cashless
exercise shall not be permitted if the exercise by means of a Cashless Exercise
would be a violation of any law, including the Sarbanes-Oxley Act of 2002, which
prohibits public companies from making personal loans to any director or
executive officer.

            4.4   TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Company shall have no obligation to deliver shares of Stock until the tax
withholding obligations of the Participating Company Group have been satisfied
by the Optionee.

            4.5   CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.

            4.6   RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN

                                       3
<PAGE>

THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

            4.7   FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.

      5.    NONTRANSFERABILITY OF THE OPTION.

            The Option may be exercised during the lifetime of the Optionee only
by the Optionee or the Optionee's guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of
descent and distribution. Following the death of the Optionee, the Option, to
the extent provided in Section 7, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.

      6.    TERMINATION OF THE OPTION.

            The Option shall terminate and may no longer be exercised after the
first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.

      7.    EFFECT OF TERMINATION OF SERVICE.

            7.1   OPTION EXERCISABILITY. If the Optionee's Service with the
Participating Company Group terminates for any reason, the Option may be
exercised by the Optionee (or the Optionee's legal representative, designated
beneficiary or other person who acquired the right to exercise the Option by
reason of the Optionee's death) at any time prior to the expiration of
thirty-six (36) months years after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.

            7.2   EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the time period set forth in
Section 7.1 is prevented by the provisions of Section 4.6, the Option shall
remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

            7.3   EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the time period set forth in
Section 7.1 of shares acquired upon the

                                       4
<PAGE>

exercise of the Option would subject the Optionee to suit under Section 16(b) of
the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Optionee would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Optionee's termination of Service,
or (iii) the Option Expiration Date.

      8.    CHANGE IN CONTROL.

            8.1   DEFINITIONS.

                  (a)   An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.

                  (b)   A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 8.1(a)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the "TRANSFEREE"), as the case
may be. For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting securities of one or more corporations or other business entities which
own the Company or the Transferee, as the case may be, either directly or
through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of
the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.

            8.2   EFFECT OF CHANGE IN CONTROL ON OPTION. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or other business entity or parent thereof, as the case may be (the
"ACQUIRING CORPORATION"), may, without the consent of the Optionee, either
assume the Company's rights and obligations under the Option or substitute for
the Option a substantially equivalent option (as determined by the Board) for
the Acquiring Corporation's stock. The Option shall terminate and cease to be
outstanding effective as of the date of the Change in Control to the extent that
the Option is neither assumed or substituted for by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control. Notwithstanding the foregoing, shares acquired upon exercise of the
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise
provided

                                       5
<PAGE>

herein. Furthermore, notwithstanding the foregoing, if the corporation the stock
of which is subject to the Option immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving
or continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the Option shall not
terminate unless the Board otherwise provides in its discretion. The Board may,
in its discretion, determine that upon a Change in Control the Option shall be
canceled in exchange for payment with respect to each Vested Share subject to
such Option immediately prior to its cancellation in (a) cash, (b) stock of the
Company or the Acquiring Corporation or (c) other property which, in any such
case, shall be in an amount having a Fair Market Value equal to the excess of
the Fair Market Value of the consideration to be paid per share of Stock in the
Change in Control over the Exercise Price per share under the Option (subject to
any required tax withholding). Such payment shall be made as soon as practicable
following the Change in Control.

      9.    ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

            In the event of any stock dividend, stock split, reverse stock
split, recapitalization, merger, combination, reclassification, or similar
change in the capital structure of the Company, appropriate adjustments shall be
made in the number, Exercise Price and class of shares of stock subject to the
Option. If a majority of the shares which are of the same class as the shares
that are subject to the Option are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "NEW SHARES"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 9 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

      10.   RIGHTS AS A STOCKHOLDER, EMPLOYEE OR DIRECTOR.

            The Optionee shall have no rights as a stockholder with respect to
any shares covered by the Option until the date of the issuance of a certificate
for the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 9. Nothing in this Option Agreement
shall confer upon the Optionee any right to continue in the Service of a
Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee's Service as an Employee
or Director, as the case may be, at any time.

                                       6
<PAGE>

      11.   LEGENDS.

            The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this Section.

      12.   MISCELLANEOUS PROVISIONS.

            12.1  BINDING EFFECT. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

            12.2  TERMINATION OR AMENDMENT. The Board may terminate or amend the
Plan or the Option at any time; provided, however, that except as provided in
Section 8.2 in connection with a Change in Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No
amendment or addition to this Option Agreement shall be effective unless in
writing.

            12.3  NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt
of such notice) upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party's signature
on the Notice or at such other address as such party may designate in writing
from time to time to the other party.

            12.4  INTEGRATED AGREEMENT. The Notice, and this Option Agreement
and the Plan constitute the entire understanding and agreement of the Optionee
and the Participating Company Group with respect to the subject matter contained
herein or therein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those
as set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of the Notice and the Option Agreement shall
survive any exercise of the Option and shall remain in full force and effect.

            12.5  APPLICABLE LAW. This Option Agreement shall be governed by the
laws of the State of Washington as such laws are applied to agreements between
Washington residents entered into and to be performed entirely within the State
of Washington.

                                       7
<PAGE>

            12.6  COUNTERPARTS. The Notice may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                       8
<PAGE>

                                                  Optionee: ____________________

                                                          Date: ________________

                           NONEMPLOYEE DIRECTOR OPTION
                                 EXERCISE NOTICE

SCOLR Pharma, Inc.
Attention: Chief Financial Officer
____________________________
____________________________

Ladies and Gentlemen:

      1.    OPTION. I was granted an option (the "OPTION") to purchase shares of
the common stock (the "SHARES") of SCOLR Pharma, Inc. (the "COMPANY") pursuant
to the Company's 2004 Equity Incentive Plan (the "PLAN"), my Notice of Grant of
Nonemployee Director Option (the "NOTICE") and my Nonemployee Director Option
Agreement (the "OPTION AGREEMENT") as follows:

            Grant Number:                                     __________________

            Date of Option Grant:                             __________________

            Number of Option Shares:                          __________________

            Exercise Price per Share:                         $ ________________

      2.    EXERCISE OF OPTION. I hereby elect to exercise the Option to
purchase the following number of Shares in accordance with the Notice and the
Option Agreement:

            Total Shares Purchased:                                  ___________

            Total Exercise Price (Total Shares  X  Price per Share)  $__________

      3.    PAYMENTS. I enclose payment in full of the total exercise price for
the Shares in the following form(s), as authorized by my Option Agreement:

            (TM) Cash:                               $ __________________

            (TM) Check:                              $ __________________

            (TM) Tender of Company Stock:            Contact Plan Administrator

            (TM) Cashless exercise (same-day sale):  Contact Plan Administrator

                                       1
<PAGE>

      4.    TAX WITHHOLDING. I authorize payroll withholding and otherwise will
make adequate provision for the federal, state, local and foreign tax
withholding obligations of the Company, if any, in connection with the Option.

      5.    OPTIONEE INFORMATION.

            My address is: _____________________________________________________

                           _____________________________________________________

            My Social Security Number is: ______________________________________

      7.    BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon my heirs, executors, administrators, successors and assigns.

      I understand that I am purchasing the Shares pursuant to the terms of the
Plan, the Notice and my Option Agreement, copies of which I have received and
carefully read and understand.

                                                  Very truly yours,

                                                  ______________________________
                                                  (Signature)

Receipt of the above is hereby acknowledged.

SCOLR Pharma, Inc.

By: __________________________

Title: _______________________

Dated: _______________________

                                       2
<PAGE>

                               SCOLR PHARMA, INC.

                 NOTICE OF GRANT OF NONEMPLOYEE DIRECTOR OPTION

      ________________________ (the "OPTIONEE") has been granted an option (the
"OPTION") to purchase certain shares of Stock of SCOLR, Inc. pursuant to the
SCOLR PHARMA, INC. 2004 EQUITY INCENTIVE PLAN (the "PLAN"), as follows:

      GRANT NUMBER:                  ___________________

      DATE OF OPTION GRANT:          ___________________

      NUMBER OF OPTION SHARES:       ___________________

      EXERCISE PRICE:                $ ________________ per share (50% of Fair
                                     Market Value on Date of Option Grant)

      OPTION EXPIRATION DATE:        The date ten (10) years after the Date of
                                     Option Grant.

      TAX STATUS OF OPTION:          Nonstatutory Stock Option

      VESTING:                       100% of the Number of Option Shares shall
                                     be vested on and after the Date of Option
                                     Grant.

      By their signatures below, the Company and the Optionee agree that the
Option is governed by this Notice and by the provisions of the Plan and the
Nonemployee Director Option Agreement attached to and made a part of this
document. The Optionee acknowledges receipt of a copy of the Nonemployee
Director Option Agreement, represents that the Optionee has read and is familiar
with the Plan and the provisions of the Nonemployee Director Stock Option
Agreement, and hereby accepts the Option subject to all of its terms and
conditions.

SCOLR, INC.                                     OPTIONEE

By: _____________________________               ________________________________
                                                Signature

Its: ____________________________               ________________________________
                                                Date

Address: 3625 132nd Avenue SE                   ________________________________
         Suite 300                              Address
         Bellevue, WA  98006                    ________________________________

ATTACHMENTS: Nonemployee Director Option Agreement
             Nonemployee Director Option Exercise Notice

                                       3

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