exv10w2





Exhibit
10.2



SEVERANCE AGREEMENT




     SEVERANCE AGREEMENT (this “Agreement”), dated as of October 19, 2009 (the “Effective Date”),
between Questcor Pharmaceuticals, Inc., a California corporation (the “Company”), and David Young
(“Executive”).



W I T N E S S E T H:




     WHEREAS, Executive is being employed by the Company pursuant to an Offer Letter dated October
15, 2009, and the Company and Executive desire to enter into this Agreement to set forth the terms
on which Executive may be entitled to severance benefits from the Company. The following terms and
conditions supersede anything of the same subject matter provided for in the Offer Letter or any
other agreement entered into prior to the Effective Date.



     NOW, THEREFORE, in consideration of the mutual covenants herein contained, the Company and
Executive hereby agree as follows:



     1. At-Will Nature of Employment.



          (a) Termination of Employment. The Company may terminate Executive’s employment at
any time with or without Cause effective immediately upon delivery of a Notice of Termination to
Executive. Subject to the immediately following sentence and for purposes of this Agreement only,
“Cause” shall mean with respect to Executive, any of the following: (i) Executive’s material
neglect of assigned duties with the Company or Executive’s failure or refusal to perform assigned
duties with the Company, which continues uncured for thirty (30) days following receipt of written
notice of such deficiency from the Board of Directors of the Company (“Board”) or the Chief
Executive Officer of the Company, specifying the scope and nature of the deficiency; (ii)
Executive’s commission of a felony or fraud; or Executive’s misappropriation of property belonging
to the Company or its affiliates; (iii) Executive’s commission of a misdemeanor or act of
dishonesty, which causes material harm to the Company; (iv) Executive’s engaging in any act of
moral turpitude which causes material harm to the Company; (v) Executive’s breach of the Company’s
trading compliance program or any confidentiality, proprietary information or nondisclosure
agreement with the Company; or (vi) Executive’s working for another company, partnership or other
entity engaged in the pharmaceutical, biotechnology, medical device or other medically related
business, whether as an employee, consultant or director, while an employee of the Company without
the prior written consent of the Board. Any determination of Cause as used herein will be made in
good faith by the Board. A termination by the Company for reasons other than set forth in clauses
(i) through (vi) above, or for no reason at all but not including a termination of Executive’s
employment with the Company as a result of death or Disability, shall be deemed a “Termination
Without Cause.”




          (b) Voluntary Termination by Executive. Executive may voluntarily terminate his
employment with the Company upon 30 days written notice to the Company.




          (c) Termination by Executive for Good Reason. Executive may terminate his employment
with the Company for Good Reason. “Good Reason” shall mean the occurrence, without Executive’s
written consent, of one or more of the following events: (i) the Company reduces Executive’s base
salary by more than 25%, (ii) the Company decreases Executive’s



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annual bonus target percentage to below 40% of base salary, (iii) the Company materially
decreases Executive’s responsibilities, (iv) the Company relocates Executive’s principal place of
work to a location more than fifty (50) miles from the location of Executive’s principal place of
work on the date of this Agreement, or (v) the Company materially breaches the terms of this
Agreement; provided that no such event shall constitute Good Reason hereunder unless (a) Executive
shall have given written notice to the Company of Executive’s intent to resign for Good Reason
within 30 days after Executive becomes aware of the occurrence of any such event (specifying in
detail the nature and scope of the event), (b) such event or occurrence shall not have been cured
within 30 days of the Company’s receipt of such notice, (c) any Termination by Executive for Good
Reason following such 30 day cure period must occur no later than the date that is 30 days
following the expiration of such 30 day cure period. Executive’s Termination for Good Reason shall
be treated as involuntary.




          (d) Notice of Termination. Any termination of Executive’s employment by the Company
or by Executive shall be communicated by a written Notice of Termination addressed to Executive or
the Company, as applicable. Termination may be effective immediately upon communication of such
Notice of Termination. A “Notice of Termination” shall mean a notice stating that Executive’s
employment with the Company has been or will be terminated and the specific provisions of this
Section 1 under which such termination is being effected.




          (e) Payments Upon Termination. Upon termination of Executive’s employment for any
reason, the Company shall pay Executive (i) his Base Salary earned but not yet paid for services
rendered to the Company on or prior to the date on which the Employment Period ends, (ii) any
accrued but unused vacation days, (iii) any incurred but unpaid reimbursable business expenses and
other insurance related reimbursable expenses, and (iv) any amounts required under the Company’s
Employee Stock Purchase Plan (or successor plans). Any reimbursement for expenses payable under
subsection (iii) shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv)
and shall be paid on or before the last day of Executive’s taxable year following the taxable year
in which Executive incurred the expenses; provided, however, Executive’s right to reimbursement for
such amounts shall not be subject to liquidation or exchange for any other benefit.




     2. Payments Upon Certain Terminations Not Involving a Change in Control.



          (a) Termination by the Company Without Cause or Termination by Executive for Good
Reason. In addition to the payments described in Section 1(e) and subject to Section 4 and
Section 5, provided that Executive is in compliance with his obligations under his Proprietary
Information and Inventions Agreement with the Company, in the event Executive’s employment is
terminated by the Company Without Cause or by Executive for Good Reason, the Company shall (i) pay
Executive any annual bonus payable for services rendered in any annual bonus period for the year
which had been completed in its entirety prior to the date on which the Employment Period ends and
that had not previously been paid, provided, however, it is the Company’s intent that any such
annual bonus shall be evaluated by the Board, and if applicable, paid, no later than December 31 of
the calendar year following the calendar year to which such annual bonus relates, (ii) continue to
make Base Salary payments for (A) a period 6 months following such termination of employment if the
termination occurs on or before the third anniversary of the date on which Executive commenced
employment with the Company, or (B) a period 12 months following such termination of employment if
the termination occurs after such third anniversary date (the period of time such payments are
provided, the “Severance Period”), payable over such 6 month or 12 month period, as the case may
be, on the regular payroll dates of the Company in accordance with the Company’s payroll practices
as in effect on such



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termination date, and subject to applicable tax withholding. Such continued Base Salary
payments shall commence upon the first payroll date following the effective date of the Release
Agreement referenced in Section 5, and the first continued Base Salary payment shall cover the
period between the termination date and such payment, provided, however, no amount shall be paid
pursuant to this Section 2(a) unless, on or prior to the fifty-fifth (55th) day following the date
of the Executive’s Separation from Service (as defined in Section 4 below), Executive has executed
an effective Release Agreement and any applicable revocation period has expired. Each installment
payment made pursuant to this Section 2(a)(ii) shall be considered a separate payment for purposes
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (including, without
limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)).




          (b) Duty to Mitigate. If Executive is reemployed for at least twenty (20) hours per
week on average at any time after the termination date and before the end of the Severance Period,
Executive shall promptly provide written notice to the Company of such reemployment, and all
further severance compensation payments under this Section 2 shall be decreased by the amount of
the annual compensation received by Executive from the new employer.




     3. Payments Upon Certain Terminations Involving a Change in Control.



          (a) Statement of Intent. The Board recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control of the Company may exist and that the
uncertainty and questions that it may raise among management could result in the departure or
distraction of management personnel to the detriment of the Company and its shareholders.
Accordingly, the Board has decided to reinforce and encourage Executive’s attention and dedication
to Executive’s assigned duties without the distraction arising from the possibility of a change in
control of the Company.




          (b) Accelerated Vesting. Notwithstanding anything to the contrary in the Company’s
1992 Employee Stock Option Plan or its 2006 Equity Incentive Award Plan (the “Option Plans”), in
the event that a Change in Control (as defined in the Option Plans) occurs, and Executive’s
employment with the Company is terminated by the Company Without Cause or by Executive for Good
Reason at any time within the three (3) month period before the date of such Change in Control or
during the twelve (12) month period following the date of such Change in Control, one-hundred
percent (100%) of the then-unvested shares of Questcor’s common stock subject to each of
Executive’s outstanding stock options and one-hundred percent (100%) of Executive’s restricted
shares subject to vesting will become immediately vested and exercisable on the date of such
termination.




          (c) Cash Severance Upon Termination Without Cause or for Good Reason. Subject to
Section 4 below, in the event a Change in Control occurs which is also a Cash Severance Change in
Control (as defined below), and Executive’s employment with the Company is terminated by the
Company Without Cause or by Executive for Good Reason at any time within the three (3) month period
before the date of such Cash Severance Change in Control or during the twelve (12) month period
following the date of such Cash Severance Change in Control, Executive will receive severance
compensation equal to the sum of (i) an amount equal to his highest Base Salary in the calendar
year in which the Cash Severance Change in Control occurs, plus (ii) an amount equal to his target
bonus as established by the Board or its Compensation Committee for the year during which the
termination takes place (or if such target bonus has not yet been established, the target bonus for
the prior year), payable in accordance with Section 3(d) below



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     For purposes of this Section 3(c), “Cash Severance Change in Control” shall mean and include
the following:



               (i) the acquisition, directly or indirectly, by any “person” or “group” (as those terms are
defined in Sections 3(a)(9), 13(d) and 14(d) of the Exchange Act and the rules thereunder) of
“beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities
entitled to vote generally in the election of directors ( “voting securities” ) of the Company that
represent 50% or more of the combined voting power of the Company’s then outstanding voting
securities, other than:



                    (A) an acquisition by a trustee or other fiduciary holding securities under any employee
benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by
the Company or by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any person controlled by the Company,



                    (B) an acquisition of voting securities by the Company or a corporation owned, directly or
indirectly by the shareholders of the Company in substantially the same proportions as their
ownership of the stock of the Company; or



                    (C) in a public offering of the Company’s securities.



               (ii) A change in the composition of the Board occurring within a twelve (12) month period, as
a result of which a majority of the incumbent directors are replaced by directors whose appointment
or election is not endorsed by a majority of the incumbent directors before the date of the
appointment or election; or



               (iii) the consummation by the Company (whether directly involving the Company or indirectly
involving the Company through one or more intermediaries) of (x) a merger, consolidation,
reorganization, or business combination or (y) a sale or other disposition of all or substantially
all of the Company’s assets (provided, the sale of assets does not constitute a related party
transfer as set forth in Treasury Regulation §1.409A-3(i)(5)(viii)(B)), in each case other than a
transaction which results in the Company’s voting securities outstanding immediately before the
transaction continuing to represent (either by remaining outstanding or by being converted into
voting securities of the Company or the person that, as a result of the transaction, controls,
directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of
the Company’s assets or otherwise succeeds to the business of the Company (the Company or such
person, the “Successor Entity” ) directly or indirectly, at least fifty percent (50%) of the
combined voting power of the Successor Entity’s outstanding voting securities immediately after the
transaction,



     For purposes of subsection (i) of the definition of “Change in Control,” the calculation of
voting power shall be made as if the date of the acquisition were a record date for a vote of the
Company’s shareholders, and for purposes of subsection (iii) of the definition of “Change in
Control,” the calculation of voting power shall be made as if the date of the consummation of the
transaction were a record date for a vote of the Company’s shareholders.



          (d) Application of Section 280G of the Code. In the event that it shall be determined
that any payment or distribution in the nature of compensation (within the meaning of section
280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable or



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distributed or distributable pursuant to the terms of this Agreement or otherwise (a
“Payment”), would constitute an “excess parachute payment” within the meaning of section 280G of
the Code, the aggregate present value of the Payments under the Agreement shall be reduced (but not
below zero) to the Reduced Amount (defined below), provided that the reduction shall be made only
if the Accounting Firm (described below) determines that the reduction will provide the Executive
with a greater net after-tax benefit than would no reduction. The “Reduced Amount” shall be an
amount expressed in present value which maximizes the aggregate present value of Payments under
this Agreement without causing any Payment under this Agreement to be subject to the Excise Tax
(defined below), determined in accordance with section 280G(d)(4) of the Code. The term “Excise
Tax” means the excise tax imposed under section 4999 of the Code, together with any interest or
penalties imposed with respect to such excise tax. Unless the Executive shall have elected another
method of reduction by written notice to the Company prior to the Change of Control, the Company
shall reduce the Payments under this Agreement by first reducing Payments that are not payable in
cash and then by reducing cash Payments. Only amounts payable under this Agreement shall be
reduced pursuant to this subsection (d). All determinations to be made under this subsection (d)
shall be made by an independent certified public accounting firm selected by the Company
immediately prior to the Change of Control (the “Accounting Firm”), which shall provide its
determinations and any supporting calculations both to the Company and the Executive within 10 days
of the Change of Control. Any such determination by the Accounting Firm shall be binding upon the
Company and the Executive. All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in this subsection (d) shall be borne solely by the Company.




          (e) Payment Administration. Subject to Section 4 below, the severance payment under
Section 3(c) shall be made in a single lump sum on the release effective date of the Release
Agreement referenced in Section 5; provided, however, no amount shall be paid pursuant to this
Section 3(e) unless, on or prior to the fifty-fifth (55th) day following the later of (i) the
Executive’s Separation from Service or (ii) the effective date of a Cash Severance Change in
Control occurring within three months following Executive’s Separation from Service, Executive has
executed an effective Release Agreement and any applicable revocation period has expired. Payments
under Section 3(c) shall be in addition to the payments under Section 1(e) but shall be in lieu of,
and not in addition to, the payment of any cash severance payments that Executive may otherwise be
entitled to under Section 2 of this Agreement.




          (f) No Duty to Mitigate. Executive’s reemployment at any time following the
termination of Executive’s employment shall have no effect on his right to collect severance under
this Section 3.




     4. Section 409A Payment Delay.



          (a) Payment Delay. Notwithstanding anything herein to the contrary, to the extent any
payments to Executive pursuant to Sections 2 or 3 are treated as non-qualified deferred
compensation subject to Section 409A of the Code, then (i) no amount shall be payable pursuant to
such section unless Executive’s termination of employment constitutes a “separation from service”
with the Company (as such term is defined in Treasury Regulation Section 1.409A-1(h) and any
successor provision thereto) (a “Separation from Service”), and (ii) if Executive, at the time of
his Separation from Service, is determined by the Company to be a “specified employee” for purposes
of Section 409A(a)(2)(B)(i) of the Code and the Company determines that delayed commencement of



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any portion of the termination benefits payable to Executive pursuant to this Agreement is
required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code
(any such delayed commencement, a “Payment Delay”), then such portion of the Executive’s
termination benefits described in Section 2 or 3, as the case may be, shall not be provided to
Executive prior to the earlier of (A) the expiration of the six-month period measured from the date
of the Executive’s Separation from Service, (B) the date of the Executive’s death or (C) such
earlier date as is permitted under Section 409A. Upon the expiration of the applicable Code
Section 409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to a Payment Delay shall
be paid in a lump sum to Executive within 30 days following such expiration, and any remaining
payments due under the Agreement shall be paid as otherwise provided herein. The determination of
whether Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as
of the time of his Separation from Service shall made by the Company in accordance with the terms
of Section 409A of the Code and applicable guidance thereunder (including without limitation
Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).




          (b) Exceptions to Payment Delay. Notwithstanding Section 4(a), to the maximum extent
permitted by applicable law, amounts payable to Executive pursuant to Section 2 or 3, as the case
may be, shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with respect to
separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with respect to short-term
deferrals). Accordingly, the severance payments provided for in Section 2 and 3 are not intended
to provide for any deferral of compensation subject to Section 409A of the Code to the extent (i)
the severance payments payable pursuant to Section 2 or 3, as the case may be, by their terms and
determined as of the date of Executive’s Separation from Service, may not be made later than the
15th day of the third calendar month following the later of (A) the end of the Company’s fiscal
year in which Executive’s Separation from Service occurs or (B) the end of the calendar year in
which Executive’s Separation from Service occurs, or (ii) (A) such severance payments do not exceed
an amount equal to two times the lesser of (1) the amount of Executive’s annualized compensation
based upon Executive’s annual rate of pay for the calendar year immediately preceding the calendar
year in which Executive’s Separation from Service occurs (adjusted for any increase during the
calendar year in which such Separation from Service occurs that would be expected to continue
indefinitely had Executive remained employed with the Company) or (2) the maximum amount that may
be taken into account under a qualified plan pursuant to Section 401(a)(17) for the calendar year
in which Executive’s Separation from Service occurs, and (B) such severance payments shall be
completed no later than December 31 of the second calendar year following the calendar year in
which Executive’s Separation from Service occurs.




          (c) Interpretation. To the extent the payments and benefits under this Agreement are
subject to Section 409A of the Code, this Agreement shall be interpreted, construed and
administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the
Code and the Treasury Regulations thereunder (and any applicable transition relief under Section
409A of the Code).




     5. Release.



          (a) Execution of Release. As a condition of Executive’s right to receive the payments
described in Sections 2(a) and 3(c), Executive shall within 21 days following Executive’s
termination of employment (or within 45 days if Executive is terminated as part of a group layoff)
execute and deliver to the Company a full and complete release of all claims, known and unknown,
that Executive may



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have against the Company and its related past and present entities, officers,
directors, shareholders, agents, representatives, successors and employees, such release to be
substantially in the form of the release attached hereto as Exhibit A (the “Release
Agreement”); provided, however, that any conflict between the terms of this Agreement and such form
of release attached as Exhibit A shall be resolved in favor of this Agreement.




          (b) Effect of Failure. In the event Executive fails to deliver or revokes the release
referred to in Section 5(a) above, Executive shall not be entitled to any of the payments described
in Section 2(a) or 3(c) above. In the event that, prior to the end of the Severance Period,
Executive breaches any of his obligations under this Agreement, including this Section 5, the
Company’s obligations to provide the payments under Sections 2(a) and 3(c) shall thereupon cease
and the Company shall be entitled to recover from Executive any and all amounts theretofore paid to
Executive pursuant to Section 2(a) or 3(c).




     6. Death and Disability. In the event the Executive’s employment at the Company ends
as a result of Executive’s death, this Agreement shall automatically terminate and Executive’s
estate shall be entitled to receive (i) the amounts described in Section 1(e), and (ii) any annual
bonus payable for services rendered in any annual bonus period for the year which had been
completed in its entirety prior to the date on which the Employment Period ends and that had not
previously been paid. The bonus amount under clause (ii) will be payable to Executive’s estate
when and if such annual bonuses would otherwise have been payable; provided, however, it is the
Company’s intent that the bonus shall be evaluated by the Board, and if applicable, paid, no later
than December 31 of the calendar year following the calendar year to which such annual bonus
relates. In the event of Executive’s Disability, the Company shall have the right to terminate
this Agreement and Executive’s employment immediately. Additionally, Executive shall be entitled
to his annual bonus as described under clause (ii) above, except that the payments shall be to
Executive and not his estate.




     7. Miscellaneous.



          (a) Survival. To the extent necessary to give effect to such provisions, the
provisions of this Agreement shall survive the termination hereof, whether such termination shall
be by expiration of the Employment Period or otherwise.




          (b) Binding Effect. This Agreement shall be binding on, and shall inure to the
benefit of, the Company and any person or entity that succeeds to the interest of the Company
(regardless of whether such succession occurs by operation of law) by reason of the sale of all or
a portion of the Company’s equity securities, a merger, consolidation or reorganization involving
the Company or, unless the Company otherwise elects in writing, a sale of all or a portion of the
assets of the business of the Company. This Agreement shall also inure to the benefit of
Executive’s heirs, executors, administrators and legal representatives.




          (c) Assignment. Executive may not assign this Agreement. The Company may assign its
rights, together with its obligations, under this Agreement (i) to any affiliate or subsidiary or
(ii) to third parties in connection with any sale, transfer or other disposition of all or
substantially all of its business or assets.




          (d) Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the matters referred to herein and supersedes any and all prior



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agreements, whether written or oral. There are no promises, representations, inducements or
statements between the parties other than those that are expressly contained herein. Executive
acknowledges that he is entering into this Agreement of his own free will and accord, and with no
duress, that he has read this Agreement and that he understands it and its legal consequences.
Pursuant to the terms of the Offer Letter, Executive is a participant in the annual employee
incentive program for 2009, which shall be interpreted and administered to comply with the terms of
Section 409A of the Code. To the extent that this Agreement otherwise conflicts with the Offer
Letter, the terms of this Agreement shall control.




          (e) Severability; Reformation. In the event that one or more of the provisions of
this Agreement is or shall become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall not be affected
thereby. In the event any covenant contained herein is not enforceable in accordance with its
terms, including, but not limited to, if found to be excessively broad as to duration, scope,
activity or subject, Executive and the Company agree that such covenant shall be reformed to make
it enforceable in a manner that provides as nearly as possible the result intended by this
Agreement so as to be enforceable to the maximum extent compatible with applicable law.




          (f) Waiver. Waiver by any party hereto of any breach or default by the other party of
any of the terms of this Agreement shall not operate as a waiver of any other breach or default,
whether similar to or different from the breach or default waived. No waiver of any provision of
this Agreement shall be implied from any course of dealing between the parties hereto or from any
failure by either party hereto to assert its or his rights hereunder on any occasion or series of
occasions.




          (g) Notices. Any notice required or desired to be delivered under this Agreement
shall be in writing and shall be delivered personally, by courier service, by registered mail,
return receipt requested, or by email and shall be effective upon actual receipt by the party to
which such notice shall be directed, and shall be addressed as follows (or to such other address as
the party entitled to notice shall hereafter designate in accordance with the terms hereof):




               If to the Company:


Questcor Pharmaceuticals, Inc.

Attention: Chief Executive Officer

3260 Whipple Road

Union City, California 94587




               If to Executive:



                  To the most recent address of the Executive set forth in the personnel
records of the Company.



          (h) Amendments. This Agreement may not be altered, modified or amended except by a
written instrument signed by each of the parties hereto.




          (i) Headings. Headings to sections in this Agreement are for the convenience of the
parties only and are not intended to be part of or to affect the meaning or interpretation hereof.




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          (j) Counterparts. This Agreement 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.




          (k) Withholding. Any payments provided for herein shall be reduced by any amounts
required to be withheld by the Company under applicable Federal, State or local income or
employment tax laws or similar statutes or other provisions of law then in effect.




          (l) Disputes. Any and all disputes connected with, relating to or arising from
Executive’s employment with the Company, this Agreement, or the Release attached as Exhibit A, will
be settled by final and binding arbitration in accordance with the rules of the American
Arbitration Association as presently in force. The only claims not covered by this Agreement are
claims for benefits under the unemployment insurance or workers’ compensation laws. Any such
arbitration will take place in Alameda County, California. The parties hereby incorporate into
this agreement all of the arbitration provisions of Section 1283.05 of the California Code of Civil
Procedure. The Company understands and agrees that it will bear the costs of the arbitration
filing and hearing fees and the cost of the arbitrator. Each side will bear his/its own attorneys’
fees, and the arbitrator will not have authority to award attorneys’ fees unless a statutory
section at issue in the dispute authorizes the award of attorneys’ fees to the prevailing party, in
which case the arbitrator has authority to make such award as permitted by the statute in question.
The arbitration shall be instead of any civil litigation; this means that Executive is waiving any
right to a jury trial, and that the arbitrator’s decision shall be final and binding to the fullest
extent permitted by law and enforceable by any court having jurisdiction thereof. Judgment upon
any award rendered by the arbitrators may be entered in any court having jurisdiction.




          (m) Governing Law. This Agreement shall be governed by the laws of the State of
California, without reference to principles of conflicts or choice of law under which the law of
any other jurisdiction would apply.




          (n) Representation. Executive acknowledges that Stradling Yocca Carlson & Rauth
represents the Company and Executive has neither sought nor received legal advice from Stradling
Yocca Carlson & Rauth in connection with this Agreement.




[SIGNATURE PAGE FOLLOWS]




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     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly
authorized officer and Executive has hereunto set his hand as of the day and year first above
written.



Questcor Pharmaceuticals, Inc.




	 	 	 	 	 
	By: 

	
/s/ Don Bailey
	 	 
		Name: 

	
Don Bailey
	 	 
		Title:

	President & Chief Executive Officer	 	 
	 
	 	 	 	 
	Executive	 	 
	 
	 	 	 	 
	By:

	/s/ David Young	 	 
	 

	 

David Young
	 	 







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EXHIBIT A




Form of Release




SEPARATION AGREEMENT AND GENERAL RELEASE




                                             , on behalf of himself and his heirs, successors, and assigns (the
“Executive”) and Questcor Pharmaceuticals, Inc. (the “Company”) hereby agree to the following terms
and conditions related to the recent termination of Executive’s employment with the Company.



     1. Executive’s employment with the Company ceased effective                                          (the “Termination
Date”). Effective as of that date, Executive (a) relinquished his title[s] of
                                         of the Company, as well as any other officer or employee positions or titles
he may have held with the Company and any of its affiliated companies, and (b) [if applicable]
resigned as a director of the Company and any of its affiliated companies.



     2. With respect to any outstanding business expenses, Executive agrees that on or before , he
will submit a final expense reimbursement statement reflecting any outstanding business expenses
incurred through his Termination date, along with the appropriate receipts and necessary supporting
documentation. The Company will provide reimbursement pursuant to its current business policies
and practices for all reasonable and appropriate business expenses.



     3. Other than any outstanding business expenses and the future payments referenced in
Paragraph 5 below, Executive represents and agrees that he has received all compensation owed to
him by the Company through his Termination Date, including any and all wages, bonuses, incentives,
stock options, commissions, earned but unused vacation, and any other payments, benefits, or other
compensation of any kind to which he was entitled from the Company.



     4. Executive represents to the Company that he is signing this Separation Agreement and
General Release (this “Agreement”) voluntarily and with a full understanding of and agreement with
its terms for the purpose of receiving additional pay and consideration from the Company beyond
that which is owed to him.



     5. Conditioned on Executive’s execution, without subsequent revocation, of this Separation
Agreement and General Release and Executive’s compliance with the terms of this Agreement, the
Company will provide Executive with the consideration in accordance with Section 2(a) and Section
3(c) of the Severance Agreement between Executive and the Company dated                             , 2008 commencing
either eight (8) days after the Company’s receipt of this Separation Agreement and General Release
executed by Executive (the “Release Effective Date”) or as soon thereafter as administratively
practicable.



     6. Upon Executive’s eligibility for health insurance coverage through other employment during
the Severance Period, all insurance premium payments by the Company for Executive and his currently
insured dependents under COBRA shall cease. Other than what is specified in the Employment
Agreement, Executive will not accrue or be entitled to receive any other compensation or benefits,
including but not limited to, vacation, holiday pay, car allowance, etc., during the Severance
Period.



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     7. Should Executive fail to execute this Agreement within the time frame provided or should
Executive subsequently revoke or breach this Agreement, this Agreement will immediately become null
and void, no consideration will due or payable, and any and all consideration provided under this
Separation Agreement must be immediately returned.



     8. Executive understands that nothing in this Separation Agreement supersedes his continuing
obligations under the Company’s [Proprietary Information and Inventions Agreement, Policy Against
Insider Training, Confidentiality Agreement, Non-Disclosure Agreement, etc.] which he signed during
his employment, all of which will remain in full force and effect as these documents contain obligations which
continue after the effective date of his termination. Executive agrees to comply with all such
continuing obligations.



     9. In exchange for the consideration described above, which Executive would not otherwise be
entitled to receive, Executive does hereby forever irrevocably and unconditionally fully release
and discharge the Company and its parents, subsidiaries, and affiliates, together with their past
and current officers, directors, agents, employees, partners, shareholders and representatives
(hereinafter collectively referred to as the “Released Parties”) from any and all causes of action,
claims, suits, demands or other obligations or liabilities of every kind and nature (including
without limitation attorneys’ fees and costs), whether known or unknown, that Executive ever had,
now has, or may in the future have that arose on or before the date Executive signs this Agreement,
including but not limited to all claims regarding any aspect of his employment, compensation, or
the termination of his employment with the Company, his offer letter from the Company, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, Title VII of
the Civil Rights Act of 1964, 42 U.S.C. section 1981, the Fair Labor Standards Acts, the WARN Act,
the Sarbanes-Oxley Act, the California Fair Employment and Housing Act, California Government Code
section 12900, et seq., the Unruh Civil Rights Act, California Civil Code section 51, all
provisions of the California Labor Code; the Employee Retirement Income Security Act, 29 U.S.C.
section 1001, et seq., all as amended, any other federal, state or local law, regulation or
ordinance or public policy, contract, tort or property law theory, or any other cause of action
whatsoever that arose on or before the date Executive signs this Agreement. Executive’s release
contained herein shall not include any release of any rights, claims or entitlements Executive has
or may have to indemnification under any Indemnification Agreement he entered into with the Company
or pursuant to the Company’s Articles of Incorporation or any coverage Executive may have under the
Company’s directors and officers insurance policy for acts and omissions occurring within the
course and scope of Executive’s employment while acting as an officer or director of the Company.



     10. It is further understood and agreed that as a condition of this Agreement, all rights
under Section 1542 of the Civil Code of the State of California are expressly waived by Executive.
Such Section reads as follows:




“A general release does not extend to claims which the creditor does not
know or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his
or her settlement with the debtor.”



     Thus, for the purpose of implementing a full and complete release and discharge of the
Released Parties, Executive expressly acknowledges that this Agreement is intended to include and



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does include in its effect, without limitation, all claims which Executive does not know or suspect
to exist in his favor against the Released Parties at the time of execution hereof, and that this
Agreement expressly contemplates the extinguishment of all such claims.




     11. Executive agrees to withdraw with prejudice all complaints or charges, if any, he has
filed against any of the Released Parties with any agency or court. Executive agrees that he will
not file any lawsuit, complaint, or charge against any Released Party based on the claims released
in this Separation Agreement and General Release.



     12. The release in this Agreement includes, but is not limited to, claims arising under
federal, state or local law for age, race, sex or other forms of employment discrimination and
retaliation. In accordance with the Older Workers Benefit Protection Act, Executive hereby
knowingly and voluntarily waives and releases all rights and claims, known or unknown, arising
under the Age Discrimination in Employment Act of 1967, as amended, which he might otherwise have
had against the Released Parties. Executive is hereby advised that he should consult with an
attorney before signing this Agreement and that he has 21 days in which to consider and accept this
Agreement by signing and returning this Agreement to the Chairman of the Company’s Compensation
Committee. In addition, Executive has a period of seven days following his execution of this
Agreement in which he may revoke the Agreement. If Executive does not advise the Chairman of the
Compensation Committee by a writing received by him within such seven day period of Executive’s
intent to revoke the Agreement, the Agreement will become effective and enforceable upon the
expiration of the seven days.



     13. Executive acknowledges that this Agreement may be filed by the Company with the Securities
and Exchange Commission in accordance with the Company’s filing obligations under the Securities
Exchange Act of 1934.



     14. Executive represents that he has returned to the Company all proprietary or confidential
information and property of the Company, including but not limited to any Company owned or leased
laptop computer, all keys to the office and leased automobile, all fobs, credit cards, files,
records, access cards, equipment and other Company owned property, records or information in his
possession, including all copies thereof in whatever form, including any and all electronic copies,
and has destroyed all electronic copies of all proprietary or confidential information of the
Company.



     15. Executive acknowledges that he is aware of his obligations under the federal securities
laws relating to trading in the Company’s securities while in possession of material, non-public
information about the Company. Executive further acknowledges that he is aware of his reporting
obligations under Section 16(a) of the Securities Exchange Act of 1934 and that he has properly and
timely filed all forms required by such Section.



     16. Any and all disputes connected with, related to or arising from this Separation Agreement
and General Release will be settled by final and binding arbitration in accordance with the rules
of the American Arbitration Association as presently in force. Any such arbitration will take
place in Alameda County, California. The parties hereby incorporate into this agreement all of the
arbitration provisions of Section 1283.05 of the California Code of Civil Procedure. The Company
understands and agrees that it will bear the costs of the arbitration filing and hearing fees and
the cost of the arbitrator. Each side will bear his/its own attorneys’ fees, and the arbitrator
will



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not have authority to award attorneys’ fees unless a statutory section at issue in the dispute
authorizes the award of attorneys’ fees to the prevailing party, in which case the arbitrator has
authority to make such award as permitted by the statute in question. The arbitration shall be
instead of any civil litigation; this means that you are waiving any right to a jury trial, and
that the arbitrator’s decision shall be final and binding to the fullest extent permitted by law
and enforceable by any court having jurisdiction thereof. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction.




     17. This Separation and General Release shall not be construed against any party merely
because that party drafted or revised the provision in question, and it shall not be construed as
an admission by the Released Parties of any improper, wrongful, or unlawful actions, or any other
wrongdoing against Executive, and the Released Parties specifically disclaim any liability to or
wrongful acts against Executive.



     18. This Agreement may be modified only by written agreement signed by both parties.



     19. In the event any provision of this Agreement is void or unenforceable, the remaining
provisions shall continue in full force and effect.



     20. This Separation Agreement and General Release, along with the above-mentioned
[Confidentiality, Indemnification, and Non-Disclosure Agreements between Company and Executive],
all of which are incorporated herein by this reference, constitute the entire agreement between the
parties regarding the subject matter hereof, and supersede any and all prior and contemporaneous
oral and written agreements. Executive acknowledges and agrees that he is not relying on any
representations or promises by any representative of the Company regarding any term not included in
this Agreement or concerning the meaning of any aspect of this Release Agreement.



     21. This Separation Agreement and General Release may be executed in one or more counterparts
and by facsimile or email, each of which shall be deemed an original but all of which shall
constitute a single document.



	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	EXECUTIVE
	 
	Dated:
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	David Young
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	QUESTCOR PHARMACEUTICALS, INC.
	 
	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 





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EXHIBIT B




CALIFORNIA LABOR CODE SECTION 2870




     “(a) Any provision in an employment agreement which provides that an employee shall assign, or
offer to assign, any of his or her rights in an invention to his or her employer shall not apply to
an invention that the employee developed entirely on his or her own time without using the
employer’s equipment, supplies, facilities, or trade secret information except for those inventions
that either:



          (1) Relate at the time of conception or reduction to practice of the invention to the
employer’s business, or actual or demonstrably anticipated research or development of the employer;
or




          (2) Result from any work performed by the employee for the employer.




     (b) To the extent a provision in an employment agreement purports to require an employee to
assign an invention otherwise excluded from being required to be assigned under subdivision (a),
the provision is against the public policy of this state and is unenforceable.”




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