exv10w1






Exhibit 10.1









September 23, 2010




VIA HAND DELIVERY




Mr. Gary Sawka

Questcor Pharmaceuticals, Inc.

3260 Whipple Road

Union City, CA 94587




Re: Transition to 25% time



Dear Mr. Sawka:




     This letter agreement (“Agreement”) sets forth the terms of your change in status from your
current role as a full-time employee of Questcor Pharmaceuticals, Inc. (the “Company”) to a new
role as a 25% time employee of the Company for a three month transition period:



     1. Transition Date. Your last day as the Company’s Senior Vice President and Chief Financial
Officer, the Company’s Principal Accounting Officer and its Assistant Secretary, will be October
1, 2010 (the “Transition Date”). Until the Transition Date, you shall continue to use your best
efforts to perform your currently assigned duties and responsibilities. During your continued
employment in your current capacity through the Transition Date, you will receive your regular
base salary payments and continued benefits coverage in which you are currently enrolled. Of
course, you must continue to comply with all of the Company’s policies and procedures during your
continued employment.



     2. Post-Transition Date. On the Transition Date, you will continue to be an employee of the
Company under the terms set forth in this Agreement, but you will no longer be an officer of the
Company or its subsidiary and your title will change to Special Projects, Finance. Within five
(5) business days of the Transition Date, you will use your best efforts to execute and deliver
to the Company a “sub-certification” to support the certifications contemplated by Section 302 of
the Sarbanes-Oxley Act of 2002. You agree to work at 25% of your usual work week and your
compensation will be a gross amount of $5,579.16 per month ($2,798.58 gross semi-monthly) less
all applicable payroll deductions and withholdings. The Company will also reimburse you, in
accordance with its standard practices, for any expenses incurred in the performance of your
post-Transition Date duties and responsibilities. The term of your post-Transition Date
employment will be for a period (the “Transition Period”) commencing on the Transition Date and
ending on the “Transition Ending Date” which shall be December 31, 2010. A description of your
duties and responsibilities during the Transition Period is set forth on Schedule 1 and
the Company shall direct the means and methods of how you accomplish these duties and
responsibilities.



     3. Continued Vesting. As a result of your continuous service as an employee during the
Transition Period, all your stock options to purchase the Company’s Common Stock shall continue
to vest until the Transition Ending Date. After the Transition Ending Date, in accordance with
your stock option agreements (the “Option Agreements”) and the Company’s 2006 Equity Incentive
Award Plan under which your options were granted (the “Option Plan”), you will have ninety (90)
days to exercise your vested stock options, subject to certain exceptions as set forth in the
Option Agreements and Option Plan. Upon the Transition Ending Date, all of your unvested stock
options will terminate immediately.



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     4. Other Benefits. Your participation in the Company’s medical, dental and vision insurance
plans will end on October 30, 2010. Holidays will be paid at 25% of the full time rate. Until the
Transition Ending Date, you will also continue to be eligible to participate in the Company’s
401(k) Plan. All other benefits including life, accidental death and disability insurance, PTO
accrual and your participation in the Employee Stock Purchase Plan will end on your Transition
Date.



     5. Accrued Salary and Vacation. On the Transition Ending Date, the Company will pay you for
all accrued salary and all accrued and unused vacation earned through the Transition Ending Date,
subject to standard payroll deductions and withholdings. The Company will also pay you for any
approved expenses incurred but not yet paid as of the Transition Ending Date. You are entitled to
these payments by law.



     6. Transition Ending Date Benefits. If you: (a) timely sign and date this Agreement, (b)
allow it to become effective and fully perform under its terms, (c) sign and date the Transition
Ending Date Release attached hereto as Exhibit A on or within 21 days after the
Transition Ending Date, and (d) allow the Transition Ending Date Release to become effective and
do not revoke it; then after your Transition Ending Date and upon the effectiveness of the
Transition Ending Date Release the Company will pay you $70,000.



     7. Proprietary Information and Inventions. You agree that the Proprietary Information and
Inventions Agreement between you and the Company (the “Proprietary Information Agreement” shall
remain in full force and effect following the date of this Agreement and the Transition Ending
Date in accordance with its terms.



     8. Other Work Activities. You have no duty to mitigate any compensation you receive from
this Agreement. Throughout the Transition Period, you may engage in employment, consulting, or
other work relationships in addition to your work for the Company, provided that such other
employment, consulting, or work relationships do not interfere with your continuing obligations
to the Company or otherwise create a conflict of interest with the Company. The Company will make
reasonable arrangements to enable you to perform your work for the Company at such times and in
such a manner so that it will not interfere with other activities in which you may engage. In
order to protect the trade secrets and confidential and proprietary information of the Company,
you agree that, during the Transition Period, you will notify the Company, in writing, before you
obtain competitive employment, perform competitive work for any business entity, or engage in any
other work activity that is or may be competitive with the Company, and you will obtain the
Company’s written consent before engaging in any such competitive activity. If you engage in such
competitive activity without the Company’s prior written consent, or otherwise breach this
Agreement or the Proprietary Information Agreement, then, in addition to any other remedies, the
Company’s obligation to pay your salary will cease, and the Company will have the right to set
your Transition Ending Date as of the date you first engaged in competitive activity and void
your right to the Transition Ending Date Benefits described in Paragraph 6.



     9. Other Compensation or Benefits.



          (a) General Compensation or Benefits. You acknowledge that, except as expressly
provided in this Agreement, you are not entitled to receive and will not receive from the Company
any additional compensation or benefits, including but not limited to salary, bonuses, severance,
or employee benefits either during your continued employment or after the Transition Ending Date.
By way of example, but not limitation, you acknowledge and agree that you are not eligible for
any bonus compensation for 2010, and upon the termination of your employment on the Transition
Ending Date, you will not be entitled to receive any severance pay notwithstanding the terms of
that certain Severance Agreement between you and the Company dated September 10, 2008, which
agreement is hereby terminated and of no further force or effect, and you hereby waive any right
to any compensation or benefits under
that Agreement.





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          (b) Change in Control Compensation or Benefits.




               (i) Change in Control Benefits Prior to the Transition Date. From the date of this Agreement
up until and including your Transition Date, you shall be entitled to receive any Change in
Control benefits to which you become entitled during such period pursuant to the terms of your
Change in Control Agreement dated September 10, 2008 and amended December 22, 2008 (“Change in
Control Agreement”); provided, however, that if any such compensation or benefits are provided to
you, they shall be in lieu of the other benefits provided under this Agreement, including without
limitation any of the compensation or benefits set forth in Sections 2, 3, 4, 5 and 6 herein.



               (ii) Change in Control Benefits After the Transition Date. After the Transition Date, you
shall not be entitled to receive any Change in Control severance benefits, regardless of whether
the Company is subject to a Change in Control after the Transition Date (including any Change in
Control that occurs during the Transition Period) under your Change in Control Agreement. The
acceleration of the vesting of your stock options upon a Change in Control shall be governed by
the Option Plan and your Option Agreements. You expressly agree that your Change in Control
Agreement shall have no further force or effect after the Transition Date, and you hereby waive
any right to any compensation or benefits under that Agreement after the Transition Date. For
purposes of clarification, if there is a Change of Control after the Transition Period, all other
terms of this Agreement will remain in full effect.



     10. Return of Company Property. You agree to return to the Company, on the Transition Ending
Date or earlier if requested by the Company, all Company documents (and all copies thereof) and
other property of the Company in your possession or control. You agree that you will make a
diligent and timely search to locate any such documents, property and information. In addition,
if you have used any personally owned computer, server, or e-mail system to receive, store,
review, prepare or transmit any Company confidential or proprietary data, materials or
information, then you agree to provide the Company, no later than the Transition Ending Date,
with a computer-useable copy of all such information and then permanently delete and expunge such
Company confidential or proprietary information from those systems without retaining any
reproductions (in whole or in part); and you agree to provide the Company access to your system
as requested to verify that the necessary copying and/or deletion is done. Your timely compliance
with this Section 10 is a precondition to your eligibility for the Transition Ending Date
Benefits.



     11. Nonsolicitation. In order to protect the trade secrets and confidential and proprietary
information of the Company, you agree that during your continued employment, and for one year
following the Transition Ending Date, you will not, either directly or through others, solicit or
attempt to solicit any employee, consultant, or independent contractor of the Company to
terminate his or her relationship with the Company in order to become an employee, consultant or
independent contractor to or for any other person or entity.



     12. Nondisparagement. You agree not to disparage the Company or the Company’s officers,
directors, employees, shareholders, parents, subsidiaries, affiliates, and agents, in any manner
likely to be harmful to them or their business, business reputation or personal reputation and
the Company agrees not to disparage you in any manner likely to be harmful to your business,
business reputation or personal reputation; provided that the parties may respond accurately and
fully to any question, inquiry or request for information when required by legal process.



     13. Release.



          (a)
General Release. In exchange for the consideration provided to you by this Agreement that you are not otherwise entitled to receive, you hereby generally and
completely release, acquit and forever discharge the Company and affiliated entities, along with
its and their predecessors and successors and their respective directors, officers, employees,
shareholders, partners, agents, attorneys, insurers, affiliates and assigns (collectively, the
“Released Parties”), of and from any and all claims, liabilities and obligations, both known and
unknown, that arise from or are in any way related to events, acts, conduct, or omissions
occurring at any time prior to and including the date that you sign this Agreement (collectively,
the “Released Claims”).






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          (b) Scope of Release. The Released Claims include, but are not limited to: (a) all
claims arising out of or in any way related to your employment with the Company, or the
termination of that employment; (b) all claims related to your compensation or benefits from the
Company, including salary, bonuses, commissions, other incentive compensation, vacation pay and
the redemption thereof, expense reimbursements, severance payments, fringe benefits, stock, stock
options, or any other ownership or equity interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith and fair
dealing; all tort claims, including but not limited to claims for fraud, defamation, emotional
distress, and discharge in violation of public policy; and (e) all federal, state, and local
statutory claims, including but not limited to claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964
(as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), and the California Fair
Employment and Housing Act (as amended).




          (c) Exceptions. Notwithstanding the foregoing, the following are not included in the
Released Claims (the “Excluded Claims”): (a) any rights or claims for indemnification you may
have pursuant to any written indemnification agreement with the Company to which you are a party,
the charter, bylaws, or operating agreements of the Company, or under applicable law; (b) any
rights which are not waivable as a matter of law; or (c) any claims arising from the breach of
this Agreement. In addition, nothing in this Agreement prevents you from filing, cooperating
with, or participating in any investigation or proceeding before the Equal Employment Opportunity
Commission, the Department of Labor, the California Department of Fair Employment and Housing, or
any other government agency, except that you hereby waive your right to any monetary benefits in
connection with any such claim, charge, investigation or proceeding. You hereby represent and
warrant that, other than the Excluded Claims, you are not aware of any claims you have or might
have against any of the Released Parties that are not included in the Released Claims.




     14. ADEA Waiver. You hereby acknowledge that you are knowingly and voluntarily waiving and
releasing any rights you may have under the ADEA, and that the consideration given for the waiver
and release you have given in this Agreement is in addition to anything of value to which you
were already entitled. You further acknowledge that: (a) your waiver and release do not apply to
any rights or claims that may arise after the date you sign this Agreement; (b) you should
consult with an attorney prior to signing this Agreement (although you may voluntarily decide not
to do so); (c) you have twenty-one (21) days to consider this Agreement (although you may choose
voluntarily to sign this Agreement sooner); (d) you have seven (7) days following the date you
sign this Agreement to revoke this Agreement (in a written revocation sent to and received by the
Company’s Chief Executive Officer); and (e) this Agreement will not be effective until the date
upon which the revocation period has expired, which will be the eighth day after you sign this
Agreement, provided that you do not revoke it (the “Effective Date”).



     15. Section 1542 Waiver. In giving the release herein, which includes claims which may be
unknown to you at present, you acknowledge that you have read and understand Section 1542 of the
California Civil Code, which reads as follows:



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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.


For the purpose of implementing a full and complete release and discharge of the Released
Parties, you hereby expressly waive and relinquish all rights and benefits under that section
and any law or legal principle of similar effect in any jurisdiction with respect to your
release of claims in this Agreement, including your release of unknown and unsuspected claims.




     16. Entire Agreement. Nothing in this Agreement shall affect the terms of the
Indemnification Agreement you entered into with the Company on September 10, 2008, which shall
continue in full force and effect. Both your initial offer letter and your Severance Agreement
dated September 10, 2008 are completely superseded by this Agreement and are no longer of any
force and effect. Except as expressly stated above, this Agreement, including all exhibits,
constitutes the complete, final and exclusive embodiment of the entire agreement between you and
the Company with regard to the subject matter hereof. This Agreement supersedes any and all other
agreements, whether oral, implied or written, between you and the Company on its subject matter.
It is entered into without reliance on any promise or representation, written or oral, other than
those expressly contained herein. It may not be modified except in a written agreement approved
by the Board and signed by you and a duly authorized officer of the Company. Each party has
carefully read this Agreement, has been afforded the opportunity to be advised of its meaning and
consequences by his or its respective attorneys, and signed the same of his or its own free will.
Any ambiguity in this Agreement shall not be construed against either party as the drafter.



     17. Successors and Assigns. This Agreement will bind the heirs, personal representatives,
successors, assigns, executors and administrators of each party, and will inure to the benefit of
each party, its heirs, successors and assigns.



     18. Applicable Law. This Agreement will be deemed to have been entered into and will be
construed and enforced in accordance with the laws of the State of California without regard to
conflict of laws principles. The parties agree that venue for any legal action relating to this
Agreement will be Alameda County, California.



     19. Severability; Waiver of Breach. If any provision of this Agreement is determined to be
invalid or unenforceable, in whole or in part, this determination will not affect any other
provision of this Agreement and the provision in question shall be deemed modified so as to be
rendered enforceable in a manner consistent with the intent of the parties, insofar as possible
under applicable law. Any waiver of a breach of this Agreement, or rights hereunder, shall be in
writing and shall not be deemed to be a waiver of any successive breach or rights hereunder.



     20. Counterparts. This Agreement may be executed in two counterparts, each of which will be
deemed an original, all of which together constitutes one and the same instrument. Facsimile
signatures are as effective as original signatures.



     If this Agreement is acceptable to you, please sign below within twenty-one (21) days of
your receipt of this Agreement, and return the fully signed original to me. If you do not sign
this Agreement within the aforementioned timeframe and promptly return it to me, or if you sign
this Agreement but then timely revoke this Agreement under Paragraph 14 above, then this
Agreement will be of no force or effect.



     We wish you the best and look forward to continuing to work with you prior to and during the
Reassignment Period.



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	 	Sincerely,



QUESTCOR PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/ Don Bailey
 	 
	 	 	Don Bailey 	 
	 	 	President & Chief Executive Officer 	 



	 	 	 	 	 
	UNDERSTOOD AND AGREED:

 	 
	/s/ Gary Sawka
 	 
	Gary Sawka 	 


Date: September 27, 2010












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EXHIBIT A




TRANSITION ENDING DATE RELEASE



[To be signed on or within 21 days after the Transition Ending Date]


Pursuant to the terms of that certain letter agreement (the “Agreement”) between Questcor
Pharmaceuticals, Inc. (the “Company”) and me dated ______, 2010, and as a condition of the
Transition Ending Date Benefits to be provided to me under the Agreement, I hereby provide the
following Transition Ending Date Release (the “Release”). I understand that I am not entitled to
the Transition Ending Date Benefits unless I timely sign this Release and allow it to become
effective.





     1. Release.



          (a) General Release. In exchange for the Transition Ending Date Benefits to be
provided to me that I am not otherwise entitled to receive, I hereby generally and completely
release, acquit and forever discharge the Company and its affiliated entities, along with its and
their predecessors and successors and their respective directors, officers, employees,
shareholders, partners, agents, attorneys, insurers, affiliates and assigns (collectively, the
“Released Parties”), of and from any and all claims, liabilities and obligations, both known and
unknown, that arise from or are in any way related to events, acts, conduct, or omissions
occurring at any time prior to and including the date that I sign this Release (collectively, the
“Released Claims”).




          (b) Scope of Release. The Released Claims include, but are not limited to: (a) all
claims arising out of or in any way related to my employment with the Company, or the termination
of that employment; (b) all claims related to my compensation or benefits from the Company,
including salary, bonuses, commissions, other incentive compensation, vacation pay and the
redemption thereof, expense reimbursements, severance payments, fringe benefits, stock, stock
options, or any other ownership or equity interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing
(including but not limited to claims based on or arising from the Agreement); (d) all tort
claims, including but not limited to claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (e) all federal, state, and local statutory claims,
including but not limited to claims for discrimination, harassment, retaliation, attorneys’ fees,
or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in
Employment Act of 1967 (as amended) (the “ADEA”), and the California Fair Employment and Housing
Act (as amended).




          (c) Exceptions. Notwithstanding the foregoing, the following are not included in the
Released Claims (the “Excluded Claims”): (a) any rights or claims for indemnification I may have
pursuant to any written indemnification agreement with the Company to which I am a party, the
charter, bylaws, or operating agreements of the Company, or under applicable law; (b) any rights
which are not waivable as a matter of law; or (c) any claims for breach of the Agreement arising
after the date that I sign the Release. In addition, nothing in this Release prevents me from
filing, cooperating with, or participating in any investigation or proceeding before the Equal
Employment Opportunity Commission, the Department of Labor, the California Department of Fair
Employment and Housing, or any other government agency, except that I hereby waive my right to
any monetary benefits in connection with any such claim, charge, investigation or proceeding. I
hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I
have or might have against any of the Released Parties that are not included in the Released
Claims.








A-1









 








     2. ADEA Waiver. I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights I may have under the ADEA, that the consideration given for the Release is
in addition to anything of value to which I was already entitled, and that I have been advised by
this writing, as required by the ADEA, that: (a) my release of claims does not apply to any
rights or claims that arise after the date I sign this Release; (b) I should consult with an
attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I
have twenty-one (21) days to consider this Release (although I may choose voluntarily to sign it
sooner); (d) I have seven (7) days following the date I sign this Release to revoke it by
providing written notice of my revocation to the Company’s Board of Directors; and (e) this
Release will not be effective until the date upon which the revocation period has expired
unexercised, which will be the eighth day after I sign this Release (“Effective Date”).



     3. Section 1542 Waiver. In giving the general release herein, which includes claims
which may be unknown to me at present, I acknowledge that I have read and understand Section 1542
of the California Civil Code, which 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.


For the purpose of implementing a full and complete release and discharge of the Released
Parties, I hereby expressly waive and relinquish all rights and benefits under that section and
any law of any other jurisdiction of similar effect with respect to my release of claims,
including but not limited to any unknown or unsuspected claims herein.




     4. Representations. I hereby represent that I have been paid all compensation owed
and for all hours worked, have received all the leave and leave benefits and protections for
which I am eligible, pursuant to the Family and Medical Leave Act or otherwise, and have not
suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.



	 	 	 	 	 
	UNDERSTOOD AND AGREED:

 	 
	 	 
	Gary Sawka 	 
	Date: 	 	 	 
	 








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SCHEDULE 1



Part-time services to be performed during the Transition Period will include services
commensurate with your level of experience and prior full-time role with the Company and may
be comprised of the following services as requested and directed by the Company:



Review and comment on SEC filings



Review and comment on material journal entries



Review and comment on press releases



Review and comment on corporate presentations



Review and comment on tax filings



Review and comment on insurance renewal proposals



Provide input to auditors on year end audit and quarterly reviews



Provide input on Sarbanes Oxley internal control implementation and testing



Provide input associated with activities regarding Company Trading Policy, though you will
no longer administer the policy.



Provide input on Share Repurchase Plan



Provide input on the Company’s treasury function



Provide input on real estate matters affecting the Company, including interacting with
sub-lessees.



Provide guidance on other transition matters




SCHEDULE 1