Without Cause (as hereinafter defined) or termination by Executive for Good Reason (ashereinafter defined), if Executive is a member of the Company’s Board at the time of suchtermination, he shall immediately tender to the Board his written and signed resignation from theBoard, which resignation shall be effective immediately. If Executive desires to remain on theBoard following the termination of his employment, he shall condition his resignation solely on theBoard’s acceptance thereof and the Board shall in its sole discretion decide whether or not toaccept the resignation. If the Board does not accept the resignation, then Executive shall continueto serve as a member of the Board and any stock options or restricted shares held by Executiveshall continue to vest in accordance with their terms for so long as Executive remains on theBoard. If Executive fails to tender his resignation from the Board in accordance with this Section3 or if the Board accepts his resignation, then Executive’s stock options will stop vesting as ofthe date Executive’s employment was terminated.     4. Compensation and Benefits.          (a) Base Salary. During the Employment Period, the Company shall pay Executive a basesalary at the annual rate of $525,000, subject to review and change by the Board at its discretion,which will be paid in a manner consistent with the Company’s customary payroll practices.Executive’s annual base salary payable hereunder is referred to herein as “**Base Salary**”.          (b) Annual Bonus. In addition to Base Salary, Executive shall be eligible to receivea discretionary annual cash bonus (the “**Cash Bonus**”) in accordance with the Company’s “IncentiveCompensation Policy and Process” (as such may be amended or replaced from time to time), in anamount up to a target percentage of Base Salary, which target percentage shall be set annually bythe Board. For the year ending December 31, 2008, the target percentage is sixty-five percent(65%). The actual amount of any year end Cash Bonus will be determined by and within the discretionof the Board, and the Cash Bonus shall be paid on or before the fifteenth (15th) day after thecompletion of the external audit of the Company’s financial statements for the period for which theCash Bonus relates, provided, however, it is the Company’s intent that the Board’s determinationshall be completed and, if applicable, the Cash Bonus shall be paid, no later than December 31 ofthe calendar year following the calendar year to which such Cash Bonus relates.          (c) Equity Incentive Compensation. In addition to Base Salary and the discretionaryCash Bonus, Executive shall be eligible to receive stock option awards and grants of restrictedstock under the Company’s equity incentive plans, as determined from time to time by the Board.          (d) Employee Benefit/Plan Participation. During the Employment Period, Executiveshall be eligible, but shall not be required, to participate in various employee benefit planssponsored or maintained by the Company in accordance with the terms and conditions of such plans,including those related to medical, dental, disability, and life insurance. Executive recognizesthat the Company has the right, in its sole discretion, to amend, modify or terminate any employeebenefit plans in accordance with their terms.          (e) Business Expenses. Subject to the Company’s reimbursement policies and procedures,the Company shall reimburse Executive for all reasonable and necessary expenses incurred in theperformance of Executive’s duties hereunder, upon presentation of expense statements or vouchers,receipts, and such other information and documentation as the Company may require. Any amountspayable under this Section 4(e) shall be made in accordance with Treasury Regulation Section1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Executive’s taxable yearfollowing the taxable year in which Executive incurred the expenses. The amounts
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provided under this Section 4(e) during any taxable year of Executive will not affect suchamounts provided in any other taxable year of Executive, and Executive’s right to reimbursement forsuch amounts shall not be subject to liquidation or exchange for any other benefit.     5. Termination of Employment.          (a) Termination of the Employment Period. The Employment Period shall end ifExecutive’s employment with the Company terminates with or without Cause at the election of eitherExecutive or the Company, or as a result of Executive’s death or Disability (**“Disability”**shallmean a physical or mental impairment that renders Executive unable to perform the essentialfunctions of his position, with or without reasonable accommodation). In any such event, theEmployment Period shall end and, except as otherwise provided herein, including with respect to theongoing post-employment restrictions and covenants contained in Section 12, this Agreement shallterminate upon the effective date of such termination.          (b) Termination by the Company With or Without Cause. The Company may terminateExecutive’s employment at any time during the Employment Period with or without Cause effectiveimmediately upon delivery of a Notice of Termination to Executive. Subject to the immediatelyfollowing sentence “**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 refusalto perform assigned duties with the Company, which continues uncured for thirty (30) days followingreceipt of written notice of such deficiency from the Board, specifying the scope and nature of thedeficiency; (ii) Executive’s commission of a felony or fraud; or Executive’s misappropriation ofproperty belonging to the Company or its affiliates; (iii) Executive’s commission of a misdemeanoror act of dishonesty, which causes material harm to the Company; (iv) Executive’s engaging in anyact of moral turpitude which causes material harm to the Company; (v) Executive’s breach of theterms of this Agreement or any trading compliance program or any confidentiality, proprietaryinformation or nondisclosure agreement with the Company; or (vi) Executive’s working for anothercompany, partnership or other entity, whether as an employee, consultant or director, while anemployee of the Company without the prior written consent of the Board (unless permitted by Section2). Following a Change in Control (as defined in Section 7(c) below), **“Cause”**shall not includeExecutive’s acts or omissions contemplated by clause (i) in the immediately preceding sentence andshall only include those acts and omissions set forth in (ii) through (vi) above. Anydetermination of Cause as used herein will be made in good faith by the Board. A termination by theCompany for reasons other than set forth in clauses (i) through (vi) (but excluding clause (i)following a Change in Control) above, or for no reason at all but not including a termination ofthe Employment Period as a result of death or Disability, shall be deemed a “**Termination WithoutCause**.”          (c) Voluntary Termination by Executive. Executive may voluntarily terminate hisemployment with the Company upon 30 days written notice to the Company.          (d) Termination by Executive for Good Reason. Executive may terminate his employmentwith the Company for Good Reason. “**Good Reason**” shall mean the occurrence, without Executive’swritten consent, of one or more of the following events: (i) the Company decreases Executive’s BaseSalary below $400,000, (ii) the Company decreases Executive’s Annual Bonus target percentage tobelow 50% of Base Salary, (iii) the Company materially decreases Executive’s responsibilities, or(iv) the Company materially breaches the terms of this Agreement; provided that no such event shallconstitute Good Reason hereunder unless (a) Executive shall have
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given written notice to the Company of Executive’s intent to resign for Good Reason within 30days after Executive becomes aware of the occurrence of any such event (specifying in detail thenature and scope of the event), (b) such event or occurrence shall not have been cured within 30days of the Company’s receipt of such notice, and (c) any Termination by Executive for Good Reasonfollowing such 30 day cure period must occur no later than the date that is 30 days following theexpiration of such 30 day cure period. Executive’s Termination for Good Reason shall be treated asinvoluntary.          For purposes of clause (iii) above, a material decrease in Executive’s responsibilities shallinclude, without limitation, a situation where Executive was no longer serving as the sole ChiefExecutive Officer of the Company’s parent corporation.          (e) Notice of Termination. Any termination of Executive’s employment by the Company orby Executive shall be communicated by a written Notice of Termination addressed to Executive or theCompany, as applicable. The Company may also communicate its Notice of Termination verbally, inaccordance with Section 14(g). Termination may be effective immediately upon communication of suchNotice of Termination. A “**Notice of Termination**” shall mean a notice stating that Executive’semployment with the Company has been or will be terminated and the specific provisions of thisSection 5 under which such termination is being effected.          (f) Payments Upon Termination. Upon termination of Executive’s employment for anyreason, the Company shall pay Executive (i) his Base Salary earned but not yet paid for servicesrendered to the Company on or prior to the date on which the Employment Period ends, (ii) anyaccrued but unused vacation days, (iii) any incurred but unpaid business expenses contemplated bySection 4(e) and other insurance related reimbursable expenses, and (iv) any amounts required underthe Company’s Employee Stock Purchase Plan (or successor plans).     6. Payments Upon Certain Terminations Not Involving a Change in Control.          (a) Termination by the Company Without Cause or Termination by Executive for GoodReason. In addition to the payments described in Section 5(f) and subject to Section 8 andSection 10, provided that Executive has resigned from the Board as contemplated by Section 3 and isin compliance with his obligations under Section 12, in the event the Employment Period ends byreason of termination of Executive’s employment by the Company Without Cause or by Executive forGood Reason, the Company shall (i) in accordance with Section 4(b), pay Executive any annual bonuspayable for services rendered in any annual bonus period for the year which had been completed inits entirety prior to the date on which the Employment Period ends and that had not previously beenpaid, (ii) continue to make Base Salary payments for a period 12 months following such terminationof employment (the period of time such payments are provided, the “**Severance Period**”), payable oversuch 12 month period on the regular payroll dates of the Company in accordance with the Company’spayroll practices as in effect on such termination date, and subject to applicable tax withholding.Such continued Base Salary payments shall commence upon the first payroll date following theeffective date of the Release Agreement referenced in Section 10, and the first continued BaseSalary payment shall cover the period between the termination date and such payment, provided,however, no amount shall be paid pursuant to this Section 6(a) unless, on or prior to thefifty-fifth (55th) day following the date of the Executive’s Separation from Service (as defined inSection 8 below), Executive has executed an effective Release Agreement and any applicablerevocation period has expired. Each installment payment made pursuant to this Section 6(a) (ii)shall be considered a separate payment for purposes of Section 409A of the Internal Revenue Code of1986, as amended (the “Code”) (including, without limitation, for purposes of Treasury Regulation
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Section 1.409A-2(b)(2)(iii)). In the event the Employment Period ends on or prior to December31, 2009 by reason of termination of Executive’s employment by the Company Without Cause or byExecutive for Good Reason, subject to Section 10, Executive shall receive a pro rata portion (basedupon the number of complete months within the fiscal year that shall have elapsed through the dateof Executive’s termination of employment) of any Annual Bonus that the Board determines Executivewould otherwise have received pursuant to Section 4(b) hereof for that calendar year had Executivebeen employed through the end of the year, which will be payable when and if such Annual Bonuswould otherwise have been payable in accordance with Section 4(b) had Executive’s employment notterminated, provided again that Executive resigned from the Board immediately as contemplated bySection 3 and has been in compliance with his obligations under Section 12 from the date oftermination through such payment dates. Notwithstanding the foregoing, Executive shall not beentitled to any pro-rated bonus unless the date of termination is after the first six months of thefiscal year in which it occurs. During the Severance Period, the Company shall continue to payhealth insurance premiums for continued health insurance coverage for Executive and his currentlyinsured dependents, provided that Executive makes a timely election to continue such coverage underCOBRA and is not otherwise eligible for health insurance through any subsequent employer. If thetermination is a result of Executive’s death or Disability, then Executive’s currently insureddependents shall upon their timely election be eligible to receive continued benefits pursuant toCOBRA.          (b) Duty to Mitigate. If Executive is reemployed for at least twenty (20) hours perweek 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 allfurther severance compensation payments under this Section 6 shall be decreased by the amount ofthe annual compensation received by Executive from the new employer.     7. Payments Upon Certain Terminations Involving a Change in Control.          (a) Statement of Intent. The Board recognizes that, as is the case with many publiclyheld corporations, the possibility of a change in control of the Company may exist and that theuncertainty and questions that it may raise among management could result in the departure ordistraction 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 dedicationto Executive’s assigned duties without the distraction arising from the possibility of a change incontrol of the Company.          (b) Accelerated Vesting. Notwithstanding anything to the contrary in Section 13 of theCompany’s 2006 Equity Incentive Award Plan (the “2006 Plan”), other than Sections 12.2(a) and12.2(e) of the 2006 Plan, in the event that a Change in Control (as defined in the 2006 Plan)occurs, and Executive’s employment with the Company is terminated by the Company Without Cause orby Executive for Good Reason at any time within the three (3) month period before the date of suchChange in Control or during the twelve (12) month period following the date of such Change inControl, one-hundred percent (100%) of the then-unvested shares of Questcor’s common stock subjectto each of Executive’s outstanding stock options and one-hundred percent (100%) of Executive’srestricted shares subject to vesting will become immediately vested and exercisable on the date ofsuch termination. The Company shall cause each option agreement evidencing the grant of stockoptions to Executive under the 2006 Plan (and successors to such plan) to reflect the acceleratedvesting provisions set forth in this Agreement.
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          (c) Cash Severance Upon Termination Without Cause or for Good Reason. Subject toSection 8 below, in the event that a Change in Control occurs, and Executive’s employment with theCompany is terminated by the Company Without Cause or by Executive for Good Reason at any timewithin 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, Executive will receive severancecompensation equal to the sum of (i) an amount equal to the product of his highest Base Salary inthe calendar year in which the Change in Control occurs (but in no event less than $400,000)multiplied by the number two (2), plus (ii) an amount equal to the product of his target bonus asestablished by the Board or its Compensation Committee for the year during which the terminationtakes place (or if such target bonus has not yet been established, the target bonus for the prioryear, but in no event using less than a 50% target percentage to establish the target bonus)multiplied by the number two (2), payable in accordance with Section 7(d) below.          For purposes of this Section 7(c), “Change in Control” shall mean and include the following:               (i) the acquisition, directly or indirectly, by any “person” or “group” (as those terms aredefined 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 securitiesentitled to vote generally in the election of directors (“voting securities”) of the Company thatrepresent 50% or more of the combined voting power of the Company’s then outstanding votingsecurities, other than:                    (x) an acquisition by a trustee or other fiduciary holding securities under any employeebenefit plan (or related trust) sponsored or maintained by the Company or any person controlled bythe Company or by any employee benefit plan (or related trust) sponsored or maintained by theCompany or any person controlled by the Company;                    (y) an acquisition of voting securities by the Company or a corporation owned, directly orindirectly by the shareholders of the Company in substantially the same proportions as theirownership of the stock of the Company; or                    (z) 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, asa result of which a majority of the incumbent directors are replaced by directors whose appointmentor election is not endorsed by a majority of the incumbent directors before the date of theappointment or election; or               (iii) the consummation by the Company (whether directly involving the Company or indirectlyinvolving 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 substantiallyall of the Company’s assets (provided, the sale of assets does not constitute a related partytransfer as set forth in Treasury Regulation §1.409A-3(i)(5)(viii)(B)), in each case other than atransaction which results in the Company’s voting securities outstanding immediately before thetransaction continuing to represent (either by remaining outstanding or by being converted intovoting 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 ofthe Company’s assets or otherwise succeeds to the business of the Company (the Company or suchperson, the
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“Successor Entity”) directly or indirectly, at least fifty percent (50%) of the combinedvoting power of the Successor Entity’s outstanding voting securities immediately after thetransaction, and
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               For purposes of subsection (i) of the definition of “Change in Control,” the calculation ofvoting power shall be made as if the date of the acquisition were a record date for a vote of theCompany’s shareholders, and for purposes of subsection (iii) of the definition of “Change inControl,” the calculation of voting power shall be made as if the date of the consummation of thetransaction were a record date for a vote of the Company’s shareholders.          (d) Payment Administration. Subject to Section 8, the severance payment under Section7(c) shall be made in a single lump sum on the release effective date of the Release Agreementreferenced in Section 10; provided, however, no amount shall be paid pursuant to this Section 7(d)unless, on or prior to the fifty-fifth (55th) day following the later of (i) the Executive’sSeparation from Service or (ii) the effective date of a Change in Control occurring within threemonths following Executive’s Separation from Service, Executive has executed an effective ReleaseAgreement and any applicable revocation period has expired. Payments under Section 7(c) shall be inaddition to the payments under Section 5(f) but shall be in lieu of, and not in addition to, thepayment of any cash severance payments that Executive may otherwise be entitled to under Section 6of this Agreement.          (e) No Duty to Mitigate. Executive’s reemployment at any time following thetermination of Executive’s employment shall have no effect on his right to collect severance underthis Section 7.     8. Section 409A Payment Delay.          (a) Payment Delay. Notwithstanding anything herein to the contrary, to the extent anypayments to Executive pursuant to Sections 6, 7, 9 or 11 are treated as non-qualified deferredcompensation subject to Section 409A of the Code, then (i) no amount shall be payable pursuant tosuch 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 anysuccessor provision thereto) (a “Separation from Service”), and (ii) if Executive, at the time ofhis Separation from Service, is determined by the Company to be a “specified employee” for purposesof Section 409A(a)(2)(B)(i) of the Code and the Company determines that delayed commencement of anyportion of the termination benefits payable to Executive pursuant to this Agreement is required inorder to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code (any suchdelayed commencement, a “Payment Delay”), then such portion of the Executive’s termination benefitsdescribed in Section 6, 7, 9 or 11, as the case may be, shall not be provided to Executive prior tothe earlier of (A) the expiration of the six-month period measured from the date of the Executive’sSeparation from Service, (B) the date of the Executive’s death or (C) such earlier date as ispermitted 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 toExecutive within 30 days following such expiration, and any remaining payments due under theAgreement 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 hisSeparation from Service shall made by the Company in accordance with the terms of Section 409A ofthe Code and applicable guidance thereunder (including without limitation Treasury RegulationSection 1.409A-1(i) and any successor provision thereto).          (b) Exceptions to Payment Delay. Notwithstanding Section 8(a), to the maximum extentpermitted by applicable law, amounts payable to Executive pursuant to Section 6, 7, 9 or 11, as thecase may be, shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with
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respect to separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with respectto short-term deferrals). Accordingly, the severance payments provided for in Section 6, 7, 9 and11 are not intended to provide for any deferral of compensation subject to Section 409A of the Codeto the extent (i) the severance payments payable pursuant to Section 6, 7, 9 or 11, as the case maybe, by their terms and determined as of the date of Executive’s Separation from Service, may not bemade later than the 15th day of the third calendar month following the later of (A) the end of theCompany’s fiscal year in which Executive’s Separation from Service occurs or (B) the end of thecalendar year in which Executive’s Separation from Service occurs, or (ii) (A) such severancepayments do not exceed an amount equal to two times the lesser of (1) the amount of Executive’sannualized compensation based upon Executive’s annual rate of pay for the calendar year immediatelypreceding the calendar year in which Executive’s Separation from Service occurs (adjusted for anyincrease during the calendar year in which such Separation from Service occurs that would beexpected to continue indefinitely had Executive remained employed with the Company) or (2) themaximum 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 severancepayments shall be completed no later than December 31 of the second calendar year following thecalendar year in which Executive’s Separation from Service occurs.          (c) Interpretation. To the extent the payments and benefits under this Agreement aresubject to Section 409A of the Code, this Agreement shall be interpreted, construed andadministered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of theCode and the Treasury Regulations thereunder (and any applicable transition relief under Section409A of the Code).     9. Excise Tax Gross-Up.          (a) Definitions. For purposes of this Section 9, the following terms shall have themeanings set forth below:               (i) “Excise Tax” shall mean the Excise Tax imposed by Section 4999 of the Code, together withany interest or penalties imposed with the respect to such Excise Tax.               (ii) “Parachute Value” of a Payment shall mean the present value as of the date of the Changeof Control for purposes of Section 280G of the Code of the portion of such Payment that constitutesa “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm (as definedbelow) for purposes of determining whether and to what extent the Excise Tax will apply to suchPayment.               (iii) A “Payment” shall mean any payment or distribution in the nature of compensation (withinthe meaning of Section 280G(b)(2) of the Code) to or for the benefit of Executive, whether paid orpayable pursuant to this Agreement or otherwise.               (iv) The “Safe Harbor Amount” means 2.99 times Executive’s “base amount,” within the meaningof Section 280G(b)(3) of the Code.               (v) “Value” of a Payment shall mean the economic present value of a Payment as of the date ofthe Change of Control for purposes of Section 280G of the Code, as determined by the AccountingFirm using the discount rate required by Section 280G(d)(4) of the Code.
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          (b) Anything in this Agreement to the contrary notwithstanding and except as set forth below,in the event it shall be determined that any Payment would be subject to the Excise Tax, thenExecutive shall be entitled to receive an additional payment (“Gross-Up Payment”) in an amount suchthat, after payment by Executive of all taxes (and any interest or penalty imposed with respect tosuch taxes), including, without limitation, any income taxes (and any interest and penaltiesimposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retainsan amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments; provided,however, that if the aggregate Parachute Value of all Payments does not exceed 125% of the SafeHarbor Amount, then no Gross-Up Payment shall be made to the Executive and the amounts payableunder this Agreement shall be reduced so that the Parachute Value of all Payments, in theaggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, ifapplicable, shall be made by first reducing the Payments which are cash and thereafter the noncashPayments, unless Executive shall elect another method of reduction by written notice to the Companyprior to the Change of Control.          (c) Subject to the provisions of Section 9(e), all determinations required to be made underthis Section 9, including whether and when a Gross-Up Payment is required and the amount of suchGross-Up Payment and the assumptions to be utilized in arriving at such determination, shall bemade by a nationally recognized accounting firm designated by the Company immediately prior to theChange of Control (the “Accounting Firm”) which shall provide detailed supporting calculations bothto the Company and Executive within fifteen (15) business days of the receipt of notice fromExecutive that there has been a Payment, or such earlier time as is requested by the Company. Inthe event that the Accounting Firm is serving as accountant or auditor for the individual, entityor group effecting the Change of Control, the Company shall appoint another nationally recognizedaccounting firm to make the determinations required hereunder (which accounting firm shall then bereferred to as the Accounting Firm hereunder). Any determination by the Accounting Firm shall bebinding upon the Company and Executive. All fees and expenses of the Accounting Firm shall be bornesolely by the Company.          (d) Subject to Section 8 above, any Gross-Up Payment, as determined pursuant to this Section9, shall be paid by the Company to Executive as and when the Excise Tax is incurred on a Payment,provided, however, such date shall be no later than the end of Executive’s taxable year followingthe taxable year in which the Executive remits payment of the Excise Tax (as provided in TreasuryRegulation Section 1.409A-3(i)(1)(v)). As a result of the uncertainty in the application of Section4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it ispossible that Gross-Up Payments which will not have been made by the Company should have been made(“Underpayment”), consistent with the calculations required to be made hereunder. In the event thatthe Company exhausts its remedies pursuant to Section 9(e) and Executive thereafter is required tomake a Payment of any Excise Tax, the Accounting Firm shall determine the amount of theUnderpayment that has occurred and any such Underpayment shall be promptly paid by the Company toor for the benefit of Executive.          (e) Executive shall notify the Company in writing of any claim by the Internal Revenue Servicethat, if successful, would require the Payment by the Company of the Gross-Up Payment. Suchnotification shall be given as soon as practicable but no later than ten (10) business days afterExecutive is informed in writing of such claim and shall apprise the Company of the nature of suchclaim and the date on which such claim is requested to be paid. Executive shall not pay such claimprior to the expiration of the 30-day period following the date on which Executive gives suchnotice to the Company (or such shorter period ending on the date that any Payment of taxes with
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respect to such claim is due). If the Company notifies Executive in writing prior to theexpiration of such period that it desires to contest such claim, Executive shall:               (i) give the Company any information reasonably requested by the Company relating to suchclaim,               (ii) take such action in connection with contesting such claim as the Company shall reasonablyrequest in writing from time to time, including, without limitation, accepting legal representationwith respect to such claim by an attorney reasonably selected by the Company,               (iii) cooperate with the Company in good faith in order to effectively contest such claim, and               (iv) permit the Company to participate in any proceedings relating to such claim;               provided, however, that the Company shall bear and pay directly all costs and expenses(including additional interest and penalties) incurred in connection with such contest and shallindemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income or othertax (including interest and penalties with respect thereto) imposed as a result of suchrepresentation and payment of costs and expenses. Without limitation on the foregoing provisions ofthis Section 9(e), the Company shall control all proceedings taken in connection with such contestand, at its sole option, may pursue or forego any and all administrative appeals, proceedings,hearings and conferences with the taxing authority in respect of such claim and may, at its soleoption, either direct Executive to pay the tax claimed and sue for a refund or contest the claim inany permissible manner, and Executive agrees to prosecute such contest to a determination beforeany administrative tribunal, in a court of initial jurisdiction and in one or more appellatecourts, as the Company shall determine; provided, however, that if the Company directs Executive topay such claim and sue for a refund, the Company shall indemnify and hold Executive harmless, on anafter-tax basis, from any Excise Tax or income or other tax (including interest or penalties withrespect thereto) imposed with respect to such payment; and further provided that any extension ofthe statute of limitations relating to payment of taxes for the taxable year of Executive withrespect to which such contested amount is claimed to be due is limited solely to such contestedamount. Furthermore, the Company’s control of the contest shall be limited to issues with respectto which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle orcontest, as the case may be, any other issue raised by the Internal Revenue Service or any othertaxing authority.          (f) Notwithstanding any other provision of this Section 9, the Company may, in its solediscretion, withhold and pay over to the Internal Revenue Service or any other applicable taxingauthority, for the benefit of Executive, all or any portion of any Gross-Up Payment, and Executivehereby consents to such withholding.     10. Release.          (a) Execution of Release. As a condition of Executive’s right to receive the paymentsdescribed in Sections 6(a), 7(c) and 9, Executive shall within 21 days following Executive’stermination of employment execute and deliver to the Company a full and complete release of allclaims, known and unknown, that Executive may have against the Company and its related past andpresent entities, officers, directors, shareholders, agents, representatives, successors andemployees,
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such release to be substantially in the form of the release attached hereto as ExhibitA (the “**Release Agreement**”); provided, however, that any conflict between the terms of thisAgreement and such form of release attached as Exhibit A shall be resolved in favor ofthis Agreement.          (b) Effect of Failure. In the event Executive fails to deliver or revokes the releasereferred to in Section 10(a) above, Executive shall not be entitled to any of the paymentsdescribed in Section 6(a), 7(c) or 10 above. In the event that, prior to the end of the SeverancePeriod, Executive breaches any of his obligations under this Agreement, including Sections 10 or 12hereof, the Company’s obligations to provide the payments under Sections 6(a), 7(c) and 9 shallthereupon cease and the Company shall be entitled to recover from Executive any and all amountstheretofore paid to Executive pursuant to Section 6(a), 7(c) or 9.     11. Death and Disability. In the event the Employment Period ends as a result ofExecutive’s death, this Agreement shall automatically terminate and Executive’s estate shall beentitled to receive (i) the amounts described in Section 5(f), (ii) any annual bonus payable forservices rendered in any annual bonus period for the year which had been completed in its entiretyprior to the date on which the Employment Period ends and that had not previously been paid, and(iii) a pro rata portion (based upon the number of complete months within the fiscal year thatshall have elapsed through the date on which the Employment Period ends) of any annual bonus thatthe Board determines Executive would otherwise have received pursuant to Section 4(b) for thatcalendar year had Executive been employed through the end of the year. The bonus amounts underclauses (ii) and (iii) will be payable to Executive’s estate when and if such annual bonuses wouldotherwise have been payable, in accordance with Section 4(b), had the Employment Period not ended.Notwithstanding the foregoing, Executive’s estate shall not be entitled to any pro-rated bonusunder clause (iii) unless the date the Employment Period ends is after the first six months of thefiscal year in which the Employment Period ends. In the event of Executive’s Disability, occurringduring the term of his employment, if such Disability constitutes a “Section 409A Disability”(defined below), the Company shall, subject to Section 8 above, pay Executive in a lump sum paymentan amount equal to ninety (90) days of Executive’s salary within ten (10) days following the datethat the Company determines (with the consultation of an examining medical professional) that suchSection 409A Disability has occurred. Additionally, Executive shall be entitled to his annualbonus, or pro rata portion thereof, as applicable, as described under clauses (ii) and (iii) above,except that the payments shall be to Executive and not his estate.     For purposes of this Agreement, “Section 409A Disability” shall be defined as the Executive’sinability to engage in any substantial gainful activity by reason of (i) any medically determinablephysical or mental impairment that can be expected to result in death or last for a continuousperiod of not less than 12 months; or (ii) any medically determinable physical or mental impairmentthat can be expected to result in death or last for a continuous period of not less than 12 months,while receiving income replacement benefits for a period of not less than three months under anaccident and health plan otherwise covering the Company’s employees.     12. Proprietary Information.          (a) Obligation to Maintain Confidentiality. Executive acknowledges that the continuedsuccess of the Company and its subsidiaries or affiliates depends upon the use and protection ofproprietary information. Executive further acknowledges that the proprietary information obtainedby him during the course of his employment with the Company or any of its subsidiaries oraffiliates concerning the business or affairs of the Company, or any of its subsidiaries
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or affiliates is the property of the Company or such subsidiaries or affiliates, includinginformation concerning acquisition opportunities in or reasonably related to the Company’s businessor industry. Therefore, Executive agrees that he will not disclose to any unauthorized person oruse for his own account any proprietary information, whether or not such information is developedby him, without the Board’s written consent, unless and to the extent that the proprietaryinformation (i) becomes generally known to the public other than as a result of Executive’s acts oromissions to act or (ii) is required to be disclosed pursuant to any applicable law or court order.Executive shall take reasonable and appropriate steps to safeguard proprietary information and toprotect it against disclosure, misuse, espionage, loss and theft. Executive shall deliver to theCompany upon his termination of employment, and at any subsequent time the Company may request, allmemoranda, notes, plans, records, reports, computer tapes, printouts and software and otherdocuments and data (and copies thereof) embodying or relating to the proprietary information, WorkProduct (as defined below) or the business of the Company or any of its subsidiaries or affiliates(including, without limitation, all acquisition prospects, lists and contact information) which hemay then possess or have under his control, and shall destroy any electronic copies of suchmaterials and confirm such destruction in writing to the Company.          (b) Ownership of Property. Executive acknowledges that all discoveries, concepts,ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs,analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or notincluding any confidential information) and all registrations or applications related thereto, allother proprietary information and all similar or related information (whether or not patentable)that relate to the Company’s or any of its subsidiaries’ or affiliates’ (including theirpredecessors prior to being acquired by the Company) actual or anticipated business, research anddevelopment, or existing or future products or services and that are conceived, developed,contributed to, made, or reduced to practice by Executive (either solely or jointly with others)while employed by the Company or any of its subsidiaries or affiliates, including any of theforegoing that constitutes any proprietary information or records (“ **Work Product**”), belong to theCompany or such subsidiary or affiliate, and Executive hereby assigns, and agrees to assign, all ofthe above Work Product to the Company or to such subsidiary or affiliate; provided ,however , that the provisions of this Agreement requiring assignment of Work Product to theCompany do not apply to any invention which qualifies under the provisions of California Labor CodeSection 2870, the text of which is set forth in Exhibit B hereto. Any copyrightable workprepared in whole or in part by Executive in the course of his work for any of the foregoingentities shall be deemed a “work made for hire” under the copyright laws, and the Company or suchsubsidiary or affiliate shall own all rights therein. To the extent that any such copyrightablework is not a “work made for hire,” Executive hereby assigns and agrees to assign to the Company orsuch subsidiary or affiliate all right, title, and interest, including without limitation,copyright in and to such copyrightable work. Executive shall perform all actions reasonablyrequested by the Board, at the Company’s sole expense, to establish and confirm the Company’s orsuch subsidiary’s or affiliate’s ownership (including, without limitation, assignments, consents,powers of attorney, and other instruments) in Work Product and copyrightable work identified by theBoard.          (c) Third Party Information. Executive understands that the Company and itssubsidiaries and affiliates will receive from third parties confidential or proprietary information(“**Third Party Information**”) subject to a duty on the Company’s and its subsidiaries’ or affiliates’ part to maintain the confidentiality of such information and touse it only for certain limited purposes. During Executive’s employment with the Company andthereafter, and without in any way limiting the provisions of Section 7(a) above, Executive willhold Third Party Information in the strictest
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confidence and will not disclose to anyone (other than personnel and consultants of the Company or its subsidiaries, affiliates, advisors orfinancing sources who need to know such information in connection with their work for the Companyor its subsidiaries, affiliates, advisors or financing sources) or use, except in connection withhis work for the Company or its subsidiaries, affiliates, advisors or financing sources, ThirdParty Information unless expressly authorized by the Board in writing.          (d) Use of Information of Prior Employers. During Executive’s employment with theCompany, Executive will not improperly use or disclose any confidential information or tradesecrets, if any, of any former employers or any other person to whom Executive has an obligation ofconfidentiality, and will not bring onto the premises of the Company or any of its subsidiaries oraffiliates any confidential information or trade secrets of any former employer or any other personto whom Executive has an obligation of confidentiality unless consented to in writing by the formeremployer or person.     13. Injunctive Relief with Respect to Covenants. Each party acknowledges and agreesthat the agreements and covenants of such party under Section 12 hereof relate to special, uniqueand extraordinary matters and that a violation or threatened violation of any of the terms of suchagreements and covenants will cause the other party irreparable injury for which adequate remediesare not available at law. Therefore, each party agrees that the other party shall be entitled to aninjunction, restraining order or such other equitable relief (without the requirement to post bond)restraining the first party from committing any violation of the agreements and covenants containedin Section 12. These injunctive remedies are cumulative and are in addition to any other rights andremedies either party may have under this Agreement.     14. Miscellaneous.          (a) Survival. To the extent necessary to give effect to such provisions, theprovisions of this Agreement shall survive the termination hereof, whether such termination shallbe by expiration of the Employment Period or otherwise.          (b) Binding Effect. This Agreement shall be binding on, and shall inure to the benefitof, the Company and any person or entity that succeeds to the interest of the Company (regardlessof whether such succession occurs by operation of law) by reason of the sale of all or a portion ofthe Company’s equity securities, a merger, consolidation or reorganization involving the Companyor, unless the Company otherwise elects in writing, a sale of all or a portion of the assets of thebusiness 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 itsrights, 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 orsubstantially all of its business or assets.          (d) Entire Agreement. This Agreement constitutes the entire agreement between theparties hereto with respect to the matters referred to herein and supersedes any and all prioragreements, whether written or oral. Executive’s Offer Letter dated June 2, 2008 is hereby superseded and of no further force or effect, and no other agreement relating to theterms of Executive’s employment by the Company, oral or otherwise, shall be binding between theemployee
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and the Company or any other party unless it is in writing and signed by the party againstwhom enforcement is sought. There are no promises, representations, inducements or statementsbetween the parties other than those that are expressly contained herein. Executive acknowledgesthat he is entering into this Agreement of his own free will and accord, and with no duress, thathe has read this Agreement and that he understands it and its legal consequences.          (e) Severability; Reformation. In the event that one or more of the provisions of thisAgreement 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 affectedthereby. In the event any covenant contained herein is not enforceable in accordance with itsterms, 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 makeit enforceable in a manner that provides as nearly as possible the result intended by thisAgreement 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 ofany 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 ofthis Agreement shall be implied from any course of dealing between the parties hereto or from anyfailure by either party hereto to assert its or his rights hereunder on any occasion or series ofoccasions.          (g) Notices. Any notice required or desired to be delivered under this Agreement shallbe in writing and shall be delivered personally, by courier service, by registered mail, returnreceipt requested, or by email and shall be effective upon actual receipt by the party to whichsuch notice shall be directed, and shall be addressed as follows (or to such other address as theparty entitled to notice shall hereafter designate in accordance with the terms hereof):If to the Company:Questcor Pharmaceuticals, Inc.