Lowell is correct.

create procedure TestOut

@P1 varchar(256),

@p2 varchar(MAX) OUTPUT

as

if @p1 = 'Y'

set @p2 = 'Yes'

else

set @p2 = 'Not Y'

go

declare @p2 varchar(max)

exec Testout 'Y', @p2 output

if @p2 IS NULL

print 'nothing'

else

print 'P2 is ' + @p2

drop procedure TestOut;