**EXHIBIT10.44****SEVERANCE AGREEMENT**     This Severance Agreement (the “Agreement”) is made and entered into by and between QuestcorPharmaceuticals, Inc. (the “Company”) and David Medeiros (“Medeiros”) (collectively referred to asthe “Parties”). The Agreement is effective as of July 10, 2003.     **WHEREAS***,*the Company has employed Medeiros as Vice President, Manufacturing and has determinedthat Medeiros holds a key position;     **WHEREAS**, the Company desires to (1) secure and retain the services of Medeiros and to provideinducement for him to remain in such employment, (2) to make possible full work productivity byassuring Medeiros’ morale and peace of mind with respect to future security, and (3) to provide ajust means for terminating Medeiros’ services at such time as the Company may desire to terminatehis employ;     **NOW THEREFORE**, in consideration of the promises and mutual covenants set forth herein, theParties agree as follows:**I.      SEVERANCE OBLIGATION**     Medeiros will be entitled to severance payments and certain benefits as set forth in § I.A.below, if his employment is terminated by the Company or any successor entity (collectivelyreferred to as the “Company”) without “Cause” (as defined in § II.B, below) or if he dies orbecomes disabled (as set forth in § II.A below).          A. Payment and Benefits. In the event that the Company becomes obligated to Medeirosin accordance with § I, above, and subject to his performance of his obligations hereunder, theCompany will pay him wages and benefits through his final day of employment in accordance with itsusual payroll practices. Additionally, the Company will be obligated to Medeiros as follows.          1. Severance Payments. Medeiros will be entitled to severance payments, at hislast effective rate of pay, made on the Company’s regular payroll dates (the “SeverancePayments”), consistent with the Company’s then current payroll practice, for a period offour months (the “Severance Period”). The first Severance Payment will be made to Medeiroson the first regular payroll date following Medeiros’ termination of employment.          2. Continuation of Benefits. Medeiros will be entitled to continuation ofmedical, dental and vision insurance, if he timely elects continuing coverage under COBRA.Medeiros will not accrue additional benefits, such as vacation, holiday pay or stock optionvesting during the Severance Period.B. Limit on Payments By Company.     1. Parachute Payment Limitation. Notwithstanding anything to thecontrary in this Agreement, the payments and benefits otherwise provided inparagraphs I.A.1 & I.A.2 of this Agreement shall be reduced if and to the extentthat such payments and benefits, when added to any payments and benefits provided bythe Company other than under this Agreement, would result in any
 

 
such payments being nondeductible to the Company or would subject Medeiros to anexcise tax pursuant to the golden parachute payment provisions of Section 280G orSection 4999 of the Internal Revenue Code of 1986, as amended. Any reduction ofpayments and benefits under this Agreement resulting from the foregoing limitationsshall be applied to the payments and benefits due to be otherwise provided toMedeiros later in time.**II.      TERMINATION OF EMPLOYMENT.**A.     Death or Disability.     1.     Any rights under § I of this Agreement, which have already accrued toMedeiros prior to his death or disability, will survive his death or disability.     2.     If Medeiros dies while employed by the Company, the employment relationshipwill terminate as of the date of death.     3.     If Medeiros becomes disabled for purposes of any long-term disability planof the Company for which Medeiros is eligible, or, in the event that there is nosuch plan, if Medeiros, by virtue of ill health or other disability, exhausts anyleave available to him under Family Medical Leave Act or under state law, ifapplicable, and is unable to perform substantially and continuously the dutiesassigned to him, then the Company shall have the right, to the extent permitted bylaw, to terminate Medeiros’ employment.     4.     Upon termination of Medeiros’ employment due to death or disability,Medeiros (or Medeiros’ estate or beneficiaries in the case of his death) will beentitled to receive any salary earned and other benefits earned and accrued byMedeiros prior to the date of termination and shall have no further rights to anyother compensation, benefits, or other rights under this Agreement, unless suchright survives the termination of this Agreement by its express terms and except asotherwise provided in the plans and policies of the Company.B.     Cause. For purposes of this Agreement, Cause means:     1.     Medeiros’ conviction for commission of a felony or a crime involving moralturpitude;     2.     Medeiros’ commission of any act of theft, embezzlement, misappropriation,willful misconduct, willful or gross neglect, or fraud against the Company;     3.     Medeiros’ willful and continued failure to substantially perform his jobduties (other than such failure resulting from Medeiros’ incapacity due to physicalor mental illness), which failure is not remedied within ten (10) days after writtendemand for substantial performance is delivered by the Company which specificallyidentifies the manner in which the Company believes that Medeiros has notsubstantially performed Medeiros’ duties; or     4.     Medeiros’ repeated failure to adhere to the directions of the CEO or CFO, toadhere to the Company’s policies and practices or to devote substantially all of hisbusiness time and efforts to the Company.
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     In the event Medeiros is terminated for Cause pursuant to this section, he shall have theright to receive his compensation through the effective date of termination. Medeiros shall haveno further right to receive compensation or other consideration from the Company, or have any otherremedy whatsoever against the Company, as a result of this Agreement or the termination of Medeirospursuant to this section.     C.     At Will Employment. The Parties expressly acknowledge that nothing in thisAgreement alters the fundamental nature of Medeiros’ at-will employment with the Company.Medeiros’ employment may be terminated at any time by the Company or by Medeiros, and any terms orconditions of Medeiros’ employment may be modified, with or without Cause, and with or withoutnotice.**III.**     **CHANGE OF CONTROL**     Should a “Change of Control” (as defined by §III.A. below) result in Medeiros’ termination,and should a severance plan with terms more favorable than those set forth in this Agreement beoffered as a consequence of that Change of Control, the more favorable severance plan willsupercede this Agreement.     A.     Change of Control: For the purposes of this Agreement a “Change of Control” shallbe deemed to have occurred if:     1.     any individual, firm, corporation, or other entity, or any group (as defined in §13(d)(3) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), other thanthe Company becomes directly or indirectly, the beneficial owner (as defined in the GeneralRules and Regulations of the Securities and Exchange Commission with respect to §§13(d)(1)and 13(g) of the 1934 Act) of more than fifty percent (50%) of the then outstanding sharesof the Company’s capital stock entitled to vote generally in the election of the board ofdirectors of the Company; or     2.     the stockholders of the Company approve a definitive agreement for any of thefollowing:     a. the merger or other business combination of the Company with or into anothercorporation, pursuant to which the stockholders of the Company, collectively or anyof them, do not own, immediately after the transaction, more than 50% of the votingpower of the corporation that survives; or     b. the sale, exchange, or other disposition of all or substantially all of theassets of the Company.**IV.**     **ARBITRATION OF CONTROVERSIES.**     A.     Agreement to Arbitrate. In exchange for the promises contained in this Agreement,the Parties agree to submit any and all disputes, claims or controversies arising out of, orrelating to, this Agreement, to final and binding arbitration before the American ArbitrationAssociation in accordance with its rules relating to the resolution of employment disputes, ineffect at the time of the demand for arbitration. **THE COMPANY AND MEDEIROS UNDERSTAND ANDAGREE THAT THIS IS AN AGREEMENT TO ARBITRATE SUCH DISPUTES, CLAIMS OR CONTROVERSIES IN LIEU OF AJURY TRIAL OR OTHER COURT TRIAL, AND HEREBY WAIVE THE RIGHT TO A JURY TRIAL.** Accordingly, theParties agree as follows:
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     1.     This agreement to arbitrate may be enforced by any court of competent jurisdiction,and the party seeking enforcement shall be entitled to an award of all costs, fees andexpenses, including attorney’s fees, to be paid by the party against whom enforcement isordered.     2.     The arbitration shall be held at the office of the American Arbitration Associationin Alameda County, California before a panel of three arbitrators.     3.     The award or decision of the arbitrator shall be final and binding on the Partiesand judgment on the arbitrator’s decision may be entered in any court having jurisdiction.Each of the Parties consents to the exercise of personal jurisdiction over such person bysuch court and to the propriety of venue of such court for the purpose of carrying out thisprovision; and each waives any objections that such person would otherwise have to the same.     4.     Any costs payable to the American Arbitration Association in connection with thearbitration, including the costs and fees of the arbitrator, shall be advanced by theCompany, but the arbitrator shall make such orders with respect to attorneys’ fees and othercosts and expenses related to the arbitration as the arbitrator deems just; provided thatthe arbitrator shall award to any Party such attorneys’ fees and/or other costs as may berequired by statute.     5.     This agreement to arbitrate may only be modified by a writing signed by theCompany’s CEO and Medeiros.     6.     To the extent any provision of this agreement to arbitrate would, under applicablelaw, be unenforceable or cause this agreement to arbitrate to be unenforceable in itsentirety, it is the intent of the Parties that the agreement to arbitrate be enforced to theextent allowed by law and reformed and interpreted to consistent with the applicable law.     B.     Intended Beneficiaries. Employees, officers, directors and anyone else acting asan agent of the Company are intended beneficiaries of this agreement to arbitrate and the Partiesagree that any claim against an intended beneficiary of this agreement to arbitrate, which arisesout of or relates to this Agreement will be subject to this agreement to arbitrate.**V.**     **ENTIRE AGREEMENT; NO ORAL MODIFICATION.**     This Agreement constitutes the entire agreement and understanding between the Parties withrespect to the subject matter hereof and except as expressly set forth herein, supersedes any andall other agreements, communications, understandings, promises, stipulations, and arrangements,whether any of the same are either oral or in writing, or express or implied, between the Partieshereto with respect to the subject matter hereof, including, but not limited to, any implied-in-lawor implied-in-fact covenants or duties relating to employment or the termination of employment.     This Agreement may not be modified other than in a writing executed by both Parties andstating its intent to modify or supersede this Agreement.**VI.**     **SUCCESSORS; BINDING AGREEMENT**     The Company will require any successor or assign (whether direct or indirect, by purchase,merger, consolidation, or otherwise) to all or substantially all of the business and/or assets ofthe Company to expressly assume and agree to perform this Agreement in the same manner and to thesame extent that Company would be required to perform it is no such
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succession or assignment had taken place. As used in this Agreement, “Company” shall mean theCompany hereinbefore defined and any successor or assign to its business or assets as aforesaidwhich assumes and agrees to perform this Agreement by operation of law, or otherwise.**VII.**     **HEADINGS.**     The headings in this Agreement are for convenience only, and shall not be given any affect inthe interpretation of this Agreement.**VIII.**     **CHOICE OF LAW.**     The Parties agree that this Agreement shall be construed and enforced in accordance with theinternal laws of the State of California, without regard to its choice of laws principles.**IX.**     **NOTICES.**     Any notice to be given to the Company under the terms of this Agreement shall be addressed tothe Company at the address of its principal place of business, and any notice to be given toMedeiros shall be addressed to Medeiros’ home address last shown on the records of the Company, orat such other address as either Party may hereafter designate in writing to the other. Any suchnotice shall be in writing and shall be deemed to have been duly given upon personal delivery or onthe third calendar day after it has been enclosed in a properly sealed and addressed envelope,certified, and deposited (postage and certification fee prepaid) in a post office or branch postoffice regularly maintained by the United States Government.**X.**     **SEVERABILITY.**     Should any portion of this Agreement, other than Section I or II be determined by anyarbitrator or court of competent jurisdiction to be invalid, the remainder of the agreement willremain in full force and given an effect a near as possible to the original intent of the Parties.**XI.**     **WAIVER.**     Either Party’s failure to enforce any provision or provisions of this Agreement shall not inany way be construed as a waiver of any such provision or provisions, or prevent that Partythereafter from enforcing each and every other provision of this Agreement.**XII.**     **COUNTERPARTS.**     This Agreement may be executed in several counterparts, each of which shall be deemed to be anoriginal, but all of which together will constitute one and the same instrument.
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     IN WITNESS WHEREOF, the Parties hereto acknowledge that they have read this Agreement, fullyunderstand it, and have freely and voluntarily entered into it.      **Questcor Pharmaceuticals, Inc.**