EXHIBIT 10.46 (E)
MEDICIS 2006 INCENTIVE AWARD PLAN
STOCK OPTION GRANT NOTICE
     Medicis Pharmaceutical Corporation, a Delaware corporation (the “Company”),
pursuant to the its 2006 Incentive Award Plan attached hereto as Exhibit C (the
“Plan”), hereby grants to the individual listed below (the “Participant”), an
option to purchase the number of shares of the Company’s Class A common stock,
par value $0.014 per share (“Stock”), set forth below (the “Option”). This
Option is subject to all of the terms and conditions set forth herein and in the
Stock Option Agreement attached hereto as Exhibit A (the “Stock Option
Agreement”) and the Plan, each of which are incorporated herein by reference.
Unless otherwise defined herein or the Stock Option Agreement, the terms defined
in the Plan shall have the same defined meanings in this Stock Option Grant
Notice (the “Grant Notice”).

         
Participant:
       
 
       
 
       
Grant Date:
       
 
       
 
       
Exercise Price per Share:
  $    
 
       
 
       
Total Number of Shares
       
Subject to the Option:
       
 
       
 
       
Expiration Date:
       
 
       

     
Type of Option:
  o       Incentive Stock Option            o       Non-Qualified Stock Option  
Vesting Schedule:
  Subject to the terms and conditions of the Plan, this Grant Notice and the
Stock Option Agreement, this Option shall vest and become exercisable as to:

  (i)   10% of the total number of shares of Stock subject to the Option on
                                        , 20                     ,     (ii)  
10% of the total number of shares of Stock subject to the Option on
                                        , 20                     ,     (iii)  
20% of the total number of shares of Stock subject to the Option on
                                        , 20                     ,     (iv)  
30% of the total number of shares of Stock subject to the Option on
                                        , 20                      , and     (v)
  30% of the total number of shares of Stock subject to the Option on
                                        , 20                     .

      Notwithstanding the foregoing, the Option shall become fully vested and
exercisable immediately prior to the occurrence of a Change in Control. Except
as otherwise provided in a written agreement between the Participant and the
Company or any Subsidiary, in no event shall this Option vest and become
exercisable for any additional shares of Stock following the Participant’s
Termination of Employment, Termination of Consultancy, or Termination of
Directorship, as applicable.

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     By his or her signature below, the Participant agrees to be bound by the
terms and conditions of this Grant Notice, the Stock Option Agreement and the
Plan. The Participant has reviewed this Grant Notice, the Stock Option Agreement
and the Plan in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Grant Notice and fully understands all
provisions of this Grant Notice, the Stock Option Agreement and the Plan. The
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under or relating to this Grant Notice, the Stock Option Agreement and the Plan.

              MEDICIS PHARMACEUTICAL CORPORATION:   PARTICIPANT:  
 
           
By:
       /S/ Mark A. Prygocki, Sr.   By:    
 
           
Print Name:
       Mark A. Prygocki, Sr.   Print Name:    
 
           
Title:
           
Address:
  8125 North Hayden Road   Address:    
 
           
 
  Scottsdale, Arizona 85258-2463        
 
           
 
         
 
           
Attachments:
  Stock Option Agreement (Exhibit A)        
 
  Form of Exercise Notice (Exhibit B)        
 
  Medicis 2006 Incentive Award Plan (Exhibit C)        
 
  Medicis 2006 Incentive Award Plan Prospectus (Exhibit D)        

 

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EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
     Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which
this Stock Option Agreement (this “Agreement”) is attached, Medicis
Pharmaceutical Corporation, a Delaware corporation (the “Company”), has granted
to the Participant an option under the Medicis 2006 Incentive Award Plan (the
“Plan”) to purchase the number of shares of the Company’s Class A common stock,
par value $0.014 per share (“Stock”), indicated in the Grant Notice.
ARTICLE I
GENERAL
     1.1 Defined Terms. Wherever the following terms are used in this Agreement
they shall have the meanings specified below, unless the context clearly
indicates otherwise. Capitalized terms not specifically defined herein shall
have the meanings specified in the Grant Notice or, if not defined therein, the
Plan.
          “Misconduct” shall mean (i) the commission of any act of fraud,
embezzlement or dishonesty by Participant that adversely affects the Company or
any Subsidiary, (ii) any unauthorized use or disclosure by Participant of
confidential information or trade secrets of the Company or any Subsidiary that
adversely affects the Company or any Subsidiary, (iii) any willful and continued
failure by Participant to substantially perform his or her duties with the
Company or any Subsidiary (other than any such failure resulting from
Participant’s incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to Participant by the Board,
which demand specifically identifies the manner in which the Board believes that
Participant has not substantially performed such duties, or (iv) any willful and
continued failure by Participant to substantially follow and comply with the
specific and lawful directives of the Board, as reasonably determined by the
Board (other than any such failure resulting from Participant’s incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to Participant by the Board, which demand specifically
identifies the manner in which the Board believes that Participant has not
substantially performed such directives. The foregoing definition shall not in
any way preclude or restrict the right of the Company (or any Subsidiary) to
discharge or dismiss Participant or any other person in the service of the
Company (or any Subsidiary) for any other acts or omissions, but such other acts
or omissions shall not be deemed, for purposes of this Agreement, to constitute
grounds for termination for Misconduct.
     1.2 Incorporation of Terms of Plan. The Option is subject to the terms and
conditions of the Plan, which are incorporated herein by reference.
ARTICLE II
GRANT OF OPTION
     2.1 Grant of Option. In consideration of the Participant’s past and/or
continued employment with or service to the Company or a Parent or Subsidiary
and for other good and valuable consideration, effective as of the Grant Date
set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants
to the Participant the Option to purchase any part or all of an aggregate of the
number of shares of Stock set forth in the Grant Notice, upon the terms and
conditions set forth in the Plan and this

 

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Agreement. If the Option is designated as an Incentive Stock Option in the Grant
Notice, the Option shall be an Incentive Stock Option to the maximum extent
permitted by law.
     2.2 Exercise Price. The exercise price of the shares of Stock subject to
the Option shall be as set forth in the Grant Notice, without commission or
other charge; provided, however, that the exercise price per share of Stock
subject to the Option shall not be less than 100% of the Fair Market Value of a
share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option
is designated as an Incentive Stock Option and the Participant owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the exercise price per share of
Stock subject to the Option shall not be less than 110% of the Fair Market Value
of a share of Stock on the Grant Date.
     2.3 Consideration to the Company; No Employment Rights. In consideration of
the grant of the Option by the Company, the Participant agrees to render
faithful and efficient services to the Company or any Parent or Subsidiary.
Nothing in the Plan or this Agreement shall confer upon the Participant any
right to continue in the employ or service of the Company or any Parent or
Subsidiary or shall interfere with or restrict in any way the rights of the
Company and its Parents and Subsidiaries, which rights are hereby expressly
reserved, to discharge or terminate the employment or services of the
Participant at any time for no reason or for any reason whatsoever, with or
without cause, except to the extent expressly provided otherwise in a written
agreement between the Company, a Parent or a Subsidiary and the Participant.
ARTICLE III
PERIOD OF EXERCISABILITY
     3.1 Commencement of Exercisability.
          (a) Subject to Sections 3.2, 3.3, and 7.9, the Option shall become
vested and exercisable in such number of shares of Stock and at such times as
are set forth in the Grant Notice.
          (b) No portion of the Option which has not become vested and
exercisable at the date of the Participant’s Termination of Employment,
Termination of Directorship or Termination of Consultancy, as applicable, shall
thereafter become vested and exercisable, except as may be otherwise provided by
the Administrator or as set forth in a written agreement between the Company and
the Participant.
     3.2 Duration of Exercisability. The installments provided for in the
vesting schedule set forth in the Grant Notice are cumulative. Each such
installment which becomes vested and exercisable pursuant to the vesting
schedule set forth in the Grant Notice shall remain vested and exercisable until
it becomes unexercisable under Section 3.3.
     3.3 Expiration of Option. Subject to earlier termination pursuant to
Section 5.1, the Option may not be exercised to any extent by anyone after the
first to occur of the following events:
          (a) The expiration of ten years from the Grant Date;
          (b) If this Option is designated as an Incentive Stock Option and the
Participant owned (within the meaning of Section 424(d) of the Code), on the
Grant Date, more than 10% of the total combined voting power of all classes of
stock of the Company or any “subsidiary corporation” of the

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Company or any “parent corporation” of the Company (each within the meaning of
Section 424 of the Code), the expiration of five years from the Grant Date;
          (c) The expiration of 90 days following the date of the Participant’s
Termination of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, unless such Termination of Employment, Termination
of Directorship or Termination of Consultancy occurs by reason of the
Participant’s death or Disability or the discharge of the Participant for
Misconduct;
          (d) The expiration of twelve months following the date of the
Participant’s Termination of Employment, Termination of Directorship or
Termination of Consultancy, as applicable, by reason of the Participant’s
Disability;
          (e) The expiration of 180 days from the date of the Participant’s
Termination of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, by reason of the Participant’s death; or
          (f) The date of the Participant’s Termination of Employment,
Termination of Directorship or Termination of Consultancy, as applicable, by the
Company or any Parent or Subsidiary by reason of the discharge of the
Participant for Misconduct.
     3.4 Special Tax Consequences. In the event the Option is designated an
Incentive Stock Option, the Participant acknowledges that, to the extent that
the aggregate Fair Market Value (determined as of the Grant Date) of all shares
of stock with respect to which incentive stock options granted by the Company
(or any “subsidiary corporation” or any “parent corporation” of the Company),
including the Option, are exercisable for the first time by the Participant in
any calendar year exceeds $100,000, the Option and such other options shall be
non-qualified stock options to the extent necessary to comply with the
limitations imposed by Section 422(d) of the Code. The Participant further
acknowledges that the rule set forth in the preceding sentence shall be applied
by taking the Option and other “incentive stock options” into account in the
order in which they were granted, as determined under Section 422(d) of the Code
and the Treasury Regulations thereunder.
ARTICLE IV
EXERCISE OF OPTION
     4.1 Person Eligible to Exercise. Except as provided in Section 7.2, during
the lifetime of the Participant, only the Participant may exercise the Option or
any portion thereof. After the death of the Participant, any exercisable portion
of the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by the Participant’s personal representative or by any
person empowered to do so under the deceased the Participant’s will or under
then applicable laws of descent and distribution.
     4.2 Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any
time prior to the time when the Option or portion thereof becomes unexercisable
under Section 3.3.
     4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Secretary of the Company or the
Secretary’s office of all of the following prior to the time when the Option or
such portion thereof becomes unexercisable under Section 3.3:

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          (a) An Exercise Notice in writing signed by the Participant or any
other person then entitled to exercise the Option or portion thereof, stating
that the Option or portion thereof is thereby exercised, such notice complying
with all applicable rules established by the Administrator. Such notice shall be
substantially in the form attached as Exhibit B to the Grant Notice (or such
other form as is prescribed by the Administrator, which may include, without
limitation, electronic notice provided through a third-party administrator);
          (b) The receipt by the Company of full payment for the shares of Stock
with respect to which the Option or portion thereof is exercised, including
payment of any applicable withholding tax, which may be in one or more of the
forms of consideration permitted under Section 4.4; and
          (c) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the Option.
     4.4 Method of Payment. Payment of the exercise price shall be by any of the
following, or a combination thereof, at the election of the Participant:
          (a) cash;
          (b) check;
          (c) to the extent permitted under applicable laws, delivery of a
notice that the Participant has placed a market sell order with a broker with
respect to shares of Stock then issuable upon exercise of the Option, and that
the broker has been directed to pay a sufficient portion of the net proceeds of
the sale to the Company in satisfaction of the aggregate exercise price;
provided, that payment of such proceeds is then made to the Company upon
settlement of such sale;
          (d) with the consent of the Administrator, through the delivery of
shares of Stock which have been owned by the Participant for at least six
months, duly endorsed for transfer to the Company with a Fair Market Value on
the date of exercise equal to the aggregate exercise price of the Option or
exercised portion thereof; or
          (e) any combination of the consideration provided in the foregoing.
     4.5 Conditions to Issuance of Stock Certificates. The shares of Stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. Such shares shall be fully paid and
nonassessable. The Company shall not be required to issue or deliver any shares
of Stock purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions:
          (a) The admission of such shares to listing on all stock exchanges on
which such Stock is then listed;
          (b) The completion of any registration or other qualification of such
shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body,
which the Administrator shall, in its absolute discretion, deem necessary or
advisable;

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          (c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;
          (d) The receipt by the Company (or the Parent or Subsidiary employing
the Participant) of full payment for such shares, including payment of any
applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4; and
          (e) The lapse of such reasonable period of time following the exercise
of the Option as the Administrator may from time to time establish for reasons
of administrative convenience.
     4.6 Rights as Stockholder. The Participant (or other person entitled to
exercise the Option) shall not be, nor have any of the rights or privileges of,
a stockholder of the Company in respect of any shares of Stock purchasable upon
the exercise of any part of the Option unless and until such shares shall have
been issued by the Company to the Participant (or such other person) (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
shares of Stock are issued, except as provided in Section 11.3 of the Plan.
ARTICLE V
FORFEITURE FOR FRAUD,
DISHONESTY, UNLAWFUL COMPETITION
AND OTHER HARMFUL ACTS
     5.1 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 3.3 OR IN ANY
EXHIBIT TO THIS AGREEMENT, THE PARTICIPANT’S RIGHTS WITH RESPECT TO THE PORTION
OF THE OPTION GRANTED HEREUNDER BUT NOT YET EXERCISED SHALL IMMEDIATELY
TERMINATE AND BE NULL AND VOID IF:
          (a) THE ADMINISTRATOR DETERMINES THAT THE PARTICIPANT ENGAGED IN
ILLEGAL ACTS, FRAUD, DISHONESTY, WILLFUL MISCONDUCT OR OTHER INTENTIONAL CONDUCT
DETRIMENTAL TO THE COMPANY OR ANY SUBSIDIARY, INCLUDING VIOLATION OF THE INSIDER
TRADING POLICY OF THE COMPANY OR ANY SUBSIDIARY (EACH AN “IMPROPER ACT”);
          (b) THE PARTICIPANT’S EMPLOYMENT BY THE COMPANY OR ANY SUBSIDIARY IS
TERMINATED FOR CAUSE AND THE PARTICIPANT HAS COMMITTED IMPROPER ACTS;
          (c) THE PARTICIPANT HAS AT ANY TIME DISCLOSED TO ANY PERSON, FIRM,
CORPORATION OR OTHER ENTITY ANY “PROPRIETARY INFORMATION” (AS DEFINED BELOW) OF
THE COMPANY OR ANY SUBSIDIARY WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BOARD,
OR EXCEPT AS SUCH DISCLOSURE MAY HAVE BEEN REQUIRED IN CONNECTION WITH THE
PARTICIPANT’S SERVICE AS AN EMPLOYEE OF THE COMPANY OR ANY SUBSIDIARY OR AS
OTHERWISE REQUIRED BY LAW;
          (d) THE PARTICIPANT SOLICITS OR OTHERWISE INDUCES ANY EMPLOYEE OF THE
COMPANY OR ANY SUBSIDIARY TO TERMINATE HIS EMPLOYMENT;

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          (e) THE PARTICIPANT SOLICITS BUSINESS FROM ANY OF THE COMPANY’S OR ANY
SUBSIDIARY’S CUSTOMERS WITH WHOM THE PARTICIPANT HAS A RELATIONSHIP OR THE
IDENTITY OF WHOM BECAME KNOWN TO THE PARTICIPANT BY REASON OF THE PARTICIPANT’S
RELATIONSHIP WITH THE COMPANY OR ANY SUBSIDIARY, FOR AND ON BEHALF OF ANY OF THE
COMPANY’S COMPETITORS;
          (f) THE PARTICIPANT DISPARAGES THE COMPANY OR ANY SUBSIDIARY OR
COMMITS ANY OTHER ACT OF DISLOYALTY;
          (g) THE PARTICIPANT ENGAGES IN ANY CONDUCT IN VIOLATION OF THE
PARTICIPANT’S CONTRACTUAL OBLIGATIONS TO THE COMPANY OR ANY SUBSIDIARY,
INCLUDING BUT NOT LIMITED TO A VIOLATION OF ANY VALID NON-COMPETITION,
NON-DISCLOSURE, NON-SOLICITATION OR OTHER AGREEMENT;
          (h) THE PARTICIPANT FAILS TO ASSIGN TO THE COMPANY OR ANY SUBSIDIARY
ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT IN
VIOLATION OF ANY OF THE POLICIES OF THE COMPANY OR ANY SUBSIDIARY OR ANY
AGREEMENT BETWEEN THE PARTICIPANT AND THE COMPANY OR ANY SUBSIDIARY; OR
          (i) THE PARTICIPANT REFUSES TO BE AVAILABLE FOR REASONABLE
CONSULTATION WITH RESPECT TO THE SUBJECT MATTER OF THE PARTICIPANT’S EMPLOYMENT
OR ENGAGEMENT FOLLOWING TERMINATION OF SUCH EMPLOYMENT.
THE ACTS OR CIRCUMSTANCES DESCRIBED IN THIS SECTION 5.1 SHALL BE REFERRED TO AS
“EVENTS OF FORFEITURE”.
     5.2 FOR PURPOSES OF THIS ARTICLE V, THE TERM “PROPRIETARY INFORMATION”
SHALL MEAN ALL CONFIDENTIAL OR SECRET CUSTOMER LISTS, PROSPECTIVE CUSTOMER
LISTS, TRADE SECRETS, PROCESSES, PRODUCT FORMULATIONS, INVENTIONS, IMPROVEMENTS,
MANUFACTURING FORMULATION OR SYSTEMS TECHNIQUES, PRODUCT FORMULAS, DEVELOPMENT
OR EXPERIMENTAL WORK, WORKS IN PROCESS, BUSINESS, MARKETING AND COMPETITIVE
STRATEGIES, INFORMATION RELATING TO ANY PATENT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHT OF THE COMPANY OR ANY SUBSIDIARY, AND ANY OTHER SECRET OR
CONFIDENTIAL PROPRIETARY MATTER RELATING TO OR PERTAINING TO THE PRODUCTS,
SERVICES, SALES OR BUSINESS OF THE COMPANY OR ANY SUBSIDIARY.
     5.3 IN ADDITION TO THE FOREGOING RIGHTS AND ANY AND ALL OTHER RIGHTS WHICH
THE COMPANY (OR ANY OF ITS SUBSIDIARIES OR AFFILIATES) MAY HAVE AGAINST THE
PARTICIPANT AT LAW OR IN EQUITY, THE PARTICIPANT FURTHER AGREES THAT UPON THE
OCCURRENCE OF ANY OF THE EVENTS OF FORFEITURE DESCRIBED IN SECTION 5.1, UPON THE
DETERMINATION OF THE ADMINISTRATOR, THE PARTICIPANT SHALL OWE THE COMPANY THE
EXCESS OF THE FAIR MARKET VALUE OVER THE EXERCISE PRICE (MEASURED AS OF THE DATE
OF EXERCISE) OF ALL SHARES ACQUIRED THROUGH EXERCISE OF ANY OPTION WITHIN THE
THREE YEARS PRECEDING THE ADMINISTRATOR’S DETERMINATION THAT AN EVENT OF
FORFEITURE HAS OCCURRED. THE PARTICIPANT SHALL PAY SUCH AMOUNT TO THE COMPANY
WITHIN 30 DAYS OF THE ADMINISTRATOR’S WRITTEN DETERMINATION THAT AN EVENT OF
FORFEITURE HAS OCCURRED, WHICH DETERMINATION MAY BE MADE BY NOTICE TO THE
PARTICIPANT WITHIN ANY TIME UP TO TWO YEARS FOLLOWING THE

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PARTICIPANT’S TERMINATION OF EMPLOYMENT, TERMINATION OF DIRECTORSHIP OR
TERMINATION OF CONSULTANCY, AS APPLICABLE.
     5.4 BY ACCEPTING THIS AGREEMENT, THE PARTICIPANT CONSENTS TO DEDUCTION FROM
ANY AMOUNTS THE COMPANY MAY OWE TO THE PARTICIPANT FROM TIME TO TIME (INCLUDING
AMOUNTS OWED TO THE PARTICIPANT AS WAGES OR OTHER COMPENSATION, FRINGE BENEFITS,
VACATION PAY OR COMMISSIONS) TO THE EXTENT OF ANY AMOUNT WHICH THE PARTICIPANT
OWES THE COMPANY PURSUANT TO THE PROVISIONS OF SECTION 5.3. WHETHER OR NOT THE
COMPANY ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE COMPANY DOES NOT
RECOVER BY MEANS OF THE SET-OFF THE FULL AMOUNT OWED TO IT BY THE PARTICIPANT,
THEN THE PARTICIPANT AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE
COMPANY.
     5.5 THE PARTICIPANT MAY BE RELEASED FROM THE PARTICIPANT’S OBLIGATIONS
UNDER THIS ARTICLE V ONLY IF THE ADMINISTRATOR DETERMINES, IN ITS SOLE
DISCRETION, THAT SUCH A RELEASE IS IN THE BEST INTERESTS OF THE COMPANY. SO LONG
AS THEY ARE MADE IN GOOD FAITH, ALL DETERMINATIONS BY THE ADMINISTRATOR MADE
PURSUANT TO THIS ARTICLE V SHALL BE FINAL, BINDING AND NON-APPEALABLE.
ARTICLE VI
MANDATORY ARBITRATION
     6.1 Mandatory Arbitration. In consideration of the terms and conditions set
forth herein, including the Company’s grant of the Option to the Participant,
the Participant and the Company voluntarily promise and agree to arbitrate any
and all claims and disputes covered by this Agreement. The arbitration shall be
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (“AAA”) and the National Rules for the
Resolution of Employment Disputes (“Employment Dispute Rules”) in effect on the
date the arbitration is commenced in accordance with this Agreement. AAA’s
Employment Dispute Rules shall govern disputes concerning the term or
termination of the Participant’s employment; all federal, state, or local laws,
regulations, statutes, or policies prohibiting employment discrimination and/or
harassment (including, without limitation, discrimination or harassment based on
race, sex, national origin, religion, age, or disability) and/or unlawful
retaliation in termination of employment in violation of any public policy; any
policy, compensation, or benefit plan of the Company, excluding the Company’s
equity incentive plans; and claims for personal, emotional or physical injury
not otherwise governed by workers’ compensation. The Commercial Arbitration
Rules of AAA shall govern all other disputes relating to the Company’s equity
incentive plans, including, without limitation, disputes relating to this
Agreement. The provisions of this Agreement shall govern the rights of all
parties hereto, including but not limited to any party claiming for or on behalf
of the Participant, including the Participant’s heirs, successors, assigns,
personal representatives and bankruptcy trustees. The Participant and the
Company further agree that binding arbitration pursuant to this Agreement shall
be the sole, exclusive, and final remedy for resolving any such claims and
disputes.
     6.2 Claims Covered By Mandatory Arbitration Agreement. With the exception
of only those claims specifically excluded in Section 6.3 below, the provisions
of Section 6.1 cover all legally actionable claims that the Participant may
currently, or in the future, have against Company, including without limitation,
the following:

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          (a) any and all claims arising under any alleged or actual contract,
agreement, or covenant (oral, written, or implied), including this Agreement,
between the Participant and Company relating to the Participant’s employment,
the termination of the Participant’s employment, directorship and/or consultancy
or an equity incentive award provided to the Participant;
          (b) any and all claims arising under any policy, compensation, or
benefit plan of the Company or any Subsidiary, including the Company’s equity
incentive plans, unless the decision at issue was made by an entity other than
the Company or a Subsidiary, in which case the agreement that arbitration is the
exclusive remedy applies only to the Participant’s claims against the Company or
any Subsidiary;
          (c) any and all claims arising under any federal, state, or local law,
regulation, statute, or policy prohibiting employment discrimination and/or
harassment, (including, without limitation, discrimination or harassment based
on race, sex, national origin, religion, age, or disability) and/or unlawful
retaliation;
          (d) any and all claims arising under any public policy;
          (e) any and all claims for personal, emotional, physical, or economic
injury; and
          (f) any and all claims relating to any other rights, obligations, or
duties arising out of constitutions, statutes or common law, whether or not
specifically referred to in this Agreement, and whether similar to or dissimilar
to rights, obligations, or duties referred to in this Agreement, which are or
may be granted to any party to this Agreement by the laws of any state or
country in which either party resides or engages in the business of the Company.
     6.3 Claims Excluded From Arbitration Agreement. The only claims not subject
to Section 6.1 are limited to:
          (a) any claim by the Participant for workers’ compensation benefits;
          (b) any claim by the Participant for benefits under a benefit plan of
the Company which provides its own arbitration procedure;
          (c) any claim by a party involving violation of rules, regulations, or
laws governing insider trading;
          (d) any claim prohibited from binding arbitration by applicable laws
or public policy; and
          (e) any claim brought before the Equal Employment Opportunity
Commission, however, notwithstanding the foregoing, the Participant agrees that
the Participant’s sole recovery for any damages shall be through the binding
arbitration process described herein.
     6.4 Procedures.
          (a) A written request for mediation/arbitration which contains a
specific statement of the acts complained of and the statutory or other
violation alleged, must be served by mail on the other party, and in duplicate
(with a copy of this Agreement attached) on the AAA office in Phoenix, Arizona
or the AAA regional office in which Phoenix is located. The Company shall be
served at its principal place of business at such time, and Holder shall be
served at the home address shown in his/her personnel file at

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such time. The request shall set forth the names, addresses, and telephone
numbers of the parties; the amount in controversy, if any; the remedy sought;
and that the hearing location agreed upon is Phoenix, Arizona. The request must
be filed within the time limit established by the applicable statute of
limitations necessary to perfect an administrative claim or initiate a lawsuit,
whichever is sooner, if the dispute involves statutory rights, and when
statutory rights are not at issue, within one year of the day on which the act
complained of occurred, or notice thereof was given, whichever occurs first.
          (b) The parties shall attempt in good faith to select one person by
agreement to mediate the dispute. The mediator, after consultation with the
parties, will determine the mediation procedures to be followed. The fees and
expenses of the mediator, if any, will be paid by the Company. If no mutual
agreement can be reached as to such person, then the dispute will be settled by
binding arbitration under the procedures set forth below. No mediation shall
exceed two hours without the Company’s written agreement to lengthen the
mediation. Mediation is not binding on either party.
          (c) If the dispute is not resolved by discussion or mediation within
30 days of the request for mediation/arbitration, AAA shall administer the
arbitration. AAA shall appoint an arbitrator within 30 days of AAA’s receipt of
notice that the matter was not, or will not be, resolved through mediation. The
arbitrator must be licensed to practice law in the state in which the
arbitration is convened, and the arbitrator shall, by virtue of background and
similar experience, be knowledgeable in matters pertaining to equity
compensation agreements and employment relationships and disputes.
          (d) The arbitrator may establish rules for the conduct of the
arbitration consistent with the terms of this Agreement and the applicable AAA
rules. Each party shall have the presumptive right to take two depositions at
their own expense. The arbitrator may order additional depositions for good
cause shown and such other discovery as the arbitrator considers necessary. Each
party shall be entitled to counsel of its choice. All proceedings shall be
deemed private and confidential and shall not be disclosed to the public by
either the arbitrator or the parties to the arbitration, except as required by
legal process or as necessary to judicially challenge an arbitration award under
the grounds set forth below. The arbitrator shall have the authority to
entertain motions to dismiss and/or motions for summary judgment by any party
and shall apply the standards governing such motions under the Federal Rules of
Civil Procedure.
          (e) In arbitrations governed by the Commercial Arbitration Rules of
AAA, not earlier than 30 nor more than 45 days after appointment, the arbitrator
shall conduct a preliminary hearing in accordance with AAA’s “Guidelines for
Expediting Large, Complex Commercial Arbitrations.” Not less than five days
prior to the preliminary hearing, all parties to the arbitration shall serve
upon all other parties to the arbitration a written list of witnesses and
exhibits to be used in the arbitration hearing. Except for good cause shown, no
witness or exhibit may be utilized at the arbitration hearing other than those
set forth on such list. The arbitrator shall have the power to compel production
of documents at the hearing by subpoena. Each party shall be entitled to counsel
of its choice. All proceedings and information provided at the hearings shall be
deemed private and confidential and shall not be disclosed to the public by
either the arbitrator or the parties to the arbitration. The arbitrator shall
have the authority to entertain motions to dismiss and/or motions for summary
judgment by any party and shall apply the standards governing such motions under
the Federal Rules of Civil Procedure.
          (f) Also in arbitrations governed by the Commercial Arbitration Rules,
the arbitrator shall receive evidence in a single hearing which shall be
conducted in Phoenix, Arizona. The hearing shall commence not more than 60 days
after the appointment of the arbitrator.
          (g) In arbitrations governed by the Employment Dispute Rules, the
arbitrator shall conduct an Arbitration Management Conference with the parties
not later than 60 days after appointment,

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and shall thereafter conduct the Arbitration in Phoenix, Arizona at a time and
date set after consultation with the parties during the Management Conference.
          (h) The arbitrator shall issue such award as is proper under the
applicable substantive law of Arizona or of the United States, as the case may
be, and the evidence. The arbitrator shall have no power or authority to add to
or, except as otherwise provided in Section 7.7 hereof, to detract from the
Agreement of the parties. The arbitrator shall not have authority to alter the
terms or conditions of employment lawfully established by the Company, nor
modify or disregard the standards of professional conduct and performance set by
the Company in good faith, but shall only determine whether the law has been
violated by the acts of either party as specifically alleged.
          (i) The arbitrator shall issue a final award not more than 20 days
following the conclusion of the hearing. The arbitrator shall have authority to
grant injunctive relief in a form substantially similar to that which would
otherwise be granted by a court of law. The arbitrator shall issue a written
opinion setting forth a statement of the grounds for the award and the method of
determining damages, if any, awarded. The award shall be final and binding on
all parties and may be entered as a judgment, under seal, and enforced, or
injunctive relief maybe sought, in any court of competent jurisdiction. Judicial
modification of the award shall be limited to situations in which the arbitrator
fails or refuses to apply controlling law or the valid and enforceable terms of
this Agreement.
          (j) The arbitrator shall be entitled to receive reasonable
compensation at an hourly rate to be established by agreement between the
arbitrator and AAA. All fees and expenses of the arbitration, including a
transcript if either party requests, will be borne by the parties equally,
except that in arbitrations governed by the Employment Dispute Rules, the fees
and expenses will be borne by the parties as follows: the Participant shall pay
an amount equivalent to the filing fee in Arizona District Court, plus one-half
of the expense of the transcript, and any other amounts deemed fair and
reasonable by the arbitrator; the Company shall bear the remaining fees and
expenses of the arbitration. Each party will pay for the fees and expenses of
its own attorneys, experts, witnesses and the presentation of proof and
post-hearings briefs, unless the party prevails on a claim for which attorneys’
fees are recoverable by statute or contract, and the arbitrator awards such
fees.
          (k) Either party may bring an action in a court of competent
jurisdiction to compel arbitration under this Agreement, to seek to vacate an
arbitration award, and to enforce an arbitration award. Except as otherwise
provided in this Agreement, the Participant agrees that the Participant will not
initiate or prosecute any lawsuit in any way related to any claim covered by
this Agreement.
     6.5 Miscellaneous Provisions. For the purposes of the arbitration
provisions of this Article VI:
          (a) The term “Company” includes all related entities, all directors,
officers, employees, agents, representatives, benefit plans, benefit plan
sponsors, fiduciaries, administrators, or affiliates of any of the above, and
all successors and assigns of any of the above excluding the Participant.
          (b) If either party pursues a covered claim against the other by
action, method or legal proceeding other than arbitration as provided herein,
the responding party shall be entitled to dismissal or injunctive relief
regarding such action and shall be entitled to recover all costs, losses, and
attorneys’ fees related to such other action or proceeding.

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ARTICLE VII
OTHER PROVISIONS
     7.1 Administration. The Administrator shall have the power to interpret the
Plan, this Agreement and the Grant Notice and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. All actions taken
and all interpretations and determinations made by the Administrator in good
faith shall be binding, conclusive and final upon the Participant, the Company
and all other interested persons. No member of the Administrator shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan, this Agreement or the Option. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Administrator under the Plan and this Agreement.
     7.2 Option Not Transferable.
          (a) Subject to Section 7.2(b), the Option may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution. Neither the Option nor any interest or right therein shall be
liable for the debts, contracts or engagements of the Participant or his or her
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
          (b) Notwithstanding any other provision in this Agreement, with the
consent of the Administrator and to the extent the Option is not designated as
an Incentive Stock Option, the Option may be transferred to one or more
Permitted Transferees, subject to the terms and conditions set forth in
Section 11.1(b) of the Plan.
          (c) Unless transferred to a Permitted Transferee in accordance with
Section 7.2(b), during the lifetime of the Participant, only the Participant may
exercise the Option or any portion thereof. Subject to such conditions and
procedures as the Administrator may require, a Permitted Transferee may exercise
the Option or any portion thereof during the Participant’s lifetime. After the
death of the Participant, any exercisable portion of the Option may, prior to
the time when the Option becomes unexercisable under Section 3.3, be exercised
by the Participant’s personal representative or by any person empowered to do so
under the deceased the Participant’s will or under then applicable laws of
descent and distribution.
     7.3 Restrictive Legends and Stop-Transfer Orders.
          (a) The share certificate or certificates evidencing the shares of
Stock purchased hereunder shall be endorsed with any legends that may be
required by any applicable federal or state securities laws.
          (b) The Participant agrees that, in order to ensure compliance with
the restrictions referred to herein, the Company may issue appropriate “stop
transfer” instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.

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          (c) The Company shall not be required: (i) to transfer on its books
any shares of Stock that have been sold or otherwise transferred in violation of
any of the provisions of this Agreement, or (ii) to treat as owner of such
shares of Stock or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such shares shall have been so transferred.
     7.4 Shares to Be Reserved. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of Stock as will
be sufficient to satisfy the requirements of this Agreement.
     7.5 Notices. Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company at its principal place of business
in care of the Secretary of the Company, and any notice to be given to Holder
shall be addressed to Holder at the most recent address indicated in his or her
personnel file at such time. By a notice given pursuant to this Section 7.5,
either party may hereafter designate a different address for notices to be given
to that party. Any notice which is required to be given to the Participant
shall, if the Participant is then deceased, be given to the person entitled to
exercise his or her Option pursuant to Section 4.1 by written notice under this
Section 7.5. All notices and communications shall be deemed to have been
received unless otherwise set forth herein: (i) in the case of personal
delivery, on the date of such delivery; (ii) in the case of email, on the date
of transmission; (iii) in the case of facsimile transmission, on the date on
which the sender receives electronic confirmation that such notice was received
by the addressee; (iv) in the case of overnight air courier, on the second
business day following the day sent, with receipt confirmed by the courier; and
(v) in the case of delivery by certified or registered mail (return receipt
requested) on the fifth business day following the date such mailing is
deposited in a post office or branch post office regularly maintained by the
United States Postal Service.
     7.6 Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
     7.7 Governing Law; Severability; Choice of Forum. This Agreement shall be
administered, interpreted and enforced under the laws of the State of Delaware,
without regard to the conflicts of law principles thereof. Should any provision
of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable. To the extent that any provision of this Agreement is
held to be illegal or unenforceable because it is overbroad, that provision
shall not be void but shall be limited only to the extent required by applicable
law and enforced as so limited. Any arbitration, application for injunctive
relief, or litigation relating to the Option shall be filed and conducted in
Maricopa County, Arizona.
     7.8 Non-Waiver of Rights. The Company’s failure to enforce at any time any
of the versions of this Agreement or to require at any time performance by the
Participant of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement, or
any part hereof, or the right of Company thereafter to enforce each and every
provision in accordance with the terms of this Agreement.
     7.9 Conformity to Securities Laws. The Participant acknowledges that the
Plan is intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission thereunder, and state
securities laws and regulations. Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

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     7.10 Amendments. This Agreement may not be modified, amended or terminated
except by an instrument in writing, signed by the Participant or such other
person as may be entitled to exercise the Option pursuant to Section 4.1 and by
a duly authorized representative of the Company.
     7.11 Successors and Assigns. Subject to the terms and conditions of the
Plan, this Agreement shall inure to the benefit of and be binding on the
successors and assigns of the Company. Subject to the restrictions on transfer
herein set forth in Section 7.2, this Agreement shall be binding upon the
Participant and his or her heirs, executors, administrators, successors and
assigns.
     7.12 Notification of Disposition. If this Option is designated as an
Incentive Stock Option, the Participant shall give prompt notice to the Company
of any disposition or other transfer of any shares of Stock acquired under this
Agreement if such disposition or transfer is made (a) within two years from the
Grant Date with respect to such shares or (b) within one year after the transfer
of such shares to the Participant. Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by the Participant in such
disposition or other transfer.
     7.13 Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan or this Agreement, if the Participant is subject to
Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, this Agreement shall be deemed
amended to the extent necessary to conform to such applicable exemptive rule.
     7.14 Entire Agreement. The Plan, the Grant Notice (including all Exhibits
thereto) and this Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and the Participant with respect to the subject matter hereof.
UPON ENTERING INTO THIS AGREEMENT, THE PARTICIPANT WARRANTS THAT HE/SHE HAS
CAREFULLY READ THIS AGREEMENT, UNDERSTANDS ITS TERMS, AND HAS VOLUNTARILY AGREED
TO ENTER INTO IT WITHOUT RELIANCE ON ANY REPRESENTATIONS OR PROMISES BY THE
COMPANY OTHER THAN AS SET FORTH IN THIS AGREEMENT.
THE PARTICIPANT HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO
ASK ANY QUESTIONS THE PARTICIPANT HAS ABOUT THE AGREEMENT AND HAS RECEIVED
SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS.
THE PARTICIPANT UNDERSTANDS THE PARTICIPANT’S RIGHTS AND OBLIGATIONS UNDER THIS
AGREEMENT AND VOLUNTARILY ENTERS INTO IT.
THE PARTICIPANT ACKNOWLEDGES THE PARTICIPANT’S “AT-WILL” EMPLOYMENT STATUS.
THE PARTICIPANT RECOGNIZES THE PARTICIPANT’S WAIVER OF RIGHT TO A JURY TRIAL BY
AGREEING TO MANDATORY ARBITRATION.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION. THE ARBITRATION
PROVISION MAY BE ENFORCED BY THE COMPANY AND BY YOU.

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EXHIBIT B
TO STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
     Effective as of today,                                         
                    , 20                    , the undersigned hereby elects to
exercise the option to purchase the number of shares of Class A common stock,
par value $0.014 per share, specified below (the “Shares”) of Medicis
Pharmaceutical Corporation, a Delaware corporation (the “Company”), granted
pursuant to the Medicis 2006 Incentive Award Plan (the “Plan”), the Stock Option
Grant Notice dated as of                                         ,
20                     and the Stock Option Agreement attached thereto (the
“Stock Option Agreement”). Capitalized terms used herein without definition
shall have the meanings given in the Plan and, if not defined in the Plan, the
Option Agreement.

         
Participant:
       
 
         
Grant Date:
       
 
       
 
       
Number of Shares as to
       
     which Option is Exercised:
       
 
         
Exercise Price per Share:
  $    
 
         
Total Exercise Price:
  $    
 
         
Certificate to be issued in name of:
       
 
       

          Payment delivered herewith:  
$                                         (Representing the full exercise price
for the Shares, as well as any
applicable withholding tax)
 
       
 
  Form of Payment:    
 
       
 
       
 
       
 
                 (Please specify)
 
        Type of Option:   o      Incentive Stock Option       o     
Non-Qualified Stock Option

     The Participant acknowledges that the Participant has received, read and
understood the Plan and the Stock Option Agreement. The Participant agrees to
abide by and be bound by their terms and conditions. The Participant understands
that the Participant may suffer adverse tax consequences as a result of the
Participant’s purchase or disposition of the Shares. The Participant represents
that the Participant has consulted with any tax consultants the Participant
deems advisable in connection with the purchase or disposition of the Shares and
that the Participant is not relying on the Company for any tax advice. The Plan
and Option Agreement are incorporated herein by reference.
Remainder of page intentionally left blank.

 

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     This Exercise Notice, the Plan, the Stock Option Agreement and the Grant
Notice constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and the
Participant with respect to the subject matter hereof.

                  ACCEPTED BY:
MEDICIS PHARMACEUTICAL CORPORATION       SUBMITTED BY PARTICIPANT:
 
               
By:
        /S/ Mark A. Prygocki Sr.       By:    
 
               
Print Name:
       Mark A. Prygocki Sr.       Print Name:    
 
               
Title:
        Chief Financial Officer            
 
          Address:    
 
               
 
               
 
               

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EXHIBIT C
TO STOCK OPTION GRANT NOTICE
MEDICIS 2006 INCENTIVE AWARD PLAN

 

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EXHIBIT D
TO STOCK OPTION GRANT NOTICE
MEDICIS 2006 INCENTIVE AWARD PLAN PROSPECTUS