Exhibit 10.2

 

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JPMorgan Chase Bank, National

Association

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England

 

DATE:    May 10, 2012 TO:    Medicis Pharmaceutical Corporation    7720 North
Dobson Road    Scottsdale, Arizona 85256 ATTENTION:    Richard D. Peterson
FACSIMILE:    (480) 291-8847 FROM:    JPMorgan Chase Bank, National Association
SUBJECT:    Base Note Hedge Transaction

The purpose of this agreement (this “Confirmation”) is to confirm the terms and
conditions of the transaction entered into between JPMorgan Chase Bank, National
Association, London Branch (“Dealer”) and Medicis Pharmaceutical Corporation
(“Counterparty”) on the Trade Date specified below (the “Transaction”). This
Confirmation constitutes a “Confirmation” as referred to in the ISDA Master
Agreement specified below. This Confirmation constitutes the entire agreement
and understanding of the parties with respect to the subject matter and terms of
the Transaction and supersedes all prior or contemporaneous written and oral
communications with respect thereto.

The definitions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”), as published by the International Swaps and Derivatives
Association, Inc., are incorporated into this Confirmation. In the event of any
inconsistency between the Equity Definitions and the terms of this Confirmation,
the terms of this Confirmation shall govern, and in the event of any
inconsistency between either the Equity Definitions or this Confirmation and the
Agreement (as defined below), the Equity Definitions or this Confirmation, as
the case may be, shall govern. For the avoidance of doubt, except to the extent
of an express conflict, the application of any provision of this Confirmation,
the Agreement or the Equity Definitions shall not be construed to exclude or
limit the application of any other provision of this Confirmation, the Agreement
or the Equity Definitions. For the purposes of the Equity Definitions, each
reference herein to a Note Hedging Unit shall be deemed to be a reference to a
Call or an Option, as context requires.

This Confirmation evidences a complete and binding agreement between Dealer and
Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to
an agreement (the “Agreement”) in the form of the ISDA 2002 Master Agreement as
if Dealer and Counterparty had executed an agreement in such form (without any
Schedule but with the election that the “Cross Default” provisions of
Section 5(a)(vi) of the Agreement shall apply to both parties, provided that
(i) the phrase “or becoming capable at such time of being declared” shall be
deleted from clause (1) of such Section 5(a)(vi); (ii) the following language
shall be added to the end thereof: “Notwithstanding the foregoing, a default
under subsection (2) hereof shall not constitute an Event of Default if (i) the
default was caused solely by error or omission of an administrative or
operational nature; (ii) funds were available to enable the party to make the
payment when due; and (iii) the payment is made within two Local Business Days
of such party’s receipt of written notice of its failure to pay.”;
(iii) “Specified Indebtedness” will have the meaning specified in

JPMorgan Chase Bank, National Association

Organised under the laws of the United States as a National Banking Association

Main Office 1111 Polaris Parkway, Columbus, Ohio 43271

Registered as a branch in England & Wales branch No. BR000746

Registered Branch Office 125 London Wall, London EC2Y 5AJ

Authorised and regulated by the Financial Services Authority

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Section 14 of the Agreement, except that such term shall not include obligations
in respect of deposits received in the ordinary course of a party’s banking
business; and (iv) “Threshold Amount” means, in relation to Dealer, three
percent (3%) of shareholders’ equity of JPMorgan Chase & Co. (the “Dealer
Parent”) as of the Trade Date, and in relation to Counterparty, USD 25 million,
and with such other elections set forth in this Confirmation). The Transaction
shall be the only transaction under the Agreement.

The Transaction shall be considered a Share Option Transaction for purposes of
the Equity Definitions, and shall have the following terms:

 

General:

  

Trade Date:

   May 10, 2012.

Effective Date:

   The closing date for the initial issuance of the Convertible Notes.

Transaction Style:

   Modified American, as described below under “Procedure for Exercise”.

Transaction Type:

   Note Hedging Units.

Seller:

   Dealer.

Buyer:

   Counterparty.

Shares:

   The Class A common stock, par value USD 0.014 per share, of Counterparty.
Convertible Notes:    1.375% Convertible Senior Notes of Counterparty due 2017,
offered pursuant to a Prospectus to be dated as of May 10, 2012, as supplemented
by a Prospectus Supplement dated as of May 10, 2012, and to be issued pursuant
to an indenture (the “Base Indenture”) to be dated on or about May 16, 2012 (the
“Execution Date”), as supplemented and amended by a supplemental indenture (the
“Supplemental Indenture”), dated as of the Execution Date, each by and between
Counterparty and Deutsche Bank Trust Company Americas, as trustee (the Base
Indenture as so supplemented and amended, the “Indenture”). References herein to
the Indenture, the Base Indenture or the Supplemental Indenture are based on the
drafts of the Base Indenture and Supplemental Indenture most recently reviewed
by the parties at the time of execution of this Confirmation. If any relevant
sections of such documents are changed, added or renumbered upon execution
thereof, the parties will amend this Confirmation in good faith to preserve the
economic intent of the parties. Subject to the foregoing, any reference herein
to the Indenture, the Base Indenture or the Supplemental Indenture shall be to
such instrument as of the Execution Date, without giving effect to any
amendment, supplement or modification thereto other than, subject to the
provision set forth under “Settlement Amount” below relating to Counterparty
Determinations, a Merger Supplemental Indenture (as defined below). If any
amendment or supplement is made to the Indenture following the Execution Date
(other than (A) pursuant to a Merger Supplemental Indenture or (B) any

 

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   amendment pursuant to Section 6.01(j) of the Supplemental Indenture that, as
determined by the Calculation Agent, conforms the Supplemental Indenture to the
description of the Convertible Notes in the preliminary prospectus supplement as
supplemented by the issuer free writing prospectus, in each case, related to the
offering of the Convertible Notes) (x) the Calculation Agent shall determine the
relevant Settlement Amount and Settlement Date for any Note Hedging Unit
exercised thereafter in accordance with this Confirmation by referring to the
relevant provisions of the Indenture without giving effect to such amendment or
supplement, and (y) such supplement or amendment shall be disregarded for all
other purposes hereunder. Counterparty shall deliver to Dealer a copy of any
amendment to the Indenture described in clause (B) of the parenthetical in the
immediately preceding sentence prior to the effectiveness of such amendment.
Terms in quotation marks that are not otherwise defined in this Confirmation
shall have the meanings set forth in the Indenture, unless the context requires
otherwise.

Number of Note Hedging Units:

   180,000, as reduced by any Note Hedging Units exercised hereunder.

Note Hedging Unit Entitlement:

   USD1,000 divided by the Strike Price.

Strike Price:

   USD 47.075.

Applicable Percentage:

   40%.

Premium:

   As provided in Annex A to this Confirmation.

Premium Payment Date:

   The Effective Date.

Exchange:

   The New York Stock Exchange.

Related Exchanges:

   All Exchanges.

Calculation Agent:

   Dealer, whose judgments, determinations and calculations shall be made in
good faith and in a commercially reasonable manner. Following any determination
or calculation by the Calculation Agent hereunder, upon a written request by
Counterparty, the Calculation Agent will provide to Counterparty by e-mail to
the e-mail address provided by Counterparty in such written request a report (in
a commonly used file format for the storage and manipulation of financial data)
displaying in reasonable detail the basis for such calculation, it being
understood that the Calculation Agent shall not be obligated to disclose any
proprietary models used by it for such calculation.

Procedure for Exercise:

  

Potential Exercise Dates:

   Each Conversion Date.

Conversion Date:

   Each “Conversion Date”.

 

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Required Exercise on Conversion Dates:

   On each Conversion Date, a number of Note Hedging Units equal to the product
of (A) the Applicable Percentage and (B) the number of Convertible Notes in
denominations of USD1,000 principal amount submitted for conversion in respect
of such Conversion Date in accordance with the terms of the Indenture shall be
exercised automatically, subject to “Notice of Exercise” below; provided that in
no event will the number of Note Hedging Units exercised or deemed exercised
hereunder exceed the Number of Note Hedging Units. For the avoidance of doubt,
if the immediately preceding sentence would result in the exercise of a fraction
of a Note Hedging Unit on any day, the number of Shares and/or amount of cash
deliverable in respect of such portion of a Note Hedging Unit shall be equal to
the product of such fraction and the Settlement Amount applicable to a full Note
Hedging Unit exercised on such day.

Expiration Date:

   June 1, 2017

Multiple Exercise:

   Applicable, as provided under “Required Exercise on Conversion Dates”.

Automatic Exercise:

   As provided under “Required Exercise on Conversion Dates”. Notice of
Exercise:   

Notwithstanding anything to the contrary herein or in the Equity Definitions, in
order to exercise any Note Hedging Units, Counterparty must (x) notify Dealer in
writing and (y) confirm receipt by telephone to (212) 622-8783, in each case,
prior to 5:00 PM, New York City time, on the “Scheduled Trading Day” prior to
the first day of the “Conversion Period” relating to the Convertible Notes
converted on the Conversion Date relating to the relevant Exercise Date (the
“Notice Deadline”) of:

 

(i) the aggregate principal amount of Convertible Notes as to which the related
“Conversion Date” has occurred (including, if applicable, whether all or any
portion of such Convertible Notes are Convertible Notes as to which “Additional
Shares” would be added to the “Conversion Rate” pursuant to Section 8.03 of the
Supplemental Indenture (the “Make-Whole Convertible Notes”)),

 

(ii) the scheduled commencement date of the “Conversion Period” and the
scheduled settlement date under the Indenture for the Convertible Notes
converted on the Conversion Date corresponding to such Exercise Date, and

 

(iii) the applicable “Cash Percentage”; provided that, if the “Cash Percentage”
specified is a percentage other than 0%, such notice shall contain an
acknowledgment by Counterparty of its responsibilities under applicable
securities laws, and in particular, Section 9 and 10(b) of the U.S. Securities
Act of 1934, as amended (the “Exchange Act”) and the rules and regulations
thereunder, in respect of any election of a “Cash Percentage” settlement method
with respect to the relevant Convertible Notes; provided, further that if
Counterparty fails to timely

 

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provide the notice described in this clause (iii) or such notice does not
contain the foregoing acknowledgment to the extent required by this clause
(iii), notwithstanding anything to the contrary under “Settlement Amount” below,
the Settlement Amount for each relevant Note Hedging Unit shall be the
Settlement Amount (as determined by the Calculation Agent) that would have been
deliverable hereunder by Dealer with respect to such Note Hedging Unit if
Counterparty had elected a “Cash Percentage” of 0%.

 

Notwithstanding the foregoing, in respect of Convertible Notes with a Conversion
Date during the period beginning on, and including, March 1, 2017 and ending at
the close of business on the second “Scheduled Trading Day” immediately
preceding the “Maturity Date”:

 

(x) the Notice Deadline in respect of the information set forth in clause (i)
above shall be 5:00 PM, New York City time, on the “Scheduled Trading Day”
immediately preceding the “Maturity Date,”

 

(y) the Notice of Exercise need not include the information set forth in clause
(ii) above, and

 

(z) the Notice Deadline in respect of the information set forth in clause (iii)
above shall be 5:00 PM, New York City time, on the second “Scheduled Trading
Day” immediately following March 1, 2017.

 

For the avoidance of doubt, if Counterparty fails to give a Notice of Exercise
when due in respect of any exercise of Note Hedging Units hereunder as set forth
above, Dealer’s obligation to make any payment or delivery in respect of such
exercise shall be permanently extinguished, and late notice shall not cure such
failure; provided that a Notice of Exercise (and the related exercise of Note
Hedging Units) shall be effective with respect to Note Hedging Units relating to
Convertible Notes converted prior to March 1, 2017, if given after the Notice
Deadline but prior to 5:00 PM New York City time on the fifth Scheduled Trading
Day following the Notice Deadline, in which event the Calculation Agent shall
have the right to adjust the applicable Settlement Amount as appropriate to
reflect the additional costs (including, but not limited to, hedging mismatches
and market losses) and reasonable expenses incurred by Dealer in connection with
its hedging activities (including the unwinding of any hedge position) as a
result of Dealer not having received such notice on or prior to the Notice
Deadline.

Settlement Terms:    Settlement:    In lieu of the obligations set forth in
Sections 8.1 and 9.1 of the Equity Definitions, and subject to “Notice of
Exercise” above, in respect of any validly exercised Note Hedging Unit, Dealer
shall deliver to Counterparty, on the related Settlement Date, the Settlement
Amount.

 

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   For the avoidance of doubt, to the extent Dealer is obligated to deliver
Shares hereunder, the provisions of Sections 9.8, 9.9, 9.11 and 9.12 of the
Equity Definitions shall be applicable to any such delivery of Shares, except
that all references in such provisions to “Physical Settlement” and
“Physically-settled” shall be read as references to “Share Settlement” and
“Share Settled”; and provided that the Representation and Agreement contained in
Section 9.11 of the Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws arising from Counterparty’s status
as issuer of the Shares or arising from such Shares being “restricted
securities” (as defined in Rule 144 under the Securities Act of 1933, as amended
(the “Securities Act”)). “Share Settlement” means settlement of a Note Hedging
Unit pursuant to “Settlement Amount” below, and “Share Settled” has a meaning
correlative thereto.

Settlement Amount:

  

The aggregate of (i) the number of Shares that Counterparty is obligated to
deliver and (ii) the amount of cash that Counterparty is obligated to pay less
USD 1,000, in each case, to the holder of USD 1,000 principal amount of
Convertible Notes converted on such Conversion Date pursuant to Section 8.02 of
the Supplemental Indenture.

 

The number of Shares included in the Settlement Amount shall not take into
consideration any rounding pursuant to Section 8.02(j) of the Supplemental
Indenture. Instead Dealer will deliver cash in lieu of any fractional Shares
based on (i) the “Daily VWAP” on the last “Trading Day” of the applicable
“Conversion Period” and (ii) the aggregate number of Note Hedging Units
exercised on any Exercise Date.

 

In addition, and notwithstanding anything to the contrary herein:

 

(i) the Settlement Amount shall be determined by the Calculation Agent excluding
any increase to the “Conversion Rate” pursuant to Section 8.03 of the
Supplemental Indenture (a “Fundamental Change Adjustment”) or any voluntary
adjustment to the “Conversion Rate” pursuant to Section 8.04(g) of the
Supplemental Indenture (a “Discretionary Adjustment”); and

 

(ii) if Counterparty or its board of directors is permitted or required to
exercise discretion under the terms of the Indenture with respect to any
determination, calculation or adjustment (including, without limitation, any
adjustment under Section 8.04(i) or 8.05 of the Supplemental Indenture, any
adjustment to the terms of the Convertible Notes following a Merger Event
pursuant to Section 8.07 of the Supplemental Indenture, any adjustment to the
“Dividend Threshold Amount” relating to a change in the regular dividend period
for purposes of Section 8.04(d) of the Supplemental Indenture or any
determination of the fair market value of distributed property, the volume
weighted average price of Shares or the value of a “unit of Reference Property”)
(any such determination, calculation or adjustment, a “Counterparty
Determination”), Counterparty shall

 

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consult with Dealer with respect thereto and, if the Calculation Agent disagrees
in good faith with such determination, calculation or adjustment,
notwithstanding anything herein to the contrary, the Calculation Agent shall
make the relevant determination, calculation or adjustment for purposes of the
Transaction (and, for the avoidance of doubt, such determination, calculation or
adjustment shall be made (A) in accordance with the methodology set forth in the
Indenture, except as set forth herein, and (B) using, where relevant, variables
determined by the Calculation Agent).

 

Notwithstanding the foregoing, in no event shall the sum of (x) the product of
the number of Shares delivered in respect of a Note Hedging Unit and the
Applicable Limit Price on the Settlement Date for such Note Hedging Unit and (y)
the amount of cash paid in respect of any Note Hedging Unit (including any cash
in lieu of any fractional Share), exceed the Applicable Limit for such Note
Hedging Unit.

 

Section 6.3(a) of the Equity Definitions is hereby amended by deleting the
remainder of clause (ii) thereof following the words “at any time.”

Applicable Limit:    For any exercised Note Hedging Unit, an amount in USD equal
to the product of the Applicable Percentage and the excess of (i) the sum of (A)
the amount of cash, if any, paid to the holder of USD 1,000 principal amount of
Convertible Notes converted on the related Conversion Date and (B) the product
of (x) the number of Shares, if any, delivered to the holder of USD 1,000
principal amount of Convertible Notes converted on the related Conversion Date
and (y) the Applicable Limit Price on the applicable Settlement Date over (ii)
USD 1,000. Applicable Limit Price:    On any day, the opening price as displayed
under the heading “Op” on Bloomberg page MRX <equity> (or any successor
thereto). Notice of Delivery Obligation:   

No later than the “Scheduled Trading Day” immediately following the last day of
the relevant “Conversion Period,” Counterparty shall give Dealer notice of the
final number of Shares and/or the amount of cash that Counterparty is required
to deliver to holders of the relevant Convertible Notes (the “Convertible
Obligation”); provided that:

 

(i) Counterparty may provide a single such notice of the aggregate Convertible
Obligation for all Convertible Notes converted on or after March 1, 2017,

 

(ii) the requirement of Counterparty to deliver such notice shall not limit
Counterparty’s obligations with respect to Notice of Exercise, as set forth
above, in any way; and

 

(iii) in the case of any late delivery of a Notice of Delivery Obligation,
notwithstanding anything to the contrary herein, the Settlement Date for any
related Note Hedging Unit shall be the second Scheduled Trading Day following
the date such notice is delivered; provided, further, that if Counterparty fails
to deliver such notice prior to 5:00 PM New York City time on the fifth
“Scheduled Trading Day” following the last day of the relevant “Conversion
Period,” Dealer’s obligation to make any payment or delivery in respect of the
related exercise of Note Hedging Units shall be permanently extinguished and any
delivery of such notice thereafter shall not cure such failure.

 

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Settlement Date:    In respect of an Exercise Date, the settlement date for the
Shares or cash to be delivered under the Convertible Notes converted on the
corresponding Conversion Date under the terms of the Indenture. Settlement
Currency:    USD. Restricted Certificated Shares:    Notwithstanding anything to
the contrary in the Equity Definitions, Dealer may, in whole or in part, deliver
Shares in certificated form representing the Share portion of the Settlement
Amount to Counterparty in lieu of delivery through the Clearance System. Share
Adjustments:    Potential Adjustment Events:   

Notwithstanding Section 11.2(e) of the Equity Definitions, a “Potential
Adjustment Event” means any occurrence of any event or condition, as set forth
in Section 8.04(i), 8.04(a)–(e) or 8.05 of the Supplemental Indenture, that
would result in an adjustment under the Indenture to the “Conversion Rate” or
any other term of the Convertible Notes; provided that in no event shall there
be any adjustment hereunder as a result of a Fundamental Change Adjustment or a
Discretionary Adjustment.

 

Notwithstanding anything to the contrary herein, (i) Dealer shall not have any
delivery obligation hereunder in respect of any “Distributed Property” delivered
by Counterparty to which the fifth sentence of Section 8.04(c) of the
Supplemental Indenture would apply and no adjustment shall be made to the terms
of the Transaction on account of the delivery of such “Distributed Property” to
holders of the Shares and (ii) if Counterparty pays a cash dividend to which the
last paragraph of Section 8.04(d) of the Supplemental Indenture would apply,
Dealer will pay to Counterparty an amount of cash equal to the amount of such
cash dividend that Dealer or its affiliate receives on its Hedge Positions in
respect of the Transaction promptly following Dealer’s receipt thereof.

Method of Adjustment:    Calculation Agent Adjustment, which means that,
notwithstanding Section 11.2(c) of the Equity Definitions, upon any Potential
Adjustment Event (excluding, for the avoidance of doubt, any Fundamental Change
Adjustment or Discretionary Adjustment), the Calculation Agent shall make a
corresponding adjustment to any one or more of the Strike Price, Number of Note
Hedging Units, the Note Hedging Unit Entitlement, the composition of the Shares
and any other variable relevant to the exercise, settlement, payment or other
terms of the Transaction (subject to the provisions set forth under “Settlement
Amount” above in respect of any Counterparty Determination).

 

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Dividends:    If (i) an ex-dividend date for a cash dividend or distribution on
the Shares (a “Triggering Dividend”) that is less than the Regular Dividend
occurs on or after the Trade Date and on or prior to the Expiration Date, or
(ii) no ex-dividend date for a cash dividend or distribution on the Shares
occurs in any regular dividend period of Counterparty (as determined by the
Calculation Agent) that falls, in whole or in part, after the Trade Date and on
or prior to the Expiration Date, then, in each case, the Calculation Agent will
make such adjustments to any one or more of the variables relevant to the
exercise, settlement or payment or other terms of the Transaction as it
determines appropriate to account for the economic effect on the Transaction of
such shortfall or lack of a dividend, as the case may be. Regular Dividend:   
For the first Triggering Dividend for which the ex-dividend date occurs within
any regular dividend period of Counterparty (as determined by the Calculation
Agent), USD 0.10 per Share (subject to adjustment (x) by the Calculation Agent
to account for any change in the regular dividend period length and (y) as
contemplated by Section 11.2(c) of the Equity Definitions), and, for any
subsequent Triggering Dividend for which the ex-dividend date occurs within the
same regular dividend period, zero. Extraordinary Events:    Merger Events:   
Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event”
means the occurrence of any event or condition set forth in the definition of
“Merger Event” in Section 8.07(a) of the Supplemental Indenture. Notice of
Merger Consideration:    In respect of any Merger Event, Counterparty shall
notify the Calculation Agent of (i) if applicable, the weighted average of the
kind and amounts of consideration to be received by the holders of Shares in any
Merger Event who affirmatively make such an election and (ii) the details of the
adjustments made under the Indenture in respect of such Merger Event, in each
case, reasonably promptly upon determination thereof (and in any event prior to
the effective date of the Merger Event), and Counterparty shall deliver a copy
of the supplemental indenture effecting such adjustments (a “Merger Supplemental
Indenture”) as promptly as practicable following execution thereof. Consequences
of Merger Events:    Notwithstanding Section 12.2 of the Equity Definitions,
upon the occurrence of a Merger Event, the Calculation Agent shall make the
corresponding adjustment in respect of any adjustment under the Indenture to any
one or more of the nature of the Shares, the Strike Price, the Number of Note
Hedging Units, the Note Hedging Unit Entitlement, the Settlement Date and any
other variable relevant to the exercise, settlement or payment or other terms of
the Transaction to the extent an analogous adjustment is permitted or required
to be made pursuant to the Indenture in connection with such Merger Event
(subject to the provisions set forth under “Settlement Amount” above in respect
of any Counterparty Determination); provided that such adjustment shall be made
without regard to any Fundamental Change Adjustment

 

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   or any Discretionary Adjustment; and provided further that the Calculation
Agent may limit or alter any such adjustment referenced in this paragraph to
preserve the intended economic benefits of the Transaction; and provided further
that if, with respect to a Merger Event, (i) the consideration for the Shares
includes (or, at the option of a holder of Shares, may include) shares (or
depositary receipts with respect to shares) of an entity or person that is not a
corporation organized under the laws of the United States, any State thereof or
the District of Columbia or (ii) Counterparty following such Merger Event will
not be a corporation organized under the laws of the United States, any State
thereof or the District of Columbia or will not be either (x) the Issuer
following such Merger Event or (y) a wholly-owned subsidiary of the Issuer
following such Merger Event whose obligations under the Transaction are fully
and unconditionally guaranteed by such Issuer, Cancellation and Payment
(Calculation Agent Determination) may apply at Dealer’s sole election.
Nationalization, Insolvency and Delisting:    Cancellation and Payment
(Calculation Agent Determination); provided that in addition to the provisions
of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a
Delisting if the Exchange is located in the United States and the Shares are not
immediately re-listed, re-traded or re-quoted on any of the New York Stock
Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their
respective successors); if the Shares are immediately re-listed, re-traded or
re-quoted on any such exchange or quotation system, such exchange or quotation
system shall thereafter be deemed to be the Exchange. Additional Disruption
Events:    Change in Law:    Applicable; provided that Section 12.9(a)(ii) of
the Equity Definitions is hereby amended (i) by inserting the parenthetical
“(including, for the avoidance of doubt and without limitation, adoption or
promulgation of new regulations authorized or mandated by existing statute)” at
the end of clause (A) thereof, (ii) by the replacement of the word “Shares” with
“Hedge Positions” in clause (X) thereof; (iii) by adding the phrase “or
announcement” immediately after the phrase “due to the promulgation” in the
third line thereof and adding the phrase “formal or informal” before the word
“interpretation” in the same line; (iv) immediately following the word
“Transaction” in clause (X) thereof, adding the phrase “in the manner
contemplated by the Hedging Party on the Trade Date” and (v) adding the
following proviso to the end of clause (Y) thereof: “provided that such party
has used commercially reasonable efforts to avoid such increased cost on terms
acceptable to the Hedging Party”. Failure to Deliver:    Not Applicable
Insolvency Filing:    Applicable Hedging Disruption:    Applicable; provided
that:

 

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(i)     Section 12.9(a)(v) of the Equity Definitions is hereby amended by (a)
inserting the following words at the end of clause (A) thereof: “in the manner
contemplated by the Hedging Party on the Trade Date” and (b) inserting the
following two phrases at the end of such Section:

 

“For the avoidance of doubt, the term “equity price risk” shall be deemed to
include, but shall not be limited to, stock price and volatility risk. And, for
the further avoidance of doubt, any such transactions or assets referred to in
phrases (A) or (B) above must be available on commercially reasonable pricing
terms.”; and

 

(ii)    Section 12.9(b)(iii) of the Equity Definitions is hereby amended by
inserting in the third line thereof, after the words “to terminate the
Transaction”, the words “or a portion of the Transaction affected by such
Hedging Disruption”.

Increased Cost of Hedging:    Not Applicable Hedging Party:    Dealer for all
applicable Additional Disruption Events Determining Party:    Dealer for all
applicable Extraordinary Events Acknowledgements:    Non-Reliance:    Applicable
Agreements and Acknowledgements    Regarding Hedging Activities:    Applicable
Additional Acknowledgements:    Applicable

Mutual Representations: Each of Dealer and Counterparty represents and warrants
to, and agrees with, the other party that:

 

  (i) Tax Disclosure. Notwithstanding anything to the contrary herein, in the
Equity Definitions or in the Agreement, and notwithstanding any express or
implied claims of exclusivity or proprietary rights, the parties (and each of
their employees, representatives or other agents) are authorized to disclose to
any and all persons, beginning immediately upon commencement of their
discussions and without limitation of any kind, the tax treatment and tax
structure of the Transaction, and all materials of any kind (including opinions
or other tax analyses) that are provided by either party to the other relating
to such tax treatment and tax structure.

 

  (ii) Commodity Exchange Act. It is an “eligible contract participant” within
the meaning of the U.S. Commodity Exchange Act, as amended (the “CEA”). The
Transaction has been subject to individual negotiation by the parties. The
Transaction has not been executed or traded on a “trading facility” as defined
in the CEA.

 

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  (iii) Securities Act. It is a “qualified institutional buyer” as defined in
Rule 144A under the Securities Act.

Counterparty Representations: Counterparty hereby represents, warrants,
acknowledges and covenants that:

 

  (i) Counterparty is not as of the Trade Date, and shall not be after giving
effect to the transactions contemplated hereby, “insolvent” (as such term is
defined in Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United
States Code) (the “Bankruptcy Code”)) and Counterparty would be able to purchase
13,276,700 Shares in compliance with the laws of the jurisdiction of
Counterparty’s incorporation or organization.

 

  (ii) Counterparty shall immediately provide written notice to Dealer upon
obtaining knowledge of the occurrence of any event that would constitute an
Event of Default, a Potential Event of Default or a Potential Adjustment Event;
provided, however, that should Counterparty be in possession of material
non-public information regarding Counterparty, Counterparty shall not
communicate such information to Dealer in connection with this Transaction until
such information no longer constitutes material non-public information. In
addition, Counterparty shall reasonably promptly provide written notice to
Dealer of any adjustment that is made under the Indenture on account of any
Potential Adjustment Event.

 

  (iii) Counterparty’s financial condition is such that it has no need for
liquidity with respect to its investment in the Transaction and no need to
dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness.

 

  (iv) Counterparty’s investments in and liabilities in respect of the
Transaction, which it understands are not readily marketable, are not
disproportionate to its net worth, and Counterparty is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in
the Transaction.

 

  (v) The representations and warranties of Counterparty set forth in Section 3
of the Agreement and Section 1 of the Underwriting Agreement dated as of the
Trade Date between Counterparty and Deutsche Bank Securities Inc. and J.P.
Morgan Securities LLC as representatives of the underwriters party thereto (the
“Underwriting Agreement”) are true and correct and are hereby deemed to be
repeated to Dealer as if set forth herein.

 

  (vi) Counterparty understands, agrees and acknowledges that Dealer has no
obligation or intention to register the Transaction under the Securities Act,
any state securities law or other applicable federal securities law.

 

  (vii) Counterparty is not, and after giving effect to the transactions
contemplated hereby will not be, an “investment company” as such term is defined
in the Investment Company Act.

 

  (viii) Counterparty understands, agrees and acknowledges that no obligations
of Dealer to it hereunder shall be entitled to the benefit of deposit insurance
and that such obligations shall not be guaranteed by any affiliate of Dealer or
any governmental agency.

 

  (ix) (A) Counterparty is acting for its own account, and it has made its own
independent decisions to enter into the Transaction and as to whether the
Transaction is appropriate or proper for it based upon its own judgment and upon
advice from such advisers as it has deemed necessary, (B) Counterparty is not
relying on any communication (written or oral) of Dealer or any of its
affiliates as investment advice or as a recommendation to enter into the
Transaction (it being understood that information and explanations related to
the terms and conditions of the Transaction shall not be considered investment
advice or a recommendation to enter into the Transaction) and (C) no
communication (written or oral) received from Dealer or any of its affiliates
shall be deemed to be an assurance or guarantee as to the expected results of
the Transaction.

 

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  (x) Without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that Dealer is not making any representations or
warranties with respect to the treatment of the Transaction under ASC Topic 260,
Earnings Per Share, ASC Topic 815, Derivatives and Hedging, ASC Topic 480,
Distinguishing Liabilities from Equity and ASC Topic 815-40, Derivatives and
Hedging – Contracts in Entity’s Own Equity (or any successor issue statements),
or under any other accounting guidance.

 

  (xi) Counterparty is not entering into the Transaction and will not make any
election hereunder or under the Convertible Notes for the purpose of
(i) creating actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or (ii) raising or depressing
or otherwise manipulating the price of the Shares (or any security convertible
into or exchangeable for the Shares), in either case in violation of the U.S.
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

  (xii) Counterparty’s filings under the Exchange Act and other applicable
securities laws that are required to be filed have been filed and when
considered as a whole (with the more recent such reports and documents deemed to
amend inconsistent statements contained in any earlier such reports and
documents), as of the date of this representation, do not contain any untrue
statement of material fact or any omission of a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.

 

  (xiii) The Transaction, and any repurchase of the Shares by Counterparty in
connection with the Transaction, has been approved by Counterparty’s board of
directors (including engaging in derivative transactions) and any such
repurchase has been, or shall when so required be, publicly disclosed in its
periodic filings under the Exchange Act and its financial statements and notes
thereto.

 

  (xiv) No state or local (including non-U.S. jurisdictions) or non-U.S. federal
law, rule, regulation or regulatory order applicable to the Shares or the Issuer
would give rise to any reporting, consent, registration or other requirement
(including without limitation a requirement to obtain prior approval from any
person or entity) as a result of Dealer or its affiliates having the power to
vote, owning or holding (however defined) Shares.

 

  (xv) Counterparty shall deliver to Dealer on the Effective Date an opinion of
counsel, dated as of such date and reasonably acceptable to Dealer in form and
substance, with respect to the matters set forth in Section 3(a) of the
Agreement and such other matters as Dealer may reasonably request.

Miscellaneous:

Set-Off. Each party waives any and all rights it may have to set off obligations
arising under the Agreement and the Transaction against other obligations
between the parties, whether arising under any other agreement, applicable law
or otherwise.

Qualified Financial Contracts. It is the intention of the parties that, in
respect of Counterparty, (a) the Transaction shall constitute a “qualified
financial contract” within the meaning of 12 U.S.C. Section 1821(e)(8)(D)(i) and
(b) a Non-defaulting Party’s rights under Sections 5 and 6 of the Agreement
constitute rights of the kind referred to in 12 U.S.C. Section 1821(e)(8)(A).

 

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Staggered Settlement. If upon advice of counsel with respect to applicable legal
and regulatory requirements, including any requirements relating to Dealer’s
hedging activities hereunder, Dealer reasonably determines that it would not be
advisable to deliver, or to acquire Shares to deliver, any or all of the Shares
to be delivered by Dealer on the relevant Settlement Date, Dealer may, by notice
to Counterparty on or prior to any Settlement Date on which Dealer would be
required to deliver Shares hereunder (a “Nominal Settlement Date”), elect to
deliver such Shares on two or more dates (each, a “Staggered Settlement Date”)
or at two or more times on the Nominal Settlement Date as follows: (i) in such
notice, Dealer will specify to Counterparty the related Staggered Settlement
Dates (each of which will be on or prior to such Nominal Settlement Date, but
not prior to the beginning of the related “Conversion Period”) or delivery times
and how it will allocate the Shares it is required to deliver under “Settlement”
above among the Staggered Settlement Dates or delivery times; and (ii) the
aggregate number of Shares that Dealer will deliver to Counterparty hereunder on
all such Staggered Settlement Dates and delivery times will equal the number of
Shares that Dealer would otherwise be required to deliver on such Nominal
Settlement Date.

Additional Termination Events.

 

  (i) The occurrence of an “Event of Default” with respect to Counterparty under
the terms of the Convertible Notes as set forth in Section 5.01 of the
Supplemental Indenture that results in the Convertible Notes becoming or being
declared due and payable pursuant to the Indenture shall constitute an
Additional Termination Event applicable to the Transaction and, with respect to
such Additional Termination Event, (x) Counterparty shall be deemed to be the
sole Affected Party, (y) the Transaction shall be the sole Affected Transaction
and (z) Dealer may designate an Exchange Business Day as an Early Termination
Date pursuant to Section 6(b) of the Agreement (which Exchange Business Day
shall be on or as promptly as reasonably practicable after the occurrence of
such acceleration).

 

  (ii) Promptly following, but in no event later than the fifth Exchange
Business Day after, any repurchase and cancellation of Convertible Notes
(whether pursuant to Section 9.01 of the Supplemental Indenture, Section 2.07 of
the Supplemental Indenture or otherwise), Counterparty shall notify Dealer in
writing of such repurchase and cancellation and the aggregate principal amount
of Convertible Notes so repurchased and cancelled (any such notice, a
“Repurchase Notice”); provided that such Repurchase Notice shall contain an
acknowledgement by Counterparty of its responsibilities under applicable
securities laws, and in particular Section 9 and 10(b) of the Exchange Act and
the rules and regulations thereunder, in respect of such repurchase and the
delivery of such Repurchase Notice. Notwithstanding anything to the contrary in
this Confirmation, the receipt by Dealer from Counterparty of any Repurchase
Notice, within the applicable time period set forth in the preceding sentence
and containing the acknowledgement set forth in the preceding proviso, shall
constitute an Additional Termination Event as provided in this clause (ii). Upon
receipt of any such Repurchase Notice, Dealer shall designate an Exchange
Business Day following receipt of such Repurchase Notice (which Exchange
Business Day shall be within a commercially reasonable period of time after the
related settlement date for the repurchase of such Convertible Notes) as an
Early Termination Date with respect to the portion of this Transaction
corresponding to a number of Note Hedging Units (the “Repurchase Note Hedging
Units”) equal to the lesser of (A) the product of (1) the Applicable Percentage
and (2) the aggregate principal amount of such Convertible Notes specified in
such Repurchase Notice, divided by USD 1,000 and (B) the Number of Note Hedging
Units as of the date Dealer designates such Early Termination Date and, as of
such date, the Number of Note Hedging Units shall be reduced by the number of
Repurchase Note Hedging Units. Any payment hereunder with respect to such
termination shall be calculated pursuant to Section 6 of the Agreement as if
(1) an Early Termination Date had been designated in respect of a Transaction
having terms identical to this Transaction and a Number of Note Hedging Units
equal to the number of Repurchase Note Hedging Units, (2) Counterparty were the
sole Affected Party with respect to such Additional Termination Event and
(3) the terminated portion of the Transaction were the sole Affected
Transaction.

 

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  (iii) Notwithstanding anything to the contrary in this Confirmation, the
receipt by Dealer from Counterparty, within the applicable time period set forth
under “Notice of Exercise” above, of any Notice of Exercise in respect of Note
Hedging Units that relate to Make-Whole Convertible Notes shall constitute an
Additional Termination Event as provided in this clause (iii). Upon receipt of
any such Notice of Exercise, Dealer shall designate an Exchange Business Day
following such Additional Termination Event (which Exchange Business Day shall
be within a commercially reasonable period of time after the related settlement
date for such Make-Whole Convertible Notes) as an Early Termination Date with
respect to the portion of this Transaction corresponding to a number of Note
Hedging Units (the “Make-Whole Note Hedging Units”) equal to the lesser of
(A) the product of (1) the Applicable Percentage and (2) the aggregate principal
amount of such Make-Whole Convertible Notes specified in such Exercise Notice,
divided by USD 1,000 and (B) the Number of Note Hedging Units as of the date
Dealer designates such Early Termination Date and, as of such date, the Number
of Note Hedging Units shall be reduced by the number of Make-Whole Note Hedging
Units. Any payment hereunder with respect to such termination (the “Make-Whole
Unwind Payment”) shall be calculated pursuant to Section 6 of the Agreement as
if (1) an Early Termination Date had been designated in respect of a Transaction
having terms identical to this Transaction and a Number of Note Hedging Units
equal to the number of Make-Whole Note Hedging Units, (2) Counterparty were the
sole Affected Party with respect to such Additional Termination Event and
(3) the terminated portion of the Transaction were the sole Affected Transaction
(and, for the avoidance of doubt, in determining the amount payable pursuant to
Section 6 of the Agreement, the Calculation Agent shall not take into account
any Fundamental Change Adjustment); provided that the amount of cash deliverable
in respect of such early termination by Dealer to Counterparty shall not be
greater than the excess of (x) (I) the number of Make-Whole Note Hedging Units
multiplied by (II) the “Conversion Rate” (after taking into account any
applicable Fundamental Change Adjustment) multiplied by (III) the Applicable
Limit Price on the applicable Settlement Date determined by the Calculation
Agent in good faith and in a commercially reasonable manner over (y) the product
of USD 1,000 and the number of such Make-Whole Note Hedging Units, as determined
by the Calculation Agent in a commercially reasonable manner. If Counterparty
has (or is deemed to have) specified a Cash Percentage that is less than 100% in
the Notice of Exercise relating to any Make-Whole Note Hedging Units, then in
lieu of paying the Make-Whole Unwind Payment as set forth above, Dealer shall
(A) pay to Counterparty an amount of cash equal to (1) such Cash Percentage,
multiplied by (2) such Make-Whole Unwind Payment, and (B) deliver to
Counterparty a number of Shares equal to (1) 100% minus such Cash Percentage,
multiplied by (2) such Make-Whole Unwind Payment, divided by (3) a price per
Share determined by the Calculation Agent in good faith and in a commercially
reasonable manner, in each case, on the date such Make-Whole Unwind Payment
would otherwise be due pursuant to the terms of the Agreement and this
Confirmation (or within a commercially reasonable period of time thereafter, as
determined by Dealer taking into account existing liquidity conditions and
Dealer’s hedging and hedge unwind activity or settlement activity in connection
with such payment and delivery).

Counterparty agrees that it will promptly cancel any repurchased Convertible
Notes pursuant to Section 2.06 of the Supplemental Indenture.

For the avoidance of doubt, the provisions set forth below under “Alternative
Calculations and Dealer Payment on Early Termination and on Certain
Extraordinary Events,” including and subject to the conditions and limitations
set forth therein, shall apply to any Dealer Payment Obligation amount resulting
from an Additional Termination Event set forth in clause (i) or (ii) above.

Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good
faith reasonable judgment of Dealer based on the advice of counsel, the Shares
(the “Hedge Shares”) acquired by Dealer or any of its affiliates (collectively
for the purposes of this paragraph only, “Dealer”) for the purpose of hedging
its obligations pursuant to the Transaction cannot be sold in the public market
by Dealer without registration under the Securities Act, Counterparty shall, at
its election: (i) in order to allow Dealer to sell the Hedge Shares in a
registered offering, make available to Dealer an effective registration
statement under the Securities Act to cover the resale

 

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of such Hedge Shares and (A) enter into an agreement, in form and substance
satisfactory to Dealer, substantially in the form of an underwriting agreement
for a registered offering of substantially similar size, (B) provide
accountant’s “comfort” letters in customary form for registered offerings of
equity securities of substantially similar size, (C) provide disclosure opinions
of nationally recognized outside counsel to Counterparty reasonably acceptable
to Dealer, (D) provide other customary opinions, certificates and closing
documents customary in form for registered offerings of equity securities of
substantially similar size and (E) afford Dealer a reasonable opportunity to
conduct a “due diligence” investigation with respect to Counterparty customary
in scope for underwritten offerings of equity securities of substantially
similar size; provided, however, that if Dealer, in its sole discretion, is not
satisfied with access to due diligence materials, the results of its due
diligence investigation, or the procedures and documentation for the registered
offering referred to above, then clause (ii) or clause (iii) of this paragraph
shall apply at the election of Counterparty; (ii) in order to allow Dealer to
sell the Hedge Shares in a private placement, enter into a private placement
agreement substantially similar to private placement purchase agreements
customary for private placements of equity securities of substantially similar
size, in form and substance satisfactory to Dealer, including customary
representations, covenants, blue sky and other governmental filings and/or
registrations, indemnities to Dealer, due diligence rights (for Dealer or any
designated buyer of the Hedge Shares from Dealer), opinions and certificates and
such other documentation as is customary for private placements agreements for
private placements of equity securities of substantially similar size, all
reasonably acceptable to Dealer (in which case, the Calculation Agent shall make
any adjustments to the terms of the Transaction that are necessary, in its
commercially reasonable determination, to compensate Dealer for any discount
from the public market price of the Shares incurred on the sale of Hedge Shares
in a private placement); or (iii) purchase the Hedge Shares from Dealer at the
VWAP Price on such Exchange Business Days, and in the amounts, requested by
Dealer. “VWAP Price” means, on any Exchange Business Day, the per Share
volume-weighted average price as displayed under the heading “Bloomberg VWAP” on
Bloomberg page MRX.N <equity> AQR (or any successor thereto) in respect of the
period from 9:30 a.m. to 4:00 p.m. (New York City time) on such Exchange
Business Day (or if such volume-weighted average price is unavailable, or is, in
the Calculation Agent’s reasonable discretion, erroneous, the market value of
one Share on such Exchange Business Day, as determined by the Calculation Agent
using, if practicable, a volume-weighted method). This paragraph shall survive
the termination, expiration or early unwind of the Transaction.

Status of Claims in Bankruptcy. Dealer acknowledges and agrees that this
Confirmation is not intended to convey to Dealer rights with respect to the
Transaction that are senior to the claims of common stockholders in any U.S.
bankruptcy proceedings of Counterparty; provided that nothing herein shall limit
or shall be deemed to limit Dealer’s right to pursue remedies in the event of a
breach by Counterparty of its obligations and agreements with respect to the
Transaction other than during Counterparty’s bankruptcy; provided, further, that
nothing herein shall limit or shall be deemed to limit Dealer’s rights in
respect of any transactions other than the Transaction.

No Collateral. Notwithstanding any provision of this Confirmation, the
Agreement, Equity Definitions, or any other agreement between the parties to the
contrary, the obligations of Counterparty under the Transaction are not secured
by any collateral.

Securities Contract; Swap Agreement. The parties hereto agree and acknowledge
that Dealer is a “financial institution,” “swap participant” and “financial
participant” within the meaning of Sections 101(22), 101(53C) and 101(22A) of
the Bankruptcy Code. The parties hereto further agree and acknowledge (A) that
this Confirmation is (i) a “securities contract,” as such term is defined in
Section 741(7) of the Bankruptcy Code, with respect to which each payment and
delivery hereunder or in connection herewith is a “termination value,” “payment
amount” or “other transfer obligation” within the meaning of Section 362 of the
Bankruptcy Code and a “settlement payment” or a “transfer” within the meaning of
Section 546 of the Bankruptcy Code, and (ii) a “swap agreement,” as such term is
defined in Section 101(53B) of the Bankruptcy Code, with respect to which each
payment and delivery hereunder or in connection herewith is a “termination
value,” a “payment amount” or “other transfer obligation” within the meaning of
Section 362 of the Bankruptcy Code and a “transfer” within the meaning of
Section 546 of the Bankruptcy Code, and (B) that Dealer is entitled to the
protections afforded by, among other sections, Section 362(b)(6), 362(b)(17),
362(b)(27), 362(o), 546(e), 546(g), 546(j), 548(d)(2), 555, 560 and 561 of the
Bankruptcy Code.

 

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Repurchase Notices. Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, provide Dealer with a written notice of such
repurchase (a “Repurchase Notice”) on such day if, following such repurchase,
the Unit Equity Percentage as determined on such day is greater by 0.5% or more
than the Unit Equity Percentage included in the immediately preceding Repurchase
Notice (or, in the case of the first such Repurchase Notice, greater by 0.5% or
more than the Unit Equity Percentage as of the date hereof). The “Unit Equity
Percentage” as of any day is the fraction, expressed as a percentage, (i) the
numerator of which is the sum of (A) the product of the number of Note Hedging
Units and the Note Hedging Unit Entitlement and (B) the number of Shares
underlying any other call option transaction between Dealer as seller and
Counterparty as buyer, and (ii) the denominator of which is the number of Shares
outstanding on such day. Counterparty agrees to indemnify and hold harmless
Dealer and its affiliates and their respective officers, directors, employees,
advisors, agents and controlling persons (each, a “Section 16 Indemnified
Person”) from and against any and all losses (including losses relating to
Dealer’s hedging activities as a consequence of becoming a Section 16 “insider”,
including without limitation, any forbearance from hedging activities or
cessation of hedging activities and any losses in connection therewith with
respect to the Transaction), claims, damages, judgments, liabilities and
reasonable expenses (including reasonable attorney’s fees), joint or several, to
which a Section 16 Indemnified Person may become subject, as a result of
Counterparty’s failure to provide Dealer with a Repurchase Notice on the day and
in the manner specified in this paragraph, and to reimburse, within 30 days upon
written request, each of such Section 16 Indemnified Persons for any reasonable
legal or other expenses incurred in connection with investigating, preparing
for, providing testimony or other evidence in connection with or defending any
of the foregoing. If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
the Section 16 Indemnified Person, such Section 16 Indemnified Person shall
promptly notify Counterparty in writing, and Counterparty, upon request of the
Section 16 Indemnified Person, shall retain counsel reasonably satisfactory to
the Section 16 Indemnified Person to represent the Section 16 Indemnified Person
and any others Counterparty may designate in such proceeding and shall pay the
reasonable fees and expenses of such counsel related to such proceeding.
Counterparty shall not be liable for any settlement of any proceeding effected
without its written consent, but if settled with such consent or if there be a
final judgment for the plaintiff, Counterparty agrees to indemnify any
Section 16 Indemnified Person from and against any loss or liability by reason
of such settlement or judgment. Counterparty shall not, without the prior
written consent of the Section 16 Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Section 16
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Section 16 Indemnified Person, unless such settlement
includes an unconditional release of such Section 16 Indemnified Person from all
liability on claims that are the subject matter of such proceeding on terms
reasonably satisfactory to such Section 16 Indemnified Person. If the
indemnification provided for in this paragraph is unavailable to a Section 16
Indemnified Person or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then Counterparty, in lieu of indemnifying such
Section 16 Indemnified Person thereunder, shall contribute to the amount paid or
payable by such Section 16 Indemnified Person as a result of such losses,
claims, damages or liabilities. The remedies provided for in this paragraph are
not exclusive and shall not limit any rights or remedies that may otherwise be
available to any Section 16 Indemnified Person at law or in equity. The
indemnity and contribution agreements contained in this paragraph shall remain
operative and in full force and effect regardless of the termination of the
Transaction.

Alternative Calculations and Dealer Payment on Early Termination and on Certain
Extraordinary Events. If Dealer owes Counterparty any amount in connection with
the Transaction pursuant to Sections 12.2, 12.3 (and “Consequences of Merger
Events” above), 12.6, 12.7 or 12.9 of the Equity Definitions (except in the case
of an Extraordinary Event that (x) is within Counterparty’s control or (y) as a
result of which the Shares have changed into cash) or pursuant to
Section 6(d)(ii) of the Agreement (except in the case of an Event of Default in
which Counterparty is the Defaulting Party or a Termination Event in which
Counterparty is the Affected Party, other than an Event of Default or a
Termination Event that resulted from an event or events outside Counterparty’s
control) (a “Dealer Payment Obligation”), Counterparty shall have the right, in
its sole discretion, to require Dealer to satisfy any such Dealer Payment
Obligation by delivery of Termination Delivery Units (as defined below) by
(A) giving irrevocable telephonic notice to Dealer, confirmed in writing within
one Scheduled Trading Day, between the hours of 9:00 a.m. and 4:00 p.m. New York
time on the Early Termination Date or other date the transaction is terminated,
as applicable (“Notice of Dealer Termination Delivery”) and (B) remaking the
representation set forth under “No Material Non-Public Information” below on the
date of such notice; provided

 

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that if Counterparty does not validly so elect (or is not permitted to elect) to
require Dealer to satisfy its Dealer Payment Obligation by delivery of
Termination Delivery Units, Dealer shall have the right, in its sole discretion,
to elect to satisfy its Dealer Payment Obligation by delivery of Termination
Delivery Units. Within a commercially reasonable period of time following
receipt of a Notice of Dealer Termination Delivery or delivery by Dealer of
notice of its election to satisfy the Dealer Payment Obligation by delivery of
Termination Delivery Units, Dealer shall deliver to Counterparty a number of
Termination Delivery Units having a cash value equal to the amount of such
Dealer Payment Obligation (as determined by the Calculation Agent in a
commercially reasonable manner). If the provisions set forth in this
paragraph are applicable, the provisions of Sections 9.8, 9.9, 9.11 (modified as
described above) and 9.12 of the Equity Definitions shall be applicable, except
that all references to “Shares” shall be read as references to “Termination
Delivery Units”. In addition, notwithstanding anything to the contrary in the
Equity Definitions, Dealer may, in whole or in part, deliver securities
comprising Termination Delivery Units in certificated form to Counterparty in
lieu of delivery through the Clearance System.

“Termination Delivery Unit” means one Share or, if the Shares have changed into
cash or any other property or the right to receive cash or any other property as
the result of an Insolvency, Nationalization or Merger Event, a unit consisting
of the number or amount of each type of property received by a holder of one
Share (without consideration of any requirement to pay cash or other
consideration in lieu of fractional amounts of any securities) in such
Insolvency, Nationalization or Merger Event, as determined by the Calculation
Agent. If such Insolvency, Nationalization or Merger Event involves a choice of
consideration to be received by holders, the Calculation Agent shall determine
the composition of such consideration in its commercially reasonable discretion.

No Material Non-Public Information. Counterparty represents and warrants to
Dealer that it is not aware of any material nonpublic information concerning
itself, the Shares or option contracts related to the Shares.

Right to Extend. Dealer may postpone any potential Exercise Date or Settlement
Date or postpone or extend any other date of valuation or delivery with respect
to some or all of the relevant Note Hedging Units (in which event the
Calculation Agent shall make appropriate adjustments to the Settlement Amount
for such Note Hedging Units), if Dealer determines, in its reasonable discretion
based on the advice of counsel (in the case of clause (a) or sub-clause (b)(ii)
below) or in its commercially reasonable discretion (in the case of sub-clause
(b)(i) below), that (a) a Regulatory Disruption has occurred or (b) such
extension is reasonably necessary or appropriate to (i) preserve Dealer’s
hedging or hedge unwind activity hereunder in light of existing liquidity
conditions (but only if there is a material decrease in liquidity relative to
Dealer’s expectations on the Trade Date) or (ii) enable Dealer to effect
purchases of Shares in connection with its hedging, hedge unwind or settlement
activity hereunder in a manner that would, if Dealer were the Issuer or an
affiliated purchaser of the Issuer, be in compliance with applicable legal,
regulatory or self-regulatory requirements, or with related policies and
procedures applicable to Dealer. “Regulatory Disruption” shall mean any event
that Dealer determines makes it appropriate with regard to any legal, regulatory
or self-regulatory requirements or related policies and procedures (whether or
not such requirements, policies or procedures are imposed by law or have been
voluntarily adopted by Dealer), for Dealer to refrain from or decrease any
market activity in connection with the Transaction. Notwithstanding anything to
the contrary, in the case of a postponement pursuant to sub-clause (b)(i) above,
no such Exercise Date or Settlement Date or other date of valuation or delivery
may be postponed or added more than 30 Scheduled Trading Days after the original
Exercise Date or Settlement Date or other date of valuation or delivery, as the
case may be.

Transfer or Assignment. Counterparty may not transfer any of its rights or
obligations under the Transaction without the prior written consent of Dealer
not to be unreasonably withheld. For the avoidance of doubt, Dealer may
condition its consent on any of the following, without limitation: (i) the
receipt by Dealer of opinions and documentation reasonably satisfactory to
Dealer in connection with such transfer, (ii) such transfer being effected on
terms reasonably satisfactory to Dealer with respect to any legal and regulatory
requirements relevant to Dealer, (iii) the transferee being a United States
person (as defined in the Internal Revenue Code of 1986, as amended), (iv) that,
in Dealer’s reasonable determination, Dealer will not be required, as a result
of such transfer, to pay the transferee an amount under Section 2(d)(i)(4) of
the Agreement greater than the amount, if any, that Dealer would have been
required to pay to Counterparty in the absence of such transfer, (v) that, in
Dealer’s reasonable determination, no Event of Default, Potential Event of
Default or Termination Event will occur as a

 

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result of such transfer and (vi) that Counterparty will continue to be obligated
to provide notices hereunder relating to the Convertible Notes and will continue
to be obligated under the provisions set forth under “Disposition of Hedge
Shares” and “Repurchase Notices” herein. In addition, Dealer may not, without
the consent of Counterparty (such consent not to be unreasonably withheld),
transfer or assign all or a portion of its Note Hedging Units hereunder except
to any affiliate of Dealer (x) that has, at the time of such transfer or
assignment, a rating for its long term, unsecured and unsubordinated
indebtedness that is equal to or better than Dealer’s credit rating, or
(y) whose obligation hereunder will be guaranteed, pursuant to the terms of a
customary guarantee in a form used by Dealer generally for similar transactions,
by Dealer or Dealer Parent. Notwithstanding the foregoing, it shall be a further
condition to a transfer or assignment by Dealer without Counterparty’s consent
that such transfer or assignment would not result in a deemed exchange by
Counterparty of the transferred or assigned portion of the Transaction for a
modified transaction that differs materially in kind or extent for U.S. federal
income tax purposes.

If (a) at any time (1) the Section 16 Equity Percentage exceeds 8%, (2) the Unit
Equity Percentage exceeds 14.5% or (3) Dealer, Dealer Group (as defined below)
or any person whose ownership position would be aggregated with that of Dealer
or Dealer Group (Dealer, Dealer Group or any such person, a “Dealer Person”)
under any federal, state or local (including non-U.S.) laws, rules, regulations
or regulatory orders, or any organizational documents or contracts of
Counterparty that are, in each case, applicable to ownership of Shares
(“Applicable Restrictions”), owns, beneficially owns, constructively owns,
controls, holds the power to vote or otherwise meets a relevant definition of
ownership, or could be reasonably viewed as meeting any of the foregoing, in
excess of a number of Shares equal to (x) the number of Shares that would give
rise to reporting, registration, filing or notification obligations or other
requirements (including obtaining prior approval by a state, federal or non-U.S.
regulator) of a Dealer Person, or could result in an adverse effect on a Dealer
Person (except for any filings of Schedule 13D or Schedule 13G under the
Exchange Act or any other filing obligations applicable as of the date hereof),
under Applicable Restrictions, as determined by Dealer in its reasonable
discretion, and with respect to which such requirements have not been met or the
relevant approval has not been received minus (y) 1% of the number of Shares
outstanding on the date of determination (either such condition described in
clause (1), (2) or (3), an “Excess Ownership Position”), and (b) Dealer is
unable, after commercially reasonable efforts, to effect a transfer or
assignment on pricing and terms and within a time period reasonably acceptable
to it of all or a portion of this Transaction pursuant to the preceding
paragraph such that an Excess Ownership Position no longer exists (it being
understood and agreed that, if an Excess Ownership Position exists, the
condition to transfer or assignment set forth in the last sentence of the
preceding paragraph shall not apply), Dealer may designate any Scheduled Trading
Day as an Early Termination Date with respect to a portion (the “Terminated
Portion”) of this Transaction, such that an Excess Ownership Position no longer
exists following such partial termination. In the event that Dealer so
designates an Early Termination Date with respect to a portion of this
Transaction, a payment shall be made pursuant to Section 6 of the Agreement as
if (i) an Early Termination Date had been designated in respect of a Transaction
having terms identical to this Transaction and a Number of Note Hedging Units
equal to the Terminated Portion, (ii) Counterparty shall be the sole Affected
Party with respect to such partial termination and (iii) such Transaction shall
be the only Terminated Transaction (and, for the avoidance of doubt, the
provisions set forth under the caption “Alternative Calculations and Dealer
Payment on Early Termination and on Certain Extraordinary Events” shall apply to
any amount that is payable by Dealer to Counterparty pursuant to this sentence).
The “Section 16 Equity Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the number of Shares that Dealer and
any of its affiliates subject to aggregation with Dealer for purposes of the
“beneficial ownership” test under Section 13 of the Exchange Act and all persons
who may form a “group” (within the meaning of Rule 13d-5(b)(1) under the
Exchange Act) with Dealer (collectively, “Dealer Group”) “beneficially own”
(within the meaning of Section 13 of the Exchange Act) without duplication on
such day (or to the extent that the equivalent calculation under Section 16 of
the Exchange Act and the rules and regulations thereunder results in a higher
number, such number) and (B) the denominator of which is the number of Shares
outstanding on such day.

Designation by Dealer. Notwithstanding any other provision in this Confirmation
to the contrary requiring or allowing Dealer to purchase, sell, receive or
deliver any shares or other securities to or from Counterparty, Dealer may
designate any of its affiliates to purchase, sell, receive or deliver such
shares or other securities and otherwise to perform Dealer’s obligations in
respect of the Transaction and any such designee may assume such obligations.
Dealer shall be discharged of its obligations to Counterparty to the extent of
any such performance.

 

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Role of Agent. Each party agrees and acknowledges that (i) J.P. Morgan
Securities LLC, an affiliate of Dealer (“JPMS”), has acted solely as agent and
not as principal with respect to the Transaction and (ii) JPMS has no obligation
or liability, by way of guaranty, endorsement or otherwise, in any manner in
respect of the Transaction (including, if applicable, in respect of the
settlement thereof). Each party agrees it will look solely to the other party
for performance of such other party’s obligations under the Transaction.

Severability; Illegality. Notwithstanding anything to the contrary in the
Agreement, if compliance by either party with any provision of the Transaction
would be unenforceable or illegal, (a) the parties shall negotiate in good faith
to resolve such unenforceability or illegality in a manner that preserves the
economic benefits of the transactions contemplated hereby and (b) the other
provisions of the Transaction shall not be invalidated, but shall remain in full
force and effect.

Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING RELATING TO THE TRANSACTION. EACH PARTY (I) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH A
SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER INTO
THE TRANSACTION, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS PROVIDED HEREIN.

Wall Street Transparency and Accountability Act. In connection with Section 739
of the Wall Street Transparency and Accountability Act of 2010 (“WSTAA”), the
parties hereby agree that neither the enactment of WSTAA or any regulation under
the WSTAA, nor any requirement under WSTAA or an amendment made by WSTAA, shall
limit or otherwise impair either party’s otherwise applicable rights to
terminate, renegotiate, modify, amend or supplement this Confirmation or the
Agreement, as applicable, arising from a termination event, force majeure,
illegality, increased costs, regulatory change or similar event under this
Confirmation, the Equity Definitions incorporated herein, or the Agreement
(including, but not limited to, rights arising from Change in Law, Hedging
Disruption, Increased Cost of Hedging, an Excess Ownership Position, or
Illegality (as defined in the Agreement)).

Agreements and Acknowledgements Regarding Hedging. Counterparty understands,
acknowledges and agrees that: (A) at any time on and prior to the Expiration
Date, Dealer and its affiliates may buy or sell Shares or other securities or
buy or sell options or futures contracts or enter into swaps or other derivative
securities in order to adjust its hedge position with respect to the
Transaction; (B) Dealer and its affiliates also may be active in the market for
Shares other than in connection with hedging activities in relation to the
Transaction; (C) Dealer shall make its own determination as to whether, when or
in what manner any hedging or market activities in securities of Issuer shall be
conducted and shall do so in a manner that it deems appropriate to hedge its
price and market risk with respect to the “Daily VWAP”; and (D) any market
activities of Dealer and its affiliates with respect to Shares may affect the
market price and volatility of Shares, as well as the “Daily VWAP”, each in a
manner that may be adverse to Counterparty.

Early Unwind. In the event the sale of the “Firm Securities” (as defined in the
Underwriting Agreement) is not consummated with the underwriters thereof for any
reason, other than in cases involving breach of the Underwriting Agreement by
Dealer or its affiliate, by the close of business in New York on May 23, 2012
(or such later date as agreed upon by the parties) (May 23, 2012 or such later
date as agreed upon being the “Early Unwind Date”), the Transaction shall
automatically terminate (the “Early Unwind”) on the Early Unwind Date and
(a) the Transaction and all of the respective rights and obligations of Dealer
and Counterparty under the Transaction shall be cancelled and terminated and
(b) each party shall be released and discharged by the other party from and
agrees not to make any claim against the other party with respect to any
obligations or liabilities of the other party arising out of and to be performed
in connection with the Transaction either prior to or after the Early Unwind
Date. Dealer and Counterparty represent and acknowledge to the other that, upon
an Early Unwind, all obligations with respect to the Transaction shall be deemed
fully and finally discharged.

 

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Payment by Counterparty. In the event that, following payment of the Premium,
(i) an Early Termination Date occurs or is designated with respect to the
Transaction as a result of a Termination Event or an Event of Default (other
than an Event of Default or Termination Event within Counterparty’s control)
and, as a result, Counterparty owes to Dealer an amount calculated under
Section 6(e) of the Agreement, or (ii) Counterparty owes to Dealer any amount
under “Consequences of Merger Events” above (other than as a result of a Merger
Event that resulted from an event or events within Counterparty’s control), such
amount shall be deemed to be zero.

Part 2(b) of the ISDA Schedule – Payee Representation. For the purpose of
Section 3(f) of this Agreement, Counterparty makes the following representation
to Dealer:

Counterparty is a corporation established under the laws of the State of
Delaware and is a “United States person” (as that term is defined in
Section 7701(a)(30) of the Code).

Part 3(a) of the ISDA Schedule – Tax Forms:

 

Party Required to Deliver Document   Form/Document/Certificate   Date by which
to be Delivered Counterparty   A complete and duly executed United States
Internal Revenue Service Form W-9 (or successor thereto.)   (i) Upon execution
and delivery of this Agreement; (ii) promptly upon reasonable demand by Dealer;
and (iii) promptly upon learning that any such Form previously provided by
Counterparty has become obsolete or incorrect. Dealer   A complete and duly
executed United States Internal Revenue Service Form W-9 (or successor thereto).
  (i) Upon execution and delivery of this Agreement; (ii) promptly upon
reasonable demand by Counterparty; and (iii) promptly upon learning that any
such Form previously provided by Dealer has become obsolete or incorrect.

Governing Law; Jurisdiction: THIS CONFIRMATION AND ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING UNDER OR RELATED TO THIS CONFIRMATION SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL
MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND
ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

Contact information. For purposes of the Agreement (unless otherwise specified
in the Agreement), the addresses for notice to the parties shall be:

(a) Counterparty

Medicis Pharmaceutical Corporation

7720 North Dobson Road

Scottsdale, Arizona 85256

Attention: Richard D. Peterson

Fax: (480) 291-8847

 

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(b) Dealer

 

  JPMorgan Chase Bank, National Association   EDG Marketing Support   Email:   
EDG_OTC_HEDGING_MS@jpmorgan.com   Facsimile No:    1-866-886-4506  
With a copy to:      Attention:    Jason Wood   Title:    Managing Director  
Telephone:    (212) 622-8783   Facsimile No:    (415) 226-0616

 

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LOGO [g352281g44x91.jpg]

Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to EDG Confirmation
Group, J.P. Morgan Securities LLC, 277 Park Avenue, 11th Floor, New York, NY
10172-3401, or by fax to (212) 622 8519.

Very truly yours,

 

J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National
Association By:  

/s/ Daniel Weinberg

Authorized Signatory Name:   Daniel Weinberg

Accepted and confirmed

as of the Trade Date:

 

Medicis Pharmaceutical Corporation By:  

/s/ Richard D. Peterson

Authorized Signatory Name:   Richard D. Peterson

[Base Note Hedge Transaction Signature Page]

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ANNEX A

The Premium for the Transaction is set forth below.

 

Premium:    USD 28,800,000

 

A-1