exv10w1



 






Exhibit 10.1




THIRD AMENDMENT





Amendment to Employment Agreement between Medicis Pharmaceutical Corporation and Jonah
Shacknai, dated July 1, 1996, as amended by an agreement dated April 1, 1999, as further
amended by an agreement dated February 21, 2001 (the “Agreement”).



     This Third Amendment is made as of this 30th day of December, 2005 between Medicis
Pharmaceutical Corporation, a corporation organized under the laws of the State of Delaware (the
“Company”), with offices located at 8125 North Hayden Road, Scottsdale, Arizona, and Jonah Shacknai
(the “Executive”), residing in Scottsdale, Arizona:



WITNESSETH




     WHEREAS, the Company and the Executive desire to enter into the present amendment whereby the
Executive will continue to provide personal services to the Company as Chairman and Chief Executive
Officer; and



     WHEREAS, the Company recognizes the unique services of the Executive to the Company and to its
financial success, and further recognizes the limitations of the Executive’s ability to travel due
to parental obligations; and



     WHEREAS, the Company highly values the past and present services and contributions of the
Executive to furtherance of shareholder value, and believes that the ongoing participation of the
Executive as Chairman and Chief Executive Officer is an important element of the Company’s future
success; and



     WHEREAS, the Company recognizes that the Executive has provided such services and made such
extraordinary contributions in furtherance of shareholder value while simultaneously providing for
the custodial care of his two minor children; and



     WHEREAS, the Company recognizes that the Executive has engaged in and presently engages in
extensive philanthropic and charitable activities in Arizona and elsewhere, which activities
significantly inure to the benefit of the Company in numerous



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ways, including reinforcing positive public relations for the Company in the local community and
elsewhere; and




     WHEREAS, the Executive has received local, regional and national recognition for his business,
charitable and philanthropic efforts; and



     WHEREAS, the Company desires that the Executive continue his engagement and participation in
such philanthropic and charitable activities in a similar manner and extent; and



     WHEREAS, the Executive shall continue to have the duties and responsibilities set forth in
Section 2(a) of the July 1, 1996 Agreement, as amended on April 1, 1999, and is further amended on
February 27, 2001,



     NOW, THEREFORE, in consideration of the continued employment of the Executive by the Company
as Chairman and Chief Executive Officer, the above premises and the mutual agreements hereinafter
set forth, the receipt, adequacy and sufficiency of which is hereby acknowledged, the parties agree
to amend their July 1, 1996 Employment Agreement, as further amended on April 1, 1999 and
thereafter on February 21, 2001 (the “Agreement”) as follows:



     1. The Agreement shall be extended for a five (5) year period commencing on January 1, 2006
and expiring on December 31, 2011 (the amended term) and shall be subject to automatic renewal for
successive periods as provided for in Article 4 of the Agreement.



     2. Section 2(b) of the Agreement, as amended by the amendment agreed to on April 1, 1999,
shall be further amended to read:




“(b) Throughout his employment hereunder, the Executive shall
continue to work a minimum of four (4) days per week, during
normal working hours during the business week or otherwise,
including but not limited to, conventions, meetings and off-site
activities, to the fulfillment of the duties of his employment,
with full



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recognition of his other obligations as designated hereinafter
which may occur outside the Company’s headquarters in the Phoenix
Metropolitan area. The Executive shall conduct such business
activities at the Company’s headquarters at 8125 North Hayden
Road, Scottsdale, Arizona, or from such other headquarters located
in the greater Phoenix area as the Company may determine.
Alternatively, the Executive shall be available during the
business week to meet with Company personnel, attend telephonic
meetings, and participate in other corporate matters from his home
during the normal business week and/or at such other times as the
Executive may be available, provided that the Executive’s children
are not in his care at such time. It is expressly understood and
agreed that the Executive may not be available for corporate
matters during such times that he is providing care for his
children. Further, the Company acknowledges and agrees that the
participation by the Executive in philanthropic, community
education and/or charitable activities during the normal business
week shall be considered to be in furtherance of the Executive’s
duties of his employment with the Company.”



     3. Exhibit A of the Agreement shall be amended, as provided and attached hereto, is to state,
among other items, that the base salary of the Executive effective January 1, 2006 shall be
$1,020,000 per annum, and shall be subject to all provisions set forth in the Agreement concerning
adjustment of the Executive’s base salary.



     4. Section 5 of the Agreement shall have added a subsection (j) which shall read:



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“(j) Notwithstanding anything to the contrary contained in the
Agreement, in the event the Agreement is extended beyond January
1, 2011 by virtue of the automatic renewal provisions of
subsection (a) of Section 4 of the Agreement, or otherwise, the
terms of the Agreement setting forth the payments by the Company
to the Executive, and the other entitlements of the Executive, to
be provided upon the termination by the Company of the Executive’s
employment, including but not limited to a Termination of
Employment as a result of Change of Ownership or Control of the
Company as provided in Section 9 of the Agreement, or to be
provided upon the resignation by the Executive of his employment
for Good Reason as provided in Section 8 of the Agreement, shall
remain in full force and effect for the duration of such extension
or renewal term.”



     5. Section 3 of the Agreement shall have added a subsection (d), which shall read:




“(d) The Company shall provide the Executive with six (6) weeks
of paid vacation time per year. The Executive shall endeavor to
schedule such vacation time in a manner that will not material
detract from the Executive’s performance of his duties. In the
event the Executive’s employment terminates for any reason,
whether voluntary or involuntary, the Company shall, no later than
thirty (30) days after the Date of Termination, make a payment to
the Executive for the value of all unused vacation.”



     6. Subsection (a)(iv) of Section 5 of the Agreement shall read:



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“(iv) If Executive’s employment is terminated pursuant to
subsection 4(b)(iii) by reason of Executive’s death, the Company
agrees to pay to the legal representative of his estate, for a
period of twenty-four (24) months (commencing with the Date of
Termination), an amount equal to and payable at the same rate at
his then current Base Salary.”



     7. The third paragraph in subsection (a)(v) of Section 5 of the Agreement shall read:




“After such termination because of the Executive’s disability, the
Executive shall be paid, in substantially equal monthly
installments, one hundred percent (100%) of his Base Salary (at
the rate in effect at the time Notice of Termination is given) for
twenty-four (24) months, and thereafter an annual amount equal to
fifty percent (50%) of such Base Salary for the balance of the
Term, but in no event for less than a twelve (12) month period.”



     8. Subsection (b) of Section 5 shall read:




“(b) Should any payment or provision of benefit provided for in
Section 5 constitute an “excess parachute payment” as defined in
Section 280G of the Internal Revenue Code of 1986 and the
regulations and interpretations of the Internal Revenue Service
promulgated thereunder, the successor to the Company, the
successor to the Company shall make all payments and provide all
benefits to the Executive as set forth in this Section 5, and
further shall reimburse the Executive for all excise taxes imposed
on the Executive by



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the Internal Revenue Service or any other taxing authority with
respect to such “excess parachute payments” (the “gross-up”
payment).”



     9. Section 5 of the Agreement shall have added a subsection (k), which shall read:




“(k) Effect of Section 409A of the Code.




Notwithstanding anything to the contrary in this Agreement, if, upon the advice of
its counsel, the Company determines that any payments or benefits to be provided to
Executive pursuant to this Agreement is or may become subject to the additional tax
under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed
under Section 409A (“409A Taxes”) if provided at the time otherwise required under
this Agreement, then:




(a) (i) such payments shall be delayed until the date that is six months
after the date of Executive’s “separation from service” (as such term is
defined under Section 409A) with the Company, or such shorter period that,
in the opinion of such counsel, is sufficient to avoid the imposition of
409A Taxes (the “Payments Delay Period”), and (ii) such payments shall be
increased by an amount equal to interest on such payments for the Payments
Delay Period at a rate equal to the rate of earnings then credited on
accounts in the Company’s Deferred Compensation Plan, or any successor
plan;




(b) (i) with respect to the provision of such benefits, for a period of
six months following the date of Executive’s “separation from service” (as
such term is defined under Section 409A) with the Company, or such shorter
period, that, in the opinion of such counsel, is sufficient to avoid the
imposition of 409A Taxes (the “Benefits Delay Period”), Executive shall be
responsible for the full cost of providing such benefits, and (ii) on the
first day following the Benefits Delay Period, the Company shall reimburse
Executive for the costs of providing such benefits imposed on Executive
during the Benefits Delay Period, plus interest accrued at a rate equal to
the rate of earnings then credited on accounts in the Company’s Deferred
Compensation Plan, or any successor plan; and




(c) The Company shall fund any payments to Executive that are to be
delayed as a result of the imposition of a Payment Delay Period (including
the interest to be paid with respect to such delayed payments) and/or any
payments that are expected to be paid to Executive as a result of the
imposition of a Benefits Delay



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Period (including any interest to be paid with respect thereto)
(collectively, the “Delayed Payments”) by establishing and irrevocably
funding a trust for the benefit of Executive. Such trust shall be a
grantor trust described in Section 671 of the Code. The trust shall
provide for distribution of amounts to Executive in order to pay taxes, if
any, that become due prior to payment of the Delayed Payments pursuant to
the trust. The amount of such fund shall equal a good faith estimate of
the Delayed Payments determined by the Company in consultation with
Executive. The establishment and funding of such trust shall not affect
the obligation of the Company to pay the Delayed Payments pursuant to this
Section 5(k).”



	 	 	 	 	 
	MEDICIS PHARMACEUTICAL CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ Michael A. Pietrangelo	 	 
	 

	 	 	 	 
	 

	 	Michael A. Pietrangelo

Chairman of the Executive Committee

of the Board of Directors	 	 
	 
	 	 	 	 
	By:

	 	/s/ Spencer Davidson	 	 
	 

	 	 	 	 
	 

	 	Spencer Davidson

Chairman of the Compensation Committee

of the Board of Directors	 	 
	 
	 	 	 	 





	 	 	 
	JONAH SHACKNAI

	 	 
	 
	 	 
	/s/ Jonah Shacknai
	 	 
	  
	 	 






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EXHIBIT A  —  STOCK OPTION AND COMPENSATION COMMITTEE



The following sets forth the Executive’s compensation in accordance with paragraph 3(a):




	 	 	 	 	 
	1.

	 	Annual base compensation* (“Base

Salary”)
	 	$1,020,000 per year
	 
	 	 	 	 
	2.

	 	Health/Medical and other Employee
benefits provided to other employees
of the Company.
	 	Actual cost
	 
	 	 	 	 
	3.

	 	Stock Options and Restricted
Stock Grants
	 	Minimum annual award options
to purchase 126,000 shares of
the commons stock of the
Company, and 25,200 shares of
Restricted Stock, or other
long term incentives offered
to other executives of
equivalent or greater value.
Minimum current value is based
on the capitalization of the
Company at January 1, 2006 and
shall increase proportionally
to the increase in the
capitalization of the Company
thereafter. Such annual grant
is to be awarded no earlier
than thirty (30) days before
or no later than thirty (30)
days after the anniversary
date of this Agreement and
subject to vesting of
one-third of the stock options
and restricted stock on each
of the first three
anniversaries of the date of
grant of such incentive stock
options and restricted stock,
and otherwise subject to the
terms and conditions of the
stock option plan and
restricted stock plan pursuant
to which they are granted. In
the event of a change in
ownership or control of the
Company, or if the Company’s
Incentive Stock Option and
Restricted Stock Plans are
dissolved, eliminated or
modified, then the Executive
shall receive in lieu of this
minimum annual award, a
minimum annual award equal to
the “cash equivalent” as set
forth and provided for in
Section 9(b).
	 
	 	 	 	 
	4.

	 	Annual Cash Bonus
	 	The Board agrees to determine,
in good faith, the annual cash
bonus to be provided to the
Executive
based upon the Executive’s
performance and the
performance of the Company
measured against the
Company’s fiscal plan for the
prior fiscal year calculated
in accordance with the
performance improvement plan
approved by shareholders in
November 2004, or such other
plan as may be in effect from
time to time.





*The Stock Option and Compensation Committee will review the base salary amount annually and
provide an increase in the Executive’s base annual compensation as appropriate and within its
discretion.