Document:

exv4w1

 

Exhibit 4.1

CSK AUTO, INC.

45/8% Senior Exchangeable Notes due 2025

 

SECOND SUPPLEMENTAL INDENTURE

Dated as of July 27, 2006

with respect to the

INDENTURE

Dated as of December 19, 2005

 

THE BANK OF NEW YORK TRUST COMPANY, N.A.,

as Trustee

 

 

SECOND SUPPLEMENTAL INDENTURE

     SECOND SUPPLEMENTAL INDENTURE dated as of July 27, 2006 (this “Supplemental Indenture”) among
CSK Auto, Inc., an Arizona corporation (the “Company”), CSK Auto Corporation, a Delaware
corporation and the parent of the Company (the “Issuer”), CSKAUTO.COM, Inc., a Delaware corporation
(the “Subsidiary Guarantor”), and The Bank of New York Trust Company, N.A., a national banking
association, as trustee under the indenture referred to below (the “Trustee”).

WITNESSETH

     A. WHEREAS, the Company, the Issuer and the existing Subsidiary Guarantor have heretofore
executed and delivered to the Trustee an Indenture (as amended, supplemented or otherwise modified,
the “Indenture”) dated as of December 19, 2005, providing for the issuance of the Company’s 45/8%
Senior Exchangeable Notes due 2025 (the “Notes”), initially in the aggregate principal amount of up
to $100,000,000.

     B. WHEREAS, pursuant to and in accordance with Section 10.02 of the Indenture, the Company has
obtained, on the date hereof, the consent of the holders of the Notes representing not less than a
majority in aggregate Principal Amount of the outstanding Notes to the amendments to the Indenture
set forth in this Supplemental Indenture.

     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, it is mutually covenanted and agreed
for the equal and ratable benefit of the holders of the Notes as follows:

     SECTION 1. Defined Terms. As used in this Supplemental Indenture, terms defined in
the Indenture or in the preamble or recital hereto are used herein as therein defined. The words
“herein,” “hereof” and hereby and other words of similar import used in this Supplemental Indenture
refer to this Supplemental Indenture as a whole and not to any particular section hereof.

     SECTION 2. Amendments to Indenture. At such time as the Company delivers written
notice to the Trustee and The Altman Group, Inc., the Depositary for the Notes for purposes of a
tender offer and consent solicitation for the Notes, that Notes representing at least a majority in
aggregate Principal Amount of outstanding Notes not owned by the Company or its Affiliates tendered
(and not validly withdrawn) have been accepted pursuant to the Company’s Letter of Consent and
Waiver dated July 27, 2006:

	 	(a)	 	The following defined term will be added to Section 1.01 of the Indenture in
the appropriate alphabetical order:

     “Covenant Reversion Date” means 11:59 p.m., New York City time,
on June 30, 2007.

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	 	(b)	 	The definition of “Exchange Price” in Section 1.01 of the Indenture shall be
amended by deleting the text of such definition in its entirety and replacing it with
the following text:

     “Exchange Price” as of any day means the Principal Amount
divided by the Exchange Rate as of such date and rounded to the
nearest cent. The Exchange Price shall be $16.50 per share of
Common Stock as of July 27, 2006.

	 	(c)	 	Section 4.06 of the Indenture shall be amended by deleting the text of such Section in
its entirety and replacing it with the following text:

     Section 4.06. Rule 144A Information Requirement. Within the
period prior to the expiration of the holding period applicable to
sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), the Company and the Issuer covenant and agree
that they shall, during any period in which neither the Company nor
the Issuer is subject to Section 13 or 15(d) under the Exchange Act,
make available to any holder or beneficial holder of Notes or any
Common Stock issued upon exchange thereof which continue to be
Restricted Securities in connection with any sale thereof and any
prospective purchaser of Notes or such Common Stock designated by
such holder or beneficial holder, the information required pursuant
to Rule 144A(d)(4) under the Securities Act upon the request of any
holder or beneficial holder of the Notes or such Common Stock and it
will take such further action as any holder or beneficial holder of
such Notes or such Common Stock may reasonably request, all to the
extent required from time to time to enable such holder or
beneficial holder to sell its Notes or Common Stock without
registration under the Securities Act within the limitation of the
exemption provided by Rule 144A, as such Rule may be amended from
time to time. Upon the request of any holder or any beneficial
holder of the Notes or such Common Stock, the Company and the Issuer
will deliver to such holder a written statement as to whether it has
complied with such requirements.

	 	(d)	 	Section 4.08 of the Indenture shall be amended by deleting the text of such Section in
its entirety and replacing it with the following text:

     Section 4.08. Compliance Certificate. The Company shall,
except as otherwise provided in this Section 4.08, deliver to the
Trustee, within one hundred twenty calendar days after the end of
each fiscal year of the Company (which fiscal year of the Company
presently ends on the Sunday nearest to January 31), a certificate
signed by either the principal executive officer, principal
financial officer or principal accounting officer of the Company,

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stating whether or not to the best knowledge of the signer
thereof the Company or the Issuer is in default in the performance
and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement
of notice provided hereunder) and, if the Company or the Issuer
shall be in default, specifying all such defaults and the nature and
the status thereof of which the signer may have knowledge (such
certificate, a “Compliance Certificate”).

     The Company will, except as otherwise provided in this Section
4.08, deliver to the Trustee, promptly upon becoming aware of (i)
any default in the performance or observance of any covenant,
agreement or condition contained in this Indenture, or (ii) any
Event of Default, an Officers’ Certificate specifying with
particularity such default or Event of Default and further stating
what action the Company or the Issuer has taken, is taking or
proposes to take with respect thereto (such certificate, a “Default
Certificate”).

     Any notice required to be given under this Section 4.08 shall
be delivered to a Responsible Officer of the Trustee at its
Corporate Trust Office.

     Notwithstanding any other provision of this Section 4.08 or
this Indenture, (i) the Compliance Certificate that the Company
would have been required (but for this sentence) to deliver pursuant
to this Section 4.08 at any time before the Covenant Reversion Date
shall not be required to be delivered for failure of the Company to
comply with Sections 4.08 or 5.04 of this Indenture until the
Covenant Reversion Date, and (ii) the Company shall have no
obligation to deliver a Default Certificate pursuant to this Section
4.08 relating to the default in the performance or breach of any
covenant contained in Sections 4.08 or 5.04 of this Indenture that
occurred prior to the Covenant Reversion Date.

	 	(e)	 	Section 5.04 of the Indenture shall be amended by deleting the text of such Section in
its entirety and replacing it with the following text:

     Section 5.04. Reports by Company. The Company shall, except
as otherwise provided in this Section 5.04, file with the Trustee
(and the Commission if at any time after the Indenture becomes
qualified under the Trust Indenture Act), and transmit to holders of
Notes, such information, documents and other reports and such
summaries thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant to
such Act, whether or not the Notes are governed by such Act;
provided that any such information, documents or

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reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall, unless such
information, documents or reports are available on the Commission’s
EDGAR filing system (or any successor thereto) be filed with the
Trustee within fifteen calendar days after the same is so required
to be filed with the Commission. Delivery of such reports,
information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute
constructive notice of any information contained therein or
determinable from information contained therein, including the
Company’s compliance with any of its covenants hereunder (as to
which the Trustee is entitled to rely exclusively on Officers’
Certificates). Notwithstanding any other provision of this Section
5.04 or this Indenture, the documents and reports referred to in
this Section 5.04 that the Company would have been required to file
with the Commission or the Trustee on any date on or before the
Covenant Reversion Date (but for this sentence) will not be required
to be filed by the Company until the Covenant Reversion Date.

(f)    Subclause (e) of Section 6.01 of the Indenture shall be amended by deleting the text of
such Subclause in its entirety and replacing it with the following text:

     (e) failure on the part of the Company duly to observe or
perform any other of the terms, covenants or agreements on the part
of the Company in the Notes or this Indenture (other than a covenant
or agreement a default in whose performance or whose breach is
elsewhere in this Section 6.01 specifically dealt with) continued
for a period of 60 calendar days after the date on which written
notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Trustee, or to the
Company and a Responsible Officer of the Trustee by the holders of
at least 25% in aggregate Principal Amount of the Notes at the time
outstanding determined in accordance with Section 8.04; provided,
however, that notwithstanding any of the foregoing or any other
provision of this Indenture, the failure of the Company to comply
with Sections 4.08 or 5.04 of this Indenture, and Section 314(a) of
the Trust Indenture Act, at any time before the Covenant Reversion
Date, shall not constitute a default or an Event of Default under
this clause (e); or

(g)   The first paragraph of Subclause (e) of Section 14.01 of the Indenture shall be amended
by deleting the text of such paragraph in its entirety and replacing it with the following
text:

     (e) If a Noteholder elects to exchange its notes in connection
with a specified corporate transaction pursuant to

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Section 14.01(b) that occurs prior to December 15, 2010, and
the corporate transaction also constitutes a Fundamental Change as
described in clause (i) or (ii) of the definition thereof, subject
to Section 14.07, the Exchange Rate shall be increased by an
additional number of shares of Common Stock (the “Additional
Shares”) as described below, provided that if the Stock Price is
greater than $60.00 or less than $12.00 (subject in each case to
adjustment as described below), the number of Additional Shares
shall be zero. Notwithstanding the foregoing, in no event will the
Exchange Rate be increased pursuant to this Section 14.01(e) to a
rate that would exceed 83.3333 shares, subject to adjustments in the
same manner as the Exchange Rate as set forth in Section 14.05 per
$1,000 Principal Amount of Notes.

(h)    Section 14.04 of the Indenture shall be amended by deleting the text of such Section in
its entirety and replacing it with the following text:

     Section 14.04. Exchange Rate. Each $1,000 Principal Amount of
the Notes shall be exchangeable into the number of shares of Common
Stock specified in the form of Note (herein called the “Exchange
Rate”) attached as Exhibit A hereto (as of July 27, 2006, 60.6061
shares), subject to adjustment as provided in this Article 14.

(i) Schedule A of the Indenture shall be amended by deleting the text of such Schedule in
its entirety and replacing it with the following text:

     The following table sets forth the number of Additional Shares
to be received per $1,000 Principal Amount of Notes pursuant to
Section 14.01(e) of this Indenture:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Stock Price	 	 	 	 	 	 	 	 	 	 	 	 
	Effective Date	 	$12.00	 	$16.00	 	$20.00	 	$24.00	 	$28.00	 	$32.00	 	$36.00	 	$40.00	 	$44.00	 	$48.00	 	$52.00	 	$56.00	 	$60.00
	 
	December 15, 2006
	 	 	22.7273	 	 	 	13.6844	 	 	 	9.2207	 	 	 	7.6839	 	 	 	6.5862	 	 	 	5.7629	 	 	 	5.1226	 	 	 	4.6103	 	 	 	4.1912	 	 	 	3.8420	 	 	 	3.5464	 	 	 	3.2931	 	 	 	0.0000	 
	December 15, 2007
	 	 	22.7273	 	 	 	11.5151	 	 	 	7.8184	 	 	 	6.5153	 	 	 	5.5845	 	 	 	4.8865	 	 	 	4.3435	 	 	 	3.9092	 	 	 	3.5538	 	 	 	3.2576	 	 	 	3.0071	 	 	 	2.7923	 	 	 	0.0000	 
	December 15, 2008
	 	 	22.7273	 	 	 	8.9399	 	 	 	5.7870	 	 	 	4.8225	 	 	 	4.1336	 	 	 	3.6169	 	 	 	3.2150	 	 	 	2.8935	 	 	 	2.6305	 	 	 	2.4113	 	 	 	2.2258	 	 	 	2.0668	 	 	 	0.0000	 
	December 15, 2009
	 	 	22.7273	 	 	 	5.7986	 	 	 	3.1542	 	 	 	2.6285	 	 	 	2.2530	 	 	 	1.9714	 	 	 	1.7523	 	 	 	1.5771	 	 	 	1.4337	 	 	 	1.3143	 	 	 	1.2132	 	 	 	1.1265	 	 	 	0.0000	 
	December 15, 2010
	 	 	0.000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 	 	 	0.0000	 

	 	(j)	 	The first sentence of the Note shall be amended by deleting the text of such
sentence in its entirety and replacing it with the following text:

     CSK Auto, Inc., a corporation duly organized and validly
existing under the laws of the State of Arizona (herein called the
“Company”, which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received
hereby promises to pay to or its registered assigns, [the
Principal Amount of Dollars1 ($ )] [the Principal
Amount of Dollars ($ ) or such amount as is indicated in the
records of the

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	 	 	 	Trustee and the Depositary2] on December 15, 2025,
and to pay interest thereon from December 19, 2005 or from the most
recent Interest Payment Date to which Interest has been paid or duly
provided for, on December 15 and June 15 of each year (each, an
“Interest Payment Date”), commencing on June 15, 2006, at the rate
of (i) 4.625% per annum for the period from and including December
19, 2005 to, but excluding July 27, 2006, (ii) 6.75% from and
including July 27, 2006 to, but excluding December 15, 2010, and
(iii) 6.50% per annum thereafter, until the Principal Amount is paid
or made available for payment at December 15, 2025 or upon
acceleration, or until such date on which the Notes are exchanged or
repurchased as provided herein, and at the rate of 6.75% per annum
on any overdue principal and on any overdue installment of Interest.
	 
	 	(k)	 	All other references in the Note to “45/8%” shall be changed “63/4%”.
	 
	 	(l)	 	The reference in the Note to “49.8473 shares of Common Stock” shall be changed
to “60.6061 shares of Common Stock”.
	 
	 	(m)	 	The reference in the Note to “an Exchange Price of approximately $20.06 per
share” shall be changed to “an Exchange Price of approximately $16.50 per share”.

     SECTION 3. Waiver of Defaults and Events of Default. Any existing or past default,
Default or Event of Default arising under the Indenture as a result of a failure to comply with
Sections 4.06, 4.08 and 5.04 of the Indenture (as each Section existed prior to its amendment
pursuant to this Supplemental Indenture) or any acceleration of any Indebtedness in connection
therewith is hereby waived.

     SECTION 4. Ratification of Indenture; Supplemental Indentures Part of Indenture.
Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all
the terms, conditions and provisions thereof shall remain in full force and effect. This
Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of
Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

     SECTION 5. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     SECTION 6. Trustee Makes No Representation. The Trustee makes no representation as
to the validity or sufficiency of this Supplemental Indenture.

     SECTION 7. Execution in Counterparts. This Supplemental Indenture may be executed in
any number of counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.

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     SECTION 8. Effect of Headings. The titles and headings of the Sections of this
Supplemental Indenture have been inserted for convenience of reference only, and are not to be
considered a part hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.

     SECTION 9. Effectiveness. This Supplemental Indenture shall become effective upon
execution by the Company, the Issuer, the Subsidiary Guarantor, and the Trustee.

     SECTION 10. Reaffirmation of the Indemnification Obligations under Section 7.06. In
connection with the execution of this Supplemental Indenture, the Company, the Issuer and the
Subsidiary Guarantors hereby reaffirm their respective indemnification obligations in favor of the
Trustee under Section 7.06 of the Indenture.

[signature page follows]

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     IN WITNESS WHEREOF, each of the parties hereto have caused this Supplemental Indenture to be
duly executed on its behalf by its duly authorized officer as of the day and year first above
written.

	 	 	 	 	 	 	 
	 	 	CSK AUTO, INC.
	 
	 	 	 	 	 	 
	 

	 	By: /s/ Randi Val Morrison
 

	 	 
	 

	 	Name:
	 	Randi Val Morrison	 	 
	 

	 	Title:
	 	Vice President, General Counsel and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CSK AUTO CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By: /s/ Randi Val Morrison
 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Randi Val Morrison	 	 
	 

	 	Title:
	 	Vice President, General Counsel and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	CSKAUTO.COM, INC.
	 
	 	 	 	 	 	 
	 

	 	By: /s/ Randi Val Morrison
 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Randi Val Morrison	 	 
	 

	 	Title:
	 	Vice President, General Counsel and Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	THE BANK OF NEW YORK TRUST
COMPANY, N.A., as Trustee
	 
	 	 	 	 	 	 
	 

	 	By: /s/ Sandee’ Parks
 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Sandee’ Parks	 	 
	 

	 	Title:
	 	Vice President	 	 

9exv10w1

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made and
entered into as of July 25,
2006 (the “Effective Date”) by and between Medicis Pharmaceutical Corporation
Company” or “Medicis”) and Mark A. Prygocki (“Executive”).

     WHEREAS, the Company currently employs Executive;

     WHEREAS, the Company and Executive (the “Parties”) wish to set forth in writing the
terms on which Executive will continue to be employed by the Company;

     THEREFORE, the Parties agree as follows:

1. TERM

     1.1 Term. The term of this Agreement shall commence on the date Effective Date, and
shall continue on the terms and conditions set forth below, until Executive’s employment is
terminated as provided in Section 5 (the “Term”).

2. POSITION AND DUTIES

     2.1 Position or Duties. Executive shall serve as the Executive Vice President & Chief
Financial Officer of the Company, and shall have such authority, duties and responsibilities as
ordinarily assigned to an employee holding such position. Executive shall also have such
additional authority, duties and responsibilities as assigned to him by the Company from time to
time with his consent.

3. COMPENSATION

     3.1 Base Compensation. Executive shall be paid a salary at the annual rate of
$496,000 (the “Base Compensation”). The Base Compensation shall be reviewed at least
annually, and may be increased, but not decreased. In the event that the Base Compensation is
increased, the new salary shall be the Base Compensation for purposes of this Agreement thereafter.

     3.2 Bonus Compensation. For each fiscal year during the term of employment, Executive
shall be eligible to receive a cash bonus based on a target bonus of not less than 75 % of
Executive’s Base Compensation for that fiscal year the portion of which shall be awarded based on
the Company’s achievement of certain operating, financial or other corporate goals established by
the Board of Directors (the “Board”) of the Company, or the Compensation Committee (the
“Committee”) of the Board. The target bonus for any fiscal year that is less than twelve
months shall be prorated by multiplying the target bonus by a fraction the numerator of which is
the number of months in the fiscal year and the denominator of which is twelve. The bonus
compensation shall be paid not later than the 15th day of the third month following the
end of the Company’s tax year.

 

 

     3.3 Benefits. Executive shall be entitled to participate in all pension, 401(k) and
other employee plans and benefits, including without limitation, medical, dental, vision,
disability and life insurance plans, in accordance with the terms of such plans or policies as they
may be in effect from time to time, on the same basis as other executive-level employees of the
Company.

     3.4 Indemnification and Directors and Officers’ Insurance.

          (a) During the Employment Period and thereafter, the Company shall indemnify the Executive to
the fullest extent permitted under law from and against any expenses (including but not limited to
attorneys’ fees, expenses of investigation and preparation and fees and disbursements of the
Executive’s accountants and other experts), judgments, fines, penalties and amounts paid in
settlement actually and reasonably incurred by the Executive in connection with any proceeding in
which the Executive was or is made party or was or is involved (for example, as a witness) by
reason of the fact the Executive was or is employed by the Company.

          (b) Such indemnification is subject to:

               (i) the Company promptly receiving written notice that a claim or liability has been
asserted or threatened (“Notice of Claim”);

               (ii) the Executive providing reasonable cooperation and assistance in the defense or
settlement of a claim; and

               (iii) the Company being afforded the opportunity to have the sole control over the defense
and/or settlement of such claim or liability.

          (c) Unless within twenty days after receiving the Notice of Claim, the Company notifies the
Executive in writing of its intent to defend against such claim or liability, the Executive may
defend, settle and/or compromise any such claim or liability, and be indemnified for all losses
resulting from such defense, settlement and/or compromise, and the Company shall advance to the
Executive all costs and expenses incurred by him in connection with any proceeding covered by this
provision within twenty days after receipt by the Company of a written request for such advance,
provided such request shall include an undertaking by the Executive to repay the amount of such
advance if it shall ultimately be determined that he is not entitled to be indemnified against such
costs and expenses. If the Company gives the Executive such written notice the Executive also may
participate in such defense at his own cost and expense.

          (d) Such indemnification shall continue as to the Executive during the Employment Period and
for ten years from the Date of Termination with respect to acts or omissions which occurred prior
to his cessation of employment with the Company and shall inure to the benefit of the Executive’s
heirs, executors and administrators.

          (e) The Company agrees to continue and maintain directors’ and officers’ liability insurance
policies covering the Executive to the extent that the Company provides such coverage for its other
executive officers. Such insurance coverage shall continue as to the Executive even if he has
ceased to be an employee or agent of the Company with respect to acts or omissions which occurred
prior to his cessation of employment with the Company.

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     3.5 Method of Payment. The monetary compensation payable and any benefits due to
Executive hereunder may be paid or provided in whole or in part, from time to time, by the Company
and/or its respective parents, subsidiaries and affiliates, but shall at all times remain the
responsibility of the Company.

     3.6 Vacation. Executive shall be entitled to 28 days of paid vacation annually during
the Term. Executive’s vacation pay shall not be subject to the Company’s policies applicable to
non-executive employees concerning accrual, use and scheduling of vacation, as such policies may be
in effect from time to time. Executive’s vacation pay shall vest in equal increments each pay
period during each year, and may not be carried over from year to year. Executive shall provide
reasonable notice of his intent to take vacation time to his supervisor and obtain his supervisor’s
approval before taking vacation time. Executive must make reasonable efforts to be accessible to
the Company during periods of vacation..

     3.7 Business Expenses. Executive shall be entitled to reimbursement of reasonable
business expenses in accordance with Company policies, as they may be in effect from time to time.

4. PRIMARY DUTY TO THE COMPANY

     4.1 Devotion of Time and Effort. Executive shall use Executive’s good faith best
efforts and judgment in performing Executive’s duties as required hereunder and to act in the best
interests of the Company. Executive shall devote all of his business time, attention and energies
to the business of the Company.

     4.2 Other Activities. Executive may engage in other activities for Executive’s own
account while employed hereunder, including without limitation, charitable, community and other
business activities, provided that in the judgment of the Board such other activities do not
materially interfere with the performance of Executive’s duties hereunder, and do not violate
Sections 6 and 7. With regard to any other businesses or activities, Executive shall notify the
Board of all such activities and shall not begin such activities until Executive receives written
approval from the Board, which shall not be unreasonably withheld or unduly delayed. This
restriction shall not apply to a passive ownership by Executive of less than one percent of the
securities of a publicly traded entity with a market capitalization greater than $500,000,000 at
the time of Executive’s investment.

5. TERMINATION

     5.1 Due to Death. Executive’s employment shall terminate as of the date of his death.

     5.2 Due to Disability. The Company may terminate Executive’s employment if he becomes
“disabled”, as defined below, upon thirty days’ written notice to Executive. For purposes of this
Agreement, the term “Disability” shall mean a physical or mental incapacity as a result of
which Executive becomes unable to continue to perform the essential functions of his job with or
without accommodation hereunder for six consecutive calendar months or for shorter periods
aggregating 125 business days in any twelve month period, or, if this provision is inconsistent
with any applicable law, to the extent not prohibited by law.

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     5.3 By the Company Without “Cause”. The Company may terminate Executive’s employment
without “Cause” as defined in Section 5.5 below at any time upon thirty days’ written notice to
Executive.

     5.4 By Executive Without “Good Reason”. Executive may terminate his employment
hereunder without Good Reason, as defined in Section 5.6 below, at any time upon thirty days’
written notice (the “Notice Period”) to the Company. During the Notice Period, Executive shall
continue to perform Executive’s duties hereunder and shall not be employed by any other person or
entity.

     5.5 By The Company For “Cause”. The Company may terminate Executive’s employment for
“Cause”. Not less than thirty days prior to the date of termination, Executive shall be notified
in writing of the Company’s intention to terminate, the grounds for doing so and the date of the
termination. The notice shall specify a date within thirty days of the notice on which Executive
shall have an opportunity to address the Board as to the grounds for termination. The Company may
relieve Executive of his duties between the date of the notice and the proposed date of
termination, and such action shall not constitute “Good Reason” for Executive to terminate under
Section 5.6. For purposes of this Agreement, “Cause” shall mean the Board’s reasonable
determination that one or more of the following conditions exist:

          (a) Executive has been convicted of or pled guilty or nolo contendre to any felony;

          (b) Executive has committed one or more acts of theft, embezzlement or misappropriation
against the Company;

          (c) Executive has failed to substantially perform Executive’s duties hereunder (other than
such failure resulting from Executive’s incapacity due to physical or mental illness), which
failure has not been remedied within thirty days after written demand for substantial performance
was delivered by the Company which demand specifically identified the manner in which the Company
believes that Executive has not substantially performed Executive’s duties;

          (d) Executive has materially breached his obligations under this Agreement, including without
limitation, Sections 6 and 7, which breach was not remedied within thirty (30) days after written
notice was delivered by the Company which specifically identified the breach that the Company
believes has occurred;

          (e) Executive has engaged in willful misconduct towards the Company or in any conduct
involving moral turpitude that is detrimental to the business or the reputation of the Company; or

          (f) Executive has failed to perform Executive’s duties with appropriate diligence, effort and
skill (other than such failure resulting from Executive’s incapacity due to physical or mental
illness) as reasonably determined by the Company’s Chief Executive Officer in consultation with the
Board, which failure has not been remedied within thirty days after written notice of specifying
the failure was delivered by the Chief Executive Officer to Executive.

4

 

     5.6 By Executive For “Good Reason.” Executive may terminate his employment for good
reason upon at least thirty days prior written notice to the Company. For purposes of this
Agreement, “Good Reason” shall mean: (a) the Company’s material breach of the salary and
benefit obligations hereunder, and either such breach is incurable or, if curable, has not been
cured within fifteen days following receipt of written notice by Executive to the Company of such
breach by the Company; (b) a material, substantial, and permanent reduction in the authority of
Executive without Executive’s prior written consent; (c) a material change in Executive’s title
without Executive’s prior written consent; (d) Executive’s primary reporting relationship being
changed such that Executive no longer reports to an officer above the rank of Executive Vice
President of the Company without Executive’s prior written consent; or (e) a relocation of
Executive’s primary office to a location that would increase Executive’s commuting distance more
than thirty-five (35) miles from Scottsdale, Arizona, without Executive’s prior written consent.
Executive shall be deemed to have waived Executive’s right to terminate for “Good Reason” with
respect to any such breach or action if Executive does not notify the Company in writing of such
breach or action within thirty days of such breach or action. The fact that the Company becomes a
subsidiary of another entity, or that the Company’s status changes from publicly-traded to
privately-held, as a result of the change in control, shall not, by itself, constitute a material
reduction in the authority of Executive, a material adverse change in Executive’s title, or
Executive’s primary reporting relationship being changed such that Executive no longer reports to
an officer above the rank of Executive Vice President of the Company.

     5.7 Severance Payment. In the event Executive’s employment terminates pursuant to
Sections 5.4 (Without Good Reason) or 5.5 (For Cause), Executive, if requested and able to do so,
shall continue to render services to the Company pursuant to this Agreement until the Effective
Date of Termination, and Executive shall continue to receive Executive’s Base Compensation and
benefits as otherwise provided under this Agreement through the Effective Date of Termination.
Executive shall have no further right to receive compensation, benefits or other consideration from
the Company, and Executive shall not be entitled to any severance payments or benefits, except as
set forth in the final paragraph of this Section 5.7 or as required by applicable law or the
Company’s pension or welfare benefit plans. The “Effective Date of Termination” shall be
the date of Executive’s Death for a termination under Section 5.1, and the date specified in the
written notice of termination for a termination under Sections 5.2, 5.3, 5.4, 5.5 or 5.6.

     In the event that Executive’s employment is terminated pursuant to Section 5.1 (Death),
Section 5.2 (Due to Disability), Section 5.3 (Without Cause), or Section 5.6 (For Good Reason),
Executive, if requested and able to do so, shall continue to render services to the Company
pursuant to this Agreement until the Effective Date of Termination, and Executive or Executive’s
Trust or estate, as applicable, shall continue to receive compensation as provided in this
Agreement through the Effective Date of Termination. Thereafter, Executive shall be entitled to
severance pay and benefits as set forth in subparagraph (a) through (c) below provided that not
later than sixty days following Executive’s “separation from service,” within the meaning of
Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and
any Treasury Regulations or other guidance issued thereunder (“Separation from Service”),
Executive (or Executive’s trust or estate, as applicable) executes and delivers, and any revocation
period required by law has run and Executive has not revoked, a general release of claims in a

5

 

form acceptable to the Company in its sole and absolute discretion, and Executive is not in
material breach of any of the provisions of this Agreement. The Company shall provide Executive
with a general release of claims in a form acceptable to the Company not later than one week
following Executive’s Separation from Service.

          (a) Amount. In addition to other compensation payable to Executive for services
rendered through the Effective Date of Termination, subject to Section 5.9, on the sixtieth day
after a Separation from Service, the Company shall pay Executive, as a single severance payment:
(i) in the event of termination under Section 5.1 (Death) or Section 5.2 (Disability), one year’s
Base Compensation; or (ii) in the event of termination under Section 5.3 (Without Cause) or Section
5.6 (For Good Reason), the sum of two times the highest rate of Executive’s annual Base
Compensation in effect during the three years preceding the Effective Date of Termination, two
times the highest annual bonus received by the Executive for a twelve month fiscal or twelve month
bonus year in the three years preceding the Effective Date of Termination; and a prorated bonus for
the year in which the termination occurs determined by multiplying the bonus most recently paid
(which shall be annualized for any fiscal year of less than twelve months or year in which
Executive received a pro-rated bonus) by a fraction, the numerator of which is the number of days
elapsed in the calendar year in which the termination occurs as of the Effective Date of
Termination, and the denominator of which is the number of days in the period for which the most
recent bonus was paid (collectively, the “Severance Amount”). In the event of termination
under Section 5.1 (Death) and/or Section 5.2 (Disability), the Company may elect to provide the
Severance Amount directly or through an insurance benefit. Executive agrees to reasonably cooperate
with the Company in connection with the Company’s efforts to obtain such insurance, if any.

          (b) Vesting of Equity Awards. In addition to the Severance Amount, all unvested stock
options and restricted stock of the Company held by the Executive shall immediately vest as of the
Effective Date of Termination (the “Vesting”).

          (c) Benefits. In addition to the Severance Amount and the Vesting, subject to Section
5.9, on the sixtieth (60th) day after a Separation from Service, the Company shall pay
to Executive in a single lump sum, an amount equal to twenty-four times the applicable monthly
COBRA premium for Executive and his covered dependents (the “Severance Benefits”). The
payment of the Severance Benefits shall not affect Executive’s eligibility to elect to continue
health care benefits under COBRA at Executive’s own expense.

     In the event of a termination pursuant to Section 5.5(c) or (f), on the thirtieth, sixtieth
and ninetieth days after a Separation from Service, the Company shall pay Executive, as a single
severance payment, an amount equal to one-thirty-sixth (1/36) of the Executive’s Base Compensation
as of the Effective Date of Termination, provided that Executive is not in material breach of any
of the provisions of this Agreement, including without limitation, Sections 6 and 7. This amount
shall be in addition to all other compensation payable to Executive for services rendered through
the Effective Date of Termination. In addition, during the thirty day period following the
Executive’s Separation form Service with the Company, the Company may elect, but shall not be
obligated, to offer to Executive an additional amount equal to the Monthly Payment, defined below,
multiplied by a number selected by the Company that shall be not less than one nor more than
twenty-one (the “Multiplier”). The “Monthly Payment” shall be equal

6

 

to: (i) one-twelfth (1/12) of the Executive’s Base Compensation as of the Effective Date of
Termination the highest rate of Executive’s annual Base Compensation in effect during the three
years preceding the Effective Date of Termination; and (ii) one-twelfth (1/12) of the highest
annual bonus received by the Executive for a twelve month fiscal or twelve month bonus year in the
three years preceding the Effective Date of Termination. The amount, if any, so offered, shall be
referred to as the “Section 5.5 Payment”. If a Section 5.5 Payment is offered, in order to
be eligible to receive the Section 5.5 Payment, within sixty days following the Company’s election
to offer a Section 5.5 Payment to Executive, Executive (or Executive’s trust or estate, as
applicable) must execute and deliver, and any revocation period required by law must have run and
Executive must not have revoked, a general release of claims in a form acceptable to the Company in
its sole and absolute discretion, and Executive must not be in material breach of any of the
provisions of this Agreement, including without limitation, Sections 6 and 7. The Section 5.5
Payment shall be payable in a number of monthly installments equal to the Multiplier. The first
monthly installment of the Section 5.5 Payment, if any, shall be payable on the first business day
of the fourth month after Executive’s Separation from Service, and the subsequent installments
shall be made on the first business day of each month thereafter until all installments have been
made.

     5.8 Certain Additional Payments. If any payment or benefit received or to be received
by Executive in connection with a change in control of the Company or termination of Executive’s
employment (whether payable pursuant to the terms of this Agreement, a stock option plan or any
other plan or arrangement with the Company) (the “Total Payments”) will be subject to the excise
tax imposed by Section 4999 of the Code, as amended, the Company will pay to the Executive, within
thirty days of any payments giving rise to excise tax, an additional amount (the “gross-up
payment”) such that the net amount retained by the Executive, after deduction of any excise tax on
the Total Payments and any federal and state and local income and employment tax and excise tax on
the gross-up payment provided for by this Section 5.8, will equal the total payments. For purposes
of determining the amount of the gross-up payment, the Executive will be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the calendar year that the
payment is to be made, and state and local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive’s residence on the date of termination or the date that
excise tax is withheld by the Company, net of the maximum reduction in federal income taxes that
could be obtained by deducting such state and local taxes. For purposes of determining whether any
of the Total Payments would not be deductible by the Company and would be subject to the excise
tax, and the amount of such excise tax, (1) Total Payments will be treated as “parachute payments”
within the meaning of Section 280G(b)(2) of the Code, and all parachute payments in excess of the
base amount within the meaning of Section 280G(b)(3) will be treated as subject to the excise tax
unless, in the opinion of tax counsel selected by the Company’s independent auditors prior to the
change in control and acceptable to the Executive, such Total Payments (in whole or in part) are
not parachute payments, or such parachute payments in excess of the base amount (in whole or in
part) are otherwise not subject to the excise tax, and (2) the value of any non-cash benefits or
any deferred payment will be determined by the Company’s independent auditors in accordance with
Sections 280G(d)(3) and (4) of the Code. If the excise tax is subsequently determined to be less
than the amount originally taken into account hereunder, the Executive will repay to the Company,
when such reduction in excise tax is finally determined, the portion of the gross-up payment
attributable to such reduction. If the excise tax is determined to exceed the amount

7

 

originally taken into account hereunder (including by reason of any payment, the existence or
amount of which cannot be determined at the time of the gross-up payment), the Company will make an
additional gross-up payment in respect of such excess (plus any interest payable with respect to
such excess) when such excess if finally determined.

     5.9 Compliance With Internal Revenue Code Section 409A.

          (a) Short-Term Deferral Exemption. This Agreement is not intended to provide for any
deferral of compensation subject to Code Section 409A and, accordingly, the benefits provided
pursuant to this Agreement are intended to be paid not later than the later of: (i) the fifteenth
day of the third month following Executive’s first taxable year in which such benefit is no longer
subject to a substantial risk of forfeiture, and (ii) the fifteenth day of the third month
following the first taxable year of the Company in which such benefit is no longer subject to a
substantial risk of forfeiture, as determined in accordance with Code Section 409A and any Treasury
Regulations and other guidance issued thereunder. The date determined under this subsection is
referred to as the “Short-Term Deferral Date.”

          (b) Compliance with Code Section 409A. Notwithstanding anything to the contrary
herein, in the event that any benefits provided pursuant to this Agreement are not actually or
constructively received by the Executive on or before the Short-Term Deferral Date, to the extent
such benefit constitutes a deferral of compensation subject to Code Section 409A, then: (i)
subject to clause (ii), such benefit shall be paid upon Executive’s Separation from Service, with
respect to the Company and its affiliates, and (ii) if Executive is a “specified employee,” as
defined in Code Section 409A(a)(2)(B)(i), with respect to the Company and its affiliates, such
benefit shall be paid upon the date which is six months after the date of Executive’s Separation
from Service (or, if earlier, the date of Executive’s death). In the event that any benefit
provided for in this Agreement is subject to this subsection, such benefit shall be paid on the
sixtieth day following the payment date determined under this subsection, and shall be made subject
to the requirements of Section 5.7.

     5.10 No Duty to Mitigate

     Executive shall be entitled to the full severance benefits provided under this Section 5,
without regard to Executive’s efforts or lack of efforts to obtain alternative employment, and the
severance benefits provided to Executive shall not be reduced by any amounts earned by Executive
from any other source.

     5.11 Other Severance Benefits.

     To the extent Executive is entitled to receive any severance or similar payment and/or
benefits under both the Medicis Pharmaceutical Corporation Amended and Restated Executive Retention
Plan (the “Retention Plan”) and this Agreement, Executive shall receive the greater of the
payments and/or benefits under this Agreement or the Retention Plan, but shall not be entitled to
receive both; provided, however, that the timing and form of payment and/or benefits shall be
governed by this Agreement to the extent such payment or benefit is in lieu of any payment or
benefit under this Agreement (determined based upon the timing and form of payment and/or benefit
that would otherwise have been provided under this agreement).

8

 

6. CONFIDENTIALITY

     During the Term, Executive will have access to and become acquainted with various information
relating to the Company’s business operations, including customer and supply lists, customer files,
marketing data, business plans, strategies, employee lists, contracts, financial records and
accounts, products in development, product plans, projections and budgets, and similar information.
Executive agrees that to the extent such information is not generally known to or available to the
public and/or the industry, and gives the Company an advantage over competitors who do not know of
or use such information, such information and documents constitute “Confidential
Information” of the Company. Executive further agrees that any documents relating to the
business of the Company, whether they are prepared by Executive or come into Executive’s possession
in any other way, are owned by the Company, shall remain the exclusive property of the Company, and
must be returned to the Company upon termination of employment. Executive shall not use any
Confidential Information of the Company, directly or indirectly, for Executive’s own benefit, or
the benefit of any person or entity other than the Company, nor shall Executive disclose
Confidential Information to any person or entity other than the Company and its employees, either
during the Term or at any time thereafter, except as may be appropriate for Executive to perform
his duties as an employee, officer and/or director, directly or indirectly, of the Company. In the
event Executive violates this provision during any period in which he is receiving severance under
Section 5.7 of this Agreement, in addition to any other remedies the Company may have, the Company
may terminate the Severance Payments, Vesting and Severance Benefits under Section 5.7.

7. NON-SOLICITATION/NON-COMPETITION

     7.1 Non-Solicitation. For a period of one year following the date Executive’s
employment hereunder is terminated, Executive shall not solicit or induce any of the Company’s
employees, agents or independent contractors to end their relationship with the Company, or
recruit, solicit or otherwise induce any such person to perform services for Executive, or any
other person, firm or company.

     7.2 Non-Competition.

          (a) Executive acknowledges that the Company does business throughout the world. During the
Term, and throughout the Post-Termination Non-Compete Period, as defined in Section 7.2(b) below,
unless Executive’s employment is terminated under Sections 5.2, 5.3 or 5.6 following a change of
ownership or effective control within the meaning of Section 280G of the Code and the regulations
thereunder, Executive shall not, directly or indirectly, serve as an employee, consultant, officer,
director, lender, investor, shareholder, partner, manager or member of any person or entity, or own
or act as a sole proprietor of a business that engages in the production of dermatological or
facial aesthetic products, or similar business (a “Competitor”), during that period in any
County of the State of Arizona, any of the States of the United States of America, any country in
Europe, other than the Company or its affiliates, or as approved in advance in writing by the CEO
of the Company or the Board; provided, however, that Executive’s passive ownership of less than one
percent (1%) of the publicly traded securities of any publicly traded entity that engages in the
production of dermatological or facial aesthetic products, or similar business, with a market
capitalization greater than $500,000,000 at the time

9

 

of Executive’s investment shall not violate this Section 7.2. Notwithstanding the foregoing,
it shall not be a violation of this Section 7.2 for Executive to provide services as an employee,
consultant, officer, partner, manager or member of one or more Competitors totaling not more than
20 hours in the aggregate during any month and not more than 150 hours in the aggregate during any
12-month period in any such capacity; provided, that (1) Executive voluntarily resigns from the
Company pursuant to Section 5.4 on or after the date Executive reaches the age of 63 and (2)
Executive provides the Company with a written certification that Executive does not intend to
provide full-time services as an employee, consultant, officer, partner, manager or member of any
Competitor.

          (b) For purposes of this Section 7.2, “Post-Termination Non-Compete Period” shall mean
the twenty four (24) month period following the Effective Date of Termination; provided, however,
that “Post-Termination Non-Compete Period” shall mean (i) the three month period immediately
following the Effective Date of Termination, if Executive is terminated under Section 5.5(c) or (f)
and Executive is not offered a Section 5.5 Payment of any amount, or (ii) the number of months
immediately following the Effective Date of Termination equal to the Multiplier plus three months,
if Executive is terminated under Section 5.5(c) or (f) and the Section 5.5 Payment is offered to
the Executive.

          (c) In the event Executive violates this Section 7.2 during any period in which he is
receiving severance under Section 5.7 of this Agreement, in addition to any other remedies the
Company may have, the Company may terminate the Severance Payments, Vesting and Severance Benefits
under Section 5.7. Executive acknowledges that these restrictions shall not prevent or unduly
restrict Executive from practicing his profession, or cause him economic hardship.

8. ARBITRATION AGREEMENT

     8.1 Claims Subject to Arbitration. Any controversy, dispute or claim between
Executive and the Company, or its parents, subsidiaries, affiliates and any of their officers,
directors, agents or other employees, shall be resolved by binding arbitration, at the request of
either party.

     The arbitrability of any controversy, dispute or claim under this Agreement shall be
determined by application of the substantive provisions of the Federal Arbitration Act (9 U.S.C.
sections 1 and 2) and by application of the procedural provisions of Arizona law, except as
provided herein. Arbitration shall be the exclusive method for resolving any dispute and all
remedies available from a court of competent jurisdiction shall be available; provided, however,
that either party may request provisional relief from a court of competent jurisdiction, if such
relief is not available in a timely fashion through arbitration.

     The claims which are to be arbitrated include, but are not limited to any claim arising out of
or relating to this Agreement or the employment relationship between Executive and the Company,
claims for wages and other compensation, claims for breach of contract (express or implied), claims
for violation of public policy, wrongful termination, tort claims, claims for unlawful
discrimination and/or harassment (including, but not limited to, race, religious creed, color,
national origin, ancestry, physical disability, mental disability, gender identity or

10

 

expression, medical condition, marital status, age, pregnancy, sex or sexual orientation) to
the extent allowed by law, and claims for violation of any federal, state, or other government law,
statute, regulation, or ordinance, except for claims for workers’ compensation and unemployment
insurance benefits. This Agreement shall not be interpreted to provide for arbitration of any
dispute that does not constitute a claim recognized under applicable law.

     8.2 Selection of Arbitrator. The Executive and the Company will select a single
neutral arbitrator by mutual agreement. If the Executive and the Company are unable to agree on a
neutral arbitrator within thirty days of a demand for arbitration, either party may elect to obtain
a list of arbitrators from the Judicial Arbitration and Mediation Service (“JAMS”) or the
American Arbitration Association (“AAA”), and the arbitrator shall be selected by alternate
striking of names from the list until a single arbitrator remains. The party initiating the
arbitration shall be the first to strike a name.

     8.3 Demand for Arbitration. The demand for arbitration must be in writing and must be
made by the aggrieved party within the statute of limitations period provided under applicable
State and/or Federal law for the particular claim(s). Failure to make a written demand within the
applicable statutory period constitutes a waiver of the right to assert that claim in any forum.

     8.4 Location of Arbitration. Arbitration proceedings will be held in Scottsdale,
Arizona.

     8.5 Choice of Law. The arbitrator shall apply applicable State and/or Federal
substantive law to determine issues of liability and damages regarding all claims to be arbitrated,
and shall apply the Federal Rules of Evidence to the proceeding.

     8.6 Discovery. The parties shall be entitled to conduct reasonable discovery and the
arbitrator shall have the authority to determine what constitutes reasonable discovery. The
arbitrator shall hear motions for summary judgment/adjudication as provided in the Federal Rules of
Civil Procedure.

     8.7 Written Opinion and Award. Within thirty days following the hearing and the
submission of the matter to the arbitrator, the arbitrator shall issue a written opinion and award
which shall be signed and dated. The arbitrator’s award shall decide all issues submitted by the
parties, and the arbitrator may not decide any issue not submitted. The opinion and award shall
include factual findings and the reasons upon which the decision is based. The arbitrator shall be
permitted to award only those remedies in law or equity which are requested by the parties and
allowed by law.

     8.8 Appeals. The final award may be appealed to another arbitrator who will be chosen
by the parties in the same manner as the original arbitrator. All the rules governing judicial
appeals of judgments from the Federal District Court for the State of Arizona, the Ninth Circuit
Court of Appeals shall apply to any appeal of this award, including but not limited to the time
frames, deadlines and the standards of review.

     8.9 Costs of Arbitration. The cost of the arbitrator and other incidental costs of
arbitration that would not be incurred in a court proceeding shall be borne by the Company. The
parties shall each bear their own costs and attorneys’ fees in any arbitration proceeding,

11

 

provided, however, that the arbitrator shall have the authority to require either party to pay
the costs and attorneys’ fees of the other party to the extent permitted under applicable federal
or state law, as a part of any remedy that may be ordered.

     8.10 Waiver of Right to Jury. Both the Company and Executive understands that by
using arbitration to resolve disputes they are giving up any right that they may have to a judge or
jury trial with regard to all issues concerning employment or otherwise covered by this Section 8.

9. GENERAL PROVISIONS

     9.1 Assignment; Binding Effect. Neither the Company nor Executive may assign,
delegate or otherwise transfer this Agreement or any of their respective rights or obligations
hereunder without the prior written consent of the other party, except in the case of Executive’s
death. Any attempted prohibited assignment or delegation shall be void. This Agreement shall be
binding upon and inure to the benefit of any permitted successors or assigns of the parties and the
heirs, executors, administrators and/or personal representatives of Executive.

     9.2 Notices. All notices, requests, demands and other communications that are
required or may be given under this Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method with electronic confirmation of receipt; the day after it
is sent, if sent for next-day delivery to a domestic address by recognized overnight delivery
service (e.g., FedEx); and upon receipt, if sent by certified or registered mail, return receipt
requested. In each case notice shall be sent to:

	 	 	 
	If to the Company:

	 	Medicis Pharmaceutical Corporation
	 

	 	8125 North Hayden Road
	 

	 	Scottsdale, AZ 85258
	 

	 	Attention: Chief Executive Officer
	 

	 	Facsimile: 602-808-3875
	 
	 	 
	If to Executive:

	 	Mark A. Prygocki
	 

	 	8125 North Hayden Road
	 

	 	Scottsdale, AZ 85258
	 

	 	Fax: 602-778-6006

     Any party may change its address for the purpose of this Section 9.2 by giving the other party
written notice of its new address in the manner set forth above.

     9.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supersedes all prior agreements; provided, however,
that this Agreement shall supplement, not supersede, any prior agreements concerning the
Confidential Information or other intellectual property of the Company, and any conflicts or
inconsistencies between such agreements shall be resolved so that the provision providing greater
rights to the Company shall prevail.

12

 

     9.4 Amendments; Waivers. This Agreement may be amended or modified, and any of the
terms and covenants may be waived, only by a written instrument executed by the parties hereto, or,
in the case of a waiver, by the party waiving compliance. Any waiver by any party in any one or
more instances of any term or covenant contained in this Agreement shall neither be deemed to be
nor construed as a further or continuing waiver of any such term or covenant of this Agreement.

     9.5 Provisions Severable. In case any one or more provisions of this Agreement shall
be invalid, illegal or unenforceable, in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not, in any way, be affected or impaired thereby.
If any provision hereof is determined by any court of competent jurisdiction to be invalid or
unenforceable by reason of such provision extending the covenants and agreements contained herein
for too great a period of time or over too great a geographical area, or being too extensive in any
other respect, such provision shall be interpreted to extend only over the maximum period of time
and geographical area, and to the maximum extent in all other respects, as to which it is valid and
enforceable, all as determined by such court in such action.

     9.6 Attorney’s Fees. If any legal action, arbitration or other proceeding, is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach or default in
connection with any of the provisions of this Agreement, each of the parties hereto shall be
responsible for payment of their own attorneys’ fees and other costs incurred by them in that
action or proceeding, without regard to whomever is the prevailing party in such action or
proceeding with respect to such claims, except as otherwise provided in Section 8.

     9.7 Governing Law. This Agreement shall be construed, performed and enforced in
accordance with, and governed by the laws of the State of Arizona without giving effect to the
principles of conflict of laws thereof.

     9.8 Non-Disparagement. During Executive’s employment and thereafter, Executive and
the Company agree to represent Executive and the Company in a positive light and not to disparage
or in any other way communicate to any person or entity any negative information or opinion
concerning each other, or the Company’s parents, subsidiaries and affiliates, or any of their
partners, members, shareholders, officers, directors, employees or agents, or any of them. This
provision shall not prohibit Executive or the Company from making any statements or taking any
actions required by law, or reporting any actions or inactions Executive or the Company believe to
be unlawful. This provision shall not be interpreted to require or encourage Executive or the
Company to make any misrepresentations.

     9.9 Return of Property. Upon termination of Executive’s employment, Executive shall
return to the Company any and all Company property, materials, or equipment in his or her
possession, including, without limitation, Company property described in Section 6.

     9.10 Cooperation. During Executive’s employment with the Company and thereafter,
Executive agrees to cooperate with the Company and its agents, accountants and attorneys concerning
any matter with which Executive was involved during his employment. Such cooperation shall
include, but not be limited to, providing information to, meeting with and reviewing documents
provided by the Company and its agents, accountants and attorneys during

13

 

normal business hours or other mutually agreeable hours upon reasonable notice and to make
himself available for depositions and hearings, if necessary and upon reasonable notice. If
Executive’s cooperation is required after the termination of Executive’s employment, the Company
shall reimburse Executive for any out of pocket expenses incurred in and any wages lost by
Executive for time spent performing his obligations hereunder.

     9.11 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which shall constitute the same instrument.

     9.12 Headings. The headings contained in this Agreement are provided solely for the
Parties’ convenience and shall not be deemed to alter the meaning of the text of the Agreement.

     9.13 Survival. Sections 6, 7, 8, and 9 shall survive the termination of this
Agreement. If Executive becomes entitled to the Severance Payment, Vesting and Severance Benefits
under Section 5.7 and/or payments under Section 5.8 in connection with the termination of this
Agreement, the Company’s obligation to make such payments and provide such benefits shall survive
the termination of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
first written above.

	 	 	 	 	 	 	 	 	 
	THE COMPANY:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Medicis Pharmaceutical Corporation,

a Delaware corporation	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Jonah Shacknai
	 	 	 	July 25, 2006	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Jonah Shacknai
	 	 	 	Date	 	 
	 

	 	Its: Chairman of the Board of Directors

and Chief Executive Officer	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	EXECUTIVE:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Mark A. Prygocki

	 	 	 	July 24, 2006	 	 
	 	 	 	 	 	 	 
	Mark A. Prygocki	 	 	 	Date	 	 
	 

	 	 	 	 	 	 	 	 

14

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