-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qg+MxKstBlKqhvrfyLtRc6uQHABhqBXRHLcO/cPnRYvIN8tZgHAM/2+WsJbIsMso HKwEd3c5bKwCJlJVXSym/w== 0000950153-97-000780.txt : 19970815 0000950153-97-000780.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950153-97-000780 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970814 EFFECTIVENESS DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICIS PHARMACEUTICAL CORP CENTRAL INDEX KEY: 0000859368 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 521574808 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-33647 FILM NUMBER: 97663428 BUSINESS ADDRESS: STREET 1: 4343 EAST CAMELBACK RD CITY: PHOENIX STATE: AZ ZIP: 85018 BUSINESS PHONE: 2125992000 MAIL ADDRESS: STREET 1: 4343 E CAMELBACK RD STREET 2: SUITE 250 CITY: PHOENIX STATE: AZ ZIP: 85018 S-8 1 FORM S-8 1 As filed with the Securities and Exchange Commission on August 14, 1997 Registration No. ________ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MEDICIS PHARMACEUTICAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 52-1574808 (State of Incorporation) (I.R.S. Employer Identification No.) 4343 East Camelback Road Suite 250 Phoenix, Arizona 85018 (Address of Principal Executive Offices) Medicis Pharmaceutical Corporation 1996 Stock Option Plan (Full Title of Plan) ---------------------------------- Jonah Shacknai Chairman and Chief Executive Officer Medicis Pharmaceutical Corporation 4343 East Camelback Road Suite 250 Phoenix, Arizona 85018 (Name and Address of Agent for Service) (602) 808-8800 (Telephone Number, Including Area Code of Agent for Service) Copy to: Frank M. Placenti, Esq. Bryan Cave LLP 2800 North Central Avenue Phoenix, Arizona 85004 CALCULATION OF REGISTRATION FEE
Title of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of be Registered Registered (1) Offering Price Per Aggregate Offering Registration Fee Share (2) Price (2) Common Stock, $.014 1,950,000 shares and $ 42.5 $82,875,000 $25,113.64 par value and rights Preferred Stock Purchase Rights (3)
(1) Plus such additional indeterminate number of shares as may be issuable pursuant to the anti-dilution provisions of the Plan. (2) Estimated solely for the purpose of calculating the registration fee. Pursuant to Rule 457(c) and Rule 457(h) under the Securities Act of 1933, as amended, the proposed maximum offering price per share and the proposed maximum aggregate offering price have been determined on the basis of the average of the high and low prices of the Class A Common Stock on the Nasdaq National Market on June 16, 1997. (3) The Preferred Stock Purchase Rights initially trade with the Class A Common Stock and are not currently exercisable. 2 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT This Registration Statement relates to 1,950,000 shares of Common Stock, par value $.014, of Medicis Pharmaceutical Corporation ("Registrant" or "Company") being registered for use under the Registrant's 1996 Stock Option Plan (the "Plan"). ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. The following documents which have been filed by the Company with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are incorporated by reference herein and shall be deemed to be a part hereof: (a) The Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 1996; (b) Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996; (c) Quarterly Report on Form 10-Q, as amended, for the fiscal quarter ended December 31, 1996; (d) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997; (e) Current Report on Form 8-K, dated August 2, 1996; (f) Current Report on Form 8-K, dated January 22, 1997; (g) Current Report on Form 8-K, dated March 28, 1997; (h) Proxy Statement for 1996 Annual Meeting of Shareholders; (j) The description of the Company's Class A Common Stock contained in the Company's Registration Statement on Form S-3 (Registration No. 333-10247), filed with the Commission on August 15, 1996, and any amendment thereto updating such description; and (k) The description of the Company's Preference Stock Purchase Rights contained in the Company's Registration Statement on Form S-3 (Registration No. 333-10247), filed with the Commission on August 15, 1996, and any amendment thereto updating such description. All other documents filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Registration Statement and prior to the filing of a post-effective amendment to this Registration Statement which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the II-1 3 date of filing of such documents (such documents, and the documents enumerated above, being hereinafter referred to collectively as the "Incorporated Documents"). Any statement contained in an Incorporated Document shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL. Not applicable. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article VI of the Company's Certificate of Incorporation and Article VI of the Company's By-Laws provide for the indemnification of its directors and officers under certain circumstances and are incorporated herein by reference. Section 145 of the General Corporation Law of the State of Delaware empowers a Delaware corporation to indemnify any person who is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation) by reason of the fact that such person is or was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement and reasonably incurred by such person in connection with such action, suit or proceeding, provided that he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which he actually and reasonably incurred in connection therewith. The indemnification provided is not deemed to be exclusive of any other rights to which an officer or director may be entitled under a corporation's by-laws, by agreement, vote, or otherwise. In May 1997, the Company purchased insurance in the aggregate amount of $7,000,000 covering the Company's directors and officers against claims arising out of their service to the Company and its subsidiaries. The insurance policy runs for a period of one year at a total cost of approximately $185,000. II-2 4 ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. Exhibit Number Description - ------ ----------- 4.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 4.1b to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File No. 0-18443, previously filed with the Commission) 4.2 By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, File No. 0-18443, previously filed with the Commission) 4.3 Rights Agreement, dated as of April 17, 1995, by and between the Company and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A, File No. 0-18443, filed with the Commission on August 18, 1995) 4.4 Amendment No. 1 to Rights Agreement, dated as of April 15, 1996, by and between the Company and American Stock Transfer & Trust Company, as Rights Agreement (incorporated herein by reference to Exhibit 4 to Amendment No. 1 on Form 8-A/A to the Company's Registration Statement on Form 8-A, File No. 0-18443, filed with the Commission on April 16, 1996) 4.5 Amendment No. 2 to Rights Agreement, dated as of March 17, 1997, between the Company and Norwest Bank Minnesota, N.A., as successor-in-interest to American Stock Transfer & Trust Company, as Rights Agent (incorporated herein by reference to Exhibit 4.1b to the Company's Quarterly Report on Form 10-Q, File No. 0-18443, filed with the Commission on May 9, 1997) 5 Opinion of Bryan Cave LLP 23.1 Consent of Ernst & Young LLP 23.2 Consent of Bryan Cave LLP (included in Exhibit 5) 24 Power of Attorney (included on signature pages of this Registration Statement) 99.1 Medicis Pharmaceutical Corporation 1996 Stock Option Plan 99.2 Form of Incentive Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan 99.3 Form of Non-Qualified Employee Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan II-3 5 99.4 Form of Non-Qualified Non-Employee Consultant Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan 99.5 Form of Non-Qualified Non-Employee Director Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan ITEM 9. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective Registration Statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement: provided however, that paragraphs (a)(l)(i) and (a)(l)(ii) of this Section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement; (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and II-4 6 (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer of controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-5 7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona, on the 11th day of August, 1997. MEDICIS PHARMACEUTICAL CORPORATION By: /s/ Jonah Shacknai ------------------------- Jonah Shacknai Chairman and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated. Each person whose individual signature appears below hereby authorizes Jonah Shacknai and Mark A. Prygocki, Sr., or either one of them, to execute in the name of each such person and to file any amendment to this Registration Statement and appoints Jonah Shacknai and Mark A. Prygocki, Sr., or either one of them, as attorney-in-fact to sign on his behalf individually and in each capacity stated below and to file any amendments to this Registration Statement, including any and all post-effective amendments.
Signature Title Date /s/ Arthur G. Altschul, Jr. Director August 5, 1997 - --------------------------- Arthur G. Altschul, Jr. /s/ Richard L. Dobson, M.D. Director August 5, 1997 - --------------------------- Richard L. Dobson, M.D. /s/ Peter S. Knight Director August 5, 1997 - --------------------------- Peter S. Knight /s/ Michael A. Pietrangelo Director August 5, 1997 - --------------------------- Michael A. Pietrangelo /s/ Mark A. Prygocki, Sr. Chief Financial Officer, August 5, 1997 - --------------------------- Secretary and Treasurer Mark A. Prygocki, Sr. (Principal Financial Officer and Principal Accounting Officer) /s/ Philip S. Schein, M.D. Director August 5, 1997 - --------------------------- Philip S. Schein, M.D.
II-6 8 /s/ Lottie H. Shackelford Director August 5, 1997 - --------------------------- Lottie H. Shackelford /s/ Jonah Shacknai Chairman of the Board August 5, 1997 - --------------------------- of Directors and Chief Jonah Shacknai Executive Officer
II-7 9 Exhibit Index Exhibit Number Description - ------ ----------- 4.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 4.1b to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, File No. 0-18443, previously filed with the Commission) 4.2 By-Laws (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1992, File No. 0-18443, previously filed with the Commission) 4.3 Rights Agreement, dated as of April 17, 1995, by and between the Company and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit I to the Company's Registration Statement on Form 8-A, File No. 0-18443, filed with the Commission on August 18. 1995) 4.4 Amendment No. 1 to Rights Agreement, dated as of April 15, 1996, by and between the Company and American Stock Transfer & Trust Company, as Rights Agent (incorporated herein by reference to Exhibit 4 to Amendment No. 1 on Form 8-A/A to the Company's Registration Statement on Form 8-A, File No. 0-18443, filed with the Commission on April 16, 1996) 4.5 Amendment No. 2 to Rights Agreement, dated as of March 17, 1997, between the Company and Norwest Bank Minnesota, N.A., as successor-in-interest to American Stock Transfer & Trust Company, as Rights Agent (incorporated herein by reference to Exhibit 4.1b to the Company's Quarterly Report on Form 10-Q, File No. 0-18443, filed with the Commission on May 9, 1997. 5 Opinion of Bryan Cave LLP 23.1 Consent of Ernst & Young LLP 23.2 Consent of Bryan Cave LLP (included in Exhibit 5) 24 Power of Attorney (included on signature pages of this Registration Statement) 99.1 Medicis Pharmaceutical Corporation 1996 Stock Option Plan 99.2 Form of Incentive Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan 99.3 Form of Non-Qualified Employee Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan 99.4 Form of Non-Qualified Non-Employee Consultant Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan II-8 10 99.5 Form of Non-Qualified Non-Employee Director Stock Option Certificate Agreement relating to options granted under the Medicis Pharmaceutical Corporation 1996 Stock Option Plan II-9 EX-5 2 OPINION OF BRYAN CAVE LLP 1 EXHIBIT 5 [BRYAN CAVE LLP LETTERHEAD] August 11, 1997 MEDICIS PHARMACEUTICAL CORPORATION REGISTRATION STATEMENT ON FORM S-8 Ladies and Gentlemen: We have acted as counsel to Medicis Pharmaceutical Corporation, a Delaware corporation (the "Registrant"), in connection with the registration under the Securities Act of 1933, as amended (the "Securities Act"), of 1,950,000 shares (the "Shares") of the Company's common stock, $.014 par value (the "Common Stock"), which may be issued from time to time upon the exercise of stock options granted pursuant to the Company's 1996 Stock Option Plan (the "Plan"). The Shares are being registered pursuant to a registration statement on Form S-8 (the "Registration Statement") filed with the Securities and Exchange Commission (the "Commission"). In arriving at the opinion expressed below, we have examined the Registration Statement and such other documents, including the Articles of Incorporation and Bylaws of the Company, each as amended to date, as we have deemed necessary to enable us to express the opinion set forth herein. In addition, we have examined and relied on the originals or copies, certified or otherwise identified to our satisfaction as conforming to the originals thereof, of such other documents and corporate records of the Company and such other instruments and certificates of public officials and other persons as we have deemed appropriate. We have assumed the authenticity of all documents submitted to us as originals, the conformity to the original documents of all documents submitted to us as copies, and the genuineness of all signatures on all documents reviewed by us. Based on the foregoing and subject to the limitations and qualifications set forth herein, we are of the opinion that: The Shares of Common Stock to be issued by the Company pursuant to the Registration Statement have been duly authorized, and upon issuance and delivery in accordance with the terms of the Plan will be duly and validly issued and fully paid and nonassessable. This opinion is limited to the present laws of the State of Arizona and the present federal laws of the United States and to the facts as they presently exist. We hereby consent to references to our firm under the caption "Legal Matters" in the Registration Statement. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the Commission thereunder. Very truly yours, /s/ Bryan Cave LLP ------------------------- Bryan Cave LLP EX-23.1 3 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8) pertaining to the Medicis Pharmaceutical Corporation 1996 Stock Option Plan of our report dated August 2, 1996 with respect to the consolidated financial statements and schedule of Medicis Pharmaceutical Corporation included in its Annual Report (Form 10-K/A) for the fiscal year ended June 30, 1996, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP Phoenix, Arizona August 11, 1997 EX-99.1 4 MEDICIS PHARMACEUTICAL CORP 1996 STOCK OPTION PLAN 1 EXHIBIT 99.1 MEDICIS PHARMACEUTICAL CORPORATION 1996 STOCK OPTION PLAN 2 i TABLE OF CONTENTS Page ---- Section 1. PURPOSE ....................................................... 1 Section 2. DEFINITIONS ................................................... 1 Section 3. SHARES SUBJECT TO OPTIONS ..................................... 4 Section 4. EFFECTIVE DATE ................................................ 4 Section 5. COMMITTEE ..................................................... 4 Section 6. ELIGIBILITY ................................................... 4 Section 7. GRANT OF OPTIONS .............................................. 4 Section 8. OPTION PRICE .................................................. 5 Section 9. EXERCISE PERIOD ............................................... 6 Section 10. TRANSFERABILITY ............................................... 6 Section 11. SECURITIES REGISTRATION AND RESTRICTIONS ...................... 6 Section 12. LIFE OF PLAN .................................................. 7 Section 13. ADJUSTMENT .................................................... 7 Section 14. SALE OR MERGER OF THE COMPANY ................................. 7 Section 15. AMENDMENT OR TERMINATION ...................................... 8 Section 16. CHANGE OF CONTROL ............................................. 8 Section 17. MISCELLANEOUS ................................................. 8 3 MEDICIS PHARMACEUTICAL CORPORATION 1996 STOCK OPTION PLAN SECTION 1 PURPOSE The purpose of this Plan is to promote the interests of Medicis Pharmaceutical Corporation (the "Company") by granting Options to purchase Stock to Key Employees, Outside Directors and Key Consultants in order to (a) attract and retain Key Employees and Key Consultants; (b) provide an additional incentive to each Key Employee and Key Consultant to work to increase the value of the Stock; and (c) provide each such Key Employee, Outside Director and Key Consultant with a stake in the future of the Company which corresponds to the stake of each of the Company's stockholders. SECTION 2 DEFINITIONS Each term set forth in this Section 2 shall have the meaning set forth opposite such term for purposes of this Plan and for any Option granted under this Plan. For purposes of such definitions, the singular shall include the plural and the plural shall include the singular. Unless otherwise expressly indicated, all Section references herein shall be construed to mean references to a particular Section of this Plan. 2.1 BOARD means the Board of Directors of the Company. 2.2 CHANGE OF CONTROL means any of the following: (i) the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as amended from time to time) (the "Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either (A) the then outstanding shares of Stock (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Company Voting Securities"), provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (y) any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such acquisition in substantially the same portion as their ownership, immediately prior to such acquisition of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, shall not constitute a change in control of the Company; or (ii) individuals who, as of March 31, 1996, constitute the Board of Directors of the Company (the "incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to March 31, 1996, whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then comprising the incumbent Board shall be considered as though such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or 4 2 (iii) approval by the shareholders of the Company of a reorganization, merger or consolidation (a "Business Combination"), in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such Business Combination do not, following such Business Combination, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportion as their ownership immediately prior to such Business Combination or the Outstanding Company Common Stock and Company Voting Securities, as the case may be; or (iv) (A) a complete liquidation or dissolution of the Company or a (B) sale or other disposition of all or substantially all of the assets of the Company other than to a corporation with respect to which, following such sale or disposition, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Company Voting Securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the Outstanding Company Common Stock and Company Voting Securities, as the case may be, immediately prior to such sale or disposition. 2.3 CODE means the Internal Revenue Code of 1986, as amended. 2.4 COMMITTEE means the committee of Non-Employee Directors appointed by the Board to administer this Plan as contemplated by Section 5. 2.5 COMPANY means Medicis Pharmaceutical Corporation, a Delaware corporation, and any successor to such corporation. 2.6 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 2.7 DESIGNATED COMMITTEE means a committee appointed by the Committee in accordance with Section 5. 2.8 FAIR MARKET VALUE means the average of the highest and lowest quoted selling prices for Stock on the relevant date, or (if there were no sales on such date) the weighted average of the means between the highest and lowest quoted selling prices on the nearest day before and the nearest day after the relevant date, as reported in the Wall Street Journal or a similar publication selected by the Committee. 2.9 INSIDER shall mean an employee who is, at the time of an award made under this Plan, an insider pursuant to Section 16 of the Exchange Act. 2.10 ISO means any option granted under this Plan to purchase Stock which satisfies the requirements of Section 422 of the Code. 2.11 KEY CONSULTANT means any consultant or independent contractor of the Company or a Subsidiary (other than a Non-Employee Director) or any such consultant or contractor who is a Non-Employee Director and who serves as such a consultant or contractor pursuant to a written agreement with the Company which has been approved by the Board, in either case who, in the judgment of the Committee acting in its absolute discretion, is a key to the success of the Company or a Subsidiary. 5 3 2.12 KEY EMPLOYEE means any employee of the Company or a Subsidiary, who, in the judgment of the Committee acting in its absolute discretion, is a key to the success of the Company or a Subsidiary. 2.13 NON-EMPLOYEE DIRECTOR means any member of the Board of Directors of the Company qualified as such under SEC Rule 16b-3(b)(3)(i) under the Exchange Act, or any successor rule. 2.14 NON-ISO means any option granted under this Plan to purchase stock which fails to satisfy the requirements of Section 422 of the Code or has been specifically denominated as a non-ISO by the Committee as of the time the option is granted. 2.15 OPTION means an ISO or a Non-ISO. 2.16 OPTION CERTIFICATE means the written agreement or instrument which sets forth the terms of an Option granted to a Key Employee, Key Consultant or Outside Director under this Plan. 2.17 OPTION PRICE means the price which shall be paid to purchase one share of stock upon the exercise of an Option granted under this Plan. 2.18 OUTSIDE DIRECTOR means any member of the Board of Directors of the Company who is not employed by the Company, regardless of whether such person qualifies as a Non-Employee Director. 2.19 PARENT CORPORATION means any corporation which is a parent corporation of the Company within the meaning of Section 424(e) of the Code. 2.20 PLAN means this Medicis Pharmaceutical Corporation 1996 Stock Option Plan, as amended from time to time. 2.21 PRINCIPAL OFFICER means the Chairman of the Board (if the Chairman of the Board is a payroll employee), the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President and the Treasurer of the Company and any other person who is an "officer" of the Company as that term is defined in SEC Rule 16a-1(f) under the Exchange Act or any successor rule thereunder. 2.22 SECURITIES ACT means the Securities Act of 1933, as amended. 2.23 SEC means the Securities Exchange Commission. 2.24 STOCK means the Class A Common Stock, $.001 par value per share, of the Company. 2.25 SUBSIDIARY means any corporation which is a subsidiary corporation of the Company within the meaning of Section 424(f) of the Code. 2.26 TEN PERCENT SHAREHOLDER means a person who owns after taking into account the attribution rules of Section 424(d) of the Code more than ten percent (10%) of the total combined voting power of all classes of stock of either the Company, a Subsidiary or a Parent Corporation. 6 4 SECTION 3. SHARES SUBJECT TO OPTIONS There shall be 1,300,000 shares of Stock reserved for issuance in connection with ISOs and Non-ISOs granted under this Plan. Such shares of Stock shall be reserved to the extent that the Company deems appropriate from authorized but unissued shares of Stock and from shares of Stock which have been reacquired by the Company. Any shares of Stock subject to an Option which remain after the cancellation, expiration or exchange of such Option for another Option thereafter shall again become available for use under this Plan. SECTION 4. EFFECTIVE DATE The effective date of this Plan shall be October 1, 1996, subject to approval by the stockholders of the Company acting at a duly called meeting of such stockholders or acting by unanimous written consent in lieu of a meeting, provided such stockholder approval occurs within twelve (12) months after the date the Board approves and adopts this Plan. SECTION 5. COMMITTEE This Plan shall be administered by a Committee consisting solely of not less than two (2) Non-Employee Directors. The Committee acting in its absolute discretion shall exercise such powers and take such action as expressly called for under this Plan. Furthermore, the Committee shall have the power to interpret this Plan and to take such other action in the administration and operation of this Plan as the Committee deems equitable under the circumstances, which action shall be binding on the Company, on each affected Key Employee, Key Consultant or Outside Director and on each other person directly or indirectly affected by such action. The Committee may appoint a separate committee comprised of two or more persons, at least one of which is a member of the Board (and who may also be a Key Employee or a Key Consultant) and the other of whom, if not a member of the Board, is a Principal Officer of the Company (the "Designated Committee"), to administer this Plan with respect to Key Employees who are not Principal Officers and to Key Consultants, subject to such conditions, restrictions and limitations as may be imposed by the Committee: including (i) Options to purchase not more than 50,000 shares of Common Stock may be granted by the Designated Committee in any one calendar year to all employees of the Company in the aggregate; and (ii) the Committee shall establish a maximum number of shares that may be subject to Options granted under the Plan in any one calendar year to any single Key Employee or Key Consultant by the Designated Committee. Unless and until the Committee shall take further action, the maximum number of shares that may be subject to Options granted under the Plan in any one calendar year by the Designated Committee to any single Key Employee or Key Consultant shall be 5,250. Any actions duly taken by the Designated Committee with respect to the grant of Options to Key Employees who are not Principal Officers and to Key Consultants shall be deemed to have been taken by the Committee for purposes of the Plan. SECTION 6. ELIGIBILITY Only Key Employees, Key Consultants and Non-Employee Directors shall be eligible for the grant of Options under this Plan. SECTION 7. GRANT OF OPTIONS 7.1 COMMITTEE ACTION. The Committee acting in its absolute discretion shall grant Options to Key Employees and Key Consultants under this Plan from time to time to purchase shares of Stock and, further, shall have the right to grant new Options in exchange for outstanding Options. Options shall be granted to Non-Employee Directors as provided in Section 7.3 of this Plan. Each grant of an Option shall be evidenced by an Option Certificate, and each Option Certificate shall: 7 5 (a) specify whether the Option is an ISO or Non-ISO; and (b) incorporate such other terms and conditions as the Committee acting in its absolute discretion deems consistent with the terms of this Plan, including, without limitation, a limitation on the number of shares subject to the Option which first became exercisable or subject to surrender during any particular period. If the Committee grants an ISO and a Non-ISO to a Key Employee on the same date, the right of the Key Employee to exercise or surrender one such Option shall not be conditioned on his or her failure to exercise or surrender the other such Option. In connection with the termination for any reason of employment by or service to the Company or any Subsidiary of any particular holder of any Option, the Committee may, in its discretion, determine to modify the number of shares of Stock as to which such Option first becomes exercisable during any particular period as provided in the related Option Certificate; provided, however, that the Committee may not extend any such period with respect to any shares of Stock subject to such Option. 7.2 $100,000 LIMIT. To the extent that the aggregate Fair Market Value of the stock with respect to which ISOs and other incentive stock options satisfying the requirements of Section 422 of the Code granted to a Key Employee under this Plan and under any other stock option plan adopted by the Company, a Subsidiary or a Parent Corporation first become exercisable in any calendar year exceeds $100,000 (based upon the Fair Market Value on the date of the grant), such Options shall be treated as Non-ISOs. 7.3 GRANTS OF NON-ISOS TO OUTSIDE DIRECTORS. (a) On the last business day of each September during the term of this Plan each then Outside Director shall be granted, without any further action on the part of the Committee, a Non-ISO hereunder to purchase 3,000 shares of Stock at the Fair Market Value of such Stock on the date of grant. Each such Option shall be exercisable in whole or in part one year after the date of grant, provided that such Outside Director has continued as an Outside Director for one year (or until his or her date of death, if earlier), and shall remain exercisable until the tenth anniversary of the date such Option is granted. The aforementioned grants of options to Outside Directors shall be in lieu of any and all further grants of options to Outside Directors after the last business day of September 1996 pursuant to the Medicis Pharmaceutical Corporation 1988 Stock Option Plan, the Medicis Pharmaceutical Corporation 1990 Stock Option Plan and the Medicis Pharmaceutical Corporation 1992 Stock Option Plan or the Medicis Pharmaceutical Corporation 1995 Stock Option Plan. In all respects, a Non-ISO grant to an Outside Director hereunder shall conform to the terms and conditions of a Non-ISO under this Plan and, except as otherwise permitted with respect to Outside Directors who are Key Consultants or as otherwise provided in Section 7.4(b), Outside Directors shall only be eligible to receive options under this Plan as provided in this Section 7.3(a). SECTION 8. OPTION PRICE The Option Price for each share of Stock subject to an Option shall not be less than the Fair Market Value of a share of Stock on the date the Option is granted or, if the Option is an ISO and the Key Employee is a Ten Percent Shareholder, the Option Price for each share of Stock subject to such Option shall not be less than 110% of the Fair Market Value of a share of Stock on the date the Option is granted. The Option Price shall be payable in full upon the exercise of any Option, and an Option Certificate at the discretion of the Committee (except for an Option granted to a Non-Employee Director) may provide for the payment of the Option Price either in cash or in Stock acceptable to the Committee or in any combination of cash and Stock acceptable to the Committee. Any payment made in Stock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee. 8 6 SECTION 9. EXERCISE PERIOD (a) Each Option granted under this Plan shall be exercisable in whole or in part at such time or times as set forth in the related Option Certificate, but no Option Certificate shall provide that: (1) an Option is exercisable before the date such Option is granted, or (2) an Option is exercisable after the date which is the tenth anniversary of the date such Option is granted. If an option that is an ISO is granted to a key employee who is a Ten Percent Shareholder, the Option Certificate shall provide that the Option is not exercisable after the expiration of five years from the date the Option is granted. An Option Certificate may provide for the exercise of an Option after the employment of a Key Employee or service by a Key Consultant has terminated for any reason whatsoever, including death or disability. In connection with the termination for any reason of employment by or service to the Company or any Subsidiary of any particular holder of any Option, the Committee may, in its discretion, determine to extend the period during which such Option may be exercised as provided in the related Option Certificate; provided, however, that no such extension shall permit an Option to be exercised beyond the date specified in paragraph (b) of this Section or the date applicable to Options granted to a Ten Percent Shareholder, as the case may be. (b) Notwithstanding any other provision of this Section, upon a Change of Control each Option granted under this Plan prior to such Change of Control (whether prior to or after the amendment of the Plan to include this provision) shall immediately become exercisable to the full extent of the original grant and, in the case an Option held by a Key Employee shall remain exercisable for three months (or such longer period as specified in the particular Option with regard to all or any shares of Stock covered by such Option) after any termination of employment of such Key Employee. SECTION 10. TRANSFERABILITY The Committee shall impose such restrictions on the transfer of options granted under the Plan as it may deem advisable, including, without limitation, restrictions deemed necessary or advisable under applicable federal securities laws, under the requirements of any stock exchange or market upon which Stock is then listed in or traded, and under any Blue Sky or state securities laws applicable to such Stock. Upon request of any person receiving an award of an Option under the Plan, the Committee may, in its sole and absolute discretion, determine to remove any such transfer restriction originally imposed and may, in connection with the removal of such transfer restriction, impose such conditions (including restrictions on further transfers of the Option or upon transfers of the Shares upon exercise of the Option) as the Committee, in its discretion, may deem advisable, including, without limitation, restrictions deemed by the Committee to be necessary or advisable in order to comply with applicable federal and state securities laws or the requirements of any stock exchange or market upon which the Stock is then listed or traded. Subject to its authority to impose such conditions on further transfers, the Committee shall authorize the transfer of Options for bona fide estate planning purposes or for contributions to qualified charities or charitable trusts. SECTION 11. SECURITIES REGISTRATION AND RESTRICTIONS Each Option Certificate shall provide that, upon the receipt of shares of Stock as a result of the exercise or surrender of an Option, the Key Employee, Key Consultant or Outside Director shall, if so requested by the Company, hold such shares of Stock for investment and not with a view toward resale or distribution to the public and, if so requested by the Company, shall deliver to the Company a written statement to that effect satisfactory to the Company. Each Option Certificate shall also provide that, if so requested by the Company, the Key Employee, Key Consultant or Outside Director shall represent in writing to the Company that he or she will not sell or offer to 9 7 sell any such shares of Stock unless a registration statement shall be in effect with respect to such Stock under the Securities Act and any applicable state securities law or unless he or she shall have furnished to the Company an opinion, in form and substance satisfactory to the Company, of legal counsel acceptable to the Company, that such registration is not required. Certificates representing the Stock transferred upon the exercise or surrender of an Option granted under this Plan may at the discretion of the Company bear a legend to the effect that such Stock has not been registered under the Securities Act or any applicable state securities law and that such Stock may not be sold or offered for sale in the absence of (i) an effective registration statement as to such Stock under the Securities Act and any applicable state securities law or (ii) an opinion, in form and substance satisfactory to the Company, of legal counsel acceptable to the Company, that such registration is not required. Furthermore, the Company shall have the right to require a Key Employee, Key Consultant or Outside Director to enter into such stockholder or other related agreements as the Company deems necessary or appropriate under the circumstances as a condition to the issuance of any Stock under this Plan to a Key Employee, Key Consultant or Outside Director. SECTION 12. LIFE OF PLAN No Option shall be granted under this Plan on or after the earlier of (a) the tenth anniversary of the original effective date of this Plan as determined under Section 4; provided, however, that after such anniversary date this Plan otherwise shall continue in effect until all outstanding Options have been exercised in full or no longer are exercisable, or (b) the date on which all of the Stock reserved under Section 3 of this Plan has, as a result of the exercise of Options granted under this Plan, been issued or no longer is available for use under this Plan, in which event this Plan also shall terminate on such date. SECTION 13. ADJUSTMENT The number of shares of Stock reserved under Section 3 of this Plan, the number of shares of Stock to be granted from time to time pursuant to Section 7.3 of this Plan (if permitted by the exemption in Rule 16b-3 under the Exchange Act or any successor rule), the number of shares of Stock that may be granted pursuant to Section 5 of this Plan by the Designated Committee to any single Key Employee or Key Consultant, and the number of shares of Stock subject to Options granted under this Plan and the Option Price of such Options shall be adjusted by the Board in an equitable manner to reflect any change in the capitalization of the Company, including, but not limited to, such changes as stock dividends or stock splits. Furthermore, the Board shall have the right to adjust in a manner which satisfies the requirements of Section 424(a) of the Code the number of shares of Stock reserved under Section 3 of this Plan and the number of shares subject to Options granted under this Plan and the Option Price of such Options in the event of any corporate transaction described in Section 424(a) of the Code that provides for the substitution or assumption of such Options. If any adjustment under this Section 13 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under this Plan and the number subject to any Options granted under this Plan shall be the next lower number of shares of Stock, rounding all fractions downward. An adjustment made under this Section 13 by the Board shall be conclusive and binding on all affected persons and, further, shall not constitute an increase in "the number of shares reserved under Section 3" within the meaning of Section 15(a) of this Plan. SECTION 14. SALE OR MERGER OF THE COMPANY If the Company agrees to sell all or substantially all of its assets for cash or property or for a combination of cash and property or agrees to any merger, consolidation, reorganization, division or other corporate transaction in which Stock is converted into another security or into the right to receive securities or property and such agreement does not provide for the assumption or substitution of the Options granted under this Plan, each then outstanding Option at the direction and discretion of the Board may be canceled unilaterally by the Company as of 10 8 the effective date of such transaction in exchange for a payment in cash or Stock, or in a combination of cash and Stock, equal in amount to the excess of the Fair Market Value on such date of the shares represented by the canceled Options over the Option Price for such shares. SECTION 15. AMENDMENT OR TERMINATION This Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, that no such amendment shall be made absent the approval of the stockholders of the Company (a) to increase the aggregate number of shares reserved under Section 3, (b) to change the class of persons eligible for Options under Section 6 or (c) to materially modify the requirements as to eligibility for participation in this Plan, (d) to otherwise materially increase the benefits accruing under this Plan to Plan participants if such approval would be required in order for the Company to comply with applicable law or the rules or regulations of any stock exchange or market on which the Stock is traded or listed. The Board also may suspend the granting of Options under this Plan at any time and may terminate this Plan at any time; provided, however, that the Company shall not have the right to unilaterally cancel or, in a manner which would materially adversely affect the holder, amend or modify any Option granted before such suspension or termination unless (i) the Key Employee, Key Consultant or Outside Director consents in writing to such modification, amendment or cancellation or (ii) there is a dissolution or liquidation of the Company or a transaction described in Section 13 or Section 14 of this Plan. It is the intention of the Company that the Plan shall comply with the conditions of Rule 16b-3 of the Exchange Act, as such Rule may from time to time be amended. The Board shall have the authority, without the approval of the stockholders, to amend the Plan from time to time to include any conditions, terms or other provisions which may be required to be set forth in a plan in order for transactions by directors or officers to be exempt under Rule 16b-3 of the Exchange Act or any successor exemption. SECTION 16. CHANGE OF CONTROL Notwithstanding any other provision of this Section, upon a Change of Control each Option granted under this Plan prior to such Change of Control (whether prior to or after the amendment of the Plan to include this provision) shall immediately become exercisable to the full extent of the original grant and shall remain exercisable for three months (or such longer period as specified in the particular Option with regard to all or any shares of Stock covered by such Option) after (i) any termination of employment of any Key Employee; or (ii) resignation or removal of any Outside Director from the Company's Board of Directors. SECTION 17. MISCELLANEOUS 17.1 NO STOCKHOLDER RIGHTS. No Key Employee, Key Consultant or Outside Director shall have any rights as a stockholder of the Company as a result of the grant of an Option to him or to her under this Plan or his or her exercise or surrender of such Option pending the actual delivery of Stock subject to such Option to such Key Employee, Key Consultant or Non-Employee Director. 17.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option to a Key Employee, Key Consultant or Outside Director under this Plan shall not constitute a contract of employment or consulting or right to continue to serve on the Company's Board of Directors and shall not confer on a Key Employee, Key Consultant or Outside Director any rights upon his or her termination of employment or service in addition to those rights, if any, expressly set forth in the Option Certificate which evidences his or her Option. 17.3 WITHHOLDING. The exercise or surrender of any Option granted under this Plan shall constitute a Key Employee's full and complete consent to whatever action the Committee elects to satisfy the federal and state 11 9 tax withholding requirements, if any, which the Committee in its discretion deems applicable to such exercise or surrender. 17.4 CONSTRUCTION. This Plan and the Option Certificates shall be construed under the laws of the State of Arizona. EX-99.2 5 FORM OF INCENTIVE STOCK OPTION CERTIFICATE AGMT 1 EXHIBIT 99.2 INCENTIVE STOCK OPTION CERTIFICATE AGREEMENT THIS AGREEMENT is made as of the Date of Grant shown on Exhibit A hereto, and between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Corporation"), and the individual named on Exhibit A hereto (the "Optionee"). WHEREAS, the Optionee is a valuable and trusted employee of the Corporation and the Corporation considers it desirable and in its best interests that the Optionee be given an added incentive to advance the interests of the Corporation by possessing an option to purchase shares of the Corporation, in accordance with the Corporation's stock option plan identified on Exhibit A hereto (the "Plan"); and WHEREAS, Section 7.1 of the Plan states that options granted under the Plan shall be evidenced by certificates incorporating such terms and conditions as the Committee (as such term is defined in the Plan) in its absolute discretion deems consistent with the terms of the Plan; and WHEREAS, the Committee took action on the Date of Grant shown on Exhibit A to authorize the issuance of a stock option to the Optionee; NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties as follows: 1. GRANT OF OPTION. Subject to the terms and conditions set forth herein, the Corporation hereby grants to the Optionee the right, privilege and option to purchase the number of shares of its Class A Common Stock (the "Common Stock") shown on Exhibit A hereto. The Option is intended to be an Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended. 2. PURCHASE PRICE. The purchase price per share under the option granted to Optionee under Paragraph 1 above shall be as shown on Exhibit A hereto, subject to adjustment as provided herein and in the Plan. 3. TIME OF EXERCISE OF OPTION. Subject to the terms and conditions set forth herein, this option may be exercised by the Optionee according to the schedule noted on Exhibit A. Subject to the foregoing limitation, Optionee may exercise the option to purchase all the shares granted by this option at one time or the Optionee may exercise the option to purchase the shares granted by this option from time to time, until the termination thereof as provided in Paragraph 5 below. 4. METHOD OF EXERCISE. The option shall be exercised by written notice directed to the Board of Directors of the Corporation, at the Corporation's principal place of business, accompanied by a check in payment of the option price for the number of shares specified and paid for. The Committee may approve or disapprove in its absolute discretion a request for 2 payment to be made in whole or in part in stock of the Corporation. The Corporation shall make immediate delivery of the shares purchased under the Option, provided that if any law or regulation requires the Corporation to take any such action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such action. 5. TERMINATION OF OPTION. Except as otherwise stated in Section 12 or elsewhere herein, any unvested option shall terminate upon termination of employment, and any vested option, to the extent not theretofore exercised, shall terminate upon the first to occur of the following dates: (a) upon the date which is three (3) months subsequent to the date on which the Optionee's employment by the Corporation is terminated (except if such termination be by reason of death or permanent and total disability); (b) the expiration of twelve (12) months after the date on which the Optionee's employment by the Corporation is terminated, if such termination be by reason of Optionee's permanent and total disability (as determined in the absolute discretion of the Committee); (c) the expiration of one hundred eighty (180) days from the death of the Optionee while in the employ of the Corporation, in which event the transferee of said option (or any unexercised portion thereof) pursuant to Optionee's Will or by laws of intestacy must exercise said option within one hundred eighty (180) days following the date of the Optionee's death; or (d) the date which is ten (10) years from the date of grant of the option. 6. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that the number of issued shares of Common Stock of the Corporation shall be increased or reduced by change in par value, split up, reclassification, distribution of a dividend payable in stock, or the like, the number of shares subject to option and the option price per share shall be proportionately adjusted. If the Corporation is reorganized or consolidated or merged with another corporation, the Optionee shall be entitled to receive options covering shares of such reorganized, consolidated, or merged company in the same proportion, at an equivalent price, and subject to the same conditions. For purposes of the preceding sentence, the excess of the aggregate fair market value of the shares subject to the option immediately after the reorganization, consolidation or merger over the aggregate option price of such shares shall not be more than the excess of the aggregate fair market value of all shares subject to the option immediately before such reorganization, consolidation, or merger over the aggregate option price of such shares, and the issuance of a new option or assumption of the old option shall not give the Optionee additional benefits which the Optionee did not have under the old option, or deprive the Optionee of benefits which the Optionee had under the old option (except with respect to fractional shares). 2 3 7. RIGHTS PRIOR TO EXERCISE OF OPTION. The option is not transferable by the Optionee, except in the event of death as provided in Paragraph 5(c) above, and during the Optionee's lifetime is exercisable only by the Optionee. The Optionee shall have no rights as a stockholder with respect to the option shares until payment of the option price and delivery to the Optionee of certificates for such shares as herein provided. 8. SECURITIES, REGISTRATION AND RESTRICTIONS. Upon receipt of the shares of the Corporation as a result of the exercise in whole or in part of this option, the Optionee, if so requested by the Corporation, shall represent and warrant to the Corporation that the Optionee is acquiring the shares of Common Stock for investment and not with a view toward resale or distribution to the public and, if so requested by the Corporation, shall deliver to the Corporation a written statement to that effect satisfactory to the Corporation. Additionally, if so requested by the Corporation, that the Optionee will execute and deliver to the Corporation a written agreement that the Optionee will not sell or offer to sell any such shares of Common Stock unless a registration statement shall be in effect with respect to such shares of Common Stock under the Securities Act (as defined in the Plan) and any applicable state securities law or unless the Optionee shall have furnished to the Corporation an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Certificates representing the shares transferred upon the exercise or surrender of the option may, at the discretion of the Corporation, bear a legend to the effect that such shares have not been registered under the Securities Act or any applicable state securities law and that such shares may not be sold or offered for sale in the absence of (i) an effective registration statement as to such shares under the Securities Act and any applicable state securities law, or (ii) an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Furthermore, the Corporation shall have the right to require the Optionee to enter into such stockholder or other related agreements as the Corporation deems necessary or appropriate under the circumstances as a condition to the issuance of any shares under this option. 9. PAYMENT OF WITHHOLDING TAX. In the event the Corporation determines that it is required to withhold state or Federal income tax as a result of the exercise of an option, as a condition to the exercise thereof, the Optionee may be required to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. Payment of such withholding requirements may be made, in the discretion of the Plan Committee, (i) in cash, (ii) by delivery of shares of Common Stock registered in the name of the Optionee, or by the Corporation not issuing such number of shares of Common Stock subject to the option, having a fair market value at the time of exercise equal to the amount to be withheld, or (iii) any combination of (i) and (ii) above. 10. MISCELLANEOUS. The Optionee shall not have any right as a stockholder of the Corporation solely as a result of the grant of this opinion. The grant of this option does not constitute a contract of employment. This option shall be subject in all respects to the terms of the Plan. The exercise of this option shall constitute the Optionee's sole and complete consent to 3 4 whatever action the Committee elects to satisfy the Federal and State tax withholding requirements, if any, which the Committee in its sole discretion deems applicable to such exercise. This option shall be governed by the laws of the state applicable to the Plan. 11. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 12. FORFEITURE FOR FRAUD, DISHONESTY, UNLAWFUL COMPETITION AND OTHER ACTS. A. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 5 OR IN ANY EXHIBIT TO THIS AGREEMENT, ALL OPTION AND OTHER RIGHTS WITH RESPECT TO ALL OPTIONS GRANTED TO OPTIONEE HEREUNDER BUT NOT YET EXERCISED SHALL IMMEDIATELY TERMINATE AND BE NULL AND VOID IF: (i) OPTIONEE'S EMPLOYMENT BY THE CORPORATION IS TERMINATED FOR CAUSE; (ii) THE COMMITTEE OF THE CORPORATION'S BOARD OF DIRECTORS THEN ADMINISTERING THE CORPORATION'S STOCK OPTION PLANS (THE "COMMITTEE") DETERMINES THAT THE OPTIONEE ENGAGED IN ILLEGAL ACTS, FRAUD, DISHONESTY, WILLFUL MISCONDUCT, INCLUDING VIOLATION OF THE CORPORATION'S INSIDER TRADING POLICY, OR OTHER UNAUTHORIZED CONDUCT DETRIMENTAL TO THE CORPORATION; (iii) OPTIONEE HAS AT ANY TIME DISCLOSED TO ANY PERSON, FIRM, CORPORATION OR OTHER ENTITY ANY OF THE CORPORATION'S "PROPRIETARY INFORMATION" (AS DEFINED BELOW) IN A MANNER WHICH COULD PLACE THE CORPORATION AT A COMPETITIVE DISADVANTAGE OR CREATE EXPOSURE TO LIABILITY, WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BOARD OF DIRECTORS, OR EXCEPT AS SUCH DISCLOSURE MAY HAVE BEEN REQUIRED IN CONNECTION WITH THE OPTIONEE'S SERVICE AS AN EMPLOYEE OF THE CORPORATION OR BY LAW; (iv) OPTIONEE SOLICITS OR OTHERWISE INDUCES ANY EMPLOYEE OF THE CORPORATION TO TERMINATE HIS OR HER EMPLOYMENT; (v) OPTIONEE SOLICITS BUSINESS FROM ANY OF THE CORPORATION'S CUSTOMERS FOR AND ON BEHALF OF ANY OF THE CORPORATION'S COMPETITORS FOR PRODUCTS IN THE SAME CLASS OF TRADE DURING THE OPTIONEE'S PERIOD OF EMPLOYMENT WITH THE CORPORATION AND FOR A PERIOD OF ONE YEAR FOLLOWING THE OPTIONEE'S SEPARATION FROM THE COMPANY, UNLESS PRIOR WRITTEN CONSENT IS GIVEN BY THE COMMITTEE; (vi) OPTIONEE DISPARAGES THE CORPORATION OR COMMITS ANY OTHER ACT OF DISLOYALTY; (vii) OPTIONEE ENGAGES IN ANY CONDUCT IN VIOLATION OF OPTIONEE'S CONTRACTUAL OBLIGATIONS TO THE CORPORATION, INCLUDING BUT NOT LIMITED TO A VIOLATION OF ANY VALID NON-COMPETITION, NON-DISCLOSURE, NON-SOLICITATION OR OTHER WRITTEN AGREEMENT; (viii) OPTIONEE FAILS TO ASSIGN TO THE CORPORATION ANY PATENT, COPYRIGHT, TRADEMARK OR 4 5 OTHER INTELLECTUAL PROPERTY RIGHT IN VIOLATION OF ANY OF THE CORPORATION'S POLICIES OR ANY AGREEMENT BETWEEN THE CORPORATION AND OPTIONEE; OR (ix) OPTIONEE REFUSES TO BE AVAILABLE FOR REASONABLE CONSULTATION WITH RESPECT TO THE SUBJECT MATTER OF OPTIONEE'S EMPLOYMENT FOR A PERIOD OF THREE MONTHS FOLLOWING TERMINATION OF SUCH EMPLOYMENT. THE ACTS OR CIRCUMSTANCES DESCRIBED IN THE PRECEDING SENTENCE SHALL BE REFERRED TO AS "EVENTS OF FORFEITURE." B. FOR PURPOSES OF THIS SECTION, THE TERM "PROPRIETARY INFORMATION" SHALL MEAN ALL CONFIDENTIAL OR SECRET CUSTOMER LISTS, PROSPECTIVE CUSTOMER LISTS, TRADE SECRETS, PROCESSES, PRODUCT FORMULATIONS, INVENTIONS, IMPROVEMENTS, MANUFACTURING FORMULATION OR SYSTEMS TECHNIQUES, PRODUCT FORMULAS, DEVELOPMENT OR EXPERIMENTAL WORK, WORKS IN PROCESS, BUSINESS, MARKETING AND COMPETITIVE STRATEGIES, INFORMATION RELATING TO ANY PATENT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF THE CORPORATION, AND ANY OTHER SECRET OR CONFIDENTIAL PROPRIETARY MATTER RELATING TO OR PERTAINING TO THE CORPORATION OR ITS PRODUCTS, SERVICES, SALES OR BUSINESS. C. IN ADDITION TO THE FOREGOING RIGHTS AND ANY AND ALL OTHER RIGHTS WHICH THE CORPORATION (OR ANY OF ITS SUBSIDIARIES OR AFFILIATES) MAY HAVE AGAINST THE OPTIONEE AT LAW OR IN EQUITY, OPTIONEE FURTHER AGREES THAT UPON OCCURRENCE OF ANY OF THE EVENTS OF FORFEITURE DESCRIBED IN SUBSECTION A, OPTIONEE SHALL OWE THE CORPORATION THE EXCESS OF THE FAIR MARKET VALUE OVER THE OPTION PRICE (MEASURED AS OF THE DATE OF ACQUISITION) OF ALL SHARES ACQUIRED THROUGH EXERCISE OF ANY OPTION WITHIN THE THREE (3) YEARS PRECEDING THE COMMITTEE'S DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED. OPTIONEE SHALL PAY SUCH AMOUNT AS CALCULATED OR DETERMINED BY THE COMMITTEE TO THE CORPORATION WITHIN THIRTY (30) DAYS OF THE COMMITTEE'S WRITTEN DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED, WHICH DETERMINATION MAY BE MADE BY NOTICE TO THE OPTIONEE WITHIN ANY TIME UP TO TWO (2) YEARS FOLLOWING THE OPTIONEE'S TERMINATION OF EMPLOYMENT. D. BY ACCEPTING THIS AGREEMENT, OPTIONEE CONSENTS TO DEDUCTION FROM ANY AMOUNTS THE CORPORATION MAY OWE TO OPTIONEE FROM TIME TO TIME (INCLUDING AMOUNTS OWED TO OPTIONEE AS WAGES OR OTHER COMPENSATION, FRINGE BENEFITS, VACATION PAY OR COMMISSIONS) TO THE EXTENT OF ANY AMOUNT WHICH OPTIONEE OWES THE CORPORATION PURSUANT TO THE PROVISIONS OF SUBSECTION C. WHETHER OR NOT THE CORPORATION ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE 5 6 CORPORATION DOES NOT RECOVER BY MEANS OF THE SET-OFF THE FULL AMOUNT OWED TO IT BY THE OPTIONEE, THEN OPTIONEE AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE CORPORATION. E. THE OPTIONEE MAY BE RELEASED FROM OPTIONEE'S OBLIGATIONS UNDER THIS SECTION 12 ONLY IF THE COMMITTEE DETERMINES, IN ITS SOLE DISCRETION, THAT SUCH A RELEASE IS IN THE BEST INTERESTS OF THE CORPORATION. SO LONG AS THEY ARE MADE IN GOOD FAITH, ALL DETERMINATIONS BY THE COMMITTEE MADE PURSUANT TO THIS SECTION 12 SHALL BE FINAL, BINDING AND NONAPPEALABLE. 13. AGREEMENT REGARDING PRIOR OPTION GRANTS. OPTIONEE EXPRESSLY AGREES THAT, IN CONSIDERATION FOR THE GRANT OF THE OPTIONS PROVIDED FOR IN THIS AGREEMENT, THE PROVISIONS OF SECTIONS 12, 13 AND 14 OF THIS AGREEMENT SHALL BE DEEMED INCORPORATED INTO ALL PRIOR OPTION AGREEMENTS, IF ANY, ENTERED INTO BETWEEN THE CORPORATION AND THE OPTIONEE AND THAT THE FORFEITURE PROVISIONS SET FORTH IN THIS AGREEMENT SHALL APPLY TO ALL OPTIONS PREVIOUSLY GRANTED TO OPTIONEE. OPTIONEE ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS IMPORTANT PROVISIONS AFFECTING OPTIONEE'S ECONOMIC INTEREST AND THAT OPTIONEE HAS CAREFULLY READ AND CONSIDERED AND AGREES TO BE BOUND BY THIS AGREEMENT. ACKNOWLEDGED AND AGREED TO____________________________ (Optionee's Signature) 6 7 14. ARBITRATION. A. Any controversy, claim or dispute arising out of or relating to this Agreement or the option, including but not limited to the provisions of Sections 5, 12 and 13 hereof, or any act or occurrence relating to the foregoing, or any decision of the Committee relating to an option or its forfeiture ("A Dispute") shall be determined and resolved by binding arbitration in accordance with Title IX of The United States Code and The commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the date the arbitration is commenced in accordance herewith. In the event of any inconsistency between such Rules of the AAA and the terms of this Agreement, this Agreement shall supersede the Rules of the AAA. Judgment upon any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final, binding, non-appealable and conclusive. The provisions of this Agreement shall govern the rights of all parties hereto, including but not limited to any party claiming for or on behalf of Optionee, including Optionee's heirs, successors, assigns, personal representatives and bankruptcy trustees. B. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by Certified Mail, Return Receipt Requested to the Corporation at its principal place of business or to the Optionee at his/her residence address as reflected in the records of the Corporation, by Certified Mail, Return Receipt Requested to the AAA Office in Phoenix, Arizona, or in the absence of such an office, to the AAA Region in which Arizona is located. C. The AAA shall administer the arbitration. The AAA shall appoint a single arbitrator to conduct the arbitration within 30 days of the AAA's receipt of a demand for arbitration in accordance with this Section. The arbitrator shall, by virtue of background, similar experience, be knowledgeable in matters pertaining to stock option agreements and employment relationships. There shall be no right of discovery in connection with the arbitration except in accordance with the AAA's Commercial Arbitration Rules. Not earlier than thirty (30) nor more than forty-five (45) days after appointment, the arbitrator shall conduct a preliminary hearing in accordance with the AAA "Guidelines for Expediting Large, Complex Commercial Arbitrations." Not less than five (5) days prior to the preliminary hearing, all parties to the arbitration shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used in the arbitration hearing Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than those set forth on such list. D. The arbitrator shall receive evidence in a single hearing which shall be conducted in Phoenix, Arizona, unless the arbitrator determines by written application of a party that such location would represent an unreasonable hardship and that the hearing should be conducted in another location. The hearing shall be commenced not more than sixty (60) days after the appointment of the arbitrator. 7 8 E. The arbitrator shall award reasonable attorneys fees and costs in favor of the prevailing party. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrator shall have the power to hear and decide, by documents only or with the hearing (at the arbitrator's sole discretion) any pre-hearing motions which are in the nature of pre-trial motions to dismiss or for summary judgment. The arbitrator shall be entitled to receive reasonable compensation at an hourly rate to be established by agreement between the arbitrator and the AAA. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. MEDICIS PHARMACEUTICAL CORPORATION By:_________________________________________ Chairman and Chief Executive Officer ______________________________________(SEAL) Corporate Secretary Accepted and Agreed to: ____________________________________________ Optionee 8 EX-99.3 6 FORM OF NON-QUALIFIED EMPLOYEE STOCK OPTION CERT 1 EXHIBIT 99.3 NON-QUALIFIED EMPLOYEE STOCK OPTION CERTIFICATE AGREEMENT THIS AGREEMENT is made as of the Date of Grant shown on Exhibit A hereto, and between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Corporation"), and the individual named on Exhibit A hereto (the "Optionee"). WHEREAS, the Optionee is a valuable and trusted employee of the Corporation and the Company considers it desirable and in its best interests that the Optionee be given an added incentive to advance the interests of the Corporation by possessing an option to purchase shares of the Corporation, in accordance with the Corporation's stock option plan identified on exhibit A hereto (the "Plan"); and WHEREAS, Section 7.1 of the Plan states that options granted under the Plan shall be evidenced by certificates incorporating such terms and conditions as the Plan Committee (as such term is defined in the Plan) in its absolute discretion deems consistent with the terms of the Plan; and WHEREAS, the Plan Committee took action on the Date of Grant shown on Exhibit A to authorize the issuance of new options to the Optionee; NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties as follows: 1. GRANT OF OPTION. Subject to the terms and conditions set forth herein, the Corporation hereby grants to the Optionee the right, privilege and option to purchase the number of shares of its Class A Common Stock (the "Common Stock") shown on Exhibit A hereto. These options are not intended to be Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended. 2. PURCHASE PRICE. The purchase price per share under the option granted to Optionee under Paragraph 1 above shall be as shown on Exhibit A hereto, subject to adjustment as provided herein and in the Plan. 3. TIME OF EXERCISE OF OPTION. Subject to the terms and conditions set forth herein, the aforesaid option , until the termination thereof as provided in Paragraph 5 below, may be exercised by the Optionee according to the schedule noted on Exhibit A. Subject to the foregoing limitation, Optionee may exercise the option to purchase all the shares granted by this option at one time or the Optionee may exercise the option to purchase the shares granted by the option from time to time, until the termination thereof as provided in Paragraph 5 below. 2 4. METHOD OF EXERCISE. The option shall be exercised by written notice directed to the Board of Directors of the Corporation, at the Corporation's principal place of business, accompanied by a check in payment of the option price for the number of shares specified and paid for. The Committee may approve or disapprove in its absolute discretion a request for payment to be made in whole or in part in stock of the Corporation. The Corporation shall make immediate delivery of the shares purchased under the option, provided that if any law or regulation requires the Corporation to take any such action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such action. 5. TERMINATION OF OPTION. Except as otherwise stated in Section 12 or elsewhere herein, any unvested option shall terminate upon termination of employment, and any vested option, to the extent not theretofore exercised, shall terminate upon the first to occur of the following dates: (a) upon the date which is three (3) months subsequent to the date on which the Optionee's employment by the Corporation is terminated (except if such termination be by reason of death or permanent and total disability or for cause); (b) the expiration of twelve (12) months after the date on which the Optionee's employment by the Corporation is terminated, if such termination be by reason of Optionee's permanent and total disability (as determined in the absolute discretion of the Committee); (c) the expiration of one hundred eighty (180) days from the death of the Optionee while in the employ of the Corporation, in which event the transferee of said option (or any unexercised portion thereof) pursuant to Optionee's Will or by laws of intestacy must exercise said option within one hundred eighty (180) days following the date of the Optionee's death; or 6. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that the number of issued shares of Common Stock of the Corporation shall be increased or reduced by change in par value, split up, reclassification, distribution of a dividend payable in stock, or the like, the number of shares subject to option and the option price per share shall be proportionately adjusted. If the Corporation is reorganized or consolidated or merged with another company, the Optionee shall be entitled to receive options covering shares of such reorganized, consolidated, or merged company in the same proportion, at an equivalent price, and subject to the same conditions. For purposes of the preceding sentence, the excess of the aggregate fair market value of the shares subject to the option immediately after the reorganization, consolidation or merger over the aggregate option price of such shares shall not be more than the excess of the aggregate fair market value of all shares subject to the option 2 3 immediately before such reorganization, consolidation, or merger over the aggregate option price of such shares, and the new option price of such shares, and the new option or assumption of the old option shall not give the Optionee additional benefits which the Optionee did not have under the old option, or deprive the Optionee of benefits which the Optionee had under the old option (except with respect to fractional shares). 7. RIGHTS PRIOR TO EXERCISE OF OPTION. This option is not transferable by the Optionee, except in the event of death as provided in Paragraph 5 above, and during the Optionee's lifetime is exercisable only by the Optionee. The Optionee shall have no rights as a stockholder with respect to the option shares until payment of the option price and delivery to him of certificates for such shares as herein provided. 8. SECURITIES, REGISTRATION AND RESTRICTIONS. Upon receipt of the shares of the Corporation as a result of the exercise in whole or in part of the Option, the Optionee, if so requested by the Corporation, shall represent and warrant to the Corporation that the Optionee is acquiring the shares of Common Stock for investment and not with a view toward resale or distribution to the public and, if so requested by the Corporation, shall deliver to the Corporation a written statement to that effect satisfactory to the Corporation. Additionally, if so requested by the Corporation, that the Optionee will execute and deliver to the Corporation a written agreement that the Optionee will not sell or offer to sell any such shares of Common Stock unless a registration statement shall be in effect with respect to such shares of Common Stock under the Securities Act (as defined in the Plan) and any applicable state securities law or unless the Optionee shall have furnished to the Corporation an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Certificates representing the shares transferred upon the exercise or surrender of the option granted hereby may, at the discretion of the Corporation, bear a legend to the effect that such shares have not been registered under the Securities Act or any applicable state securities law and that such shares may not be sold or offered for sale in the absence of (i) an effective registration statement as to such shares under the Securities Act and any applicable state securities law, or (ii) an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Furthermore, the Corporation shall have the right to require the Optionee to enter into such stockholder or other related agreements as the Corporation deems necessary or appropriate under the circumstances as a condition to the issuance of any shares under this option. 9. PAYMENT OF WITHHOLDING TAX. In the event the Corporation determines that it is required to withhold state or Federal income tax as a result of the exercise of an option, as a condition to the exercise thereof, the Optionee may be required to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. Payment of such withholding requirements may be made, in the discretion of the Plan Committee, (i) in cash, (ii) by delivery of shares of Common Stock registered in the name of the Optionee, or by the Corporation not issuing such number of shares of Common Stock subject to the option, having a fair market value at the time of exercise equal to the amount to be withheld, or (iii) any combination of (i) and (ii) above. 3 4 10. MISCELLANEOUS. The Optionee shall not have any right as a stockholder of the Corporation solely as a result of the grant of this option. The grant of this option does not constitute a contract of consulting. This option is subject in all respects to the terms of the Plan. This option shall be governed by the laws of the state applicable to the Plan. 11. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 12. FORFEITURE FOR FRAUD, DISHONESTY, UNLAWFUL COMPETITION AND OTHER ACTS. A. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 5 OR IN ANY EXHIBIT TO THIS AGREEMENT, ALL OPTION AND OTHER RIGHTS WITH RESPECT TO ALL OPTIONS GRANTED TO OPTIONEE HEREUNDER BUT NOT YET EXERCISED SHALL IMMEDIATELY TERMINATE AND BE NULL AND VOID IF: (i) OPTIONEE'S EMPLOYMENT BY THE CORPORATION IS TERMINATED FOR CAUSE; (ii) THE COMMITTEE OF THE CORPORATION'S BOARD OF DIRECTORS THEN ADMINISTERING THE CORPORATION'S STOCK OPTION PLANS (THE "COMMITTEE") DETERMINES THAT THE OPTIONEE ENGAGED IN ILLEGAL ACTS, FRAUD, DISHONESTY, WILLFUL MISCONDUCT, INCLUDING VIOLATION OF THE CORPORATION'S INSIDER TRADING POLICY, OR OTHER UNAUTHORIZED CONDUCT DETRIMENTAL TO THE CORPORATION; (iii) OPTIONEE HAS AT ANY TIME DISCLOSED TO ANY PERSON, FIRM, CORPORATION OR OTHER ENTITY ANY OF THE CORPORATION'S "PROPRIETARY INFORMATION" (AS DEFINED BELOW) IN A MANNER WHICH COULD PLACE THE CORPORATION AT A COMPETITIVE DISADVANTAGE OR CREATE EXPOSURE TO LIABILITY, WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BOARD OF DIRECTORS, OR EXCEPT AS SUCH DISCLOSURE MAY HAVE BEEN REQUIRED IN CONNECTION WITH THE OPTIONEE'S SERVICE AS AN EMPLOYEE OF THE CORPORATION OR BY LAW; (iv) OPTIONEE SOLICITS OR OTHERWISE INDUCES ANY EMPLOYEE OF THE CORPORATION TO TERMINATE HIS OR HER EMPLOYMENT; (v) OPTIONEE SOLICITS BUSINESS FROM ANY OF THE CORPORATION'S CUSTOMERS FOR AND ON BEHALF OF ANY OF THE CORPORATION'S COMPETITORS FOR PRODUCTS IN THE SAME CLASS OF TRADE DURING THE OPTIONEE'S PERIOD OF EMPLOYMENT WITH THE CORPORATION AND FOR A PERIOD OF ONE YEAR FOLLOWING THE OPTIONEE'S SEPARATION FROM THE COMPANY, UNLESS PRIOR WRITTEN CONSENT IS GIVEN BY THE COMMITTEE; (vi) OPTIONEE DISPARAGES THE CORPORATION OR COMMITS ANY OTHER ACT OF DISLOYALTY; (vii) OPTIONEE ENGAGES IN ANY CONDUCT IN VIOLATION OF OPTIONEE'S CONTRACTUAL OBLIGATIONS TO THE CORPORATION, INCLUDING BUT NOT LIMITED TO A VIOLATION OF ANY VALID NON-COMPETITION, NON-DISCLOSURE, NON- 4 5 SOLICITATION OR OTHER WRITTEN AGREEMENT; (viii) OPTIONEE FAILS TO ASSIGN TO THE CORPORATION ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT IN VIOLATION OF ANY OF THE CORPORATION'S POLICIES OR ANY AGREEMENT BETWEEN THE CORPORATION AND OPTIONEE; OR (ix) OPTIONEE REFUSES TO BE AVAILABLE FOR REASONABLE CONSULTATION WITH RESPECT TO THE SUBJECT MATTER OF OPTIONEE'S EMPLOYMENT FOR A PERIOD OF THREE MONTHS FOLLOWING TERMINATION OF SUCH EMPLOYMENT. THE ACTS OR CIRCUMSTANCES DESCRIBED IN THE PRECEDING SENTENCE SHALL BE REFERRED TO AS "EVENTS OF FORFEITURE." B. FOR PURPOSES OF THIS SECTION, THE TERM "PROPRIETARY INFORMATION" SHALL MEAN ALL CONFIDENTIAL OR SECRET CUSTOMER LISTS, PROSPECTIVE CUSTOMER LISTS, TRADE SECRETS, PROCESSES, PRODUCT FORMULATIONS, INVENTIONS, IMPROVEMENTS, MANUFACTURING FORMULATION OR SYSTEMS TECHNIQUES, PRODUCT FORMULAS, DEVELOPMENT OR EXPERIMENTAL WORK, WORKS IN PROCESS, BUSINESS, MARKETING AND COMPETITIVE STRATEGIES, INFORMATION RELATING TO ANY PATENT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF THE CORPORATION, AND ANY OTHER SECRET OR CONFIDENTIAL PROPRIETARY MATTER RELATING TO OR PERTAINING TO THE CORPORATION OR ITS PRODUCTS, SERVICES, SALES OR BUSINESS. C. IN ADDITION TO THE FOREGOING RIGHTS AND ANY AND ALL OTHER RIGHTS WHICH THE CORPORATION (OR ANY OF ITS SUBSIDIARIES OR AFFILIATES) MAY HAVE AGAINST THE OPTIONEE AT LAW OR IN EQUITY, OPTIONEE FURTHER AGREES THAT UPON OCCURRENCE OF ANY OF THE EVENTS OF FORFEITURE DESCRIBED IN SUBSECTION A, OPTIONEE SHALL OWE THE CORPORATION THE EXCESS OF THE FAIR MARKET VALUE OVER THE OPTION PRICE (MEASURED AS OF THE DATE OF ACQUISITION) OF ALL SHARES ACQUIRED THROUGH EXERCISE OF ANY OPTION WITHIN THE THREE (3) YEARS PRECEDING THE COMMITTEE'S DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED. OPTIONEE SHALL PAY SUCH AMOUNT AS CALCULATED OR DETERMINED BY THE COMMITTEE TO THE CORPORATION WITHIN THIRTY (30) DAYS OF THE COMMITTEE'S WRITTEN DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED, WHICH DETERMINATION MAY BE MADE BY NOTICE TO THE OPTIONEE WITHIN ANY TIME UP TO TWO (2) YEARS FOLLOWING THE OPTIONEE'S TERMINATION OF EMPLOYMENT. D. BY ACCEPTING THIS AGREEMENT, OPTIONEE CONSENTS TO DEDUCTION FROM ANY AMOUNTS THE CORPORATION MAY OWE TO OPTIONEE FROM TIME TO TIME (INCLUDING AMOUNTS OWED TO OPTIONEE AS WAGES OR OTHER COMPENSATION, FRINGE BENEFITS, VACATION PAY OR COMMISSIONS) 5 6 TO THE EXTENT OF ANY AMOUNT WHICH OPTIONEE OWES THE CORPORATION PURSUANT TO THE PROVISIONS OF SUBSECTION C. WHETHER OR NOT THE CORPORATION ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE CORPORATION DOES NOT RECOVER BY MEANS OF THE SET-OFF THE FULL AMOUNT OWED TO IT BY THE OPTIONEE, THEN OPTIONEE AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE CORPORATION. E. THE OPTIONEE MAY BE RELEASED FROM OPTIONEE'S OBLIGATIONS UNDER THIS SECTION 12 ONLY IF THE COMMITTEE DETERMINES, IN ITS SOLE DISCRETION, THAT SUCH A RELEASE IS IN THE BEST INTERESTS OF THE CORPORATION. SO LONG AS THEY ARE MADE IN GOOD FAITH, ALL DETERMINATIONS BY THE COMMITTEE MADE PURSUANT TO THIS SECTION 12 SHALL BE FINAL, BINDING AND NONAPPEALABLE. 13. AGREEMENT REGARDING PRIOR OPTION GRANTS. OPTIONEE EXPRESSLY AGREES THAT, IN CONSIDERATION FOR THE GRANT OF THE OPTIONS PROVIDED FOR IN THIS AGREEMENT, THE PROVISIONS OF SECTIONS 12, 13 AND 14 OF THIS AGREEMENT SHALL BE DEEMED INCORPORATED INTO ALL PRIOR OPTION AGREEMENTS, IF ANY, ENTERED INTO BETWEEN THE CORPORATION AND THE OPTIONEE AND THAT THE FORFEITURE PROVISIONS SET FORTH IN THIS AGREEMENT SHALL APPLY TO ALL OPTIONS PREVIOUSLY GRANTED TO OPTIONEE. OPTIONEE ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS IMPORTANT PROVISIONS AFFECTING OPTIONEE'S ECONOMIC INTEREST AND THAT OPTIONEE HAS CAREFULLY READ AND CONSIDERED AND AGREES TO BE BOUND BY THIS AGREEMENT. ACKNOWLEDGED AND AGREED TO____________________________ (Optionee's Signature) 6 7 14. ARBITRATION. A. Any controversy, claim or dispute arising out of or relating to this Agreement or the option, including but not limited to the provisions of Sections 5, 12 and 13 hereof, or any act or occurrence relating to the foregoing, or any decision of the Committee relating to an option or its forfeiture ("A Dispute") shall be determined and resolved by binding arbitration in accordance with Title IX of The United States Code and The commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the date the arbitration is commenced in accordance herewith. In the event of any inconsistency between such Rules of the AAA and the terms of this Agreement, this Agreement shall supersede the Rules of the AAA. Judgment upon any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final, binding, non-appealable and conclusive. The provisions of this Agreement shall govern the rights of all parties hereto, including but not limited to any party claiming for or on behalf of Optionee, including Optionee's heirs, successors, assigns, personal representatives and bankruptcy trustees. B. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by Certified Mail, Return Receipt Requested to the Corporation at its principal place of business or to the Optionee at his/her residence address as reflected in the records of the Corporation, by Certified Mail, Return Receipt Requested to the AAA Office in Phoenix, Arizona, or in the absence of such an office, to the AAA Region in which Arizona is located. C. The AAA shall administer the arbitration. The AAA shall appoint a single arbitrator to conduct the arbitration within 30 days of the AAA's receipt of a demand for arbitration in accordance with this Section. The arbitrator shall, by virtue of background, similar experience, be knowledgeable in matters pertaining to stock option agreements and employment relationships. There shall be no right of discovery in connection with the arbitration except in accordance with the AAA's Commercial Arbitration Rules. Not earlier than thirty (30) nor more than forty-five (45) days after appointment, the arbitrator shall conduct a preliminary hearing in accordance with the AAA "Guidelines for Expediting Large, Complex Commercial Arbitrations." Not less than five (5) days prior to the preliminary hearing, all parties to the arbitration shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used in the arbitration hearing Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than those set forth on such list. D. The arbitrator shall receive evidence in a single hearing which shall be conducted in Phoenix, Arizona, unless the arbitrator determines by written application of a party that such location would represent an unreasonable hardship and that the hearing should be conducted in another location. The hearing shall be commenced not more than sixty (60) days after the appointment of the arbitrator. 7 8 E. The arbitrator shall award reasonable attorneys fees and costs in favor of the prevailing party. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrator shall have the power to hear and decide, by documents only or with the hearing (at the arbitrator's sole discretion) any pre-hearing motions which are in the nature of pre-trial motions to dismiss or for summary judgment. The arbitrator shall be entitled to receive reasonable compensation at an hourly rate to be established by agreement between the arbitrator and the AAA. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. MEDICIS PHARMACEUTICAL CORPORATION By:_________________________________________ Chairman and Chief Executive Officer ____________________________________________ Employee 8 EX-99.4 7 NON-QUALIFIED NON-EMPLOYEE CONSLTNT STCK OPTN AGMT 1 EXHIBIT 99.4 NON-QUALIFIED NON-EMPLOYEE CONSULTANT STOCK OPTION CERTIFICATE AGREEMENT THIS AGREEMENT is made as of the Date of Grant shown on Exhibit A hereto, and between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Corporation"), and the individual named on Exhibit A hereto (the "Consultant"). WHEREAS, the Consultant is a valuable and trusted consultant of the Corporation and the Corporation considers it desirable and in its best interests that the Consultant be given an added incentive to advance the interests of the Corporation by possessing an option to purchase shares of the Corporation, in accordance with the Corporation's stock option plan identified on Exhibit A hereto (the "Plan"); and WHEREAS, Section 7.1 of the Plan states that options granted under the Plan shall be evidenced by certificates incorporating such terms and conditions as the Plan Committee (as such term is defined in the Plan) in its absolute discretion deems consistent with the terms of the Plan; and WHEREAS, the Plan Committee took action on the Date of Grant shown on Exhibit A to authorize the issuance of an option to the Consultant; NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties as follows: 1. GRANT OF OPTION. Subject to the terms and conditions set forth herein, the Corporation hereby grants to the Consultant the right, privilege and option to purchase the number of shares of its Class A Common Stock (the "Common Stock") shown on Exhibit A hereto. These options are not intended to be an Incentive Stock Option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended. 2. PURCHASE PRICE. The purchase price per share under the option granted to Consultant under Paragraph 1 above shall be as shown on Exhibit A hereto, subject to adjustment as provided herein and in the Plan. 3. TIME OF EXERCISE OF OPTION. Subject to the terms and conditions set forth herein, this option may be exercised by the Consultant according to the schedule noted on Exhibit A. Subject to the foregoing limitation, Consultant may exercise the option to purchase all the shares granted by this option at one time or the Consultant may exercise the option to purchase the shares granted by this option from time to time, until the termination thereof, as provided in Paragraph 5 below. 2 4. METHOD OF EXERCISE. The option shall be exercised by written notice directed to the Board of Directors of the Corporation, at the Corporation's principal place of business, accompanied by a check in payment of the option price for the number of shares specified and paid for. The Committee may approve or disapprove in its absolute discretion a request for payment to be made in whole or in part in stock of the Corporation. The Corporation shall make immediate delivery of the shares purchased under the option, provided that if any law or regulation requires the Corporation to take any such action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such action. 5. TERMINATION OF OPTION. Except as otherwise stated herein, the option, to the extent not theretofore exercised, shall terminate upon the first to occur of the following dates: (a) the expiration of one hundred eighty (180) days from the death of the Consultant in which event the transferee of the Option (or any unexercised portion thereof) pursuant to Consultant's Will or by laws of intestacy must exercise the Option within one hundred eighty (180) days following the date of the Consultant's death; and (b) Any other circumstance provided in Exhibit A. (c) In accordance with Section 12 hereof. 6. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that the number of issued shares of Common Stock of the Corporation shall be increased or reduced by change in par value, split up, reclassification, distribution of a dividend payable in stock, or the like, the number of shares subject to option and the option price per share shall be proportionately adjusted. If the Corporation is reorganized or consolidated or merged with another corporation, the Consultant shall be entitled to receive options covering shares of such reorganized, consolidated, or merged company in the same proportion, at an equivalent price, and subject to the same conditions. For purposes of the preceding sentence, the excess of the aggregate fair market value of the shares subject to the option immediately after the reorganization, consolidation or merger over the aggregate fair market value of all shares subject to the option immediately before such reorganization, consolidation, or merger over the aggregate option price of such shares, and the new option or assumption of the old option shall not give the Consultant additional benefits which the Consultant did not have under the old option, or deprive the Consultant of benefits which the Consultant had under the old option (except with respect to fractional shares). 7. RIGHTS PRIOR TO EXERCISE OF OPTION. This option is not transferable by the Consultant, except in the event of death as provided in Paragraph 5 above, and during the Consultant's lifetime is exercisable only by the Consultant. The Consultant shall have no rights as a stockholder with respect to the option shares until payment of the option price and delivery to it of certificates for such shares as herein provided. 2 3 8. SECURITIES, REGISTRATION AND RESTRICTIONS. Upon receipt of the shares of the Corporation as a result of the exercise in whole or in part of this option, the Consultant, if so requested by the Corporation, shall represent and warrant to the Corporation that the Consultant is acquiring the shares of Common Stock for investment and not with a view toward resale or distribution to the public and, if so requested by the Corporation, shall deliver to the Corporation a written statement to that effect satisfactory to the Corporation. Additionally, if so requested by the Corporation, that the Consultant will execute and deliver to the Corporation a written agreement that the Consultant will not sell or offer to sell any such shares of Common Stock unless a registration statement shall be in effect with respect to such shares of Common Stock under the Securities Act (as defined in the Plan) and any applicable state securities law or unless the Consultant shall have furnished to the Corporation an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Certificates representing the shares transferred upon the exercise or surrender of the option granted hereby may, at the discretion of the Corporation, bear a legend to the effect that such shares have not been registered under the Securities Act or any applicable state securities law and that such shares may not be sold or offered for sale in the absence of (i) an effective registration statement as to such shares under the Securities Act and any applicable state securities law, or (ii) an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Furthermore, the Corporation shall have the right to require such agreements as the Corporation deems necessary or appropriate under the circumstances as a condition to the issuance of any shares under this option. This option is subject in all respects to the terms of the Plan. 9. PAYMENT OF WITHHOLDING TAX. In the event the Corporation determines that it is required to withhold state or Federal income tax as a result of the exercise of an option, as a condition to the exercise thereof, the Consultant may be required to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. Payment of such withholding requirements may be made, in the discretion of the Plan Committee, (i) in cash, (ii) by delivery of shares of Common Stock registered in the name of the Consultant, or by the Corporation not issuing such number of shares of Common Stock subject to the Option, having a fair market value at the time of exercise equal to the amount to be withheld, or (iii) any combination of (i) and (ii) above. 10. MISCELLANEOUS. The Consultant shall not have any right as a stockholder of the Corporation solely as a result of the grant of this option. The grant of this option does not constitute a contract of consulting. This option is subject in all respects to the terms of the Plan. This option shall be governed by the laws of the state applicable to the Plan. 11. BINDING EFFECT. This Agreement shall not have any right as a stockholder of the Corporation solely as a result of the grant of the Option. The grant of the Option does not constitute a contract of consulting. 3 4 12. FORFEITURE FOR FRAUD, DISHONESTY, UNLAWFUL COMPETITION AND OTHER ACTS. A. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 5 OR IN ANY EXHIBIT TO THIS AGREEMENT, ALL OPTION AND OTHER RIGHTS WITH RESPECT TO ALL OPTIONS GRANTED TO OPTIONEE HEREUNDER BUT NOT YET EXERCISED SHALL IMMEDIATELY TERMINATE AND BE NULL AND VOID IF: (i) OPTIONEE'S CONSULTING RELATIONSHIP IS TERMINATED BY THE CORPORATION FOR CAUSE; (ii) THE COMMITTEE OF THE CORPORATION'S BOARD OF DIRECTORS THEN ADMINISTERING THE CORPORATION'S STOCK OPTION PLANS (THE "COMMITTEE") DETERMINES THAT THE OPTIONEE ENGAGED IN ILLEGAL ACTS, FRAUD, DISHONESTY, WILLFUL MISCONDUCT, INCLUDING VIOLATION OF THE CORPORATION'S INSIDER TRADING POLICY, OR OTHER UNAUTHORIZED CONDUCT DETRIMENTAL TO THE CORPORATION; (iii) OPTIONEE HAS AT ANY TIME DISCLOSED TO ANY PERSON, FIRM, CORPORATION OR OTHER ENTITY ANY OF THE CORPORATION'S "PROPRIETARY INFORMATION" (AS DEFINED BELOW) IN A MANNER WHICH COULD PLACE THE CORPORATION AT A COMPETITIVE DISADVANTAGE OR CREATE EXPOSURE TO LIABILITY, WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BOARD OF DIRECTORS, OR EXCEPT AS SUCH DISCLOSURE MAY HAVE BEEN REQUIRED IN CONNECTION WITH THE OPTIONEE'S SERVICE AS A CONSULTANT OF THE CORPORATION OR BY LAW; (iv) OPTIONEE SOLICITS OR OTHERWISE INDUCES ANY EMPLOYEE OF THE CORPORATION TO TERMINATE HIS OR HER EMPLOYMENT; (v) OPTIONEE SOLICITS BUSINESS FROM ANY OF THE CORPORATION'S CUSTOMERS FOR AND ON BEHALF OF ANY OF THE CORPORATION'S COMPETITORS FOR PRODUCTS IN THE SAME CLASS OF TRADE DURING THE OPTIONEE'S STATUS AS A CONSULTANT OF THE CORPORATION AND FOR A PERIOD OF ONE YEAR FOLLOWING THE OPTIONEE'S SEPARATION FROM THE COMPANY, UNLESS PRIOR WRITTEN CONSENT IS GIVEN BY THE COMMITTEE; (vi) OPTIONEE DISPARAGES THE CORPORATION OR COMMITS ANY OTHER ACT OF DISLOYALTY; (vii) OPTIONEE ENGAGES IN ANY CONDUCT IN VIOLATION OF OPTIONEE'S CONTRACTUAL OBLIGATIONS TO THE CORPORATION, INCLUDING BUT NOT LIMITED TO A VIOLATION OF ANY VALID NON-COMPETITION, NON-DISCLOSURE, NON-SOLICITATION OR OTHER WRITTEN AGREEMENT; (viii) OPTIONEE FAILS TO ASSIGN TO THE CORPORATION ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT IN VIOLATION OF ANY OF THE CORPORATION'S POLICIES OR ANY AGREEMENT BETWEEN THE CORPORATION AND OPTIONEE; OR (ix) OPTIONEE REFUSES TO BE AVAILABLE FOR REASONABLE CONSULTATION WITH RESPECT TO THE SUBJECT MATTER OF OPTIONEE'S CONSULTING RELATIONSHIP FOR A PERIOD OF THREE MONTHS FOLLOWING TERMINATION OF SUCH RELATIONSHIP. THE ACTS OR CIRCUMSTANCES DESCRIBED IN THE PRECEDING SENTENCE SHALL BE REFERRED TO AS "EVENTS OF FORFEITURE." 4 5 B. FOR PURPOSES OF THIS SECTION, THE TERM "PROPRIETARY INFORMATION" SHALL MEAN ALL CONFIDENTIAL OR SECRET CUSTOMER LISTS, PROSPECTIVE CUSTOMER LISTS, TRADE SECRETS, PROCESSES, PRODUCT FORMULATIONS, INVENTIONS, IMPROVEMENTS, MANUFACTURING FORMULATION OR SYSTEMS TECHNIQUES, PRODUCT FORMULAS, DEVELOPMENT OR EXPERIMENTAL WORK, WORKS IN PROCESS, BUSINESS, MARKETING AND COMPETITIVE STRATEGIES, INFORMATION RELATING TO ANY PATENT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF THE CORPORATION, AND ANY OTHER SECRET OR CONFIDENTIAL PROPRIETARY MATTER RELATING TO OR PERTAINING TO THE CORPORATION OR ITS PRODUCTS, SERVICES, SALES OR BUSINESS. C. IN ADDITION TO THE FOREGOING RIGHTS AND ANY AND ALL OTHER RIGHTS WHICH THE CORPORATION (OR ANY OF ITS SUBSIDIARIES OR AFFILIATES) MAY HAVE AGAINST THE OPTIONEE AT LAW OR IN EQUITY, OPTIONEE FURTHER AGREES THAT UPON OCCURRENCE OF ANY OF THE EVENTS OF FORFEITURE DESCRIBED IN SUBSECTION A, OPTIONEE SHALL OWE THE CORPORATION THE EXCESS OF THE FAIR MARKET VALUE OVER THE OPTION PRICE (MEASURED AS OF THE DATE OF ACQUISITION) OF ALL SHARES ACQUIRED THROUGH EXERCISE OF ANY OPTION WITHIN THE THREE (3) YEARS PRECEDING THE COMMITTEE'S DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED. OPTIONEE SHALL PAY SUCH AMOUNT AS CALCULATED OR DETERMINED BY THE COMMITTEE TO THE CORPORATION WITHIN THIRTY (30) DAYS OF THE COMMITTEE'S WRITTEN DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED, WHICH DETERMINATION MAY BE MADE BY NOTICE TO THE OPTIONEE WITHIN ANY TIME UP TO TWO (2) YEARS FOLLOWING TERMINATION OF THE OPTIONEE'S CONSULTING RELATIONSHIP. D. BY ACCEPTING THIS AGREEMENT, OPTIONEE CONSENTS TO DEDUCTION FROM ANY AMOUNTS THE CORPORATION MAY OWE TO OPTIONEE FROM TIME TO TIME (INCLUDING AMOUNTS OWED TO OPTIONEE AS FEES OR OTHER COMPENSATION) TO THE EXTENT OF ANY AMOUNT WHICH OPTIONEE OWES THE CORPORATION PURSUANT TO THE PROVISIONS OF SUBSECTION C. WHETHER OR NOT THE CORPORATION ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE CORPORATION DOES NOT RECOVER BY MEANS OF THE SET-OFF THE FULL AMOUNT OWED TO IT BY THE OPTIONEE, THEN OPTIONEE AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE CORPORATION. E. THE OPTIONEE MAY BE RELEASED FROM OPTIONEE'S OBLIGATIONS UNDER THIS SECTION 12 ONLY IF THE COMMITTEE DETERMINES, IN ITS SOLE DISCRETION, THAT SUCH A RELEASE IS IN THE BEST INTERESTS OF 5 6 THE CORPORATION. SO LONG AS THEY ARE MADE IN GOOD FAITH, ALL DETERMINATIONS BY THE COMMITTEE MADE PURSUANT TO THIS SECTION 12 SHALL BE FINAL, BINDING AND NONAPPEALABLE. 13. AGREEMENT REGARDING PRIOR OPTION GRANTS. OPTIONEE EXPRESSLY AGREES THAT, IN CONSIDERATION FOR THE GRANT OF THE OPTIONS PROVIDED FOR IN THIS AGREEMENT, THE PROVISIONS OF SECTIONS 12, 13 AND 14 OF THIS AGREEMENT SHALL BE DEEMED INCORPORATED INTO ALL PRIOR OPTION AGREEMENTS, IF ANY, ENTERED INTO BETWEEN THE CORPORATION AND THE OPTIONEE AND THAT THE FORFEITURE PROVISIONS SET FORTH IN THIS AGREEMENT SHALL APPLY TO ALL OPTIONS PREVIOUSLY GRANTED TO OPTIONEE. OPTIONEE ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS IMPORTANT PROVISIONS AFFECTING OPTIONEE'S ECONOMIC INTEREST AND THAT OPTIONEE HAS CAREFULLY READ AND CONSIDERED AND AGREES TO BE BOUND BY THIS AGREEMENT. ACKNOWLEDGED AND AGREED TO____________________________ (Optionee's Signature) 6 7 14. ARBITRATION. A. Any controversy, claim or dispute arising out of or relating to this Agreement or the option, including but not limited to the provisions of Sections 5, 12 and 13 hereof, or any act or occurrence relating to the foregoing, or any decision of the Committee relating to an option or its forfeiture ("A Dispute") shall be determined and resolved by binding arbitration in accordance with Title IX of The United States Code and The commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the date the arbitration is commenced in accordance herewith. In the event of any inconsistency between such Rules of the AAA and the terms of this Agreement, this Agreement shall supersede the Rules of the AAA. Judgment upon any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final, binding, non-appealable and conclusive. The provisions of this Agreement shall govern the rights of all parties hereto, including but not limited to any party claiming for or on behalf of Optionee, including Optionee's heirs, successors, assigns, personal representatives and bankruptcy trustees. B. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by Certified Mail, Return Receipt Requested to the Corporation at its principal place of business or to the Optionee at his/her residence address as reflected in the records of the Corporation, by Certified Mail, Return Receipt Requested to the AAA Office in Phoenix, Arizona, or in the absence of such an office, to the AAA Region in which Arizona is located. C. The AAA shall administer the arbitration. The AAA shall appoint a single arbitrator to conduct the arbitration within 30 days of the AAA's receipt of a demand for arbitration in accordance with this Section. The arbitrator shall, by virtue of background, similar experience, be knowledgeable in matters pertaining to stock option agreements and employment relationships. There shall be no right of discovery in connection with the arbitration except in accordance with the AAA's Commercial Arbitration Rules. Not earlier than thirty (30) nor more than forty-five (45) days after appointment, the arbitrator shall conduct a preliminary hearing in accordance with the AAA "Guidelines for Expediting Large, Complex Commercial Arbitrations." Not less than five (5) days prior to the preliminary hearing, all parties to the arbitration shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used in the arbitration hearing Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than those set forth on such list. D. The arbitrator shall receive evidence in a single hearing which shall be conducted in Phoenix, Arizona, unless the arbitrator determines by written application of a party that such location would represent an unreasonable hardship and that the hearing should be conducted in another location. The hearing shall be commenced not more than sixty (60) days after the appointment of the arbitrator. 7 8 E. The arbitrator shall award reasonable attorneys fees and costs in favor of the prevailing party. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrator shall have the power to hear and decide, by documents only or with the hearing (at the arbitrator's sole discretion) any pre-hearing motions which are in the nature of pre-trial motions to dismiss or for summary judgment. The arbitrator shall be entitled to receive reasonable compensation at an hourly rate to be established by agreement between the arbitrator and the AAA. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. MEDICIS PHARMACEUTICAL CORPORATION By:_________________________________________ Chairman and Chief Executive Officer ____________________________________________ Corporate Secretary ____________________________________________ Consultant 8 EX-99.5 8 NON-QUALIFIED NON-EMPLOYEE DIRECTOR STCK OPT AGMT 1 EXHIBIT 99.5 NON-QUALIFIED NON-EMPLOYEE DIRECTOR STOCK OPTION CERTIFICATE AGREEMENT THIS AGREEMENT is made as of the Date of Grant shown on Exhibit A hereto, and between MEDICIS PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Corporation"), and the individual named on Exhibit A hereto (the "Director"). WHEREAS, the Corporation considers it desirable and in its best interests that non-employee Directors be given an annual grant of options to purchase shares in the Corporation pursuant to Section 7.3 of the Corporation's stock option plan identified on Exhibit A hereto, (the "Plan"); WHEREAS, Section 7.1 of the Plan states that options granted under the Plan shall be evidenced by Certificates incorporating such terms and conditions as the Plan Committee (as such term is defined in the Plan) in its absolute discretion deems consistent with the terms of the Plan; WHEREAS, as of the date hereof the Plan provides that on the last business day following approval of an amendment of the Plan and thereafter on the last business day of September in each year, each then non-employee Director shall be granted without further action by the Plan Committee, a non-qualified incentive stock option to purchase the number of shares of its Class A Common Stock at fair market value on the date of grant as shown on Exhibit A. NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties as follows: 1. GRANT OF OPTION. Subject to the terms and conditions set forth herein, the Corporation hereby grants to the Director the right, privilege and option to purchase the number of shares of its Class A Common Stock (the "Common Stock"), shown on Exhibit A hereto. These options are not intended as Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended. 2. PURCHASE PRICE. The purchase price per share under the option granted to Director under Paragraph 1 above shall be as shown on Exhibit A hereto, subject to adjustment as provided herein and in the Plan. 3. TIME OF EXERCISE OF OPTION. Subject to the terms and conditions set forth herein, the aforesaid option, until the termination thereof as provided in paragraph 5 below, may be exercised by the Director in whole or in part, as shown on Exhibit A, provided that the Director is still a Director as of that date. 4. METHOD OF EXERCISE. The option shall be exercised by written notice directed to the Board of Directors of the Corporation, at the Corporation's principal place of business, accompanied by a check in payment of the option price for the number of shares specified and paid for. The Corporation shall make immediate delivery of the shares purchased 2 under the option, provided that if any law or regulation requires the Corporation to take any such action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such action. 5. TERMINATION OF OPTION. Except as otherwise stated herein, any unvested option shall terminate upon termination of the optionee's status as a Director of the Corporation, and any vested option, to the extent not theretofore exercised, shall terminate as shown in Exhibit A or in accordance with Section 11 hereof. 6. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that the number of issued shares of Common Stock of the Corporation shall be increased or reduced by change in par value, split up, reclassification, distribution of a dividend payable in stock, or the like, the number of shares subject to option and the option price per share shall be proportionately adjusted. If the Corporation is reorganized or consolidated or merged with another corporation, the Director shall be entitled to receive options covering shares of such reorganized, consolidated, or merged company in the same proportion, at an equivalent price, and subject to the same conditions. For purposes of the preceding sentence, the excess of the aggregate fair market value of the shares subject to the option immediately after the reorganization, consolidation or merger over the aggregate option price of such shares shall not be more than the excess of the aggregate fair market value of all shares subject to the option immediately before such reorganization, consolidation, or merger over the aggregate option price of such shares, and the new option or assumption of the old option shall not give the Director additional benefits which the Director did not have under the old option, or deprive the Director of benefits which the Debtor had under the old option (except with respect to fractional shares). 7. RIGHTS PRIOR TO EXERCISE OF OPTION. This option is not transferable by the Director, except in the event of death in which case the transferee of said option (or any unexercised portion thereof) pursuant to the Director's will or by laws of intestacy, must exercise said option within one hundred eighty (180) days following the date of the Director's death (or the date specified in Paragraph 5, if earlier). The Director shall have no rights as a stockholder with respect to the option shares until payment of the option price and delivery to him of certificates for such shares as herein provided. 8. SECURITIES, REGISTRATION AND RESTRICTIONS. Upon receipt of the shares of the Corporation as a result of the exercise in whole or in part of this option, the Director, if so requested by the Corporation, shall represent and warrant to the Corporation that the Director is acquiring the shares of Common Stock for investment and not with a view toward resale or distribution to the public and, if so requested by the Corporation, shall deliver to the Corporation a written statement to that effect satisfactory to the Corporation. Additionally, if so requested by the Corporation that the Director will execute and deliver to the Corporation a written agreement that the Director will not sell or offer to sell any such shares of Common Stock unless a registration statement shall be in effect with respect to such shares of Common Stock under the Securities Act (as defined in the Plan) and any applicable state securities law or unless 2 3 the Director shall have furnished to the Corporation an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Certificates representing the shares transferred upon the exercise or surrender of the option granted hereby may, at the discretion of the Corporation, bear a legend to the effect that such shares have not been registered under the Securities Act or any applicable state securities law and that such shares may not be sold or offered for sale in the absence of (i) an effective registration statement as to such shares under the Securities Act and any applicable state securities law, or (ii) an opinion, in form and substance satisfactory to the Corporation, of legal counsel acceptable to the Corporation, that such registration is not required. Furthermore, the Corporation shall have the right to require the Director to enter into such stockholder or other related agreements as the Corporation deems necessary or appropriate under the circumstances as a condition to the issuance of any shares under the Option. 9. MISCELLANEOUS. The Director shall not have any right as a stockholder of the Corporation solely as a result of the grant of this option. The grant of this option does not constitute a contract of employment. This option is subject in all respects to the terms of the Plan. This option shall be governed by the laws of the state applicable to the Plan. 10. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 11. FORFEITURE FOR FRAUD, DISHONESTY, UNLAWFUL COMPETITION AND OTHER ACTS. A. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTION 5 OR IN ANY EXHIBIT TO THIS AGREEMENT, ALL OPTION AND OTHER RIGHTS WITH RESPECT TO ALL OPTIONS GRANTED TO OPTIONEE HEREUNDER BUT NOT YET EXERCISED SHALL IMMEDIATELY TERMINATE AND BE NULL AND VOID IF: (i) THE COMMITTEE OF THE CORPORATION'S BOARD OF DIRECTORS THEN ADMINISTERING THE CORPORATION'S STOCK OPTION PLANS (THE "COMMITTEE") DETERMINES THAT THE OPTIONEE ENGAGED IN ILLEGAL ACTS, FRAUD, DISHONESTY, WILLFUL MISCONDUCT, INCLUDING VIOLATION OF THE CORPORATION'S INSIDER TRADING POLICY, OR OTHER UNAUTHORIZED CONDUCT DETRIMENTAL TO THE CORPORATION; (ii) OPTIONEE HAS AT ANY TIME DISCLOSED TO ANY PERSON, FIRM, CORPORATION OR OTHER ENTITY ANY OF THE CORPORATION'S "PROPRIETARY INFORMATION" (AS DEFINED BELOW) IN A MANNER WHICH COULD PLACE THE CORPORATION AT A COMPETITIVE DISADVANTAGE OR CREATE EXPOSURE TO LIABILITY, WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BOARD OF DIRECTORS, OR EXCEPT AS SUCH DISCLOSURE MAY HAVE BEEN REQUIRED IN CONNECTION WITH THE OPTIONEE'S SERVICE AS A DIRECTOR OF THE CORPORATION OR BY LAW; (iii) OPTIONEE SOLICITS OR OTHERWISE INDUCES ANY EMPLOYEE OF THE 3 4 CORPORATION TO TERMINATE HIS OR HER EMPLOYMENT; (iv) OPTIONEE SOLICITS BUSINESS FROM ANY OF THE CORPORATION'S CUSTOMERS FOR AND ON BEHALF OF ANY OF THE CORPORATION'S COMPETITORS FOR PRODUCTS IN THE SAME CLASS OF TRADE DURING THE OPTIONEE'S STATUS AS A DIRECTOR WITH THE CORPORATION AND FOR A PERIOD OF ONE YEAR FOLLOWING THE OPTIONEE'S SEPARATION FROM THE COMPANY, UNLESS PRIOR WRITTEN CONSENT IS GIVEN BY THE COMMITTEE; (v) OPTIONEE DISPARAGES THE CORPORATION OR COMMITS ANY OTHER ACT OF DISLOYALTY; (vi) OPTIONEE ENGAGES IN ANY CONDUCT IN VIOLATION OF OPTIONEE'S CONTRACTUAL OBLIGATIONS TO THE CORPORATION, INCLUDING BUT NOT LIMITED TO A VIOLATION OF ANY VALID NON-COMPETITION, NON-DISCLOSURE, NON-SOLICITATION OR OTHER WRITTEN AGREEMENT; OR (vii) OPTIONEE FAILS TO ASSIGN TO THE CORPORATION ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT IN VIOLATION OF ANY OF THE CORPORATION'S POLICIES OR ANY AGREEMENT BETWEEN THE CORPORATION AND OPTIONEE. THE ACTS OR CIRCUMSTANCES DESCRIBED IN THE PRECEDING SENTENCE SHALL BE REFERRED TO AS "EVENTS OF FORFEITURE." B. FOR PURPOSES OF THIS SECTION, THE TERM "PROPRIETARY INFORMATION" SHALL MEAN ALL CONFIDENTIAL OR SECRET CUSTOMER LISTS, PROSPECTIVE CUSTOMER LISTS, TRADE SECRETS, PROCESSES, PRODUCT FORMULATIONS, INVENTIONS, IMPROVEMENTS, MANUFACTURING FORMULATION OR SYSTEMS TECHNIQUES, PRODUCT FORMULAS, DEVELOPMENT OR EXPERIMENTAL WORK, WORKS IN PROCESS, BUSINESS, MARKETING AND COMPETITIVE STRATEGIES, INFORMATION RELATING TO ANY PATENT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY RIGHT OF THE CORPORATION, AND ANY OTHER SECRET OR CONFIDENTIAL PROPRIETARY MATTER RELATING TO OR PERTAINING TO THE CORPORATION OR ITS PRODUCTS, SERVICES, SALES OR BUSINESS. C. IN ADDITION TO THE FOREGOING RIGHTS AND ANY AND ALL OTHER RIGHTS WHICH THE CORPORATION (OR ANY OF ITS SUBSIDIARIES OR AFFILIATES) MAY HAVE AGAINST THE OPTIONEE AT LAW OR IN EQUITY, OPTIONEE FURTHER AGREES THAT UPON OCCURRENCE OF ANY OF THE EVENTS OF FORFEITURE DESCRIBED IN SUBSECTION A, OPTIONEE SHALL OWE THE CORPORATION THE EXCESS OF THE FAIR MARKET VALUE OVER THE OPTION PRICE (MEASURED AS OF THE DATE OF ACQUISITION) OF ALL SHARES ACQUIRED THROUGH EXERCISE OF ANY OPTION WITHIN THE THREE (3) YEARS PRECEDING THE COMMITTEE'S DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED. OPTIONEE SHALL PAY SUCH AMOUNT AS CALCULATED OR DETERMINED BY THE COMMITTEE TO THE CORPORATION WITHIN THIRTY (30) DAYS OF THE COMMITTEE'S WRITTEN DETERMINATION THAT AN EVENT OF FORFEITURE HAS OCCURRED, WHICH DETERMINATION MAY BE MADE BY 4 5 NOTICE TO THE OPTIONEE WITHIN ANY TIME UP TO TWO (2) YEARS FOLLOWING TERMINATION OF THE OPTIONEE'S STATUS AS A DIRECTOR OF THE CORPORATION. D. BY ACCEPTING THIS AGREEMENT, OPTIONEE CONSENTS TO DEDUCTION FROM ANY AMOUNTS THE CORPORATION MAY OWE TO OPTIONEE FROM TIME TO TIME (INCLUDING AMOUNTS OWED TO OPTIONEE AS DIRECTOR'S FEES OR OTHER COMPENSATION) TO THE EXTENT OF ANY AMOUNT WHICH OPTIONEE OWES THE CORPORATION PURSUANT TO THE PROVISIONS OF SUBSECTION C. WHETHER OR NOT THE CORPORATION ELECTS TO MAKE ANY SET-OFF IN WHOLE OR IN PART, IF THE CORPORATION DOES NOT RECOVER BY MEANS OF THE SET-OFF THE FULL AMOUNT OWED TO IT BY THE OPTIONEE, THEN OPTIONEE AGREES TO PAY IMMEDIATELY THE UNPAID BALANCE TO THE CORPORATION. E. THE OPTIONEE MAY BE RELEASED FROM OPTIONEE'S OBLIGATIONS UNDER THIS SECTION 12 ONLY IF THE COMMITTEE DETERMINES, IN ITS SOLE DISCRETION, THAT SUCH A RELEASE IS IN THE BEST INTERESTS OF THE CORPORATION. SO LONG AS THEY ARE MADE IN GOOD FAITH, ALL DETERMINATIONS BY THE COMMITTEE MADE PURSUANT TO THIS SECTION 12 SHALL BE FINAL, BINDING AND NONAPPEALABLE. 12. AGREEMENT REGARDING PRIOR OPTION GRANTS. OPTIONEE EXPRESSLY AGREES THAT, IN CONSIDERATION FOR THE GRANT OF THE OPTIONS PROVIDED FOR IN THIS AGREEMENT, THE PROVISIONS OF SECTIONS 12, 13 AND 14 OF THIS AGREEMENT SHALL BE DEEMED INCORPORATED INTO ALL PRIOR OPTION AGREEMENTS, IF ANY, ENTERED INTO BETWEEN THE CORPORATION AND THE OPTIONEE AND THAT THE FORFEITURE PROVISIONS SET FORTH IN THIS AGREEMENT SHALL APPLY TO ALL OPTIONS PREVIOUSLY GRANTED TO OPTIONEE. OPTIONEE ACKNOWLEDGES THAT THIS AGREEMENT CONTAINS IMPORTANT PROVISIONS AFFECTING OPTIONEE'S ECONOMIC INTEREST AND THAT OPTIONEE HAS CAREFULLY READ AND CONSIDERED AND AGREES TO BE BOUND BY THIS AGREEMENT. ACKNOWLEDGED AND AGREED TO____________________________ (Optionee's Signature) 5 6 13. ARBITRATION. A. Any controversy, claim or dispute arising out of or relating to this Agreement or the option, including but not limited to the provisions of Sections 5, 12 and 13 hereof, or any act or occurrence relating to the foregoing, or any decision of the Committee relating to an option or its forfeiture ("A Dispute") shall be determined and resolved by binding arbitration in accordance with Title IX of The United States Code and The commercial Arbitration Rules of the American Arbitration Association ("AAA") in effect on the date the arbitration is commenced in accordance herewith. In the event of any inconsistency between such Rules of the AAA and the terms of this Agreement, this Agreement shall supersede the Rules of the AAA. Judgment upon any award rendered in the arbitration may be entered in any court having jurisdiction and shall be final, binding, non-appealable and conclusive. The provisions of this Agreement shall govern the rights of all parties hereto, including but not limited to any party claiming for or on behalf of Optionee, including Optionee's heirs, successors, assigns, personal representatives and bankruptcy trustees. B. Any party may commence arbitration by serving upon all other parties a written demand for arbitration sent by Certified Mail, Return Receipt Requested to the Corporation at its principal place of business or to the Optionee at his/her residence address as reflected in the records of the Corporation, by Certified Mail, Return Receipt Requested to the AAA Office in Phoenix, Arizona, or in the absence of such an office, to the AAA Region in which Arizona is located. C. The AAA shall administer the arbitration. The AAA shall appoint a single arbitrator to conduct the arbitration within 30 days of the AAA's receipt of a demand for arbitration in accordance with this Section. The arbitrator shall, by virtue of background, similar experience, be knowledgeable in matters pertaining to stock option agreements and employment relationships. There shall be no right of discovery in connection with the arbitration except in accordance with the AAA's Commercial Arbitration Rules. Not earlier than thirty (30) nor more than forty-five (45) days after appointment, the arbitrator shall conduct a preliminary hearing in accordance with the AAA "Guidelines for Expediting Large, Complex Commercial Arbitrations." Not less than five (5) days prior to the preliminary hearing, all parties to the arbitration shall serve upon all other parties to the arbitration a written list of witnesses and exhibits to be used in the arbitration hearing Except for good cause shown, no witness or exhibit may be utilized at the arbitration hearing other than those set forth on such list. D. The arbitrator shall receive evidence in a single hearing which shall be conducted in Phoenix, Arizona, unless the arbitrator determines by written application of a party that such location would represent an unreasonable hardship and that the hearing should be conducted in another location. The hearing shall be commenced not more than sixty (60) days after the appointment of the arbitrator. 6 7 E. The arbitrator shall award reasonable attorneys fees and costs in favor of the prevailing party. The arbitrator shall issue a final award not more than twenty (20) days following the conclusion of the hearing. The arbitrator shall have the power to hear and decide, by documents only or with the hearing (at the arbitrator's sole discretion) any pre-hearing motions which are in the nature of pre-trial motions to dismiss or for summary judgment. The arbitrator shall be entitled to receive reasonable compensation at an hourly rate to be established by agreement between the arbitrator and the AAA. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year first above written. MEDICIS PHARMACEUTICAL CORPORATION By:_________________________________________ Chairman and Chief Executive Officer ______________________________________(SEAL) Corporate Secretary ____________________________________________ Non-Employee Director 7 -----END PRIVACY-ENHANCED MESSAGE-----